Outsource Work shifts to Tier-II and III cities in India
August 20, 2009
A Nasscom-A.T. Kearney study on “Location Roadmap for IT-BPO Growth” indicates that Tier II and III in India will soon begin to account for about 40% of the total projected IT-BPO jobs by 2018, if the state governments play their cards right.
While, this does not of course imply that big cities like Mumbai, Chennai, Bangalore, Hyderabad, Kolkata, the National Capital Region (NCR) and Pune will begin to lose their sheen as ITES hubs, since they continue to employ 80% of IT sector workforce, the fact cannot be denied that these are over headed markets now and the scene has begun to shift to smaller cities and towns. Top among these emerging destinations are cities like Ahmedabad, Kochi, Bhubaneswar, Chandigarh, Coimbatore, Indore, Jaipur, Lucknow, Madurai, Mangalore, Nagpur, Thiruvananthapuram, Vadodara, Tiruchirapalli and Visakhapatnam.
With a maturing economy, it is anyway necessary to expand the geographical spread of IT-BPO operations, lower migration across cities and reduce infrastructure burden on the metros, the Nasscom-A.T. Kearney study found. In addition, there are other changes that are likely to come about. For instance, while the current outsourcing model for both domestic and export market is activity-based, in times to come, this may change to an end-to-end process-based model.
The Indian BPO exports segment has grown from USD3.1 billion in 2004 to USD11 billion in 2008, currently accounting for 37% of the global outsourcing pie. The exports segment grew from USD3.1 billion in fiscal 2004 to USD11 billion in 2008 and currently accounts for 37% of the global business process offshoring pie, according to an E&Y survey. If all goes to plan, this can easily grow to USD28-30 billion over the next four to five years, despite the slowdown. The only big challenges are “skills shortage, creaky infrastructure in smaller towns and rapidly rising wages,” says one expert.
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