National Capital Region: Follow the Leader

Despite its infamous ‘lack of professionalism’ and equally negative

chalta-hai image, the National Capital Region (NCR)–comprising Delhi, Noida

and Gurgaon–is still the number one BPO location in India. It houses some of

the biggest facilities in India, headquarters four of the top five third-party

BPO companies from India, and accounts for more than one-fourth of all the

registrations with DoT for locating call centers.

Led by Gurgaon, the country’s BPO ball game was set in motion by NCR when

captive MNCs like American Express and GE set up base in early 1990s. The

presence of captives triggered another phenomenon–the rise of entrepreneurial

activity in the region. The captives proved that the real-time remote services

model is possible despite infrastructural shortcomings inspiring Indian

entrepreneurs to set up base in the region. After initial hiccups, entrepreneurs

blossomed and some of today’s top companies like Wipro-Spectramind, Daksh

e-Services and EXL Services started out.

This was also a phase when many small and medium businessmen tried to ‘cash

in’ on opportunities catalyzed by some vendors who promised business to them,

on the condition that they buy their solutions. This led to a ‘mushrooming’

of small ‘call centers’. Without any plan and vision, they had to fail. And

most of them did, giving the region a bad name, for some time.

PLUSES

Access to huge talent pool A headstart Excellent real estate at better prices than in Mumbai and Bangalore

MINUSES

Inadequate transport infrastructure No major base for IT industry Close proximity to Indo-Pak border

What put back the lost momentum was a flurry of MNC call-center companies who

cast their vote in favor of Gurgaon. Convergys–the world’s no. 1 call center

company–was the first to come. Today, Gurgaon has its biggest facility

globally. Since then, it has been joined by many peers, important among them

TeleperformanceUSA, Vertex, Teletech and LiveBridge. This earned Gurgaon the

title of call-center capital of India, which it still is. However, with

non-voice BPO work growing much faster, the question was whether the NCR region

could tap this opportunity as well. It seems it has managed to.

Companies like Churchill, Fidelity, and Lufthansa have chosen NCR (Gurgaon)

to do non-voice BPO in their captive units, not to talk of pioneer Amex.

Companies like ePhinay have third party F&A BPO work. What is more, some of

the high-end voice work like collections are being increasingly done in this

region, with examples like Global Vantedge, iShiva, EMR, and Worldzen.

Even now, the region leads in terms of number of companies. According to DoT

statistics in August 2003, the region boasted of a total of 115 registered BPO

companies with GE and Daksh having the maximum number of facilities at five and

four respectively.

According to real estate consultants, Jones Lang Lasalles, Delhi ranks the

highest in the contact-center production of seats in the first half of 2003 at

29 percent, Bangalore at 25 percent and Mumbai at 17 percent and Chennai at 14

percent. Even in terms of office space taken up by contact centers, Delhi was

the highest at 82 percent of the total absorption followed by Bangalore at 51

percent and Mumbai at 51 percent during the same period.

Going by the sheer number and scale of operations, the captives dominate the

region although it is the third party companies that is experiencing exponential

growth. Being in their growth phase, the likes of Daksh, Spectramind and EXL has

been hiring hundreds over the past year, while captives like GE for instance

have reached a plateau and hired less than 100 people last year.

The huge talent pool available in the region is one of its major draws.

Delhi, renowned for its excellent educational infrastructure, attracts students

from all the over the country with the region becoming a melting pot of

different cultures and communities. Consequently there is a constant supply of

young, educated, English speaking and cosmopolitan population–a delight for

any BPO recruiter.

It is generally observed that except for some BPO work with heavy IT skills

for which Bangalore is a better destination, NCR can be ahead of others in

almost all other areas. By and large, most agree that training in back office is

easier than training in voice and it is only a matter of time before non-voice

forms a substantial amount of the work from the NCR.

The Troika



While we may talk of NCR as a single destination, it is important to draw a

distinction between the three hotspots. The proximity of the three centers means

that a number of factors have similar implications like access to the same

talent pool, proximity to an international airport and the momentum within the

region. Yet there are some micro issues that have impacted the growth of centers

differently.

Gurgaon has surged ahead of Noida and Delhi mainly because of the aggressive

positioning by the real-estate industry. Led by Unitech and DLF Universal, real

estate biggies wooed the BPO industry with world-class office facilities at

extremely competitive rates. Priced at Rs 30-40 per sq ft, the cost is inclusive

of facilities like elevator, air-conditioning and power which is the not the

case in other BPO destinations like Mumbai and Bangalore.

Price is not the only differentiator as real estate values in suburban areas

in almost all locations are quite comparable and there has been a steady decline

in values over the last few years. However by virtue of having a head start in

this business, large developers in Gurgaon have managed to move up the value

chain and there is a distinct quality advantage that hi-tech space in Gurgaon

has vis-à-vis other prominent centers. Another important factor is the ready

availability of space since the scalability needs of this industry is very huge.

Along with office infrastructure, real estate industry also developed

multi-storied apartments for residential purposes and world-class shopping

malls. With affordable accommodation, a secure law and order environment and

close proximity to the international airport, Gurgaon hit the industry’s

imagination as the choicest destination.

But Noida and Delhi scored in other aspects. Noida offered cheaper real

estate, hosted the region’s earth station, offered better road connectivity

and power supply. With last mile being a problem (at least in the early days),

proximity to the earth station was important. Delhi’s advantage is that it has

the international airport in close proximity and efficient transport system

within the city.

Imbalances within the region are expected to even out with real estate prices

in Gurgaon going up and Noida winning in the process and the completion of the

Delhi Metro Railway in Delhi giving a spurt to the industry as transportation

within the city would become simpler.

Can it Continue?



Even as the region continues to attract BPO companies there are some

dampeners which could prove to be its undoing. A lot of positive features of the

region get negated because of its proximity to the Indo-Pak border. American

clients obsessed with data security and business continuity are not comfortable

with the idea of the border being so close. Comparatively, the South or even

Mumbai scores heavily on this front.

There are other issues that the three governments need to address

collectively. Many regulations regarding transport and infrastructure hinder the

smooth functioning of companies and add to the cost of operations. BPO companies

are sore at having to pay different transport levies for plying in the three

states, as companies have to pick their employees from all the states. Local

cabs cannot travel freely across the borders as commercial permits are required

for inter-state travel.

Second, there are concerns over poor road connectivity within the region. The

expressway between Gurgaon and Delhi is expected to ease the problem to a large

extent. Bandwidth is still a concern among companies although the presence of

private telecom service providers has eased the concern considerably. The

industry feels that the three governments can formulate a comprehensive

bandwidth policy and enable a redundant grid encircling the region for surplus

connectivity within the region.

The industry also needs to come on a common forum to address needs like

attrition and transport. While there are gentleman’s promises amongst some

companies not to hire each other’s manpower for at least two years, there is

no formal agreement binding them. Companies have also expressed a desire to work

in closer coordination in addressing their transport needs. For instance, they

could hire common transport, maybe public transport, to ferry employees to

central points in the city from which company vehicles can pick up and drop

their employees. Right now the system of door-to-door pick up and drop is a huge

strain on company resources.

Irrespective of the drawbacks, the current momentum will ensure that the NCR

remains on top of any investor’s mind. The aggressive positioning by the

real-estate industry, the unparalleled pool of ready talent base and the

progressive improvement in the infrastructure in the region will ensure that the

region does not get dislodged from the numero uno position so easily.