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BPOs flock to rural areas to set up shop

Shivani Shinde in Mumbai | September 09, 2008 02:04 IST

Rural business process outsourcing is catching the fancy of many Indian biggies, with the companies eyeing it more as a business proposition rather than a corporate social responsibility.

With the telecom industry aiming to increase its rural subscribers base and the central bank asking banks and financial firms to cater to the rural sector, businesses will have to find ways of servicing customers, say analysts. Most of the rural BPOs have a seating capacity of below 100 per centre, as they are situated in remote areas.

Some of the firms that are expanding reach in rural India are Aegis BPO, Comat Technologies, SerWizSol (a Tata enterprise) and GramIT of Byrraju Foundation.

Lower infrastructure costs, salary levels and low attrition rate make rural BPOs a suitable business proposition.

Aegis BPO, an Essar group company, is planning to set up centres in tier-III and IV cities to cater to the rural segment.

It also has plans to invest $75 million over two years to set up centres in places such as Ranchi, Bhagalpur (Bihar), Durgapur (West Bengal) and Jharkhand. GramIT, the rural BPO initiative by Byrraju Foundation, has five centres in coastal regions of Andhra Pradesh.

The company has plans to invest $75 million (over Rs 300 crore) as capital expenditure over the next two years to set up centres in places such as Ranchi, Bhagalpur (Bihar), Durgapur (West Bengal) and Jharkhand.

"We are still in talks for opening these centres as we clearly see it as a business opportunity. Absolute value and per unit realisation is less, but percentage profitability is quite high. Also, the cost of setting up a rural BPO is 20-22 per cent lower when compared with urban BPOs," said Aparup Sengupta, MD and CEO, Aegis BPO.

Other than the cost of infrastructure, the salary levels are also 15-20 per cent lower than the urban centres. In some cases, where the centres are located in the interiors, salary levels can be around Rs 3,000-7,000 per month. Attrition rate is also very low.

Agrees Jacob Verghese, chief integrator and lead partner at Byrraju Foundation, "Rural BPOs clearly have a cost advantage of 20-25 per cent. The only problem in some cases is infrastructure."

GramIT, the rural BPO initiative by Byrraju, has five centres in coastal regions of Andhra Pradesh. It started off by servicing the Satyam [Get Quote] Group, but now has six to seven corporate clients in India. The company provides both voice and transaction services in the ratio of 30:70.

"We also plan to get into providing research work and will set up centres in Madhya Pradesh and other states soon. With this, the client base could also jump to 15," Verghese adds.

SerWizSol is perhaps one of the few companies providing voice based-services from rural areas. It has one centre each in Andhra Pradesh (Ethakota) and Gujarat (Mithapur). The Ethakota centre receives 5,000 calls a day. Similarly, the Mithapur centre, which has been operational since January, gets 3,500 calls per day. Raju Bhatnagar, head (operations), SerWizSol, says they are planning to open four more centres.

But setting up centres in remote villages is not an easy task. Firms need to provide power and invest accordingly. The other issue is training of the employees. While the time taken for training is around six months, sending mid-managers to these centres is a tough task.

Comat Technologies, one of the earliest firms to get into the rural BPO space, has a different take. "There is certainly a cost advantage to it, but if the larger players plan to get into this, they need to move away from their large monolithic set-ups. While we believe that technology has evolved enough so that work can be done from anywhere, infrastructure is still a big problem," said Sriram Raghavan, co-founder and president, Comat Technologies.

Comat Technologies has about 800 centres in Karnataka and 300 centres in Haryana. But since these are in the remote areas, each centre has a capacity of 2-3 seats. Going ahead, the company plans to set centres in UP, Uttarakhand, Tripura and Sikkim.

While management is a issue for expanding into rural areas, AegisBPO has a solution. "We have created a team of 200-300 trainees that will provide nation-wide training to people. This team will eventually increase," adds Sengupta.


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