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IT firms like TCS, Infosys & Wipro losing work as MNCs' captive centres are back into fashion

BANGALORE: Captive technology centres of global corporations, which appeared to have gone out of fashion, are coming back into prominence, a development that is not good augury for Indian software companies such as Tata Consultancy ServicesBSE 0.10 %, InfosysBSE -0.21 % and WiproBSE 1.72 %.

A combination of factors, including higher scrutiny by regulators in the US and Europe, and a desire for tighter control of intellectual property, is resulting in multinational corporations increasingly relying on their own units in India.

A recent example of the change of course is the move by Allstate Corp, one of the largest insurers in the US, to set up its own facility in Bangalore, resulting in a shrinkage of work for TCSBSE 0.10 %, Infosys and Wipro. The $32-billion (Rs 1.7 lakh crore) company carved out portions of the contracts it had awarded to India's top three software companies and decided to carry out the work itself.

"The level of regulatory oversight has certainly increased visibly in the recent past, especially in the banking, financial services and insurance space," said KS Viswanath, senior vice-president of the National Association of Software and Services Companies ( Nasscom), the body that represents India's $100-billion IT services and business process outsourcing sector.

Starting from the mid-1990s, captives were an important proving ground for the offshore outsourcing model for many global corporations.