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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: email@example.com 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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HDFC Bank set up a BPO center at Tirupati in Andhra Pradesh state through its subsidiary Atlas Documentary Facilitators. Chennai's Rural Technology Business Incubator. CEO of SourcePilani. where the BPO doesn't have a presence. "The franchisee wanted commitments on work before investing in the business. And of those selected. The Babrala call center functions as back office logistic support for Tata Indicom customers in Uttar Pradesh. the client wanted to see an established unit before offering work." The solution meant investing US$55. They are less likely to move away to urban areas.work that was previously handled by more than 1. In July 2008. "The main drivers of this industry have been higher efficiency. On average. tackling specialized. Land prices in India's interior are a small fraction of prices in Mumbai and Bangalore. the rest don't move for [a variety of] reasons. That didn't work. There's the greater good to consider as well.edu/india/article." By that token. just 20% to 27% accept. Eight months into the project. "But the bottom line has been the cost savings that a BPO brings. rural BPO outlets are small -with 25 to 50 seats -. more than 200 people are employed at two BPO centers at Mithapur in Gujarat state and Babrala in Uttar Pradesh state. Typically." says Rajanish Dass. "It may not sound like much. professor of information systems and strategic management at the Indian Institute of Management Ahmedabad (IIMA). aims to hire 5.about US$100 a month for an eight-hour shift five days a week -. Next up was a franchise arrangement under which a franchisee was responsible for the infrastructure while DesiCrew brought in the work.and don't have the luxury of big clients. Raman Roy. points out that BPO recruitment has changed over the last few years. chairman and managing director of BPO firm Quattro and a veteran industry leader. Already. The Uday centers and HDFC Bank's BPO branch are exceptions. especially when it's neither project-based nor seasonal. Consider DesiCrew: The Tamil Nadu state-based BPO was incubated in 2005 by the Indian Institute of Technology. which runs a 50-seat BPO center in Rajasthan's Pilani district. and used the network created by the Indian government's Common Service Center initiative. disposable income among lower-income groups increases and villages are provided a means of sustainable development. the cost savings incurred by deploying a BPO is 40% to 50% compared to the originating companies. like agricultural income. Saloni Malhotra. are captive back-office centers for big companies. Access to female employees is an important reason rural India makes sense. Through job creation in villages and semi-urban areas. though. though.It Takes a Village: The Rise of Rural BPO: India Knowledge@Wharton (http://knowledge. such as data capturing and indexing of customer details -. low-skill data entry projects to rural BPO centers. "It was probably an idea ahead of its time. And salaries in rural set-ups -. Called Uday. As a result. A few. organizations with an eye on the cost-benefit ratio will not hesitate to switch operators or even countries if expenses reach a tipping point." say Manoj Vasudevan. Security. Ambitious Rural BPOs Most companies setting up BPO operations in rural India operate as third-party service providers to multiple clients. professionalism and reliable infrastructure had become insurmountable issues. meanwhile. companies and clients can take advantage of significantly reduced operating costs. And by moving jobs to rural areas.upenn. "About 60% to 70% happens in smaller towns. The center's approximately 550 employees are involved in non-core operations.000 to All materials copyright of the Wharton School of the University of Pennsylvania. Dass notes that BPO companies have the option of evolving into knowledge-process outsourcing units. Not only are women equally adept at handling IT tasks. infrastructural support and available skill-sets.000 applications a day at the rate of 100 applications a person in an eight-hour shift. the BPO centers are an initiative of the community services arm of group company Tata Chemicals." Malhotra says. migration to cities can be reduced. which aims to set up one computer in each village across the country.000 people for rural BPO operations over the next few years.wharton. The Tata Group. Page 2 of 4 ." All of this is bad news for an industry whose existence relies on cost-effectiveness. high-end jobs while shifting low-margin." says Raman of Source for Change. experts note.are about half of what call centers in the cities pay.000 employees in Mumbai and Chennai. The center handles 22.cfm?articleid=4450) ties held back others. realized it wasn't working. and even in satellite towns such as Gurgaon and Noida. DesiCrew's founder and CEO. they have proved to be more loyal employees. either. but US$75 to US$85 a month is huge for a rural housewife. "The already-low attrition rates can be brought down even further by employing women.
though it." Malhotra recalls. Surmountable Obstacles It's not going to be easy. Immersion training in computer applications. even if it was worth just US$20 or US$25. To be fair." says Nasscom's Bhatnagar. though. 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.wharton. can be surmounted. for instance. That way.000 in each center. testing for logic and abstract thinking may occur. "We took any work that came our way. too. HDFC Bank. Vasudevan of SourcePilani. Companies need to constantly pitch for All materials copyright of the Wharton School of the University of Pennsylvania. any prospective BPO needs to budget for a heavy-duty diesel generator. with entire villages still awaiting electrification." says DesiCrew's Malhotra. he will recover the US$100. English language comprehension and grammar.000 invested in setting up the BPO center.upenn." The solution meant investing US$55. Still. 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. usually high school graduation. But it didn't get its first big client until the end of that year. With a 100-seat unit. and he will earn a 15% royalty from SourcePilani's future operations. So. Broadband connectivity is another hurdle -. who says she takes on board only one in about 45 applicants. Source for Change's Raman recalls that some women didn't know how to turn on a computer. Since then. The individual units broke even in mid-2008. Adds Vasudevan. it may take two to four months before an employee is ready to tackle basic work such as data entry. but it's still not easy. Source for Change got buy-in from locals because of its association with the Piramal Foundation. training is more intensive than in urban BPO centers. Other rural BPO outfits are equally ambitious. including the ability to sound out words. the company has grown to employ close to 100 people. and speech and etiquette are now standard practice at most BPO outfits. "We need to get the recruiting right the first time. Periodic updates of data work are sufficient. non-voice BPO work has a lower requirement for broadband. that's an expense for most BPOs even in urban locations. "Bandwidth and connectivity are constraints if you take the country as a whole. Page 3 of 4 .but they are more critical to BPO success. 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. Low-hanging Fruit Typically. each employee-owner should get an extra US$40 every month as their share of the profit. Besides. Where a gap exists in formal qualifications. Foremost is infrastructure. They don't insist on fluency in English. Rural BPO centers are dogged by problems that are not going away soon. DesiCrew Solutions was spun off as a commercial entity in February 2007 with three employees each in four units. rural BPO centers begin by offering basic digitization services such as data entry and data conversion. the community may not accept you if you goof up initially. since concepts like "file" and "folder" may be difficult to grasp for someone unfamiliar with computers. DesiCrew plans to expand its workforce to 1. What is taught also varies considerably. Power in the hinterlands ranges from erratic to nonexistent. but if you're looking to target finite locations. Bagar is the ancestral village of the Piramal family. Managers at rural BPO centers acknowledge that recruitment is a much bigger deal for them than it is for their urban competitors.000 to US$160. "We need really smart people so that our clients have one reason less to go elsewhere. By the end of 2010. there will be acceptable connectivity within striking distance. so real-time connectivity is less of an issue.It Takes a Village: The Rise of Rural BPO: India Knowledge@Wharton (http://knowledge.edu/india/article.cfm?articleid=4450) wanted to see an established unit before offering work. and the company started making money in 2008-2009. Most rural BPOs require basic educational qualifications. "This is also a great way to bind people to the organization. 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." Naturally." he says.000 people and establish a pan-India presence. even if the meaning is unclear. Getting the right people and overcoming market skepticism are much harder problems to solve -. for instance. But even getting that level of business can be an uphill task. but do seek some proficiency in the language.
All materials copyright of the Wharton School of the University of Pennsylvania.com P. It has done web research projects. Will rural BPO centers succeed in India? Everest Group's Gupta is convinced they will be "relevant. transcription and translation work. providing regular updates on industry and company events." This is a single/personal use copy of India Knowledge@Wharton." IIMA's Dass says the domestic BPO business is large enough to make rural BPOs viable. and graphics and layout services. "Infrastructure and technology are seen as challenges." says Quatrro's Roy. and there are already successes to be seen. Raman is keen on pursuing Hindi-based voice work and has already done a pilot project for a client. e-prints. Page 4 of 4 . SourcePilani now also offers social media marketing services. SourcePilani. custom reprints. It manages accounts for clients on social networks such as Facebook and Twitter. products and special offers. posters or plaques. therefore. duplicated and scaled up. DesiCrew has undertaken web site content creation and validation. but these can be tackled easily. but most clients will soon look for an outsourcing partner who can offer them extras such as data analysis. "There's a huge market for this internationally. many are experimenting with other kinds of services. musts) and pushing the cost-value advantage.wharton." says Vasudevan. So why haven't more clients signed on? Nasscom's Bhatnagar believes there may be a herd mentality at work among client companies. GIS-based mapping and transcription work. But success stories build on themselves. For multiple copies. Once clients come on board. If rural BPO outfits can't build those capabilities in-house.edu/india/article. Because voice work is still somewhat difficult for rural BPOs. (212) 221-9595 x407.cfm?articleid=4450) clients -. "No one wants to be the first [to opt for a rural BPO]. for instance. please contact PARS International: reprints@parsintl. though. may be the only non-urban BPO that does medical transcription work. emphasizing their infrastructure (building in redundancies in power and broadband are. Source for Change is also trying out different avenues.It Takes a Village: The Rise of Rural BPO: India Knowledge@Wharton (http://knowledge. it may be worthwhile to partner with urban centers that can offer the services. report preparation. It is more critical to show clients that you have a process that can be repeated. and is now running a job web site as well.upenn. Plain vanilla data work may be a starting point.proving their capabilities. BPO industry observers recommend quickly offering value-added services.
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