Spreading into rural India

BPOs are moving to villages

Kizhanur is like any other village in Tamil Nadu's Thiruvallur district, surrounded by paddy fields and grazing cows. But look closely at No:1 Sivan Koil street which is awash with a new phenomenon "“ a business process outsourcing (BPO) version of ITC's e-choupal.

Chida Soft is a village BPO, doing coding on legal paper for an US client. It is run by entrepreneur Sharmila , 25, who supervises the Kizhanur franchisee of Lason India, part of the $170 million Lason Inc, US, an end-to-end outsourcing company that has a presence in the healthcare and publishing industries. Sharmila has provided the real estate, while Lason has invested in the hardware and training.

The result? One of India's first BPOs in a village that is run by a resident and employs locals. "Other than IT infrastructure, a BPO does not require good roads or houses. All it needs is abundant people," explains Pradeep Nevatia, managing director, Lason.

The initiative termed 'Lason Village BPO' is to be extended to five more locations in Tamil Nadu, Andhra Pradesh, Kerala and Karnataka by the end of 2005.

Most of those employed by Chida Soft have passed class 10 or above. "I have finished my twelfth standard and was doing typewriting. I am doing well here and have the support of my family. In the beginning it was difficult, but now it is alright," says Poongodi P, one of the 10 girls employed here. She gets Rs 2,000 a month, something she wouldn't have dreamed of earlier. She plans to acquire a Bachelor of Arts degree through a correspondence course.

The Kizhanur centre employs 15 people who work in three eight-hour shifts. Their work involves coding, keying in data and auditing legal publishing work. Having undergone a 10-day training programme by the Lason team, the employees have been generating quality levels of over 99 per cent.

The raw data that they receive get converted into coded data which are then physically taken to Lason as there is no internet connectivity. The data are coded according to a style sheet, the rules of which have been devised by Lason's tech team in Chennai.

Though legally the centre is not part of Lason, it is an inherent piece of its future growth strategy. It believes that out of the four cost components that bleeds a BPO, the price increase in communication equipment and hardware will continue, something that both the government or the industry cannot contain. However, what is within the industry's reach is controlling the cost of infrastructure and people.

To set up a 50 PC-equipped BPO facility in a city costs upwards of Rs 30 lakh. In a village, with low infrastructure investments, the costs are a tenth of this. Also, recruitment, training, transportation and food costs are minimal and the high attrition rates and rampant absenteeism that plague city-based BPOs are conspicuous by their absence.

Another company which has been bridging the digital divide between urban and rural Indian since 2001 is the Delhi-based Datamation group. As part of a unique private-public partnership, it involves non-government organisations (NGO) to hire and train a work force from under-privileged sections of society. But unlike Lason, the Datamation group owns and operates all the BPO centres it runs.

"We employ about 40-50 individuals in Kuppam (Andhra Pradesh) and in about five to six villages in Uttar Pradesh. The work is primarily data entry and data processing. The employees may lacking English speaking skills but they make up with their sincerity and desire to learn," says Chetan Sharma, founder of the Datamation group.

The guiding philosophy for the initiative comes from a not-for-profit society called Datamation Foundation Trust, while the commercial end is fronted by the Datamation group.

Datamation has also operated Hewlett-Packard's rural BPO initiative since February 2000. The five to six member team that it has there is expected to grow to about 15 in the next three months. The BPO initiative is part of HP's bigger project called HP i-Community in Kuppam, a community of 320,000 people in four villages.

The i-community project includes tele-medicine, turning rural women into entrepreneurs using digital photography, setting up a public grievance system, an online farming information system, an electronic employment exchange solution, among other things.

But setting up operations in a rural area might prove difficult for most BPOs. Lason is following a decentralised business associate (BA) model. A central tech team located at its Chennai office delegates parts of projects to about 60-odd centres in and around Tamil Nadu and Pondicherry.

"About two years back we anticipated a need and went to class B towns and developed a site in Pondicherry and Kanchipuram. Some components of the project which call for low skill sets have to be done in villages, or the work will go to China or the Philippines," adds Nevatia.

The central hub in Chennai employs about 1,000 for the core of the outsourcing activities. The rest is distributed across 60 centres employing 5,000 personnel.

"We went to where the employees were coming from and asked our people to manage it. But we found out that it's better to engage entrepreneurs who will invest in the business because the sense of ownership enhances productivity," points out Nevatia.

So while entrepreneurs invest in infrastructure and hardware, Lason takes ownership of the entire hiring process, training and development and remotely manages and monitors the entire proceedings.

To give it a separate identity, entrepreneurs are given the freedom to brand their operations separately, but Lason ensures that the infrastructure and the systems and processes to be followed are standardised. Lason estimates that 30 per cent of the $25 million revenues that it earned in 2004 came from the smaller centres.

Before moving to villages, Lason moved to tier 2 cities three years ago. It currently employs 300 people in Pondicherry and 400 in Kanchipuram. The complexity of the work outsourced to these centres has increased in the past three years, as have quality and productivity levels.

At the moment, Lason Village BPO and Datamation's vision maybe just experiments. But in two years the shift to rural areas may become more of a necessity, as the BPO industry will be embroiled in a grim survival game. Countries like China, Philippines and Poland will try to copy India's low cost, plenty skilled labour BPO model.

All the other IT and ITES companies are still trying to get their tier two city strategy right. It's only a matter of time before they are also bitten by the village bug.