Business Today

Call of the small town

As BPOs catch on to the domestic market’s potential, small towns look attractive locations.

Nitya Varadarajan        Print Edition: June 14, 2009

At Karaikudi Town in Tamil Nadu’s Sivaganga district, a BPO operator wanted to expand from a 50-seater to a 200-seater. His first stop: Ripcord Consulting Guild. “We have domestic customers who are willing to give us orders, but we don’t know how to manage a larger BPO. Can you help us?” he asked Ripcord Managing Director Pradeep Nevatia, who had pioneered the small-town BPO concept through Lason, a Chennai-based ITeS firm now part of BPO HOV Services. Says Nevatia: “We have enquiries from an NRI wanting to set up a BPO in India focussing on healthcare.

Partha De Sarkar, CEO, Hinduja Global Services
Partha De Sarkar
Another is for a legal service BPO on a build-operate-transfer basis in a small town.” BPOs have finally woken up to the potential of the domestic market: around $100 billion, according to NASSCOM. And, over the last 18 months, particularly since the global slowdown started biting, big players like IBM Daksh, Tech Mahindra, MphasiS BFL, Genpact and HCL have started taking this market seriously.

BPOs earned an estimated $12 billion export revenues in 2008-09, while the domestic segment fetched just $2.4 billion. But, while offshore BPO services have been growing at a CAGR of 37 per cent, their domestic counterparts are doing 50 per cent. But it’s a different world out here. Says Neeraja Kandala, Lead Analyst, Legal Services, ValueNotes Database: “For domestic clients, labour arbitrage is not a key driver for BPO growth.”

The first requirement is operational efficiency. “Operational inefficiencies cannot be covered in rupee earnings, only dollar earnings can allow this,” says Nevatia. “Go to the employees, don’t make them come to you.”

Pradeep Nevatia, MD, Ripcord
Pradeep Nevatia
Says Radhika Balasubramanian, COO, Domestic BPO Operations, Intelenet: “Where process requirements are geography agnostic, we could have centres anywhere including in rural areas.”

For now, BPOs like Intelenet and Aegis prefer to be where their customer wants them to be. But Partha De Sarkar, CEO, Hinduja Global Solutions, admits: “The rural strategy appears to be the next big wave. There is abundance of talent to scale up quickly, and if there is government support in terms of upscaling educational institutions, there is real value.” Hinduja Global gets nearly half its revenues from domestic clients.

 Outsourcing drivers for domestic BPOS

BANKING

  • Third phase of reforms
  • Competition from private banks
  • Centralisation and
    computerisation

TELECOM

  • Rising subscriber numbers
  • Move to valueadded services
  • Entry of several new players

INSURANCE

  • Increasing competition
  • Reduced time to market
  • Untapped rural market

RETAIL

  • Huge investments in the pipeline
  • Slowdown to spur consolidation
  • Need for better cost management

LOGISTICS

  • Increase in share of organised market, or third-party players, with demand for voice and non-voice

Balasubramanian looks at catchment areas where travel time is not more than an hour. Travel and other costs like eating out in town matter to an employee who earns Rs 5,000 or less a month. Can you get good people in small towns? Sometimes clients insist they need graduates or engineers, even for rote tasks. In the late ’90s, when he was CEO of Vettri Software, Indian BPOs were not wellknown overseas, and a US courier firm balked when Nevatia said he would sub-contract its order to entrepreneurs.

So Nevatia rented space and gave each entrepreneur a separate cubicle for his team. “One year later, the client was convinced (about the quality of work) and the entrepreneurs went back to their locations.”

“If overseas customers trust us with their orders, domestic customers should too,” he says. Rural areas have another upside: low attrition. “Attrition happens mostly when women get married and leave town,” says Ashwanth Gnanavelu, Project Manager at Desicrew, a TeNet enterprise. “We have to train people slightly longer—but they are very capable and over time improve even work processes,” he says. Desicrew has five centres in villages and is planning to expand into other states with its non-voice model.

Bangalore-based VGN asks some of its people to operate from their homes: it has the technology to catch them ‘napping’ on the job and this could well be adopted in semi-urban areas.

As the domestic BPO market picks up, the small town model surely cannot be wished away.

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