Talent crunch seems to be encouraging the providers of Business Process Outsourcing (BPO) services to look beyond tier-1 cities such as Bangalore, National Capital Region, Pune, Chennai, Hyderabad and Kolkata. A recent study by the Everest Group, a global sourcing consulting firm, revealed that service providers are now set to tap tier-2 and tier-3 cities — such as Ahmedabad, Nagpur, Jaipur, Indore, Nashik, Vadodrara, Chandigarh, Ludhiana, etc. — in order to fulfill their resource requirements. These cities are likely to fulfill 50 to 60 percent of projected talent demand — to achieve the target of $50 billion from current $11 billion by 2012. 

The consulting firm revealed that the movement to lower-cost cities within India is likely to result in additional 15 to 30 percent reduction in operating cost despite lower employability and higher management costs. "As a result, we expect to see an increasing footprint of BPO service providers in these tier-2 or tier-3 cities. The BPO industry and state governments need to work collaboratively towards developing these tier-2 or tier-3 cities as 'BPO Hubs' for specific verticals or domains, in order to capitalize on their inherent strengths, utilize the available talent more effectively and to create more value for buyers of BPO services," says Nikhil Rajpal, Practice Head, Global Services, Everest Research Institute.

The study evaluated the cities on the basis of their potential to become BPO hubs. Ahmedabad, Gujarat, toped the chart of BPO cities, which have potential to become Finance and Accounting Outsourcing (FAO) hubs. In fact, the city also bagged the top slot for having the potential to become the hot spot for BPO pharmaceutical services. "Realizing the fact, many State Governments in India are planning to build BPO hubs in tier-2 and tier-3 cities within their states to attract investment and get onto the worldwide BPO map. For instance, the Government of Gujarat plans to develop the Ahmedabad-Gandhinagar area as a financial services BPO hub," exhorts the study.

The cities are analyzed on the basis of numerous parameters — overall and segment-specific talent availability, employability, current and planned presence of domestic industry, addressable BPO market potential, and the presence of third-party providers and captives. "These smaller cities need to be evaluated for the kind of work that can be delivered from there, not just in terms of the total graduate pool, but also on their inherent strengths and differences. So while Jaipur adds a pool of about 29,000 graduates per year, the actual additions to employable pool for voice work is just 1600 to1800 per year. In contrast, Chandigarh and Vishakhapatnam, which have annual graduate pools of approximately 25,000 and 20,000 respectively, they add relatively more employable workforce for voice-based services, at approximately 4,500 and 2,000 per year respectively," according to the study.

Other cities that made to the list are not only surprising for global customers but they are not so known among Indian vendors. Who have even had heard names such as Mundra? Still, these cities are likely to compete with tier-1 cities in near future.

To know more about emerging outsourcing cities in India, click here.

BPO Hubs in India
Multisector Hubs					Bangalore  NCR Mumbai Chennai Hyderabad Kolkata
Finance & Accounting					Ahmedabad Nagpur Jaipur Indore Nashik
Financial Services					Ahmedabad Jaipur Nagpur Vadodara Chandigarh
Pharmaceuticals					Ahmedabad Vadodara Aurangabad Nashik Ludhiana
Logistics					Nagpur Vishakhapatnam Ahmedabad Coimbatore Mundra
Source: Everest Group