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Hub and Spoke Model and BPO Industry

The IT BPO sector in India is a sunrise sector which has been propelling phenomenal growth rates for the Indian economy since past three decades.  In our initial articles we have already mentioned a few of the factors that make India an attractive destination for the countries world over to outsource their businesses in India, such as, cost efficiency, younger talented, technical population, high GDP rate, open economy, etc.

Now that India has already attracted the businesses, creating more efficiency out of the given task, would be more profitable for the industry. It is for this reason that the industry experts have suggested new business models tap this opportunity, Hub and Spoke, being one.

What is Hub and Spoke Model?
The Hub and Spoke model or network basically refers to a system of connections arranged like a chariot wheel, in which all the traffic moves along the spokes which is connected to the hub at the center.  Thus in the wider role, Hub performs the functions of management responsibilities of customers, quality risk and performance management, training and development, manpower management, and regulatory compliance. In a similar context, the role of Spokes include meeting the performance expectations of Hub, adding to its manpower needs, local project management, supporting the Hub on issues of legality and taxes and operating as an leeway to the delivery center.

Advantages of Hub and Spoke model:
The model is seen to have enabled centralized control in an already large and scattered organization with respect to skill developments, resource utilization, enhancing operational efficiency, and helping enforce uniform/universal standards across all delivery centers.  The model minimizes the risk of delivering from single or few locations, thus allowing the service provider to make use of the labor from respective locations it chooses as Spokes.

The model has been successfully implanted in aviation and manufacturing sectors. Seeing their surging growth, utilizing the benefits of the model for the Indian IT BPO industry surely sounds a successful business tactic.