September 2006

TeNeT’s Rural BPO Initiative

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The TeNeT Group at IIT-Madras has worked over the past 18 months on a rural BPO initiative that links urban clients with a rural workforce through the Internet kiosk network.

Far out of reaches
In a village with a population of six thousand, where the primary occupation is weaving, Thenmozhi, a young graduate, runs an Internet kiosk business. With a single connected computer, she provides a variety of services to the community that includes browsing, games, photography, education and Desk Top Publishing among others. Over a period of a year, her income has grown and she has added two more computers to the kiosk. Today, with three PCs, she provides Business Process Outsourcing (BPO) services such as data entry and data conversion to clients located in distant urban centres.

In another village, Rosy, a young mother, runs a kiosk, where she employs four people and provides BPO services such as localisation of content and Computer Aided Design (CAD). While these stories are undoubtedly incongruent with our predominant perceptions of rural India, indeed today BPO operations are making their way to the most remote and unlikely parts in the country.

As celebrated New York Times columnist, Thomas Friedman, observes in his latest book ‘The World Is Flat’- “all you need now is a global, web-enabled platform for multiple forms of sharing knowledge and work, irrespective of time, distance, geography and increasingly, language.” As rural India is increasingly connected, there is no reason that jobs cannot move – as they have from London to Bangalore – to Vadalur, an unheard of village in the southern state of Tamil Nadu. Today there are approximately 15,000 Internet-enabled villages in India. With various efforts underway toward enabling rural connectivity, such as
Mission 2007 and the CSC scheme of the government, this number is projected to reach 100,000 in a few years’ time. In this scenario, the potential for the rural BPO industry can only be expected to grow.

The rural BPO business model
The TeNeT Group at Indian Institute of Technology, IIT-Madras has worked over the past 18 months on a rural BPO initiative that links urban clients with a rural workforce through the Internet kiosk network. The team identifies and trains workers in rural areas in various skills, relevant to the BPO industry. It liaises with urban clients and takes complete responsibility for the outsourcing and timely delivery of the projects undertaken, and ensures that quality standards are met. As a coordinating agency, the team protects the interests of both the clients and the kiosks. At the village-end it filters out unproductive kiosks from the system, and at the city-end it runs due diligence checks on the client to guard against fraudulent BPO activity.

This unique initiative has a portfolio of services that includes typing in English and regional languages, data entry operations, web and multimedia development and regional language translation. More recently, engineering services such as 2D drafting and conversion of 2D to 3D for the manufacturing sector have also been introduced.

While the model today runs on a smaller scale, a typical rural BPO centre, to be envisaged in the future, would consist of 10 PCs running in two shifts. Each centre would employ between 10-20 individuals, and the kiosk owner would be responsible for hiring and managing the staff, ensuring that timelines and quality standards are adhered to, and managing daily operations.

Impacts and benefits
BPO activity in India is clustered around 5 main hubs today. These centres will continue to remain important in the future, but the industry is looking to expand to other locations for several reasons. Newer locations would imply access to a larger workforce, provide an opportunity to further reduce costs of operation, help acquire language-specific skills and mitigate overall business risk and ensure business continuity. Expansion to newer locations would also help to reduce the pressure on infrastructure, being faced in the current locations.

Rural areas can be attractive outsourcing destinations for the BPO industry primarily because labour is less expensive than in the cities. Also minimal investment in infrastructure is required in the existing kiosks in order for them to serve as BPO centres. Rentals and overheads in these areas also tend to be low, further adding to the arbitrage. The most important leverage in this arrangement, however, is the existence of an entrepreneur running every kiosk, who is a trusted entry point into the village.

Likewise, the Rural BPO model offers significant benefits to the rural population. With IT training, the youth in rural areas are exposed to skills that are highly valued in today’s economy. As a result, their productivity and incomes increase, and so, also their personal confidence. The entire rural economy begins to thrive as more money flows into villages, allowing for more equitable economic growth at the national level.

Challenges
While the concept described above has been executed with encouraging results, the challenge is to scale it to thousands of villages. The constraints today are mentioned below.

• Though a large number of students pass out of schools and colleges in rural areas every year, only a small percentage is employable as per industry standards. Their skills must be enhanced so that they can be absorbed into the work force. General training in line with BPO industry requirements and specific training programmes for each of the IT services is required.

• Ensuring high quality and timely delivery of work from a widely dispersed and remotely located workforce calls for effective management systems and creative use of ICT. The Rural BPO team has already made some breakthroughs in this direction. Processes are also required to monitor and assess performance of BPO workers periodically. 

• Frequent power disruptions call for power back ups to ensure continuity of business operations. However, the situation differs vastly between states.

• Creating confidence among clients in urban areas and abroad to engage with rural areas in business transactions is required. To overcome this, support is required from several quarters such as industry associations, governments, NGOs, the press as well as other well-established industry clients.

The vision for the future
According to Nasscom, the BPO industry in India has experienced a year-on-year growth of 37 per cent in FY 2005-’06, and the size of the market is estimated to be $9-12 billion today. It employs around 400,000 people and is expected to face a shortfall of 262,000 professionals by the year 2012. With some IT training, there is a significant opportunity for the large number of high-school graduates and undergraduate degree-holders in rural areas to fill a part of this gap in the future. The potential of IT-enabled services is much larger than that of manufacturing or other services because it does not involve the physical movement of goods or people.
If the goal of setting up Village Information Centres with connectivity in 100,000 villages is achieved, all of these villages would have the potential to act as BPO centres. Consider 10 percent of these villages employing 20 people at an average salary of $65 per month. This would directly add $1.56 billion to the rural economy per annum and create 200,000 jobs. The demand for several allied industries such as hardware servicing and software development would also grow.

The rural BPO team envisions playing a significant role in this IT revolution, by leveraging the power of computing and connectivity to create wealth in rural areas. The team intends to build capacity in villages, to create the right systems and networks for remote business operations and to ensure the highest level of professionalism and quality standards. The group believes that this is not just a significant business opportunity, but also a means to catapult the pace of rural development in the country under a wholly different paradigm.

For more details visit: www.ites.tenet.res.in

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