BPO industry set to impact small towns of India

Thanks ironically to Covid-19, cheaper costs, healthier lifestyles and shrinking margins will lead to a new boom in business process outsourcing services in Tier II and Tier III Indian cities.

A black swan event like the Covid-19 pandemic has accelerated and amplified the trend of digital adoption and with it made the concept of work from home (WFH) much more acceptable even in sectors where it was considered alien till less than six months ago. According to many leading HR experts and business analysts, this is bringing about a paradigm shift in the way workplaces approach issues such as leadership, selection, screening, training and, indeed, the entire gamut of staffing and related subjects.

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BPO sector to be among the most impacted

One industry that will be affected much more than others is the business process outsourcing (BPO) sector. After all, if a worker sitting in Bangalore, or Gurgaon or Hyderabad can meet the service needs of clients sitting in the US or Europe or any other location in the world, there is no reason why these same functions cannot be fulfilled from smaller Tier II and Tier III cities, or, for that matter, even from villages. All it needs is a laptop, reliable power supply and a robust internet connection.

Not only will this lead to a significant reduction in office and other costs but also increase the talent pool available to companies in this space. For example, a well-established company like Startek, which was earlier called Aegis BPO, is already ramping up its operations in smaller, non-traditional centres like Lucknow, Bhopal and Chindwada. In fact, the company already has 3,000 employees in these cities and is looking to increase this to about 20-30 per cent of its total workforce. It currently employs about 50,000 people in 13 countries across the world.

Startek is not alone in setting this trend. Genpact, a global professional services firm focused on digital transformation, is also looking at smaller towns for talent, as the bulk of its employees come from these places.

Jobs will come to employees

This is leading to a fundamental change in the way business is conducted. Till now, it has been the norm for people living in smaller towns and villages to migrate to the big cities in search of jobs. This involved heavy costs especially in the case of senior-level recruitments as moving costs, housing costs, transportation, etc., had to be factored in both by the employers and the employees.

Then, Tier II and Tier II cities in India have been relatively less impacted by the Covid-19 outbreak than the big cities like Mumbai, New Delhi, etc. Many experts said, facilitating WFH, especially from smaller cities and towns could reduce attrition rates as there will be fewer opportunities for switching jobs.

US candidates applying for Indian jobs

For example, when Teamlease Services, one of India's leading staffing solutions companies, was looking to fill up a vacancy in its marketing department, it was surprised to receive, in addition to the expected applications from across India, enquiries from candidates in the US as well. And this isn't an isolated incident. Companies like Teamlease and other leading head-hunting firms report receiving applications from the US, Mexico, South America, South Africa and the Middle East for jobs that, conventional wisdom suggests, should be of interest only to Indian residents.

This according to Swarup Mukherjee, who runs a boutique head hunting firm in New Delhi, can potentially pave the way for the next wave, at the top end of the BPO sector. Following the global slowdown in the wake of the Covid-19 pandemic, margins of all companies are under pressure not only in India but across the world. In order to cut costs, many global corporations could be looking at India to outsource high end jobs in architecture, processing and design, R&D and strategy in addition to the traditional IT and BPO functions.

Next wave of outsourced jobs

This could set off the next wave of employment creation for professionals with the requisite skills in India. Many companies had earlier refrained from outsourcing these jobs because they were wary of sharing proprietary information and market intelligence with outsiders. But with margins severely curtailed and demand remaining sluggish, the imperative of cutting costs may override these concerns in several large global firms.

There's a pull factor as well. Indian companies have adopted WFH with a swiftness and efficiency that is comparable to best practices anywhere else. Add to it the familiarity of most educated Indians with English language and you have a combination that most other rival countries will find hard to match.

As Nasscom President Debjani Ghosh tweeted, the wider acceptance of WFH rules ensures business continuity, employee safety and most importantly makes the talent pool present in Tier II and Tier III cities more easily available to the big corporations.

“A person does not have to migrate from Jodhpur to Bengaluru to work in a multinational company, with options such as WFH,” Tiger Tyagarajan, President & CEO of Genpact was quoted as telling a leading Indian financial daily.

The spread of the pandemic and the increasing adoption of WFH is also altering lives and lifestyles. At a professional level it is also changing some very basic assumptions of the human resource functions of companies and this will have a lasting impact on the way the workplaces of the future evolve.

41% employees want WFH facilities

A survey conducted by Gartner, leading global company in the field of advisory and research services, recently found that 41 per cent of employees would like to carry on working from home even after the pandemic passes and the associated scare subsides. With health and safety becoming a key issue for many people, the benefits associated with WFH like no commuting, much less exposure to the pollution in big cities and the additional flexibility it affords, are becoming key issues for companies to take into account.

Pushing the trend of BPOs recruiting and basing employees in smaller towns and cities is the rising amount of local business opportunities in these centres. Apart from being able to serve global customers from relatively cheaper locations - thereby improving margins both for the principal as well as for the Indian BPO company - is the fact that rising prosperity in semi-urban and rural India is creating a new market for BPO services. The increasing penetration of e-commerce, tech-enabled deliveries and other customer-facing functions will lead to jobs in supply chain management and back offices in these areas.

Infrastructure will be a challenge

However, this trend of WFH and the transfer of traditionally big city-based jobs to smaller centres will also present significant management and HR challenges. The most significant is infrastructure. Despite improvements in power supply and internet availability, these can still be patchy in parts of India.

Fostering a common culture will be difficult in a scenario where employees are widely dispersed and there is, at best, only infrequent one-on-one interactions. Professional bonding and loyalty will be a challenge that HR managers will have to grapple with.

But that is for the future. For now, BPO will take on a much wider meaning than it has held in the past.