Rural outsourcing: a leap into the bigger league

Wednesday, 23 December 2009

Rural outsourcing utilizes talent in Indian tier III cities and villages to provide BPO services to the domestic outsourcing market. Service providers are typically small in size, entrepreneurial in nature and have the capacity to deliver only basic services. With projections for overseas business on the decline, many companies hope to tap the domestic market for more opportunities. While the spectrum of services is similar, the skills required may differ. Rural outsourcing has always invoked a lot of interest given its potential, but as it were, the domestic market as a whole has been on the back burner as earning in INR has been less attractive than dollar earnings. Relearning business with large BPO companies Some major announcements made recently are all set to change the scenario. Housing and Development Finance Corporation (HDFC) purchased a 26% stake in RuralShore, a Bangalore-based rural BPO firm. RuralShore has two centers currently, each with 150-200 people. The company is looking to set up 80-100-seat centers in towns with populations of 10,000-15,000 surrounded by villages. RuralShore plans to extend its reach to 500 locations with populations below 20,000 in the next seven years. The Tata Group plans to establish a rural BPO in Jamshedpur. This 250-seat center is expected to generate 1,000 jobs in Jharkhand. This model is to be replicated in other locations including Kalinganagar in Orissa. Infosys BPO is looking to tie up with service providers with centers located in rural areas and small towns. As per the revenue-share model, Infosys BPO will bring in customers and the rural operators will offer services. Wipro BPO plans to enter the domestic market by tying up with rural service providers. They already provide technology to them and may extend this to delivery tie-ups. According to a report released by ValueNotes on domestic outsourcing, “Opportunities in the Indian Domestic BPO Market ”, the sectoral opportunity and emerging trends in the large and emerging verticals include banking, financial services, insurance, telecom, government, retail, logistics, airlines and travel and hospitality. Larger companies are focusing on India, and including it in their growth strategy. Tentative big steps Rural outsourcing is fraught with challenges ranging across infrastructure, funds, scalability, skill and training shortages. One of the biggest issues for those looking to set up centers in rural areas is the availability of telecom infrastructure to support their venture. Many entrepreneurs start small operations as funding is hard to come by. This affects their scalability, which results in only small and local contracts. Maintenance can be another hurdle as it is very expensive to source service engineers in the absence of service contracts. Talent availability is limited, and training is required. However, with larger players becoming interested in this business model, the industry can look forward to more attention, investment and acceptance. The companies earlier vying for just a fraction of the outsourcing market will now gain from the experience that these large firms possess, and will be able to garner bigger contracts. As companies look ahead at leaner corporate sizes to encourage efficiency and concentrate on core functions, outsourcing has become the most viable option. Job opportunities to locals is one aspect that will certainly generate interest. The influx of the educated into big cities will slow down. Wages and real estate costs are the prime differentiators that will lead more companies to look at tier III cities and villages. State governments will play an important role by offering attractive incentives to companies setting up operations in smaller destinations. The early entrants stand to benefit the most, with the requisite experience of having roughed it out and emerging with all the aces needed to excel.

 

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