Captive Service is a portion of Business Process Outsourcing where an organization will use a wholly owned subsidiary instead of a Third Party Vendor. The benefit of doing such an arrangement would be to leverage the cost savings of using offshore resources, while maintaining complete control over process and delivery. The costs of such an arrangement are generally higher than using a vendor.
Captive Service Units have been in the media lately because of large financial firms tied to the Subprime mortgage crisis. Many of the firms had captive service units and as they file for bankruptcy, these units are being sold separately. Specifically, Lehman Brothers, Citigroup, AIG and Merrill Lynch all have captive units that are being considered or have already been sold off.