Wells Fargo strategy to expand its captive in India – too late or a smart move ?
DATE: Nov 5th, 2009
With the outsourcing marketplace moving away from Captives, Wells Fargo seems to be one of the few organizations looking to build up their captive in Hyderabad, India.
Wells Fargo is a very conservative bank. That plus a bit of good luck ( which we all need) made it a survivor and a winner during the financial crisis of last year. Wells prides itself in developing and following a process to manage risk and growth. It has paid for the institution so far.
Wells Fargo was never a big adopter of offshoring. It had built a solid IT and operations organization. It did set up a captive in India in early 2007 ( Wells Fargo opens facility in Hyderabad:March 2007) .The center in Hyderbad was a small scale operations supposed to peak up to 400 people. It remained that for a period of time and still does.
Wells Fargo then acquired Wachovia during the financial crisis and along with other challenges in Wachovia it also inherited a relatively large scale outsourcing program. Wachovia has established relationship ( and taken ownership stake) with Genpact to provide Business Processing capabilities. Wachovia also had a multi vendor strategy for IT related activities offshoring with large and small vendors in India.
Looks like Wells Fargo is looking to leverage its captive and grow their existing captive operations. What it does with its existing vendor base is yet to be seen. The vendor base providing services to Wells Fargo seems fairly solid and wonder what the reasoning behind increasing the captive is. (If anyone has better insight please drop me a note).
Captives today have to work extra hard to offer better processing capacity, efficiency, capability or cost saving compared to third party vendors. With financial institutions there is always the question of control, data privacy and sensitivity of information but the banking offshoring model is mature enough and so are the vendors to deal with and address any of these concerns. Captives at a smaller scale also deal with challenges of providing people career paths, managing attrition and provide better cost returns to the parent firms.
There are still captives which are doing great and in some industries like Retail ( Target Stores), Financial Services ( Bank of America) have reached a critical mass and operating levels where they continue to add value to their parent firms.
Where the captive strategy for Wells Fargo goes will be interesting to see as the divesture in captives in India continues and third party vendors continue to mature and build commoditized service offerings.
