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Rural BPOs: pushing economic boundaries

Rural India is home to more than 72.2 per cent of its total population, out of which only 58.7 per cent people are literate. Still, rural to urban migration has been a continuously growing trend in the past few decades due to better education and employment opportunities. The rural BPO sector offers significant opportunity to fill this crucial gap, without investing too heavily in infrastructure, unlike manufacturing or processing units. This trend is on the rise and is helping in reducing the urban-rural divide by generating employment and transforming the country’s rural landscape. Ashwanth Gnanavelu, Business Head at DesiCrew Solutions Pvt. Ltd., says, “At present, there are a significant number of rural BPO centres operating across the country. There are 90-plus locations with more than 31,000 seats across the country. Gone are the days when rural centres were being considered only for low-value tasks. We now have centres that are working on Machine Learning, Artificial Intelligence (AI), customer experience management and so on.” ¿

Growth of the rural BPO sector in India was considered an offspring of the BPO industry establishment during the first decade of the 21st century, which was driven by low operational costs in India and the rest of Asia by global players. While the BPO sector in metro cities addresses the high-end, knowledge-based operational needs, the low-end services segment is taking a shift in smaller towns.

In the next decade the BPO sector seeks an expansion to Tier 2 and 3 cities to serve Indian towns and villages, which gave rise to the growth of rural BPOs.       

The factors that pushed the growth of rural BPOs in India are: 

  • The burden of such non-challenging, non-core tasks as automated data processing and data entry shifted this work to Tier 2 and 3 cities, leaving the core service sector with Tier 1 cities. 

  • Increased operational costs in metros and Tier 1 cities forced leading BPO players to open service centres at cheaper locations. Also, rural BPOs witnesses low or no attrition as compared to urban BPOs.       

  • The rural workforce with limited computer and English knowledge and projects involving native language translations/transcriptions were given a legitimate platform for employment through rural BPOs.  

  • India no longer holds the top position in terms of the cheapest English-speaking workforce; other regions like South America and the Philippines are grabbing the eyes of global players. 


Opportunities and challenges

While cost-effectiveness and low attrition are seen as upsides to rural BPOs, the infrastructural challenges remain a major issue for them, such as 24x7 electricity and Internet connectivity. “Rural BPOs started off as a fancy and wishful model for many mainstream BPO companies, entrepreneurs and the government, about 10 years ago. However, the model is suffering because of infrastructure pangs like power, ISP and the availability of skilled manpower.

“Rural BPO companies could not scale to the extent that was expected because they were not able to meet the demands of the market. Any BPO, regardless of the location, should be able to offer a range of services. A rural BPO is constrained to provide only low-end work, leaving a lot of money on the table,” opines Karmesh Ghosh, Head Business Development, JSW Foundation.

Still, these enterprises are sustained and have provided opportunities for local employment. Also, rural BPO fuels entrepreneurship in rural areas, which brings a significant change in outsourcing trends in the country. With Narendra Modi government’s push for rural electrification, 24x7 power and Broadband Internet connectivity, the sector may soon get a major boost from an operational point of view.

For rural BPOs, new opportunities lie in supporting the huge startup ecosystem by offering competitive prices and great quality. 

  • Well-funded startups and growing companies are looking to outsource all repetitive, voluminous tasks that add little value, in order to focus on their own business.¿

  • A lot of focus and funding is happening in vernacular technologies, which is a new opportunity for rural BPO companies, if they have multilingual skill-sets.

  • Rural BPOs can also piggyback on large BPOs based out of metro cities by¿being their sub-contractors.

  • Mainstream BPO companies should not exploit the situation by squeezing the small guys in term of margins.¿It is in their interest to see that the rural BPO ecosystem grows and thrives.¿

There is constant pursuit by the ITES industry to identify models with lower cost of operations and to outsource its non-core activities. In this pursuit, it reaches out to new geographies and partners.¿With better infrastructure and educated youngster, Tier 2 and 3 towns offer good prospects to the ITES industry.¿“With the advent of such technologies as robotic process automation (RPA) and Machine Learning, the BPO industry itself is going through a churn.¿There is a need for these companies to reinvent themselves in order to be relevant to their customers.

“Also, the value proposition cannot just be the cost advantage and labour arbitrage.¿Over the last 10 years, we have seen a lot of rural BPO units come up and close down. The support from state and central government initiatives has given them a fresh lease of life. Various skill development initiatives have also made a huge impact to the availability¿of trained resources in different regions,” opines Gnanavelu.

The state and central governments can play a major role in creating sustainable delivery centres. There are plenty of opportunities in the government sector, and those can be executed out of rural BPO centres.¿Digitisation of documents, setting up contact centres for citizens and supporting e-governance initiatives can be some of the tasks that can run rural BPO centres. Scale can be achieved only through the government's intervention.

“A long-term reimbursement scheme with a number of caveats will tire a genuine entrepreneur, who will lose their passion soon,” cautions Ghosh. “The government should create a conducive business environment, including giving subsidised power, employee subsidy, SEZ-like tax breaks at block and district level locations, and so on. Automatically, the businesses would get attracted, just like it happened in the electronics, automobile or textile industries,” adds Ghosh.


Promoting Indian rural BPOs 

Under Modi government’s Digital India initiative, the India BPO Promotion Scheme (IBPS) was launched to promote BPO and ITES operations across the country. The objective of this scheme is to generate rural employment in remote locations across India. IBPS also aims to bring potential investments in the IT and ITES sectors to expand its footprint in pushing regional growth. The scheme had state-wise allocation of BPO seats with financial support up to ¿ 1,00,000 per seat in the form of Viability Gap Funding (VGF) from a corpus of ¿ 493 earmarked for FY18-19.

Special incentives for women and the disabled in remote locations are also being offered under the scheme to cover underprivileged areas. In addition to this, entrepreneurs in hilly states are being encouraged with special incentives for their ventures. The government intends to provide employment to around 1.5 lakh people through 50,000 seats considering 24x7 operations in these units.

“The IBPS is a great opportunity to bring the BPO industry to smaller towns.¿We have found STPI teams to be extremely supportive in assisting us through this scheme.¿Thanks to this initiative, we have big names venturing into Tier 2 and 3 towns. This also creates an ecosystem in these areas, whereby resources are primed¿before they enter the job market.

“The success¿of this programme would pull the brakes on urban migration, promote wealth creation in rural areas and extend economic boundaries,” says Ashwanth. At present, more than 100 BPOs with novel ideas are working successfully in India. Indeed, there is a growing number of skilled migrated workforce in urban locations that wishes to return to their native places, if given a suitable opportunity. Tapping this potential reverse migration trend could address the problem of unskilled workforce in rural BPOs.