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The success of BPOs in rural India
December 11, 2008
HDFC Bank [Get Quote] Managing Director Aditya Puri calls it one of the most satisfying achievements in his career - the ability of his bank to push high-tech prosperity out to the rural backwaters of the country.
An experiment done by the bank at Nellore about a year ago to provide job opportunities to poor unemployed rural youth has now become a major initiative. In July this year, HDFC Bank set up its first rural BPO at Tirupati in Andhra Pradesh. Set up by ADFC, the bank's subsidiary, the BPO will employ 1,500 people from nearby villages by March, thus becoming the country's largest rural BPO in the banking sector.
"As responsible corporate citizens, it's our duty to take job opportunities closer to the rural doorsteps, through economically-viable projects. In any case, it makes little sense to bring people from remote villages, most of them with a family background of small-time farmers, labourers and carpenters etc, to big cities for basic jobs", says Puri.
This altruistic effort, the scale of which will get bigger in future, also offers potentially huge cost savings for HDFC Bank. According to estimates, for performing the same level of work, an employee in a rural BPO gets around Rs 3,500 compared to around Rs 9,000 even in a Tier I city. Besides, real estate cost in villages is not even a tenth of that in Tier I or II cities and the attrition rate at around 5 per cent annually is dramatically better than 30-40 per cent in urban centres.
The Rs 3,500 salary is a princely sum for these BPO workers because they stay in their villages, spend nothing on commuting and can help out on the farm, or work as milk vendors, before their shift starts in the afternoon.
The Tirupati BPO will conduct activities that can be safely outsourced without any risk exposure to HDFC Bank and its customers. The centralised processing unit of the bank at Mumbai and Chennai scan the basic documents into image formats and transport them to the BPO over dedicated and secured leased lines. The images are used by the BPO to capture all the relevant information required for creating data files, which are then retrieved back by the CPU over the same leased lines to complete the processing cycle.
Though the higher-end bandwidth connectivity provided by BSNL is expensive, substantial cost savings will be achieved once the scale of the project gets bigger. Currently, the bank's data capturing and indexing of customer details is done in-house by around 1,000 employees spread across Mumbai and Chennai.
Though limited in scale, the concept of rural BPOs is gaining ground in India for one simple reason: It's a win-win situation for both stakeholders. While people in remote villages get jobs and the promise of a better life, companies can gain hugely in the long term in terms of cost savings. More importantly, it increases the acceptability of a company which has projects in remote areas as these rural BPOs are a cost-efficient way of giving the local population an economic stake in the company's prosperity.
Take Tata Chemicals [Get Quote], for example. In October this year, the company set up a 125-seat BPO - titled Uday - at Babrala in Uttar Pradesh, close to the company's plant. It functions as the back-office support for group firm Tata Indicom's customers in the state.
Uday is a part of the Tata group's move to recruit around 5,000 people for its rural BPOs in the next five years. The move is being spearheaded by Tata Business Support Systems, a subsidiary engaged in the business of providing back-end support such as call centres and centralised accounting to other group companies. Apart from Babrala, the other rural BPO is in Mithapur in Gujarat in the vicinity of Tata Chemicals' manufacturing unit.
Or, take the pioneering work being done by SourcePilani, a rural BPO set up in September 2007 with support from the Birla Institute of Technology and Science, Pilani. SourcePilani gets villagers to do medical transcription (conversion of medical prescriptions from audio to text format) work through customised training modules and estimates that each job created by it generates as much revenue as can be got from cultivating five acres of land in Rajasthan.
Ramalinga Raju, owner of Satyam [Get Quote] Computers, is a pioneer of sorts in India's rural BPO saga. Raju has initiated a project called GramIT, under which his family philanthropy, the Byrraju Foundation, bears the startup costs of setting up data processing centers in remote villages of Andhra Pradesh to do HR and accounting back-office work for Satyam.
Workers must have a college degree and be willing to take three-month training in computers, statistics and English before taking an exam. All who pass are offered jobs. Byrraju has adopted 160 villages so far and GramIT is looking to have operations running in all these villages.
Examples like these show how such BPOs can transform the face of rural India if they can retain even a small proportion of educated youth in villages.
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