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COVID-19: Effects on IT captives across globe
COVID-19: Effects on IT captives across globe
Ganesh Subramaniam

Senior Consultant at Draup

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COVID-19: Effects on IT captives across globe

15 Apr 2020

In the wake of the Covid-19 pandemic, businesses across globe are more likely to shut-down or carve-out their small IT captives. The unloading of business units and other assets is inevitable as management teams to simplify their business and de-risk their balance sheets. Technology service providers are proactively identifying these smaller captives to win carve-out deals.

Ever since the inception of COVID-19, global are facing critical challenges in continuing their business operations/functions seamlessly. Several captive centres of global companies may be put up for sale or shut down, as their parent entities look to cut costs and focus on business survival.

Captive IT centres, that are facing cannibalisation due to surge in IT outsourcing will be primary targets for companies to carve-out. These small captives did not engage in value-creation projects for the parent organisation and are filled with technology support teams. Parent companies will be looking to monetize these centres to improve operations and add cash infusions.

Smaller captives that have just started and are still scaling can also be potential target. These captives might not be resilient enough to handle these uncertainties. Technology service providers can capitalize on this uncertain situation to acquire these low-performing IT centres and utilize them for their regional capability expansion.