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Tier II and Tier III cities – next best BPO hubs in India

growth of the services has only been limited among the megalopolises of India.  Keeping in mind the phenomenal capacity this sector has to benefit the Indian economy, the debate of BPO companies establishing their company branches /campuses in smaller cities of India, has now ushered to make us understand many factors leading to the debate, the opportunities and pitfalls for the same.

Reasons for setting BPO business base in Tier II and Tier III cities:

According to KPMG's report "a number of information technology and BPO companies are opening centers in these places to reduce operational expenditures. These smaller cities offer advantages such as availability of talent at a lower cost, low attrition rate, affordable real estate, local government support, and a better quality of life. Analysts agree that by taking operations to a tier-III city, a company can save up to 30 per cent cost. A growing domestic market is also driving companies to open centers in tier-III cities, said Sangeeta Gupta, vice-president (VP), Nasscom.

The biggest advantage of setting up centers in the smaller cities is that there is a lower rate of attrition among the people of such cities, which saves on the training and retention cost.  The other added incentive is that these cities are small and hence managing them is much easier. This doesn't set a tough managerial challenge. Moreover, now there have sprung excellent colleges in these cities and students who are graduating from there colleges are extraordinary talented and some of those students are seriously considering to work in the BPO sector. Therefore, it becomes vitally important for BPO companies to set up their centers in smaller cities.

Advantages of setting BPO centers in Tier II and Tier III cities:

Getting operationalized in smaller cities saves the company with higher set-up costs. Since, the set-up costs are already getting costlier in Tier I cities, setting up of centers in smaller cities is economically advantageous to these BPO companies. More so, the talent in these countries can be tapped for making services available in vernacular languages. This helps in bringing up the employment level of smaller cities and moreover it leads to the balanced development of all the regions of the country, there by only leading to regional development and thus regional growth and that affecting and boosting the overall economic growth and development of the country.

Disadvantages of setting BPO centers in smaller cities:

Now, you always need talented managerial executives to work to look over the operations of these centers. However, this might be difficult as there might be reluctance on their behalf to move in to smaller cities. Also, you might not always get highly talented workforce as compared to Tier I cities workforce. There might also be problem with regards to the network connectivity and the right and needed infrastructure needed for setting up of BPO centers in smaller towns. 

All in all, the idea of setting up of Indian IT-BPO companies in smaller cities is indeed of boundless importance for all the stakeholders of the economy. However, as far as the problems regarding its initialization are concerned, there only needs to be done a setup of structured and scientifically designed process.