BPOWI: What are the main drivers behind the growth of the domestic BPO market?

Radhika Balasubramanian: The growing demand for goods and particularly services among the Indian middle class has led to the growth of the domestic BPO sector. There has been a steady increase in the scale and depth of existing service lines and expansion of service portfolios. The domestic market is seeing strong demand from sectors such as banking, telecommunications, insurance, government and utilities.

BPOWI: Could you elaborate on the business strategy behind Intelenet’s foray into this segment?

RB: Intelenet had the first mover advantage in the domestic BPO market as it was the first pure-play BPO to venture into the domestic segment with the acquisition of Sparsh in 2005.
This move was made after much discussion and deliberation on the future scenario of the industry and the course the company must adopt to mitigate the uncertainties arising out of global ups and downs. At that time, Intelenet Global Services was majorly into providing voice-based customer services to international clients. While the margins in the international business then were good, the risks were high. Given the fluctuation in currencies and economic slowdown, there could have been a negative impact on the company’s topline or bottom line. The decision to foray into the domestic segment was thus taken as a pre-emptive measure.

BPOWI: How has this sector evolved over the years?

RB: The domestic BPO industry in 2005 was extremely fragmented with small players providing mainly outbound telemarketing services. During the past three years, there has been significant growth in terms of scale, reach, quality and increase in domestic business. Today many players are joining the fray as consolidation will continue as smaller undifferentiated BPOs will be challenges as larger players with national reach and scale will dominate.

BPOWI: What has been your approach regarding expansion in Tier 2 cities?

RB: Many BPOs are setting up shops in Tier 2 cities to service the domestic market. Intelenet has ventured into Puducherry, Mohali, Aurangabad and Dehradun to tap the talent pool in these regions. We are offering contact center management and customer support services to clients with multi-lingual support in Indian languages such as Hindi, Marathi, Gujarati, Tamil, Kannada, Malayalam, Teleugu. The domestic BPO industry holds tremendous scope for growth for Intelenet and the company will continue to grow in this area.

BPOWI: What are the advantages and disadvantages of setting up delivery centers in these cities?
RB: Setting up delivery centers has its own advantages and limitations. In terms of skills, there is a ready access to a talent pool for the domestic Indian market. Language comes in handy and given that the local populace has a mastery of one-two regional languages in addition to English and Hindi, domestic BPO offers equal opportunities.
The domestic BPO sector has comparatively lower attrition rates vis-à-vis the international business. The overall cost of running the business is also significantly lower as one moves beyond metros.
In terms of skills, training might take slightly longer in Tier 2 cities, but over time there has been an improvement. However, in order to run a successful operation, the infrastructure in Tier II and III cities needs to improve. Connectivity is very important for a BPO set-up and the pace of infrastructure development has to improve.

BPOWI: What are the high growth verticals in the domestic sector?

RB: The key growth areas for the domestic BPO segment are the telecom, banking and financial services, and insurance verticals. These offer tremendous opportunity for growth through increased emphasis on customer fulfillment and other customer relationship management activities. Though captive call centers of the banks and telecom players still account for the lion’s share of the overall pie, other emerging verticals today include retail, aviation, and government. Over the next few years, there will be consolidation in the market.

BPOWI: In what way do you think the government can leverage the domestic BPO market to foster economic growth?

RB: The government can encourage the domestic market through greater adoption of outsourcing. They need to look beyond low value, high volume back office jobs and customer support functions and move to higher value offerings. Government can also provide a thrust by giving incentives similar to those offered to the IT companies over a decade ago. Furthermore, the sector needs to get more organized, qualitative and standardized.