A tough global economy, tightening client budgets, and rising costs have pushed the Indian IT-enabled services like BPO's into a cost-control mode. CNBC-TV18 tells us how the government's BPO promotion scheme is redrawing the Indian BPO landscape, with tier-2 cities becoming major attractions.
A tough global economy, tightening client budgets, and rising costs have pushed the Indian IT-enabled services and the business process outsourcing (BPO) industries’ into a cost-control mode. CNBC-TV18 reports this exercise, along with the government's BPO promotion scheme, are redrawing the Indian BPO landscape, with tier-2 cities becoming major attractions.
Already, the government has given in-principle approval for over 9,000 seats under the India BPO Promotion Scheme, which subsidizes BPO companies for setting up operations in Tier-2 and Tier-3 cities. Numerous companies have already begun tweaking their long-term strategies to include smaller towns.
"We have quite a few things. A few years ago we moved into Trichy and Salem, which are quite attractive and doing good there, now I would be quite keen on exploring the so-called Tier 3 locations in India," says Aruna Jayanti, CEO - Business Services at Capgemini.
But, 9,000 seats is just the beginning.
With a total outlay of Rs 493 crore, the Ministry Of Electronics and IT plans to set up 48,300 seats in such cities. The aim is to provide employment to nearly 1 .5 lakh people in the BPO industry by the end of FY18. The scheme also has a provision to provide 50 percent of actual expenditure, capped at Rs 1 lakh per seat.
What makes this scheme really tick, though, is its timing. It comes at a time when the Indian BPO industry has come under pressure from rising competition from rival markets and shrinking client budgets.
the industry today is highly competitive and the search for more cost-effective locations is constant and is global, so the competition is not between Bengaluru and Chennai or NCR but it is between these locations and countries like Phillippines and different parts of the world. CIS countries easy European countries so there are other cost effective locations which could stack very well viz a viz Bengaluru or a Mumbai, it should not be happening and the perhaps is where non-metro locations come into to the picture , so even from the point of view of meeting the needs from other locations we have to adopt this kind of dispersal strategy to remain competitive in the global environment says, R Chandrashekar, President of Nasscom.
This need for competitiveness has increased with the rhetoric of protectionism arising in many economies including the USA. But with industry playing ball, the government's efforts to give Tier-2 and Tier-3 cities an overhaul along with a facelift may not be in vain. The 2 rounds of bidding that have been completed so far have seen close to 83 bids for over 15,000 BPO seats and the 3rd round of bidding which is currently under way is expected to garner a lot more bids.
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