As many North American and European companies outsource to India, the country’s smaller cities are also becoming a part of their outsourcing strategies. Over the last two years, more than 300 Western companies have set up their offshore development centers in India, according to a study by Forrester. More than 60% of the respondents to the study said that these are now facing problems like spiraling costs, skyrocketing attrition, and lack of integration and management support. Third-party providers in the country, too, are plagued by such problems — wages in India are growing at 15% a year and attrition is touching 50%.

In such a situation, third-party providers are now moving toward Tier 2 and Tier 3 cities of India, such as Kochi, Coimbatore, Ahmedabad, Jaipur, Chandigarh and Mysore. These cities are not only comparatively cheaper, but also provide same quality work. The attrition level is also lower in these areas. (Read more about these cities in our article India’s Emerging cities.)

Amongst the list of such cities, Pondicherry, a city that has actively been exporting software services but hardly gets media attention. With a population of 973,829, Pondicherry has many IT and business process outsourcing (BPO) centers, the most recent one being FirstSource BPO. The city posted a strong performance in the IT sector in 2006, according to Business Outlook Survey conducted by the Confederation of Indian Industry (CII). The study found that the BPO segment in the city is growing at an annual rate of 70%, in terms of revenues.

Yet, Pondicherry has a long way to go before it is counted amongst the top cities for outsourcing of services. A neoIT study in 2004 places Pondicherry at the 20th position (with 81 points) in its Offshore City Competitive (OCC) Index. The study categorized all Indian offshore outsourcing cities into different categories — leaders, challengers, unknown and laggards. Amongst those segments, Pondicherry just made an entry in the “laggards” category — the cities, which fell in this sector, have a low OCC Index as well as a low performance rating. These cities need to critically evaluate their competitive factors and adopt concrete actionable plans to compete with other attractive cities in the short and medium term before they are permanently left behind.

To know more about Pondicherry as an outsourcing location, Global Services spoke to Integra, a Pondicherry-based service provider. All of its customers are supported out of Pondicherry. The company employs over 850 people and plans to scale up to about 2,000 people in the next couple of years. Integra has already invested four million dollars in a new facility in Pondicherry. The office has the capacity to accommodate 1,500 people round the clock. Infrastructure is also available to add 1,000 people at short notice. Integra’s Founder, Managing Director and CEO Sriram Subramanya speaks to Imrana Khan on Pondicherry as an outsourcing destination.

Why did you set up your base in a small city like Pondicherry?

Integra was set up in Pondicherry in 1994. Our intention was to fully utilize the city’s main resource i.e., skilled, vast labor pool. Pondicherry has abundant English-speaking technical talent. The city has a strong educational base with about nine engineering, seven medical, one law, and 12 arts and science colleges. These educational institutes churn out over 10,000 students per year. Other benefits, which we found here, are the lower attrition level and the availability of high-speed internet connectivity. Good quality of life and lower cost of living are also the plus points of this city.

We also have our own training school where we train first-time graduates in our area of work and absorb them in our roll on successful completion of the training.

What’s your biggest challenge of operating from a small city?

Our biggest challenge is attracting senior management to relocate.

How do customers coming in to visit their teams in Pondicherry cope with issues of roads, traffic, power, entertainment, etc.?

Customers can come to Pondicherry only by road. It is only two hours from the Chennai airport. The roads are good and it is a pleasant drive from Chennai. In fact, most people like Pondicherry after visiting the bigger cities because they feel it is less congested and much cleaner. Some of our customers stay in beach resorts around the city. The government is also taking measures to operate an airport in Pondicherry, which will be very beneficial. Also power supply is not at all a problem in the city. There are no traffic problems as well.

Pondicherry being a small city, our employees have the luxury of going home for lunch, which you cannot find in any other town.

What is your customers’ feedback on working from a smaller city?

For the customer, location does not matter as long as we are able to deliver good service consistently. Pondicherry is our corporate headquarters and principal delivery center. All our customers are serviced from this center. Our customers do not have any apprehensions that we are operating out of a smaller city. All they require is good, consistent and on-time service.

IT and BPO Service
Providers in Pondicherry

ICICI OneSource

Infosys

Integra

HCL BPO

Lason

SamcoSys

SPI Technologies

Source: Global Services