BPOs The Call of Rural India

Rural BPOs have a bright future. Just a little support from the Government will ensure the industry growth.
BPOs The Call of Rural India

Imagine, when someone who has never seen an ATM or a credit card has to learn about the loyalty card, its features, understand the member’s query, investigate the issue and formulate the response in English in a manner that could satisfy the client – its is a sheer magic.

And when this ‘someone’ is just a 12th class pass villager from India, it only evokes awe and wonder. Many rural BPO companies have made it possible out of call centers in small towns and are slowly transforming the face of rural India.

India’s BPO or BPM sector, which is worth around $25 billion, is expected to reach $50 billion by 2020, as per Nasscom. Of this, rural BPOs have a tiny fraction. Clearly, there exists an untapped opportunity in hinterland.

Opportunity Galore
The concept of rural BPOs emerged when many people of the industry realised that real estate and operating costs are going up in metros and the business is not as thriving as it used to be initially. And with the growth of the industry, grew its challenges – such as poor infrastructure, customer acquisition and training support – that need to be addressed.

Highlighting the challenges of rural BPOs, Murali Vullaganti, CEO, RuralShores, says,“Establishing centers and running them at rural locations remain a challenge due to infrastructural bottlenecks, non-availability of uninterrupted electricity and Internet connectivity.”

Ajay Chaturvedi, Founder and Chairman, HarVa, agrees. “The basic challenges are the lack of infrastructure and poor connectivity,” he says. Besides, we put efforts to change the mindset of the people and convince them to cooperate towards inclusive growth with HarVa, he says.

In addition, access to working capital is an issue. To fulfill the working capital requirement, if you will go to venture capitalists, they will talk business. And bank’s definition of SME is somebody with a business of Rs 25 crore and above. Hence, it is a challenge till now.

“If you will sell the concept of a rural BPO, you are bound to fail. The business model has to be economically viable. It’s positioning also matters,” says Chaturvedi.

Vullaganti adds, ”Getting to the CXO level is easy, but convincing the process manager to outsource work to us is always difficult.”

Stressing that it is fairly easy to start a BPO in rural areas, Manivannan JK, CEO, DesiCrew, says, “The challenge is in customer acquisition and delivery.” Way back in 2007, several customers appreciated the concept of a rural BPO. But, they were not sure about the bandwidth, power and people skills. It took a lot of efforts to showcase the skill sets of the educated rural youth, undertake pilot projects as a proof-of-concept to demonstrate our delivery capabilities. While most customers were cost-conscious, they would not reduce the quality standards or timelines, he shares.

Over a period of time, they observed that customers moved away from asking these fundamental questions and were more interested to know about the transition, governance and matters on IT-compliance.

Benefits of Rural BPOst
The technical revolution has brought great opportunity to India, but many rural areas have been left behind. “Rural BPOs bring opportunity to work beyond agriculture or weaving by integrating with the information economy to outsource work outside of urban areas,” says Pomai Verzon, Business Development Manager, IndiVillage. These jobs are a game changer for communities, especially as part of models like IndiVillage that focus on employing women and investing in the education of the community, she adds.

As per industry estimates, BPOs in small towns can reduce costs by around 40 percent compared to typical urban BPOs.

This does not end here. Higher wages have also led to significant migration from rural to urban areas. However, these urban centers face higher attrition due to factors including poor living conditions, distance from their families and better opportunities in other sectors.

Conversely, employee retention is much better in rural BPOs as they offer employees an opportunity to work at a place that is closer to their home. As a result, these centers can bring down attrition from 40-60 percent to 8-12 percent.

“ITeS in the rural area not only helps curb urban migration, but also provides employment opportunities for qualified rural youth,” emphasis Vullaganti. With sustained employment, there is an increase in income of the household, which further translates into investment in consumer durables, increased purchase of branded products and regular savings as well.

He further adds, “Setting up a center on an average results in the injection of cash, close to a million INR per month, into the village economy, which creates additional jobs and positively impacts the economic conditions of the village.”

Hub-and-Spoke Model
Rural BPOs differ from their city peers – no fancy, glass facade buildings employing thousands of employees under one roof, but spread out like hub and spoke. They typically engage around 100-150 people unlike the 500-1,500 employees in urban centers.

However, in terms of customer delivery, there is no difference, believes Manivannan. “We have a no-frills but functional center that meets customer requirements in terms of data security and accessibility. The value of the job is significantly higher, in relation to the impact it creates in the local community,” he adds.

Government Support
Talking about the Government support, Chaturvedi says, "While the Government has a lot of schemes like the Rs 1 crore collateral free loans for entrepreneurs, I have never seen any of our partners being able to get it. While we have managed to scale across 14 states with the help of our partners, the partners themselves find it extremely tough to raise working capital for a BPO. The Public Sector banks are still focused on brick-and-mortar businesses. A BPO, while exciting and a romantic idea, still does not generate the confidence in them to give collateral-free loans."

Saloni Malhotra, Founder, DesiCrew, says, “Government can be one of the biggest sources of creating outsourcing jobs. There are several opportunities in the data management and citizen contact center verticals. These jobs can be executed by the rural BPOs spread across every state.”
Apart from this, the Government can provide a subsidy, capital and training support to rural BPOs. There can also be a tax exemption provision for firms that engage impact sourcing companies, she adds.

Vullaganti says, “Government could contribute significantly through modifying their tender criteria to accommodate rural BPOs, through giving their digitisation work to rural BPO, and also through a subsidy for opex.”

Why the growth is still slow?
The presence of rural BPOs in India has actually expanded in the past few years, but growth can be tricky for several reasons. “There is only so much data entry work available, which means rural BPOs need to diversify their revenue streams to stay sustainable. For centers that have successfully built a business around data entry or digitisation, low attrition can actually become a problem as workers want to grow but have reached the ceiling,” says Verzon of IndiVillage.

Chaturvedi firmly believes that a business can’t grow just because it is inexpensive, it will always grow if there is a demand. To keep the demand growing, the product or service quality has to be good which requires hiring qualified managers for rural. While scaling up the business, more and more such managers need to be hired. And the cost that you save in the form of low cost of operations would get compensated by these well-paid managers.

Road Ahead

With central government emphasising on education, infrastructural development through PMGSY and initiatives such as Digital India, the key challenges of establishing rural BPO would be addressed in the near future. “Rural will be the next destination of IT-BPM industry owing to lower costs, high availability of talent and huge market access,” opines Vullaganti.

Looking forward, Chaturvedi believes the rural sector will be the engine for growth because prospects in urban India are shrinking. With technological advances, the outlook of villages has improved significantly, thus allowing companies to produce an array of goods and services for and from the villages.

Clearly, the industry is here to stay and has a bright future. Just a little support from the Government and industry will ensure its growth.

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The Changing Face of Rural India