Managed Offshore Subsidiary
Offshore Outsourcing Models: Introduction | Outsourcing Road Map | Relationship Management | Staff Augmentation | Project-Based Deployment | Dedicated Offshore Staffing | Build Operate Transfer (BOT) | Managed Subsidiary | Captive Offshore Subsidiary | Joint Venture
This is very similar to the BOT model, except companies offering this type of model tend to specialise in facility management, whereas BOT is offered by the suppliers of outsourced services as an adjunct to project and dedicated offshore staffing models.
Another prime difference is that BOT uses the supplier's existing employees, whereas managed subsidiaries are staffed by personnel specifically recruited for the customer.
It is common for suppliers to offer an incubation facility, whereby equipment, HR function and (shared) premises are hired from and managed by the supplier. At the start the supplier will employ the new recruits and these will be transitioned to the subsidiary once it is operational. The strength of this model is in its ability to grow economically from small teams of around five resources through to several hundred.
Some capital investment will be required if equipment is not to be hired on a permanent basis.
Advantages
- Flexible
- Continuity of resources
- Control over resource selection and management
- Retention of IPR and knowledge
- Cohesive and consistent understanding of products, corporate goals and working practices
- Improved communications by continual reinforcement and experience.
Disadvantages
- Close management of the staff required
- Legal responsibilities
- Capital investment.
Criteria For Using A Managed Subsidiary
Consider using a managed subsidiary when:
- There are guaranteed long-term requirements
- Continuity of resources is required
- On-going support and maintenance are required
Points To Consider
- Costs of purchasing hired equipment
- Transfer pricing model
- Management costs, rent and infrastructure charges levied by the supplier for hosting the subsidiary
- Attention should be paid to local taxes, rules concerning the transfer of funds and transfer pricing (How the main company pays for the work completed offshore). In general subsidiaries must be operated at a profit.
- Cost of setting up and managing an independent subsidiary.
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