The Karnataka government is revising its policy on setting up rural business process outsourcing (BPO) in the state with the intention to create more jobs and nurture entrepreneurship.
Some of the changes that have been proposed include bringing down the cap of the minimum 100 employees per unit to 50 and also give opportunity to entrepreneurs to partner any big IT company in setting up a rural BPO.
“We want to develop the rural BPO scheme and give more opportunities for youngsters in tier II and tier III cities of the state. To bring in the growth of BPO in smaller towns we are planning to revise the existing rural BPO policy. The policy is before the cabinet and we expect cabinet nod on this very soon,” M N Vidyashankar, Principal Secretary, IT, BT and S&T, Govt of Karnataka, said. “The Karnataka government started its first rural BPO in 2009.”
“The provision of providing employment to a minimum of 100 people was the major issue faced by rural BPOs which started operations and also rural entrepreneurs who were starting the facilities were not allo-wed to partner other IT companies. Some of those BPOs commenced operat-ions, but failed to get business,” Vidyashankar added. According to the existing norms of the policy, a rural BPO can be started by a person in the rural areas and the guideline also stated that the BPO which failed to employ 100 people within three months of the agreement would stand to lose its permit.
The present policy offers around Rs 40 lakh as subsidy for setting up a facility, but mandates that a minimum of 100 people should be employed for a continuous period of three years. In the new policy we want to bring that down from 100 employees to 50.
Meanwhile, the rural BPO operators in the state have welcomed the state government’s decision to slash the cap for minimum requirement.
“These were some of the recommendations suggested by the rural players in the state. The rural BPOs were facing an immense challenge by the condition of a minimum 100 employment. It’s difficult for start-ups to employ 100 people immediately as it requires a huge investment,” said Murali Vullaganti, Chief Executive Officer of RuralShores, a rural BPO which has a centre in Bagepalli in Karnataka. RuralShores has over six centres of which three are in Karnataka.
On the new proposal of partnering other IT companies and BPO for business, Vullaganti said, “This is an excellent move by the government. There are many big BPOs which outsource their internal works and other processes to smaller players. It will help rural companies as it minimises the need for the immediate scaling up of business based on client demands. A rural BPO which starts operations will take a minimum of one year to recover the capital investment.”
As of now there are around 32 firms in the rural BPO space. Some of the prominent ones include RuralShores, Tata Business Support Services (earlier know as Serwizsol), DesiCrew, and Comat Technologies. Recently, VC fund Lok Capital invested $3 million in RuralShores.
Some of the organisations that benefit from their services from such centres include, HDFC Bank, Kotak Mahindra Bank, Axis and many of the telecom players.
Recently, venture capital fund Lok Capital invested $3 million (around Rs 14 crore) in RuralShores. This was probably the first VC investment in a rural BPO space.
Among the top tier IT services firm, Wipro BPO, the business process outsourcing arm of Wipro Technologies, set up its first rural centre in Tamil Nadu recently. The facility has 20 seats and the company will increase it to 500 by 2013. The facility that has come up at Manjakkudi, a small village on the banks of the Cauvery in Tiruvarur district, caters to an international retail giant and serves it with a back office to back office concept.
