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BPO Industry Should Move To Tier II Cities: Infosys
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If a company could set up an outsourcing operation in a place like Assam or Guwahati, people would not want to move out. This will help in curbing attrition and bring more stability in the industry.
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Friday, May 11, 2012:
It's time for the BPO industry to move to Tier II and Tier III cities to bring stability to its operations and avoid high rate of attrition, opines Narayan Sampath, associate vice president of India business, Infosys BPO. In an exclusive chat with EFYTimes.com, Sampath asserted on the need for the expansion of BPO industry in Tier II and Tier III cities.
Outsourcing has become a need for companies in foreign nations. But companies in India still restrict themselves when it comes to outsourcing. Do you see this as a retarding situation for the industry?
Yes, there is very little that Indian companies have done with respect to outsourcing. But I see it as a market opportunity. There are areas of work that can be outsourced by Indian companies and I see huge potential in it. There is immense amount of growth opportunity in the Indian market.
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Do you think we have adopted the right kind of growth model in the past ten years?
We have grown back on the outsourcing necessity that existed in the West, where cost pressures lead to definite push towards outsourcing. It was the cost arbitrage that led to the initiatives of outsourcing. So if an American, or an Australian company did that, it was because they had severe pressures on cost and Indian outsourcing providers offered to do the same job at one-third of the price as compared to what they were getting otherwise. Indian companies have taken a ride on that and that's how the business has grown and it has leapfrogged in this period of time. To that extent, I think I cannot find fault in sensing an opportunity and growing with that.
Having gone to this distance, I think the time has come for this model to be adapted in India. For one, Indian companies have gone global, therefore, they are also looking for greater efficiency in their business processes. When you are small and you are operating in a local environment and uncompetitive environment, then probably Indian companies cannot afford to overlook internal costs and back office cost. But, now having gone global and facing intense competition from international markets, there is every reason why they should start looking at this option. I think it is imperative for Indian providers to cater to the domestic market.
There was international pressure that drove our growth initially but now there is Indian economy also which has come into play. Companies like Airtel consider outsourcing as one of their major needs to grow in the current competitive environment. Does that give the desired boost to the Indian BPO industry?
Very much. There are companies that know the importance of outsourcing but those are just a handful of them. Today when we speak to clients, they are not very sure as to why they should outsource. Their learning process has started but it needs to accelerate over time. We are dependent on our clients. When we make our clients do well, that is when we will grow. The clients have a certain business need and that can be serviced very rapidly. For instance, an Indian company wants to grow abroad. They are acquiring a company in an overseas market and have to set up a shop. Now they should be focusing on growing the market and settling down in a new country and looking after opportunities of growing business in that country. In that kind of a scenario, if a BPO service provider can quickly provide a back office that can scale up and provide the best practices, they would instantly get going. Otherwise setting up shop in a new country or a new environment is difficult. Similarly, multi-national companies are coming and setting up shops in India. They would be new to this country, alien to the procedures and processes that exist. In this environment, if a BPO service provider can provide services that can make the company have a speedy start, take away the worries out of the CEOs, so that they can focus on their main business while the back office engine that is driving that organisation is taken care of by service providers like us, they would be very happy. Therefore, these opportunities provide a lot of growth potential in the country.
When we look at the top BPO companies in India, they are all the ones that have integrations with IT companies like Infosys, Wipro, iGate, etc. But pure BPO companies are really not able to scale up to that level where such integrated companies have reached. Do you think BPO companies need to integrate with IT companies to grow further?
Correct. The cost arbitrage in the Indian market doesn't virtually exist. So you cannot substitute 100 FTEs of an Indian manufacturing company's financial accounting department by another 100 people and enhance efficiency. There has to be a certain process improvement which can come only with technology play. Otherwise we are not going to substitute person X by person Y and give benefits to the client as well. So it has become imperative for any company in this field to become adaptable to technology, to bring in technology related solutions, bring about platforms that will accelerate productivity, gains, etc. Yes, I think it is important.
Infosys has been a pioneer in adopting the non-linear growth model. Non-linear model is supposed to be an ideal one for the BPO companies but there are just a handful of companies that have been able to do so. What do you think are the hindrances in adoption of non-linear growth model?
I think one of the reasons is that the enabling of business processes through IT has picked up in the past 20 years. Both large and small companies have adopted IT. They have implemented ERP systems. So in such cases, as a BPO service provider, if we make a platform, it has to complement the existing system. It cannot throw away the older systems. So to that extent, the growth has been a bit slower because you cannot sell a value proposition against something which has already been invested into. People have gone through a lot of pain and have put in so much of effort to get that previous process to speed. So from that point of view, the solutions that we create, have to complement the IT solutions or the platforms that already exist. To an extent, our success has been in identifying that area, which complements the platform that is already available. Our effort is not to destroy or take away the investment that the client has made but to work with them and make those work. So I think we can identify such areas to get the non-linear growth model accelerated.
Infosys always promotes BPOs in Tier II and Tier III cities and of course the concept of rural BPOs. What are you plans of expansion in Tier II and Tier II cities in FY13?
We have five centres in India- Gurgaon, Jaipur, Pune, Bengaluru and Chennai. We operate from these large cities. Regarding the rural BPOs, any of these will not be run by Infosys. We foray in these areas through partnerships because partners bring in the type of administrative and managerial skills required to run a rural BPO. Given our size and scale, it would be impossible for us to set up shops across Indian and run them. So we have partnered with two firms and we are working through them to take the BPO jobs to rural markets. These two are Bengaluru-based companies, but they have centres across India. The concept is still in its nascent stages and it needs to grow because we need to gain acceptance of the clients to move jobs there because finally for the clients it doesn't matter where the job is delivered from. They just need to conform to the highest standards of quality, reliability, safety and security. It's a growing and an emerging model for us.
What kind of growth do you see for rural BPOs and the ones in Tier II and Tier III cities in India?
Not many companies can opt for such models as they may not have much choice. As we grow in the Tier I cities, there is hardly any space left. We are hunting for the same talent, attrition is bothering every player. So if we have a shop in Bengaluru, we are brining jobs from say US and migrating labour from Assam or Guwahati to come and work in Bengaluru. So I see it as an inefficient model. Cities are becoming costly, infrastructure is getting difficult to get and by displacing people from their natural habitat, they are causing more stress to both people and system and it is leading to attrition. There is a lot of instability in the system, in the lives of the people, in operations, customer delivery because of these rapid changes that are happening in the people front. So, given all that, it is imperative for the companies to start looking at options of taking jobs to the places where people live. For instance, we are in Bengaluru. If a company could set up an outsourcing operation in a place like Assam or Guwahati, people would not want to move out. This will help in curbing attrition and bring more stability in the industry.
Diksha P Gupta, EFYTIMES News Network
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good move