Is selling shared service centres a solution to survive the economic downturn?
One of the effects that are a direct consequence of the financial turbulence is an increase in organizations that sell shared service centers (SSCs) in other countries (so-called ´captives´) to wealthy (Indian) suppliers. This instrument to quickly improve the liquidity position was used by among others Citigroup. Here Wipro took over Citigroup’s Indian software development captive for $ 100 million and Tata Consultancy Group (TCS) acquired a captive containing several financial back office processes. This was a transaction of $ 505 million in exchange for a nine-year service contract with a value of $ 2.5 billion. Because only the wealthiest suppliers can finance this type of transaction, it is likely that the frequency of these transactions will remain limited as most suppliers (like any other company) have to rely on banks to finance large acquisitions. Other sales limiting factors are the relatively low financial value of the transaction because due to the low book value and low ma...