The Indian business process outsourcing (BPO) industry needs to diversify its delivery footprint to take advantage of low-cost centres; otherwise competitors, such as the Philippines, would further consolidate their position, says a study.

The study on information and communications technology jointly conducted by Associated Chambers of Commerce and Industry of India (Assocham) and KPMG said India was losing around 70 per cent of all incremental voice and call centre business to competitors, such as the Philippines and Eastern Europe.

Therefore, the domestic BPO industry needs to diversify and cities such as Ahmedabad, Chandigarh, Coimbatore, Dehradun, Jaipur, Kozhikode, Nagpur, Nashik, Palakkad among others must help meet 50-60 per cent of projected talent requirement of the BPO industry over next five years, it said.

It said IT-BPO companies could reduce the total operating costs by 20-30 per cent by moving to a low-cost city within India with cost differential at around 10-15 per cent for non-voice processes and upward of 20 per cent for voice processes.

“It is estimated that in the ongoing decade India might lose about $30 billion in terms of foreign exchange earnings to the Philippines, which has become the top destination for Indian investors, thus the need to reduce costs and make operations leaner is increasingly becoming significant across the BPO industry,” DS Rawat, Secretary General, Assocham said.

Lower attrition

He said “the lower attrition rate in smaller towns is a big positive owing to lower recruiting and training costs, while there is comparatively high attrition rate of 30-35 per cent in tier I cities.”

A number of Indian firms have reportedly set up substantial operations in the Philippines, which has a large pool of well-educated, English-speaking, talented and employable graduates.

Around 30 per cent graduates in the Philippines are employable, unlike 10 per cent in India where the training consumes considerable amount of time, the study highlighted. To provide content in the local language, there is a need to address the challenges of fonts, and poor bandwidth. Sector-specific, need-based services should be offered. Besides, even transportation costs for BPO employees and real estate prices in smaller cities are lower as compared to the metros, the study added.

Related Topics