In Search of a New Location

On paper, it looks the easiest decision to make. Inreality, it is often the

most debated question. After more than four years of this industry coming up,

the choice of a location for a BPO facility has not become any easier. If

anything, it has become more difficult with people trying to balance between

short-term operational challenges and long-term potentials. When the BPO

phenomenon started off in India, the only thing in the CEO’s mind was to have

the operation up and running as quickly as possible. That short-term objective

is long over and now comes the bigger goal–churning out growth year-on-year.

To achieve that, companies are ramping up and looking out for viable

destinations.

Unfortunately, the way evaluation of locations is done has not changed much,

except that weightages of certain parameters (like long-term manpower supply)

have gone up, at the expense of others (like quality of telecom infrastructure,

which has become almost uniform throughout).

The comparisons are still absolute. They are still Delhi-versus-Mumbai-versus-Bangalore

versus new locations–on quality and quantity of manpower, infrastructure,

friendliness of local government and so on.

The interactions with the industry and analyses of the decision making

process suggest that should change drastically.

Two major considerations should guide the decision making process even before

one gets on to the parameters of evaluation. They are:

• Is it the company’s first
  
  center or an add-on center in India?

• What kind of
  
  processes will it be used for? (see box–Location Selection)

• And two new
  
  parameters should be used to evaluate a location that has so far been
  
  missing. They are:

• Is the location a
  
  business decision influencer on its own or just good for locating a
  
  facility?

• How will the
  
  location evolve (this can be determined by gauging at the past evolution and
  
  the influencing factors in today’s context)?

Besides, for expansion purpose, a company that has a clear

roadmap in terms of an overseas facility would look for different kind of

strengths in a new Indian location. For example, a company with, say the first

facility in Bangalore and a fairly big overseas facility for disaster recovery,

need not find it imperative to have a new Indian facility in the northern or

western region. It can pretty well look at Hyderabad or Chennai.

Today versus Tomorrow



In terms of number of companies as well as number of people working, the

national capital region (NCR) leads both Bangalore and Mumbai. While the

non-voice companies have shown a preference for either the tech capital or the

finance capital, no call center company worth its name can overlook the NCR.

Apart from GE, companies like Convergys (No. 1 call-center company in the US);

Vertex (No. 1 in the UK); and Teletech, and Teleperform—anceUSA (other major

call-center companies) have all started out at Delhi. From the point of view of

scalability, Gurgaon still beats any other location hands down. DLF and Unitech

are even now working hard to sustain that advantage.

TOP EIGHT LOCATION * Reality denotes the work being done and not the potential

Unfortunately, they can do only this much and no further. As

the skillsets-location mapping happens in a lot more formal manner, this region

may well lose out. Locations that have not been able to build a specific

skillset will find it difficult to move up the value chain. While they may

continue to get investment from companies looking at big facilities, they will

find it difficult to sustain the leadership. It is interesting that no company

has set up an add-on facility in the NCR region. In fact, Wipro Spectramind,

which started out at Delhi has now more people working at its Mumbai facility.

So for high-value work, skillset will be the most important

parameter while deciding on the location. However, for volume jobs, the ability

to ramp up will become the deciding factor. Bangalore, for example, has a lot of

skillset but people have already started doubting its ability to absorb growth.

It is not a question of real estate but the pressure on infrastructure that the

city has started experiencing. We believe Bangalore will continue to grow but

will start pushing low-value jobs to Hyderabad, Chennai and smaller locations

within Karnataka and retain the high-value work. This may happen sooner than

expected.

Beyond the big three, only three locations have been able to

build some mindshare–Naidu’s Hyderabad; the entrepreneurial Chennai; and the

rising star, Pune. In our perception-reality mapping, Hyderabad leads in

perception. Pune’s rise has been sudden. Though it still leads in reality, it

will carry an element of hype about it, with all big players queuing up there.

Chennai remains a destination where a lot of high-value work is being done, but

there is an absence of major players there (captives do not create too much

hype).

EMERGING LOCATION * It accounts for the quality and supply of manpower, political stability, social environment, potential attrition rate and ability to absorb growth ** It accounts for infrastructure, friendliness of local government, supply of middle-level manpower, vendor availability and international connectivity

The other two important locations are Ahmedabad and Kolkata.

While Ahmedabad has got a few companies, Kolkata is yet to get any big names.

However, both the state governments (Gujarat and West Bengal) are trying to

attract investors. The other state where the government’s marketing effort has

been tremendous is Kerala–‘God’s own country’. While it remains to be

seen whether it becomes BPO’s own country or not, the state has been able to

build some mindshare. As of now, Kochi, which once topped Nasscom’s ranking of

locations, is still a relatively unknown place to the business community. And

Kolkata and Ahmedabad are still in the business radars. However, in the next

phase of growth, when considerable non-voice work comes to India, Kerala could

gain. The other locations worth mentioning–for which their respective state

governments are doing some promotion–are Punjab, Chandigarh, and Goa.

The way the industry is growing, BPO companies will have no

option but to look beyond these 5—6 cities sooner than later. While state

governments’ cooperation is a necessary condition, it is not sufficient enough

for companies to come in. (See: ‘What can state government do to attract BPO

firms’)

At one point of time–and that time is not too far in future–there

will be a switchover from ‘ease of setting up’ to ‘long-term potential’

as the most important parameter for companies while deciding on a location. This

will happen when infrastructure will be somewhat uniform and thus less important

a parameter and most of the state governments will be sensitized to the needs of

the industry. Then, the quality and supply of manpower will determine the choice

of locations. Expect cities like Jaipur, Guwahati and Bhubaneswar to pick up

then.

Shyamanuja das

Selling Your State in Three Steps>>>>>>>

Kerala, Goa, West Bengal, Rajasthan... there’s a growing list of states

eager to wean some future BPO investment away from the NCR, Bangalore, Mumbai,

just as Hyderabad, Chennai, Pune are doing. BPO veterans tell them how

Step 1



The Team: Create a team of government and non-government professionals to

not only market but provide a single-window facility for all clearance. In fact,

every potential investor should be handled as a client with a

client-relationship manager handling all its needs, rather than having

functional departments responsible for satisfying different needs.

Step 2



Marketing: Market it to a few, selected companies, preferably those that

already have their first facilities running in either of the big three

locations, typically top BPO companies or big captives like GE and eServe. It is

extremely difficult to convince someone who is coming for the first time to

India to outsource his work to a place like Kochi. Never forget the power of an

anchor-investor. It has to be someone big. Ten local companies cannot do what

one GE or Spectramind can.

Step 3



Domain knowledge: As skill-location mapping becomes imperative, each

location has to develop and market one or two skills. Once a skill is

identified, that should not only be marketed but specific training courses

should be introduced in college syllabus to develop those skills. This looks a

little strange now, but this will become extremely necessary in the next few

months.

Location Selection: Preferred Parameters>>>>>>>>

Decision makers should look at the basic considerations even before

evaluating other parameters like manpower quality, telecom infrastructure, and

friendly state government policies

Is it the first center or an add-on? Today, many companies are adding their

second/ third/fourth locations. Many new companies–both Indian and overseas–are

also setting up their facilities. The choice of locating a facility should be

entirely different in both the cases.

Each company should have the first center in one of the business

decision-making centers. We have just three major and one minor business

decision-making center in India for the new economy businesses. Delhi, Mumbai,

and Banaglore are the undisputed business influencers, while Chennai is emerging

as the fourth such location. Hyderabad is trying but is yet to get into that

league, despite all efforts by the Tamil Nadu government. A company that is

setting up in India for the first time would well be advised to start from one

of these locations. Pune may be an extremely good location for setting up a

facility but is a little isolated from the business mainstream and hence would

make running the business a little difficult, if not impossible. It becomes even

more difficult for a place like Kolkata or Kochi.

On the other hand, a top BPO company looking at an add-on center could go to

any of the locations judged purely on tangible parameters, of course, in today’s

context, which takes into account the saturation of a location. No wonder, most

of these companies are queuing up for Pune. The city’s manpower and

infrastructure are excellent and the business decisions will anyway happen in

any of the major locations. In other words, these are good satellite locations.

What kind of processes will the facility be used for? As more and more

diverse processes come to India, the skill-location mapping that has already

been created on a de facto basis will become a clear parameter to decide on

locations. Today, most of the high-volume generating work comes to the major

locations. While the National Capital Region (Gurgaon in particular) get most of

the high volume of voice work because of its good accent and the ability to

absorb a lot of growth, Bangalore with its ‘tech capital’ tag gets a lot of

technical support work. Mumbai is balanced with BFSI processes being slightly

predominant. However, what is noteworthy is how some locations are building

strong skillsets in some domain areas.

Chennai, a location with problems of accent, realized its weakness early and

concentrated on non-voice work. The companies here chose to target the

healthcare providers and the fragmented medical coding and billing industry. As

a result, Chennai today houses 80% of the medical coding and billing companies

in India. It has created a sort of entry barrier for other cities. Any company

entering this space in a big way will like to tap the trained manpower,

especially middle-level managers, and thus can never overlook Chennai.