A B Town BPO

osted: Jul 25, 2004 at 0000 hrs IST

THE closer you look, the better it gets. In 2003, the National Association of Software and Services Companies (Nasscom) began work on a report to document all Business Process Outsourcing (BPO) and IT-Enabled Services (ITES) activity in the country.The report was finally released in May 2004. In a sense, the results were a statement on the digital divide: 85 per cent of the call centre and IT services business, worth Rs 117 billion in exports, was found concentrated in 13 ‘‘clusters’’.

Yet there was room for David in Goliath’s realm. Between them, the Big Daddies — the National Capital Region (Delhi-Gurgaon-Noida; 103 companies), Bangalore (65), Mumbai (59), Hyderabad-Secundrabad (43) and Chennai (34) — accounted for 304 of India’s 404 BPO companies. The remaining 100 were spread across locations hitherto not associated with BPO, at least not in the popular imagination.

Industry researcher KPMG co-authored the report. It spoke of, among others, Ahmedabad-Gandhinagar (eight BPOs), Jaipur (six), Thiruvananthapuram (five), Cochin (three), Vishakapatnam (two). These ‘‘tier II’’ towns, along with second-rung metros like Kolkata and almost-metros like Pune — 10 BPOs apiece — were beginning to compete for a place on the Indian BPOscape.

Statistics can be misleading and a lower base obviously allows for high growth rates. That caveat notwithstanding, note that India’s BPO exports are growing at an annual 65 per cent. The NCR makes up a quarter of the export cake and is growing at 43 per cent. Jaipur has only 0.12 per cent of the BPO export market. It’s growing at a whopping 82 per cent (all figures for 2003-04).

It would seem logical. BPO entails business coming to India from the West to save costs. As such, it is perfectly in order to expect BPO units to chase a similar cost advantage within India, moving from bigger cities to cheaper, smaller towns.

Nasscom has watched the trend for two years now. ‘‘Traditionally, BPO and ITES centred around locations where the IT industry had developed,’’ says Nasscom vice-president Sangeeta Gupta, ‘‘but when high quality, affordable manpower became difficult to find in metros, hiring shifted to smaller towns.’’

The first big saving is in property prices. For instance, a BPO unit that moved to Mumbai in March 2004 would be paying upwards of Rs 150 per square foot as rent every month. If it had bought property at Nariman Point, it would have been set back by Rs 13,000 a square foot, according to real estate consultants Cushman and Wakefield.

Compare these with Nasscom-KPMG’s numbers for hired office space in Ahmedabad: Rs 20-25 a square foot a month, inclusive of key support facilities such as air-conditioning and telecom.

In many ways, the move to tier II towns echoes a trend that first succeeded in small-town America. Says Kaushal Mehta, Ahmedabad-based CEO of Motif India, a $3.5 million turnover BPO offering financial services for online auctions — eBay is a client — and similar back-up support to Fortune 500 companies such as Mellon, ‘‘In the US, all major call centres were located in suburbs, where real estate was cheap. So we chose Ahmedabad. Besides, opening a call centre in Mumbai and Chennai would mean risking your business to major players.’’

Kaushal Mehta, CEO of Motif India, does a $3.5 million turnover with eBay as a client. He chose Ahmedabad because real estate was half the price of Mumbai or Delhi Since opening in 2001, Motif has rented 35,000 square feet in Gujarat’s commercial capital. Beginning with an investment of $2 million — Kaushal Mehta and his wife Parul were IT professionals in the US who came home to entrepreneurship — its staff strength has grown from 35 to 350. Motif should be recruiting another 100 by the end of 2004.

Salaries begin at Rs 7,000. That’s low by Delhi or Mumbai standards — where HCL starts with Rs 12,000 and EXL eServices is in the Rs 10,000-14,000 range. But it’s attractive enough for Ahmedabad teens.

Interestingly, 70 per cent of Motif’s hiring is through referrals, cutting headhunting costs. An attrition rate of 15 per cent is way below Delhi’s 30-40 per cent or Gurgaon’s 25 per cent. In a sense, capitalism is feeding on small town community networks.

Ahmedabad's QX Ltd, a nine-month-old BPO, has 60 employees who ‘‘get more perks than their UK counterparts, including subsidised meals’’, according to its expat managing director Chris Robinson. An e-mail, web addresses and telecom service provider, Robinson was introduced to the idea of offshoring to India while channel surfing back home in Skipton, northern England.

He narrowed down on Ahmedabad after an extensive survey. The manpower pool was huge (‘‘Our biggest saving is in the staff’’), rentals a neat 50 per cent below UK levels. ‘‘We’re already a £15 million turnover company, though telecom costs doubled when we came to India,’’ says Robinson.

Also, small was large enough: ‘‘Ahmedabad is the size of Birmingham, the second largest city in the UK. So for us, it’s a big city... The metros are crowded. With big players like HSBC employing the best people, we did not want to compete. We buy businesses that are unprofitable in the UK and move them to India.’’

Sounds simple? ‘‘Well, simple it is, but it’s not always easy,’’ says Nasscom’s Gupta. ‘‘Even smaller towns are getting competitive,’’ she says, ‘‘there is a constant struggle for infrastructure and favourable government policies, even between states.’’

The struggle is heating up. An army of BPO players is ready to open branches in smaller towns. In Vishakapatnam, after HSBC announced a $50 billion BPO facility in 2003 — its financial back-office, as it were, for the rest of the planet — IT consultancy Ma Foi spoke of relocating its back-end centre there. In Vizag too, the Raheja Group is developing the Bheemunipatnam corridor: 4.5 million square feet of real estate earmarked for ITES-BPO companies.

Wipro Spectramind has plans for Gandhinagar, Sutherland Technologies, which now employees 6,500 people at its Chennai BPO, is looking at options in Kerala. At the cusp between small town and metro, Pune is remarkable in the number of IT-related companies showing an interest in moving there.

In Chandigarh-Mohali, the 200-strong software development centre run by Infosys is the showpiece. That aside, Dell, HCL Perot, Zensar, Audocomp and Cadmus are sniffing around. GE, according to NASSCOM-KPMG, has ‘‘strong plans’’ for expanding its presence in Jaipur.

In 2002, GE toyed with a proposal to reduce focus on Gurgaon and set up an expansive campus in Jaipur. ‘‘The plan,’’ says a former employee, ‘‘was to have staff living in hostels there and bringing them by bus to Delhi for the weekend.’’

The deal was almost done. Then GE’s American parent company chickened out, apprehensive at the thought of an India-Pakistan war. Rajasthan, after all, is a border state — even if Jaipur is about as far away from the frontier as Gurgaon. With peace back in circulation, perhaps the idea could be dusted up.

Even a decidedly old-economy hub like Indore is not immune to the BPO virus. Four major IT/BPO companies, including global giant Computer Sciences Centre (CSC) are at work there. Indian BPOs like Webdunia and Infobeans are based in Indore, as is the India office of Impetus, a midsize American IT/BPO firm.

Twenty-five per cent of CSC’s business worldwide comes from the US government. Of its 65,000 global employees, 2,500 are in India, evenly distributed between Indore’s Technology Park and Noida.

Webdunia and Impetus are based in New Palasia. This spanking district near Indore’s railway station is emerging as a sort of local Koramangula.

‘‘Our clients are US-based companies. The benefit of doing business with North America is that English language capabilities have developed in Indore and around,’’ says Vinay Chhajlani, who runs Webdunia. The company is into language-based solutions, though wireless networking and voice-based services are provided as well. It has 250-300 people in Indore and says it is growing at ‘‘40-50 per cent’’ every year.

A Nasscom study says national attrition rates are 35 per cent. In Jaipur’s BPOs, they’re at 10 per cent. In Gurgaon, the starting salary is Rs 12,000 or so. In Ahmedabad half that is enough, thank you Halfway across India, deep in Tamil country, Chhajlani would find a kindred spirit in B Kamath, CMD of Lasersoft Infosystems, which does BPO work in the banking industry. Now based in Chennai, Lasersoft is considering ancillary BPOs in Madurai, Salem and Coimbatore. Kamath explains why: ‘‘There is a lot of talent in the districts. Besides operation costs will come down by 30-40 per cent. In the next two years, there will be a lot of growth in BPOs in small towns.’’

However, in Chennai itself, Venkat Kumar, CEO of Astran and in the call centre business, is less hopeful. He says non-metros are unviable for the skills he requires: ‘‘Our company is not planning to go smaller towns.’’

In Delhi, an EXL executive puts things in perspective, ‘‘Look, it’s true that BPOs are going to smaller towns because that’s where a bulk of their recruits come from anyway. So instead of recruiting a Chandigarh kid in Delhi, you may as well take the job to him in his home town. It creates loyalty. But this is primarily non-voice work. Voice is still not moving.’’

Simply, call centres are not migrating as much as, say, insurance analysis is. When it comes to young people confident enough of speaking English, in whatever accent, on a phone line, metros still outscore B towns.

That aside, industry insiders point out infrastructure — from airlinks to telecom — and gaps in technology still give the Gurgaons and Hyderabads a headstart. ‘‘There are two big issues confronting smaller towns with BPO ambitions,’’ says an outsourcing analyst, ‘‘the digital divide and the accent divide.’’

Yet as Ranjit Narasimhan, Noida-based COO of HCL Tech BPO, puts it, ‘‘It is only a matter of time before the availability of a critical amount of accent-neutral educated youth in these regions will fuel the move to those locations.’’

Shorn of jargon that spells out a four letter word — hope. In Smallsville, BPO helps you dream big.

With Radha Venkatesan

Little Big Towns

And they’re calling it the new Bangalore

WHEN New York-headquartered EXL eService wanted to spread its wings outside Noida — where it has three centres — it did a quick survey of IT hotspots Bangalore, Hyderabad and Chennai. ‘‘After a pretty scientific and objective assessment,’’ admits Rohit Kapoor, president-CFO, EXL, ‘‘we zeroed in on Pune.’’

For a host of reasons: availability of manpower (on an average 30,000 students graduate in Pune every year), technology, ease of access (Mumbai is three hours away on the expressway), lower competitive index (read rate of attrition is not as alarming), cost structure, great climate, good quality of life.

If cost and quality are the buzzwords of BPO success, Pune, with its ability to deliver on both, is cashing in. Over the past year, at least four large BPOs have set up shop in the city: EXL, Convergys, EDS and Amdocs.

This adds to an already imposing list, including Progeon (an Infosys arm), Wipro Spectramind, WNS, MphasiS, Xansa (it targets 3,000 employees by 2006), GTL, Oceans Connect, vCustomer and the captive BPOs of HSBC and P&O Nedlloyd. Software Technology Park of India, Pune’s outgoing chief Sushil Gupta says there are ‘‘at least three enquiries a day’’.

British BPO Xansa, which has centres in Noida and Chennai, chose Pune as the third centre because it wanted a ‘‘campus style facility, an impossibility in Mumbai or other metros which have space constraints’’. The company is building its facility over 16 acres at Talewade Software Park.

EXL has 900 employees at the Pune centre and is ramping up aggressively. One of its biggest clients is UK insurance giant Aviva, and without taking names, Kapoor says the company is adding four floors to the space it already has at Magarpatta City for ‘‘a single client’’.

Seattle-HQed vCustomer too chose Pune over other metros when it wanted to open its second India centre (the first is in Delhi). ‘‘Pune has a resource base critical for us. Besides, its cosmopolitan lifestyle is another big draw,’’ says Sanjay Kumar, CEO, vCustomer. It spent Rs 40 crore on a plush centre at Kalyani Nagar this March with a capacity of seating 3,000.

The real estate industry sniffs opportunity. Consider this: Over the next three years, at least five private IT parks are coming up in Pune. This despite the fact that there already software technology technology parks in Hinjewadi, Kharadi and Talewade, besides Magarpatta.

‘‘Bangalore and Hyderabad have reached saturation point. We must be ready now that IT companies are making a beeline for Pune,’’ says Rajas Jain, whose Kumar Properties is building a Rs 500-crore IT Park at Hadapsar.

But it’s not all good news. There are several areas in which Pune is still lacking: infrastructure, roads, power, international airport. Precious little is being done on these fronts, despite vision statements floating around, promising to make Pune the City Beautiful.

Sudipta Datta

A service natural wakes up. Finally

KOLKATA’S no small town but even its partisans will acknowledge it’s the left-behind metro, a services natural that forgot to catch BPO’s morning bus. Yet, in November 2003, Hewitt Associates ranked Kolkata among hot BPO destinations such as Pune, Gurgaon and Hyderabad.

‘‘People are keen to do business in Kolkata, so that they can tap the vast talent pool of engineers and graduates,’’ says Sudip Banerjee, president, enterprise solutions, at Wipro Spectramind, which has big BPO plans for Kolkata. The hunt is on to ‘‘top-up’’ a 17 acre plot Wipro Spectramind recently picked up with another four acres.

That aside, GE Capital is conducting final due diligence exercises. HSBC has plans to set up its captive call centre in the city.

There’re still issues of concern. Raman Roy, Wipro Spectramind’s CMD, says, ‘‘As a BPO destination, Kolkata has to grow in terms of providing quality infrastructure.’’ The state government recently brought BPO units under the ‘‘essential service’’ regime, freeing them from strikes and bandhs. ‘‘We ensured that nothing stops functioning for BPO units, even if there is a bandh or social unrest,’’ says G D Gautama, state IT secretary.

Kolkata's educated youth and affordability can be small start-up friendly too. Young entrepreneur Subhojit Goswami will vouch for this: ‘‘Kolkata has so many M.Com and B.Com graduates that I don’t need to go anywhere else to service my clients’ needs,’’ he says.

Goswami’s tiny BPO does payroll, accounts, MIS report-generating work for British clients. It is a mere 10-seater, and Kolkata’s BPO universe extends to only 3,000 people. But by the end of 2004, that is projected to rise to 8,000.

Dunno about elsewhere, but in Bengal they call that a boom.

Indranil Chakraborty

Study this case quartet

Ace Infotech | RajkotMaps for the worldIT calls itself one of the oldest BPOs in the country and was set up by partners Vikram Sanghani and Sanjay Dhamsania in 1992. Ace Infotech has two lines of business: Geographical Information Systems (GIS) mapping for US-based power companies and e-publishing. It has handled data conversion projects for encyclopedias, dictionaries, scientific, financial and legal journals. About 450 employees work in the two units in Rajkot; Hyderabad has another 500.

‘‘We have invested Rs 10 crore in the company,’’ says Sanghani, ‘‘and our growth rate is 30 per cent. Today we have zero debt and zero outside funding. We are all on our own.’’ The reason for preferring Rajkot over, say, Mumbai, was ‘‘cheaper real estate and manpower’’. Starting salaries are anything between Rs 6,000-8,000.

Rajkot college graduates are attracted by the relaxed work environment. Says Sanghani, ‘‘The majority of the work is offline in nature and timings too are flexible. The first shift is from 6 am to 2 pm and the second from 2 pm to 10 pm. So even those pursuing their degrees are keen to work here.’’

Ace Infotech recruits electrical engineers for online mapping projects and mathematics and humanities graduates for e-publishing. The two big engineering colleges in Rajkot are its captive talent pool. As for ‘‘attrition rate’’, well Sanghani’s never heard of the term.

Swapna Nair

Impetus Infotech | IndoreCut-price Silicon Valley‘‘IF there’s one thing engineers really, really want, it’s interesting work,’’ says John Winchester, vice-president, technology, at Impetus Infotech. Impetus is Indore’s oldest software R&D company, with clients in North America and Europe.

When Winchester moved to Indore from Cupertino, Silicon Valley country, southern California, in January 2004, he didn’t know if the ‘‘$5-$10 mn’’ Impetus would be ‘‘interesting’’ enough. ‘‘They have a reputation for hiring the best engineers and support 12 Fortune 500 clients,’’ he says. ‘‘But I was also looking for work as challenging as at NeuStar Inc, where I was earlier.’’

But Winchester can reflect on job satisfaction later. Right now, he’s ‘‘hiring engineers like mad’’, 12 are added every month to the 200-strong team in Indore. ‘‘We’re expanding,’’ he grins. You bet.

A bigger, fancier office block is coming up round the corner from the four-floor rented premises Impetus uses currently. Until the move, the new office doubles as practice pad for a staff rock band. The singing is half-enthusiastic, half-shy, the guitars are tried and tested. Throw in worse hair-dos and denims, and we may as well be in New Delhi or Gurgaon.

‘‘Barring some of the more exciting nightlife, Indore has everything you need or want — plus competitive costs,’’ says Pankaj Sharma, Impetus CFO. Land is three-fourths its price in Mumbai. Rentals are at Rs 55-75 per square foot. Attrition is a manageable 10-12 per cent, against a national industry average of 35 per cent.

Toss in the four engineering colleges within 200 km of Indore and starting salaries of Rs 12,000. What do you get? A sound business model for writing code and satelliteing it across the ocean.

It’s heavy-duty stuff Impetus is exporting. The technology that will move most of America’s mobile phone numbers to a new, common standard; the technology to make most of Europe’s mobile phone services ‘‘talk’’ to each other — it’s being designed right here in Indore.

Surprised? So were we.

Pragya Singh

Supportscape | Jaipur‘Torn jeans and a tie’IN a quiet corner of Jaipur’s otherwise busy Jamunalal Bajaj Marg stands a rather smart building. Every night, the four-storeyed Supportscape HQ comes alive. For a few moments, the chatter of excited ‘‘workers’’ trooping in to take charge of their ‘‘work stations’’ drowns out the sound of trains thundering down the track nearby.

They walk past dress code notices — ‘‘Torn jeans and tie’’, on the day this reporter paid a visit. Once in their zones, the transformation from Shally Maheshwary to Sally takes place and a ‘‘shy Jaipur resident’’ becomes a confident interlocutor for American clients. An M.Com graduate, Maheshwary has been at Supportscape for a year. She says she likes it, ‘‘I earn Rs 6,000. My parents are okay with it. And this place has given me confidence.’’

Like her, there are 150 people others at Supportscape who don fake identities and accents each day. Over four years, this tiny company has introduced the ‘‘call centre culture’’ to the Pink City.

‘‘When we started, we had the advantage of being first,’’ says Rakesh Bhambani, director, services, at Supportscape, ‘‘It was quicker to build a brand in a smaller city, in a state with no other call centres. Cost of living is cheaper, there is practically no competition. We pick and choose our employees.’’

The first mover advantage is now old hat. Even GE, the BPO giant, has set up a unit in Jaipur. While GE officials refused to speak, it is understood Jaipur figures high in their future plans.

Supportscape made a nervous start. Skilled manpower, fluent in English and computer literate, was hard to come by. But today it is ‘‘flooded with competent applicants’’.

Bhambani is cagey about names and figures, only saying revenue has grown 200 per cent in the past year. Clients include ‘‘Sony, Europe’s largest ISP provider and a video-game maker all set to take on Microsoft’s X-Pax and Sony’s Play Station II’’. Take your guesses.

Bhambani stresses the small city BPO story has its limits. While the Rajasthan government is gung-ho, talking of tax incentives and the ‘‘40 engineering colleges’’ opening in the state, Supportscape fears an HR crunch and infrastructure being unable to cope.

‘‘Never mind what the government says,’’ says Manuj Goyal, MD, Supportscape, ‘‘if even two more companies open call centres here, there will be a crisis. The city is not prepared and neither is the government.’’ Ouch.

Anuradha Nagaraj

Fortune Infotech | VadodaraBPO + Patel = BPOtel?

FIVE years ago, K K Patel started a small medical transcription business from a 1,000 square foot rented office in Sayajigunj, downtown Vadodara. Friends thought he was crazy, but Patel felt confident. In a half decade, Fortune Infotech’s turnover has grown from Rs 30 lakh to Rs 14 crore.

Today, Fortune’s ‘‘outsourcing factory’’ is a sprawling 30,000 square foot complex, complete with a swank corporate HQ, in Chhani, on the outskirts of the city. In a reversal of stereotype, this homegrown Gujarati BPO opened a branch office in Bangalore in 2001 — but you can guess where Patel’s heart lies. ‘‘The Vadodara office is the backbone of our operations,’’ he says.

It’s not just emotion. ‘‘If I compare my Bangalore and Vadodara offices,’’ Patel says, ‘‘quiet clearly, the cost of operation here is much lower.’’ Staff retention is not an issue: ‘‘In Bangalore at times we have almost the entire staff leaving and joining some other place. It doesn’t happen here.’’

Fortune’s focus is primarily non-voice based services — documentation, insurance claim process, invoice processing, health insurance claims, market surveys. Patel has 20 MNC clients, mainly American ones. No names but they include ‘‘five top health-service providers, a major pharma company and a big airline’’.

‘‘Very soon,’’ Patel says conspiratorially, ‘‘we will add the refund request processing of airlines to our services.’’

For business rivals, a combo of Gujarati Patel and BPO can be lethal. Bangalore, Cyberabad and the rest of you — be warned.

Rohit Bhan