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Industry Research : Destination Smaller Towns for BPOs

When Aegis, the Essar group’s business process outsourcing (BPO) arm, announced a 250-seater centre in Srinagar in 2010, it raised the eyebrows of many peers. Two years after, the centre has added another 500 employees and been able to attract clients looking for capabilities and expertise in the local languages.

Aegis is not the only BPO firm in India setting shop in smaller towns. Genpact, WNS, Hinduja Global Services (HGS), Firstsource, Aditya Birla Mincas and others have done the same. With an expanding domestic market, increasing cost and higher attrition rate, outsourcing action is shifting to tier-III and IV cities.

According to a report by research firm KPMG, "a number of information technology and BPO companies are opening centres in these places to reduce operational expenditures. These smaller cities offer advantages such as availability of talent at a lower cost, low attrition rate, affordable real estate, local government support, and a better quality of life.

Analysts agree that by taking operations to a tier-III city, a company can save up to 30 per cent cost. A growing domestic market is also driving companies to open centres in tier-III cities, said Sangeeta Gupta, vice-president (VP), Nasscom.

According to recent data, the Indian IT-BPO industry is expected to be $101 billion in 2011-12. Of this, domestic IT-BPO revenue is expected to be $32 bn. The telecom sector was been the first to tap BPOs for delivering services. Many others such as banking, insurance and retail are yet to outsource in a big way.

Attrition, talent pool
Apart from a definite cost benefit, a shift to smaller cities is also due to the fact that these centres experience lower attrition and thus reduce the cost of hiring and training. The attrition rate even today in the BPO sector among large companies is 30-40 per cent.

"The wage cost in some tier-II and tier-III cities are the same. For example, the wage offered to an employee in Noida is almost the same to that offered in Lucknow. However, in the tier-III centres, the attrition level is low. So, we save on training and retention cost," said R Vaidyanathan, executive VP and head of the domestic business at Aegis BPO.

Aegis employs a little over 10,000 people in centres at Ahmedabad, Lucknow, Jamshedpur, Bhopal, Pune and Srinagar. It recently proposed a centre in Chhindwara, MP.

"Moreover, most of the tier-III centres are small. Managing a 100-seater centre is far easier than managing a 1,000-seater centre," added Gupta of Nasscom.

Sridhar K, executive VP for strategic initiatives & head of India domestic business, HGS, also notes the employee break-even is faster in small towns. "Break-even period is the minimum stipulated time for which an employee must be retained to recover the cost of training and incurred expenditure. This includes average salary, training cost, expenditure made on the employee, commission paid to recruiting agencies, and revenue generated by each employee. A company can achieve more employee break-evens in smaller cities compared to tier-I," he said. The company has centres in Siliguri (500 seats), Durgapur (1,200 seats), Guntur (500 seats) and Nagercoil (450 seats).

A lot of educational centres are also coming up in smaller towns. A significant number of engineering colleges are outside the tier-I cities. Students graduating from the institutes offer excellent talent pool. More, the students are looking at it as a career option and not just a short-term job, said S Vishwanathan, manager-consulting at Zinnov.

Keshav R Murugesh, group CEO, WNS, said all kind of services can be delivered from all centres, be it in tier-I or tier-II and tier-III cities. "In most companies, 40 to 50 per cent of employees have come to tier-I cities from tier-II and tier-III cities, in search of work. We believe the long-term philosophy will be of taking work to the people instead of the current model of taking people to where work is," he said.

Home growth
According to Nasscom Strategic Review 2012, the domestic IT-BPO market is expected to grow 17 per cent to reach Rs 91,800 crore in FY2012. The domestic BPO market is expected to reach Rs 14,900 crore, driven by demand from voice-based services (local languages) and increased adoption by both traditional and emerging verticals, including the government.

Call centres, BFSI (banking, financial services and accounting) and telecom will provide a $43-47 bn addressable opportunity for the Indian IT-BPO sector in the domestic market till 2020, according to Nasscom Perspective 2020, a study conducted by Nasscom and McKinsey. It predicts call centre demand to have a compounded annual growth rate of 11 per cent till 2020.

"There is also the telecom story. With the penetration of telecom in the hinterlands, customer support is now being delivered from tier-III centres. It not only saves cost for the company, but also enhances customer experience," said Amneet Singh,VP, Everest Group. Companies prefer to serve the local market with services in the local dialect and accent. A lot of media companies are looking at content in regional languages, according to Zinnov Consulting.

Moving to smaller cities will also allow companies to get better margins. Indian clients are price-sensitive; besides, firms will not have benefit of labour arbitrage as they have in global sourcing or exports. Analysts note domestic pricing per FTE (full-time equivalent, a workload measure) is almost half that in the export segment, leading to lower margins. More, margins are further impacted due to service tax on domestic revenue.

Among challenges it is again the people factor that is topmost. Finding senior management prepared to move to these small cities is difficult. "There’s a shortage of competent managers to supervise the processes; senior experienced managers are reluctant to move to smaller cities. More, the physical infrastructure is evolving," added Sridhar.

Murugesh also points to the unavailability of reliable and fast network connectivity in rural areas as a challenge. "IT/ITeS operations demand a high level of real time connectivity with many parts of the world. We believe all these obstacles can be overcome through a structured and a scientifically designed methodology," he said.

Posted by Veronica Silva Cusi, news correspondent

Today's Tip of the Day - Do Your Research

Read today's tip or listen to it on podcast.

Published: Friday, March 30, 2012

Printer Friendly Version Printer friendly version

2022 Buyers Guide Recording

Premium Listing
Call Center Studio

Call Center Studio
Call Center Studio is the world’s first call center built on Google and is one of the most secure and stable systems with some of the industry’s best reporting. It is one of the most full-featured enterprise grade systems (with the most calling features, one of the best call distribution, outbound dialing features and integrations—including IVR, AI Speech Recognition, blended inbound/outbound calling and includes Google’s new Dialogflow and Speech API. Call Center Studio is the absolute easiest to use (with a 10 minute setup), and is the price performance leader with lower equipment cost and less setup time.


ASC Recording Insights and neo
ASC Recording Insights guarantees legally compliant recording and analysis of all communication channels in Microsoft Teams - including audio calls (internal and external calls), chat conversations and video meetings.

neo Recording, QM & Analytics address all enterprises with recording needs, especially contact centers. The content of communication becomes accessible and critical information and trends are revealed, providing real-time business intelligence for immediate management action.


Microsoft Teams Cloud Recording Service
Geomant offers a fully managed recording service for those organisations who need to address compliance or quality management while working on Teams. The Service utilises Verint’s market leading recording technology and is hosted by Geomant in Microsoft Azure. Our managed service approach is unique in that it allows organisations to benefit from advanced recording features, all while being free from any technical infrastructure or maintenance requirements that come with a traditional on-premises set up.

Lieber & Associates

Recording System Consulting
L&A provides vendor-independent consulting services to select, contract for, test, and implement contact center recording systems. The firm's consultants specialize in contact center I.T. and have several decades of experience each with all major and many smaller makers of phone and call recording systems.

MiaRec, Inc.

MiaRec Call Recording
MiaRec's compliant, secure, and reliable Call Recording software is the foundation of our Customer & Workforce Engagement Platform.. MiaRec Call Recording seamlessly integrates with MiaRec Agent Evaluation & Scoring, Live Monitoring, Voice Analytics, Screen Capture, and Advanced Reporting to provide a comprehensive solution you can trust.


Numonix's IXCloud is one of the first fully managed compliance recording solutions for Microsoft Teams. IXCloud securely records, stores and analyzes interactions in the cloud without physical or virtual servers. As a fully managed Azure-based, Software-as-a-Service cloud interaction recording solution, IXCloud takes interaction capture into the future. It enables instant and elastic scalability to support business growth and provides the necessary tools to enhance business performance while maintaining compliance. IXCloud redefines versatility with its OpenAPI framework that enables application development. Companies and third-party developers benefit from IXCloud native capture technology, whether it be integrating with internal systems or building a third-party application.

Nuxiba Technologies

Enterprise recording management for storage, retrieval, playback, and monitoring communications throughout your contact center.

Record screen activity and calls across agent workstations, measure and monitor quality levels across all campaigns and analyze recordings to capture first-hand customer data and requirements.

Easly access all recordings and critical information to provide improved customer experience, sales, and productivity!


Oreka TR
Oreka TR total recorder includes all of the call recording capabilities you will need, at about half the cost of competing for call recorder solutions, including screen recording, mobile phone recording, live monitoring, on-demand recording, multi-tenancy, multi-site recording, audit trail, call exporting, retention management, auto-tagging (for speech analytics and phrase spotting) and so much more.

PCS Software

Call recording solution fully integrate to all main pbx solutions.

Teckinfo Solutions Pvt. Ltd.

InterDialog UCCS
InterDialog UCCS enables organizations to adhere to all compliances with its inbuilt call recording software and also has an option for screen recording. With centralized repository of all voice logs, its easy to maintain & retrieve all voice files and have a central control in case of multiple branches set up.

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