It Takes a Village: The Rise of Rural BPO: India Knowledge@Wharton (http://knowledge.wharton.upenn.


It Takes a Village: The Rise of Rural BPO
Published : February 11, 2010 in India Knowledge@Wharton

"Do you really think women can work on computers?" Men in Bagar genuinely wanted to know the answer to that question when Source for Change -- an initiative of the Mumbai-based Piramal Foundation -- set up an all-women BPO (business process outsourcing) center in this small village in India's Rajasthan state. The skepticism didn't end even after Source for Change selected 10 women from 25 applicants in August 2007. Wary men would accompany their wives or daughters to the training center and then wait around until they were ready to return home. More than two years later, men still drop in unannounced at the This is a single/personal use copy of India Knowledge@Wharton. For multiple copies, custom reprints, remodeled house that serves as Source for Change's combined e-prints, posters or plaques, please contact PARS International: P. (212) 221-9595 x407. headquarters and training center. But these are not the same suspicious husbands and fathers. Instead, they are individuals hoping to find jobs for the women in their families. "They realized that we made available the two most valued symbols of social status here: English and computers," says Karthik Raman, head of business development for Source for Change. "Some of the women who work here earn more than the men in their families. They now have a voice at the table." With state governments and industry supporting the cause, it is clear that village-level BPO is here to stay. No official numbers are available yet -- the National Association of Software and Services Companies (Nasscom) is collecting data now -- but observers agree that more than 100 such units are likely operating around India, most of them less than three years old. It's a positive development, according to Raju Bhatnagar, vice president in charge of BPOs and government relations at Nasscom. "There is tremendous opportunity for non-urban BPOs in domestic voice [i.e., call centers] and non-voice businesses, and international non-voice work." Nasscom prefers the term "non-urban" to "village" or "rural" because prospective clients may associate rural with "backward." "[It is] semantics, I know, but the change in terminology does seem to help people get over that mind-set," Bhatnagar says. Some BPO centers are run from non-air-conditioned buildings that double as schools and marriage halls. Their employees sit on plastic, stackable chairs and rush home to milk the cows when their shifts end. Others are run from modern offices where biometric IDs are required for entry and team leaders hold post-graduate degrees. Their common element is their location far from the big cities, in semi-urban and rural communities such as Ethakota in Andhra Pradesh state, Munnar in Kerala state and Shiggaon in Karnataka state. More than half the employees are women, and all employees are from 19 to 35 years old. The Bottom Line: Cost Why are non-urban BPOs on the rise? "To ease some of the pain points that exist in the domestic outsourcing business around cost and reach," says Gaurav Gupta, principal and India head of the Everest Group consultancy. Over the last few years, India's US$14 billion BPO industry seemed to have been losing a battle with rising expenses. Real estate prices were spiraling out of control. Off-the-charts attrition meant increases not only in salaries but also in training and recruitment costs. To curb people costs, many companies cast their recruiting nets further into the hinterland, but found that fewer than one in three short-listed candidates would sign on. The costs of city living did not make the move worth it for many, while family
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The Babrala call center functions as back office logistic support for Tata Indicom customers in Uttar Pradesh." says Rajanish Dass.000 people for rural BPO operations over the next few years. And of those selected. Next up was a franchise arrangement under which a franchisee was responsible for the infrastructure while DesiCrew brought in the work. especially when it's neither project-based nor seasonal. "The franchisee wanted commitments on work before investing in the business. either. and used the network created by the Indian government's Common Service Center that was previously handled by more than 1. Called Uday. professor of information systems and strategic management at the Indian Institute of Management Ahmedabad (IIMA). Ambitious Rural BPOs Most companies setting up BPO operations in rural India operate as third-party service providers to multiple clients. the client wanted to see an established unit before offering work. The center's approximately 550 employees are involved in non-core operations. "About 60% to 70% happens in smaller towns. chairman and managing director of BPO firm Quattro and a veteran industry leader. "It may not sound like much. experts note." The solution meant investing US$55." Malhotra says. Saloni Malhotra. more than 200 people are employed at two BPO centers at Mithapur in Gujarat state and Babrala in Uttar Pradesh and even in satellite towns such as Gurgaon and Noida. Already. The center handles 22. which runs a 50-seat BPO center in Rajasthan's Pilani district. Eight months into the project. companies and clients can take advantage of significantly reduced operating costs. high-end jobs while shifting low-margin. just 20% to 27% accept." All of this is bad news for an industry whose existence relies on cost-effectiveness. As a result. rural BPO outlets are small -with 25 to 50 seats -." say Manoj Vasudevan.wharton. the rest don't move for [a variety of] reasons. professionalism and reliable infrastructure had become insurmountable issues." says Raman of Source for Change. meanwhile. the BPO centers are an initiative of the community services arm of group company Tata Chemicals. "But the bottom line has been the cost savings that a BPO brings. Chennai's Rural Technology Business Incubator. tackling specialized. The Uday centers and HDFC Bank's BPO branch are exceptions. "It was probably an idea ahead of its time. On average. CEO of SourcePilani. And by moving jobs to rural areas.000 to   All materials copyright of the Wharton School of the University of Pennsylvania.It Takes a Village: The Rise of Rural BPO: India Knowledge@Wharton (http://knowledge.about US$100 a month for an eight-hour shift five days a week -. organizations with an eye on the cost-benefit ratio will not hesitate to switch operators or even countries if expenses reach a tipping point. The Tata Group. In July 2008. though. Consider DesiCrew: The Tamil Nadu state-based BPO was incubated in 2005 by the Indian Institute of Technology. which aims to set up one computer in each village across the country. low-skill data entry projects to rural BPO centers. migration to cities can be reduced. are captive back-office centers for big companies. Through job creation in villages and semi-urban areas. Security. such as data capturing and indexing of customer details -. Raman Roy. Land prices in India's interior are a small fraction of prices in Mumbai and Bangalore. the cost savings incurred by deploying a BPO is 40% to 50% compared to the originating companies. That didn't work. like agricultural income. realized it wasn't working. HDFC Bank set up a BPO center at Tirupati in Andhra Pradesh state through its subsidiary Atlas Documentary Facilitators. but US$75 to US$85 a month is huge for a rural housewife.upenn. disposable income among lower-income groups increases and villages are provided a means of sustainable development. Dass notes that BPO companies have the option of evolving into knowledge-process outsourcing units. infrastructural support and available skill-sets. points out that BPO recruitment has changed over the last few years. "The main drivers of this industry have been higher efficiency. "The already-low attrition rates can be brought down even further by employing women.000 applications a day at the rate of 100 applications a person in an eight-hour shift." By that token. Access to female employees is an important reason rural India makes sense. where the BPO doesn't have a presence.cfm?articleid=4450) ties held back others.are about half of what call centers in the cities pay. Not only are women equally adept at handling IT tasks. Typically. aims to hire 5.                    Page 2 of 4  . And salaries in rural set-ups -. DesiCrew's founder and CEO. They are less likely to move away to urban areas. A few. though.and don't have the luxury of big clients. There's the greater good to consider as well. they have proved to be more loyal employees.000 employees in Mumbai and Chennai.

"We took any work that came our way. Most rural BPOs require basic educational qualifications. With a 100-seat unit. he will recover the US$100. "Bandwidth and connectivity are constraints if you take the country as a whole. Rural BPO centers are dogged by problems that are not going away soon. since concepts like "file" and "folder" may be difficult to grasp for someone unfamiliar with computers. Adds Vasudevan.but they are more critical to BPO success. but if you're looking to target finite locations. "We need really smart people so that our clients have one reason less to go elsewhere. testing for logic and abstract thinking may occur. and speech and etiquette are now standard practice at most BPO outfits.000 in each center. but it's still not easy.It Takes a Village: The Rise of Rural BPO: India Knowledge@Wharton (http://knowledge. even if it was worth just US$20 or US$25." says DesiCrew's Malhotra. Managers at rural BPO centers acknowledge that recruitment is a much bigger deal for them than it is for their urban competitors. Since then. joined forces with the employment generation and marketing mission of the department of rural development in Andhra Pradesh to identify potential employees for its Tirupati BPO. Low-hanging Fruit Typically. any prospective BPO needs to budget for a heavy-duty diesel generator. there will be acceptable connectivity within striking distance. for instance. usually high school graduation. DesiCrew Solutions was spun off as a commercial entity in February 2007 with three employees each in four units. wants to increase headcount to 100 by the end of the year and then sell the franchise to a village cooperative. NGO connections can help rural outfits tap into extensive networks of companies willing to contract work to these centers as part of their corporate social responsibility initiatives. Other rural BPO outfits are equally ambitious. rural BPO centers begin by offering basic digitization services such as data entry and data conversion.000 to US$160. That way. The issue of community acceptance can also be tackled relatively easily if BPO firms partner with NGOs and local government departments familiar with an area. Broadband connectivity is another hurdle -. HDFC Besides. Power in the hinterlands ranges from erratic to nonexistent." he says. too." says Nasscom's Bhatnagar. and the company started making money in 2008-2009. each employee-owner should get an extra US$40 every month as their share of the profit.000 people and establish a pan-India presence. But it didn't get its first big client until the end of that year. Source for Change got buy-in from locals because of its association with the Piramal Foundation. so real-time connectivity is less of an issue.upenn. But even getting that level of business can be an uphill task. Where a gap exists in formal qualifications." Naturally.cfm?articleid=4450) wanted to see an established unit before offering work. Still. Companies need to constantly pitch for   All materials copyright of the Wharton School of the University of Pennsylvania. "This is also a great way to bind people to the organization. for instance. who says she takes on board only one in about 45 applicants. So. And SourcePilani had the backing of the Goenka Foundation as well as the premier Birla Institute of Technology and Science (located in Pilani) to ease its way. Vasudevan of SourcePilani. The individual units broke even in mid-2008. Source for Change's Raman recalls that some women didn't know how to turn on a computer. the company has grown to employ close to 100 people. the community may not accept you if you goof up initially. though. Foremost is infrastructure. Bagar is the ancestral village of the Piramal family. To be fair. can be surmounted. Surmountable Obstacles It's not going to be easy. DesiCrew plans to expand its workforce to 1.                    Page 3 of 4  . Immersion training in computer applications." Malhotra recalls. Getting the right people and overcoming market skepticism are much harder problems to solve -. even if the meaning is unclear.though it." The solution meant investing US$55. Periodic updates of data work are sufficient. that's an expense for most BPOs even in urban locations. English language comprehension and grammar. training is more intensive than in urban BPO centers. "We need to get the recruiting right the first time.wharton. with entire villages still awaiting electrification. By the end of 2010. it may take two to four months before an employee is ready to tackle basic work such as data entry.000 invested in setting up the BPO center. What is taught also varies considerably. They don't insist on fluency in English. non-voice BPO work has a lower requirement for broadband. including the ability to sound out words. and he will earn a 15% royalty from SourcePilani's future operations. but do seek some proficiency in the language.

Will rural BPO centers succeed in India? Everest Group's Gupta is convinced they will be "relevant. (212) 221-9595 x407. It has done web research projects." IIMA's Dass says the domestic BPO business is large enough to make rural BPOs viable. Source for Change is also trying out different avenues." This is a single/personal use copy of India Knowledge@Wharton. For multiple copies. and there are already successes to be seen. emphasizing their infrastructure (building in redundancies in power and broadband and is now running a job web site as well. "There's a huge market for this internationally. but most clients will soon look for an outsourcing partner who can offer them extras such as data analysis. But success stories build on themselves. GIS-based mapping and transcription work. SourcePilani. It manages accounts for clients on social networks such as Facebook and Twitter.                    Page 4 of 4  . duplicated and scaled up." says Vasudevan. DesiCrew has undertaken web site content creation and validation. Once clients come on board.   All materials copyright of the Wharton School of the University of Pennsylvania. but these can be tackled easily. custom reprints. please contact PARS International: P. It is more critical to show clients that you have a process that can be repeated. "Infrastructure and technology are seen as challenges. for instance.It Takes a Village: The Rise of Rural BPO: India Knowledge@Wharton (http://knowledge. transcription and translation work.cfm?articleid=4450) clients -. posters or plaques. though. Plain vanilla data work may be a starting point. may be the only non-urban BPO that does medical transcription work. BPO industry observers recommend quickly offering value-added services. "No one wants to be the first [to opt for a rural BPO]. products and special offers. Because voice work is still somewhat difficult for rural BPOs. So why haven't more clients signed on? Nasscom's Bhatnagar believes there may be a herd mentality at work among client companies. providing regular updates on industry and company events. report preparation. and graphics and layout services. SourcePilani now also offers social media marketing services." says Quatrro's Roy. Raman is keen on pursuing Hindi-based voice work and has already done a pilot project for a client. e-prints. musts) and pushing the cost-value advantage.upenn.wharton. therefore. it may be worthwhile to partner with urban centers that can offer the services. many are experimenting with other kinds of services.proving their capabilities. If rural BPO outfits can't build those capabilities in-house.