X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
BPO industry is going to hinterlands - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Sep 14, 2011

    BPO industry is going to hinterlands

    "Computer and English" are still status symbols in rural India. "Women going to office" is still a remote concept there. But things are changing in some of the villages in India. Information Technology (IT), which has been an integral part of the Indian growth story in recent times, is now changing the face of the hinterlands of the country. Companies in the software industry are setting up Business Process Outsourcing (BPO) centres in the rural area. Not only are small companies like DesiCrew, SourcePilani, RuralShores Business Services opening rural BPOs, but IT majors such as Infosys, and Wipro are also opening BPO centres in rural area. Some big corporate houses like Tata, HDFC have also opened BPO branches in rural area. But these are not as common as software companies.

    Initially BPO centres were set up only in the urban area because of availability of English speaking people, infrastructure etc. But this trend is changing now. The reason lies in the genesis of the BPO itself. No doubt, the main drivers of this industry have been higher efficiency, infrastructural support and available skill-sets. However, the existence of BPO relies on its cost-effectiveness.

    The US$ 14 bn Indian BPO industry is now facing steep competition from many parts of the world. Running a BPO centre in a cost effective manner is getting more difficult by each passing day. Real estate prices are spiraling not only in metros like Mumbai, Delhi but also in tier-II cities. Salary and wages are also going out of control in big cities. Due to higher salary expectation and better job opportunities in urban India, attrition is adding to the woes of BPOs. All this is destroying the cost advantage of the Indian BPO industry. Therefore, to remain competitive in the market, companies are opening BPO centres in rural India.

    In rural areas, companies need to pay around just half of the salary they pay in urban areas. Land prices are just a fraction of the prices in urban areas. Here companies do not face the attrition problem much. They mostly prefer employing female employees to lower the attrition. Hence, running costs of a BPO centre substantially declines in rural areas.

    Though there exists a cost advantage, the bigger question is the ability of companies to fulfill the service level agreements (SLAs) while running the BPO centre from a rural area. The interesting point is that companies are not facing problems on this front as far as skills are concerned. They are mostly providing services like domestic voice services, non-voice services like data entry, typing, scanning, index preparation of customers, data conversion etc. These are low-end services which do not require very high skills. After some training, people in rural areas are successfully able to fulfill these tasks. With regards to power shortage problem, companies are employing alternate power sources.

    Despite all this, it is not easy to convince a client to opt for rural BPO services. Companies need to constantly pitch for clients -- proving their capabilities, emphasizing the strength of their infrastructure (redundancies in power and broadband network) and pushing the cost-value advantage. As a matter of fact, the National Association of Software and Services Companies (Nasscom), the regulatory body for the Indian software industry prefers the term "non-urban" to "village" or "rural" because prospective clients may associate rural with backward. Though this is just semantics, it helps people get over that mind-set.

    Rural BPO brings financial empowerment, technologies, and new job opportunities to rural areas. It also helps curb the migration of people from villages to urban parts of the country. However, rural BPOs face several challenges such as erratic power supply, bad broadband networks etc. Looking at the benefits, some state governments are giving incentives like some initial capital, training cost aids to promote these initiatives.

    Rural BPO is still in its nascent stage. Rural BPO centres are growing by each passing year. However, the future of this depends much on the government's commitment towards power projects, broadband connectivity in rural areas. Role of NGO (non-governmental organization) is also very important here. 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.

    Indeed, the BPO industry definitely seems a new ray of hope for rural India!

     

     

    Equitymaster requests your view! Post a comment on "BPO industry is going to hinterlands". Click here!

      
     

    More Views on News

    Tata Consultancy Services (TCS): A Decent Start to FY17 (Quarterly Results Update - Detailed)

    Jul 14, 2016

    Tata Consultancy Services (TCS) has declared results for the quarter ended June 2016. The company has reported a 3% QoQ increase in consolidated sales while the consolidated net profit was up 0.3% QoQ.

    Tata Motors: A Profitable Fourth Quarter (Quarterly Results Update - Detailed)

    Jul 8, 2016

    Tata Motors Ltd has reported a 19% YoY and 202% YoY growth in sales and net profits for the quarter ended March 2016.

    Idea Cellular: Interest Costs Hurt Profits (Quarterly Results Update - Detailed)

    Jul 4, 2016

    Idea Cellular has reported a 12.4% YoY growth in the topline and a decrease of 0.4% YoY in the bottomline for the quarter ended March 2016.

    Why You Should Strategically Structure Your Portfolio Now? (Outside View)

    Apr 28, 2017

    PersonalFN elucidates a prudent strategy to follow as the market scales a new high.

    Superinvestors or Santas Who Visit us More Than Once a Year? (The 5 Minute Wrapup)

    Apr 28, 2017

    Meet the Superinvestors of India and know where are they directing their money to.

    More Views on News

    Most Popular

    We Don't Want More F&O Stocks... We Need Smaller Lot Sizes(Daily Profit Hunter)

    Apr 26, 2017

    Are you excited to trade in the sixteen new stocks to be introduced in the F&O segment this Friday?

    Our Private Class with India's Value Investing Guru(The 5 Minute Wrapup)

    Apr 19, 2017

    Rohan and Kunal present you the discussions with professor Sanjay Bakshi in his virtual classroom.

    HDFC Bank: The Solid Outperformer(Chart Of The Day)

    Apr 22, 2017

    Why HDFC Bank beat the Sensex by nearly 3 times.

    In an Ocean of Corporate Defaulters, Vijay Mallya is a Small Fish(Vivek Kaul's Diary)

    Apr 20, 2017

    While it is important to get Mallya back to India, the government needs to show the same vigour in chasing defaulters of public sector bank loans residing in India.

    4 Ways GST Will Impact The Mutual Fund Industry(Outside View)

    Apr 19, 2017

    PersonalFN explains how GST would impact India's mutual fund industry and investors

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-6143 4055. Fax: +91-22-2202 8550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    S&P BSE SENSEX


    Apr 28, 2017 (Close)

    MARKET STATS