Financial Times : Amy Kazmin

February 7, 2011

A farmer’s son from a fertile, betel-nut cultivating region, Rajeev Devendrappa, once aimed to join the flow of young people moving to Bangalore, India’s IT hub, to work after his studies. That idea was abandoned when his father died suddenly, leaving him responsible for his mother and younger brother. "I could not shift the entire family to Bangalore,” he said.

Yet Mr Devendrappa, 29, who has a master’s degree in commerce, has found a place in India’s expanding back-office to the world. He now works for Xchanging, a London-listed business process outsourcer (BPO), managing foreign insurance claims at a facility in Shimoga, just 22km from his native village. "The same exposure I expected to get in Bangalore, I am getting here,” he said.

Young, well-educated people with constraints on their mobility were just what Nimish Soni, Xchanging’s managing director for India, was seeking when he set up shop in Shimoga, 275km from Bangalore, several years ago, as an experimental solution to the manpower crunch in India’s big, urban outsourcing hubs.

"We were trying to solve two challenges that India has – salary inflation and attrition. The goal was to go where labour is available in plenty at an affordable price,” Mr Soni says.

Small cities and towns are already plugged into India’s outsourcing boom, providing a steady flow of ambitious youth who come to big cities to write software code, staff call-centres and handle data entry and processing for global clients.

But as business process outsourcers confront rising costs – and with monthly staff attrition rates as high as 10 to 15 per cent – in big cities, some are pushing deeper into the hinterland to tap small-town talent. It is a once-unthinkable strategy, facilitated by vast improvements in India’s telecommunications in recent years.

"Why do we have to bring people to the jobs; why not bring jobs to the people,” says Vullaganti Murali, chief executive officer of RuralShores. It operates seven small-town outsourcing centres, with about 200 employees each, and aims to start seven more in the next few months.

Many urban call centre and BPO workers are reluctant migrants, who would stay closer to home if jobs were available. "Opportunity is what drives them to come,” Mr Murali says. "But whatever salary they get in cities is not good enough to bring their families, or live comfortably.”

RuralShores – which has Indian companies such as Airtel and HDFC and small foreign businesses among its clients – is also tapping a largely overlooked talent pool: educated young women, whose parents, or obligations to husbands and children, tie them geographically.

"There is no dearth of talent. We don’t have to struggle to find resources like in Bangalore,” says Aiyappa K, manager of RuralShores’ Thirthahalli centre, 60km from Shimoga. There, about 60 per cent of workers are women – half of them married with children.

Typical is 35-year-old Jyoti Kishore Sheth, who has a degree in commerce and a 10-year-old son. "I was getting bored at home. I wanted to use my education. The income is not so much. But it’s a time pass. I can mingle with other people,” she says. Much of the work directed to remote outsourcing centres is "non-voice” data entry and processing, requiring neither a strong command of spoken English, nor elaborate accent modification training.

Telecom infrastructure costs are also lower, which means centres can be viable with just a few hundred workers. But RuralShores centres also handle customer calls in several Indian languages, serving the growing domestic market.

For Xchanging – which operates five centres, with a total of 3,000 workers, in major Indian cities – the Shimoga experiment has been deemed successful.

David Andrews, Xchanging’s chairman, says operating from Shimoga will put Xchanging at "a cost advantage for a number of years”, but he expects rivals to follow soon.

(The views expressed above are the personal views of the author)