Major companies, such as Citigroup, had wholly owned offshore service centers. Those types of company-owned offshore centers are called captive models. Captive offshoring models reduce the risk of offshoring. A recent study from the Everest Research Institute estimated the costs of third-party offshoring and captive offshoring. The estimates are shown in the accompanying table.Create a spreadsheet that totals the average cost of each model for each cost item. For example, average the annual salary based on the range for third parties and also for captives. Then calculate the total cost of ownership (TCO) of each model. The difference is the cost of risk.Full-time equivalents (FTE) are used to standardize labor costs since workers may be part time or full time. For example, two part-time workers equal one FTE. The estimates are given in terms of FTE, so the conversion is already done.Based on your results, how much does the captive offshoring model allow for risk?

The answer is the difference between the TCOs of the two models.Third-Party Offshoring ModeCaptive Offshoring ModelOffice space: Annual rental cost per square foot (assume 10,000 square feet of office space)$11 to $13$14 to $16Base salary costs of workers (assume 1,000 FTEs)$7,770 to $8,200$9,500 to $10,300General management staff for every 1,000 FTEs12 to 1416 to 18General management salary$55,000 to $65,000$70,000 to $90,000Travel and housing costs per FTE$280 to $320$900 to $1,060Major companies, such as Citigroup, had wholly owned offshore service centers. Those types of company-owned offshore centers are called captive models. Captive offshoring models reduce the risk of offshoring. A recent study from the Everest Research Institute estimated the costs of third-party offshoring and captive offshoring. The estimates are shown in the accompanying table.Create a spreadsheet that totals the average cost of each model for each cost item. For example, average the annual salary based on the range for third parties and also for captives. Then calculate the total cost of ownership (TCO) of each model. The difference is the cost of risk.Full-time equivalents (FTE) are used to standardize labor costs since workers may be part time or full time. For example, two part-time workers equal one FTE. The estimates are given in terms of FTE, so the conversion is already done.Based on your results, how much does the captive offshoring model allow for risk? The answer is the difference between the TCOs of the two models.Third-Party Offshoring ModeCaptive Offshoring ModelOffice space: Annual rental cost per square foot (assume 10,000 square feet of office space)$11 to $13$14 to $16Base salary costs of workers (assume 1,000 FTEs)$7,770 to $8,200$9,500 to $10,300General management staff for every 1,000 FTEs12 to 1416 to 18General management salary$55,000 to $65,000$70,000 to $90,000Travel and housing costs per FTE$280 to $320$900 to $1,060