With telecom connectivity be coming a non-issue and with the need to tap the skilled manpower spread across the country, BPO companies have started venturing out of their nerve centers—the A-class cities.

BPO companies have started looking beyond the traditionally hot destinations like Gurgaon, Delhi, and Mumbai. Cities like Pune, Chandigarh, and Kolkata, are slowly emerging as the darling destinations for both new companies and also for those who are looking at expansions. For instance, GE, the BPO pioneer heavyweight, instead of augmenting its existing capacity in Gurgaon and Hyderabad, preferred to move to Jaipur recently. Msource, the BPO arm of Mphasis-BFL, dared to choose Pune as a base. Spectramind also has started its center at Pune. According to Milind Chalisgaonkar, CEO, Msource, said, "We are very happy. We are able to get good infrastructure, and talented people to adhere to our aggressive ramp-up plans. The telecom connectivity is excellent." According to Rohan Sikri, head (corporate advisory services), CB Richard Ellis—south Asia, "Kochi, Chandigarh, and Kolkata are likely to emerge as hot destinations for BPO operations."

Companies like Daksh are exceptions, though. Daksh is going ahead and setting up its fourth center in Gurgaon, besides one in Mumbai.

With several state governments coming up with ITeS policies to promote their respective states as best location, there is going to be lot of interest. Chandigarh was the latest to announce its ITeS policy in January 2003. It’s another matter that Nasscom’s report on Super Nine Destination didn’t include the city.

According to Nasscom, the ITeS industry in India is experiencing the third wave of growth, both in terms of geographical areas of operation and services offered. In the first phase, according to Nasscom, the industry was dominated by captive centers of large multinationals such as GE, American Express, and Swiss Air, which set up operations in leading metros like Delhi and Mumbai.

In the second phase, the growth of the industry attracted numerous entrepreneurs (in many cases, employees of multinationals who quit their jobs to set up their own ITeS ventures) again in and around Delhi (the NCR region) and Mumbai (including Navi Mumbai).

The third phase of growth has been more geographically dispersed—with new locations like Hyderabad, Pune, Bangalore, Chennai, and more recently, Kochi coming up. The CII submitted a ten-point agenda to DoT last year to promote ‘hot sites’ in India. These sites, according to CII, should be ready to serve sites or seats where processes can continue in the event of a disaster at the original location.

Site Selection Parameters
Selecting the site for a BPO operation has become a highly complicated affair. Earlier, companies used to decide about the destination just by riding over the hype surrounding a particular destination. That’s no more the case. Existing and potential companies have graduated to hiring international real-estate consultants for advise on location strategy. It is a booming business for real-estate consulting companies. Recently, GE hired CB Richard Ellis when it decided to expand beyond Gurgaon, while the Chandigarh administration roped in the UK-based consultant Jones Lang LasSalle. Richard Ellis did a comparative analysis of 18 prominent cities across India. Some of the key parameters included state government policies, manpower availability, and catchment zone analysis. The goal of these exercises, according to consultants, was "quantification of the impact of identified parameters to support an objective location decision."

Globally, the trend is towards setting up smaller centers which cater to around 200 people as the realization is that smaller locations would create a sense of togetherness among employees and promote teamwork. With regards to real-estate prices, most of companies are looking at sub $1 per sq. feet kind of rental.

In terms of priorities for different parameters for site selection, there is no unanimity among companies. While some companies like ICICI Onesource sees robust telecom infrastructure as the most important criterion, others like Milind of Msource feel that availability of English-speaking graduates is the top priority, apart from good physical infrastructure for office, telecom infrastructure, and proximity to a good international airport. Sanjiv Agarwal of Daksh also accord top priority to HR-related issues in terms of availability of quality and numbers followed by telecom infrastructure-related issues, including connectivity through IPLCs. He also lists good physical infrastructure, presence of competition, city perception/entrepreneurial history of the city, and favorable state policies.

The availability of bandwidth, which was long felt to be the key criteria for site selection has become a non-issue due to reasonably robust connectivity services being provided by the VSNL, BSNL, MTNL and now the private operators like Tata and Bharti. With Reliance’s network going live in 600 cities in March, it would not be surprising if companies move to totally new locations.

Gurgaon, Mumbai, Bangalore, Hyderabad, Delhi, and Noida—traditionally the haven of BPO companies—play host to a total of 266 companies, thus making the locations overstretched in terms of availability of manpower and extreme pressure on physical infrastructure. Transportation costs have skyrocketed and form a major chunk of companies’ expenses. Besides, competition has increased. An upward hike of Rs 500 is good enough for a BPO professional to move to a company located next door.

Traffic congestion in the A-class cities is high. Gurgaon is the worst with national highway number 8 getting almost choked at peak hours. While work on the long-promised expressway got underway last month but its completion will take at least three years, given the scale of the project. Earlier companies used to prefer those staying in and around Gurgaon and South, West Delhi in an effort to cut traveling time and cost. But due to increased competition, they can’t do that any more. Now, professionals come to work at centers in Gurgaon all the way from East Delhi, and even Noida and Ghaziabad, which means more cost to the company.

Mumbai is also heading in the same direction. Telecom costs are among the highest, besides pressure on transport system. Mumbai is one city where domestic companies are thriving. But R Mohan, CEO, Hinduja TMT, feels otherwise. When asked as to which city he would prefer if Hinduja were to expand, he said, "We will definitely go for Mumbai. This is because our group has strong roots there. The telecom infrastructure is very good and it is well connected internationally. Also, the availability of people is there, which is very important." He feels that Trivandrum and Pune will emerge as future destinations.

Bangalore, Hyderabad (the top ITeS destination as per the Nasscom report), and Chennai, despite having a large number of centers, are still considered good though, thanks to the strong state government policies accompanied by the strong presence of big software houses. But these locations too have witnessed some problems in relation to pressure in manpower terms.

Future Locations

Pune
Pune has attracted nine companies, with Msource being the flag bearer, followed by Spectramind. This is one location that is fast emerging as a hot new destination for BPO operations. Proximity to Mumbai and presence of STPI are added advantages.

Manpower: Total enrollments of higher secondary, degree, and university students in the entire state of Maharashtra is 3,044,626. Pune is home to some good English medium schools. The volume of transient population that comes to study in Pune is very high.

Telecom Infrastructure: The city boasts of an Intelsat Standard C-Band earth station to provide connectivity to any point of the globe. Ku-band earth stations have also been set up at Nashik and Kolhapur with additional fiber connectivity from Pune for redundancy. STPI Pune has tie-ups with 18 international carriers to provide connectivity anywhere in the world.

What needs to be done: According to Anurag Mushi, associate director (research), Jones Lang LaSalle, Pune as a destination for BPO operations has not been promoted adequately by the government of Maharashtra. City transport system needs to be streamlined. It can leverage its strength of proximity with Mumbai, besides tapping the talent from satellite towns of Nashik, Kolhapur, and Aurangabad.

Chandigarh
With five companies operating out of Chandigarh, the number is set to go up with a flurry of activities and initiatives taken up by the Chandigarh Administration. A lot of companies have shown interest in setting up their facilities here.

Manpower: Total enrolments in Punjab are around 3,456,852. Though Chandigarh has a literacy rate of 82 percent and home to some very good schools and colleges, the availability of sufficient English speaking manpower with good functional and communication skills is still an issue, which was highlighted by Gartner in a report recently.

The out-migration of the potential workforce to Delhi and Gurgaon has been there for a long time. There is feeling in the government that with the companies coming in to Chandigarh, this out-migration will somewhat subside. Chandigarh has also the potential to attract talent from Himachal Pradesh, Haryana, and Delhi. Ironically, the city was not in Nasscom’s list of super nine cities.

Telecom Infrastructure: In terms of telecom infrastructure, a fiber optic backbone network covers the whole of Chandigarh. About 110 km of optical fiber has been laid by private operators, besides BSNL. Every point in the city is within 1 km of the optical fiber network. Gartner, in a study, has rated Chandigarh as the city with best telecom infrastructure. The city boasts of an STPI earth station. Chandigarh Administration announced its ITeS policy, which is aimed at inviting BPO companies to set up their operations in Chandigarh. It has offered the services of Chandigarh Infotech Park, spread over 111 acres on the north eastern border of Chandigarh, which has the capacity to house 40 companies.

Government Support: The establishment of Chandigarh Infotech Park, being promoted by the Chandigarh Administration is the single biggest step that the government has taken recently. To add to this, the government recently announced the ITeS policy. Centers for accent training, and for basic computer and Internet training and customer handling skills will be set up.

What More Needs to be Done: According to the majority of future investors intending to invest in Chandigarh, the frequency of flights between Delhi and Chandigarh should be increased till an International Airport comes up.

Kolkata
Manpower: Kolkata’s greatest advantage is the number of high-quality English medium schools, which is probably the largest in the country. Total enrollment of higher secondary, degree, and postgraduate students in West Bengal is 1,007,227.

Availability of quality manpower at reasonable salaries is a major attraction for Kolkata.

Telecom Infrastructure: BSNL provides dedicated leased line up to 140 Mbps and more. It has also started offering managed leased line services. It also provides data circuits on a national basis. It has STM-16 ring based core network supported by STM-4/STM-1 access rings connecting important buildings, provides instant provisioning of bandwidth for both point-to-point leased circuits as well as high-speed Internet access. Reliance is all set to launch its services in the city in coming months, thus making connectivity a non-issue.

Government Support: The government’s ITeS policy has tried to send the right signals to investors by offering fiscal incentives. It is roping in NRIs, leading industrial houses, software companies and venture capital companies to address the huge opportunity offered by IT-enabled services and back-office services. The government plans to introduce vocational courses in ITeS. There are also plans to promote the setting up of at least two world-class software technology parks by 2004.

What needs to be done: The state’s history of strong trade unionism acts as a deterrent. The government has to undertake a major initiative to change this perception. Just offering fiscal incentives will not suffice. Besides, the quality of transport, power, and sanitation has to be improved.

Sudesh Prasad