A Tale of Three Cities
It’s a fact well-publicized that Bengaluru and Hyderabad rule the roost as the BPO hubs of India. But with infrastructure here stretched to the maximum, high levels of attrition and soaring costs of living, BPOs have been looking at other parts of India to set up shop for some time now. Gurgaon and Noida sprung up as the next rung of BPO hubs, but these too will soon share their mantle of being sought-after BPO destinations with a number of tier II and tier III cities in India.
With infrastructure in the existing locations stretched, costs are soaring and attrition levels increasing. From a social perspective this means a balanced growth for the country. A NASSCOM AT Kearney report says that while the sector grew at 25 percent in the last decade, a conservative 15 percent growth now will mean the IT-BPO sector will employ about eight million people by 2018, from the current two million.
The bulk of this business for smaller cities will come from the domestic BPOs. “The international BPOs are not very keen on going to cities which do not have a proven track record. But the case is reverse in the case of domestic BPOs, with more providers looking at smaller cities. The cost structure is different and you will see a greater propensity from domestic players to get into these tier II and tier III cities,” says Raju Bhatnagar, VP (BPO and government relations), NASSCOM.
We take a look at three of these tier II and tier III cities: Patna and Guwahati, which show promise to host a number of BPOs in the near future; and we also look at Chandigarh, which is already doing well in this space.
PATNA
The Bihar state government has set up an IT department which will oversee all initiatives regarding IT and e-governance. While at the moment there is hardly any activity in the IT and BPO space in this state, the scope for improvement is immense. According to NASSCOM, in terms of cost of operations, Patna has a 38 percent cost advantage over the average cost of BPOs in a metro.
“Almost all the major telecom companies are located in Patna and this is responsible for BPO operations in the city. We also run the e-governance project for the state government. Last year the state government was awarded the best e-governance project in the country. People thought nothing can be done in Bihar but our achievements prove that there are opportunities to be tapped here,” says Rajeev Kumar Jha, General Manager (East), Call 2 Connect India Pvt Ltd.
Job opportunities in other sectors
Banking, insurance and telecom are the other sectors which are driving employability. For a city where other job opportunities are limited, it always makes sense for companies to come and explore the market.
Cost differentials
The cost of living is low, real estate comes at a cheaper price, all pushing down the total cost of operating a BPO. “Rental real estate price can be as high as Rs.250 per square feet in metro cities compared to Rs.40-Rs.60 in Patna,” says Jha. Margins, however, seem to remain the same as the client outsourcing business factors in these considerations.
Talent
There is plenty of talent, which means salaries can be lower. Competition too is limited which means lower attrition levels. They may not be highly skilled but good communication skill is not hard to find. Around 1,500 engineers graduate every year in Patna, of which around 10 percent is available for the IT sector, says AT Kearney and NASSCOM.
Infrastructure
Infrastructure quality is still not up to the mark. It takes considerable time in even getting the requisite telephone and broadband connections. For new BPO units, expect considerable difficulties when setting up. IT and technology support is poor because the IT sector has not really taken off in the city. Till recently state-run BSNL was the only operator providing connectivity solutions, but private players are entering the space and a change can now be seen. The biggest problem is the shortage of electricity. Power cuts vary across the city but cuts to the tune of 6-8 hours a day is usually common.
Government support
The biggest support to any business in Patna has been the law and order situation. Earlier, people could not think of running a business at night. But today, such fears have disappeared. According to the current five-year-plan, the state government will open IT parks and educational institutions in the state and create an entire IT-BPO friendly ecosystem.
GUWAHATI
Customer care has historically been a forte of people from north-east India, so it is not surprising that Guwahati should be an attractive location for a BPO. NASSCOM says Guwahati can be positioned for international BPO services especially for voice-related services, provided the key imperatives like enhancing awareness about BPO, improving local and national connectivity, and development of good commercial space are addressed.
Like Patna, it is the telecom sector which is driving the BPO segment in the city. “A number of languages are spoken in the north-east. For example, Mizoram has two dialects and Meghalaya has four. To serve these areas you need to have manpower from such states. It does not make sense to set up a BPO in every state of operation for the telecom companies so they tend to base it out of Guwahati, which sees a fair number of people from all northeastern states coming in search of work,” says Nayanjyoti Bhattacharyya, Founder, Anjaybee Infotech. Today, Anjaybee runs a 280-seater call center in Guwahati for almost all the telecom players of the region, with an outbound center in Shillong.
It is the inbound call centers that seem to be doing well as the customer base across the telecom and banking sector increases. Outbound BPOs have seen some growth but it pales in comparison to the rise that inbound BPOs have seen.
Job opportunities in other sectors
Agriculture and the tea industry have been the key contributors to the state, with oil and gas refineries and coal mining being the other key contributors to the states in terms of employment.
Cost differentials
In Guwahati one has the luxury of owning the premise since real estate costs are low. “Salaries start as low as Rs.5,000-Rs.7,500, bringing down operating costs considerably. The benefit, however, goes to the company outsourcing services where if the costs are low margins are maintained at par with BPOs in the metro towns,” says Bhattacharyya. According to NASSCOM, Guwahati has a 38 percent cost advantage over the average cost of a BPO in a metro.
Talent
The quality of talent is good, especially when it comes to speaking in English. Around 15,000 graduate annually, with a high proportion being employable.
Infrastructure
Road, air and rail connectivity is not a problem anymore with the Kolkata-Guwahati air route being probably the second-busiest in the country.
Electricity continues to be an issue with power cuts of about four hours a day. This has pushed up operating costs. The city also lacks good accommodation and is yet to see a five star hotel come up.
Government support
The IT policy leaves a lot to be desired. Only export-oriented units are liable to exemptions, which has deterred companies from setting up BPOs. Training for IT falls under services, but running a BPO is not under services industry. If it were considered an industry, a BPO would have been covered under the North East Industrial Policy, eligible for the IT exemptions.
CHANDIGARH
Often called a “pensioner’s paradise,” Chandigarh has two types of call centers—larger ones like Tech Mahindra, Dell and IBM Daksh and the smaller local ones.
“The full talent potential of Chandigarh has not yet been exploited. Chandigarh includes Mohali and Panchkula, together dubbed the tri-city. People prefer to stay in Mohali and come to Chandigarh for work since it’s cheaper to stay in Mohali,” says K.S. Suri of Excel Callnet.
The 80-odd local BPOs in Chandigarh face their own threats. Every new growth-oriented company is a threat to them because it increases the level of attrition. Chandigarh probably has the highest per capita computer literacy city in the country.
There are a lot of catchments which feed into the system of Chandigarh. People from neighboring states of Haryana, Himachal Pradesh and Jammu and Kashmir come to Chandigarh in search of employment. Positioned as a beautiful city, with a semblance of discipline in town planning, Chandigarh is a good place to live and work in.
Job opportunities in other sectors
Typically Chandigarh is a babudom, with three governments in place. There are about 15 medium to large industrial units, including two in the public sector. In addition, Chandigarh has over 2,500 units registered under the small scale sector. The important industries are paper manufacturing, basic metals and alloys and machinery.
Talent
The engineering colleges that have mushroomed in this city have meant a steady stream of supply of engineers in the BPO and tech support space.
Cost differentials
For a company, to operate out of Chandigarh would mean a saving of about 20-30 percent. The major savings come in the form of transportation since residences are in the 5-7 km radius of most workplaces.
Infrastructure
“The new airport, though delayed, is on course and flights link Chandigarh to major cities like Delhi, Mumbai and Bengaluru. The real estate in the city is booming and at times proves to be a hindrance to the BPO sector,” says Suri. It can be as high as Rs.170-Rs.180 per square feet which dents cost competitiveness to a certain extent. Electricity continues to be a problem but everyone is bullish that it will improve in the next 2-3 years with additional power generation.
Government support
“The lack of promotion through SEZ needs correction. At the moment, the government focus seems more on larger companies setting up shop in the city than promoting smaller units,” says Suri. The norms of the SEZs are also far too strict and most SEZs have not taken off. There is a perception that Chandigarh as a city is now discouraging new BPOs from coming up as it consumes a lot more infrastructure in terms of roads and parking space.
©Entrepreneur August 2010
Loading ...
1 comment
hello there and thank you for your information – I have definitely picked up anything new from right here. I did however expertise some technical issues using this site, as I experienced to reload the web site a lot of times previous to I could get it to load correctly. I had been wondering if your web host is OK? Not that I am complaining, but sluggish loading instances times will very frequently affect your placement in google and could damage your quality score if advertising and marketing with Adwords. Well I’m adding this RSS to my email and can look out for much more of your respective fascinating content. Ensure that you update this again very soon..
Leave a Comment