Bangalore: Best of Both

Long used to sobriquets of different hues–including the best-known one,
Silicon Valley of India–Bangalore is also perhaps India’s only city
equivalent of a Teflon politician! Despite having all the minuses of a third
world city, the negatives–there are many–hardly stick to it. So, despite a
civic infrastructure bursting at seams which among other things has led to an
escalating infrastructure cost and frequent disruption of service like power
supply, and industry-specific issues like high attrition rates (55-60 percent)
leading to rising recruitment pressure and spiraling wages, Bangalore remains
one of the favorite destination of BPO companies.

Perhaps among all the factors that work to create a positive perception of
Bangalore, the most critical is its spiritual closeness to the original Silicon
Valley type entrepreneurship that is always in search what Michael Lewis
describes as the "new, new thing".

As for the more tangibles, Bangalore’s attractiveness as a BPO location is
on account of its high-quality manpower, a business-friendly environment and of
course, its almost Siamese relationship with the city’s IT industry. The city
is also the capital of a state whose governmental establishment can easily be
described as the most BPO-aware in the country–so much so that its IT
secretary recently quit his high-profile job to set up his own BPO company!

*Source: DoT Bangalore is the third decision-making center in the BPO industry

PLUSES

Huge talent pool especially for tech support Major IT industry base Quality real estate in plenty Lower transportation costs Lower operational costs

MINUSES

Inadequate civic infrastructure Poor power supply Extremely competitive recruitment market 50-60 percent attrition leading to spiralling wages

Leading Captives

COMPANY LINE OF BUSINESS Hewlett-Packard Technology Swiss Re Re-insurance AOL Technology Cisco Technology Deutsche Bank Financial Services Logica Technology Microsoft Technology Dell Technology GE Capital Diversified HSBC Financial Services Cadence Technology

Bangalore is the third decision-making center in the BPO industry along with
Mumbai and the National Capital Region–a primary choice unlike a Hyderabad or
Pune, which are generally considered for expansion once BPO companies settle
down in one of the two cities or NCR. In fact, Bangalore has the highest number
of BPO companies for any Indian city after Mumbai. It currently houses more than
100 BPO companies and gets new additions every quarter. Global third-party BPO
giants like ACS, Convergys, Sykes, ClientLogic and Accenture have all set up
shop in Bangalore.

About 13 new BPO companies started their operations in Bangalore during the
first quarter of this fiscal. The investment from BPO companies in Bangalore has
also witnessed a 51 percent increase in the first quarter of this fiscal, when
compared to the corresponding period last year.

These companies invested close to Rs 500 crore for either setting up or
expanding their operations. It is expected that of the total software exports
from Karnataka expected to be about Rs 16,000 crore during the current fiscal,
BPO companies will have a 15 per cent share in these exports. It may be noted
that Karnataka exports during the previous fiscal was Rs 12,000 crore with the
BPO contributing 8 percent.

It is hard to identify Bangalore with any particular kind of BPO as the city
has a fair mix of all kinds of BPO companies. Bangalore can best be described as
a US within India–what US is to India, Bangalore will soon be to India. In
other words, the city is gradually becoming the hub of all the high-end and
high-value BPO work leaving the ‘Mcjobs’ for the rest of India.

The city is already a technology BPO hub. This is buttressed by the growing
presence of the captive tech-support BPOs. Of the 13 captive BPOs located in the
city, seven specialize in providing technology services while two others do
technology among other things. HP, AOL, Microsoft, Dell, Cisco, Cadence and
Logica have set up their tech-support base in the city. One of the newest to
join the bandwagon is Tesco, the UK retail giant, which is shifting around 350
tech jobs to Bangalore. Tesco is setting up a new center in Bangalore, which
will focus on infotech and development of common business support processes, to
bolster its business expansion moves.

The city also scores with the growing presence of BPO companies looking at
offshoring high-value work in verticals like banking, finance and insurance. For
example, Deutsche Bank has set up Deutsche Network Services Pvt Ltd in the city
for processing of high-value payments in real time, which is considered a key
business, both in terms of criticality and complexity, and cash management
processing. The bank also has a minority stake in DSL Software, its former fully
owned subsidiary, which is now a joint venture with HCL. DSL Software handles
reconciliation work for the bank. Similarly Goldman Sachs is setting up BPO for
its global operations.

Earlier, the investment banker was outsourcing work to Viteos, the BPO arm of
Bangalore-based Velankanni Software. There are several other captive operations
doing financial work. This includes HSBC, Indigo, a subsidiary of Unilever,
which does high-end processing work. PWC (part of IBM now) has set up
third-party operations for back-office processing of financial work in the city.

Very recently, the $24 billion diversified technology and manufacturing MNC
Honeywell has started using its Bangalore-based subsidiary Honeywell Technology
Solutions (HTSL), for captive BPO operations in finance and HR. Two other major
global names, Reuters and Fidelity, will soon be a part of Bangalore’s BPO
scene. Jones Lang LaSalle, a leading global provider of integrated real estate
and investment management services, in a report called Rising Urban Stars —
Uncovering Future Winners, which is part of its World Winning Cities programme
confirms Bangalore’s status as the most high profile technology hub in the
developing world. It says that the south Indian city has notable success in
attracting large offshore facilities of multinationals in software services and
contact centres, which will act as a catalyst for indigenous growth. The report
finds the city moving from an IT back-office location to a full fledged IT hub
with cutting edge research combined with low value added services.

The influx of MNCs looking for custom designed independent campus buildings,
has been transforming the local real estate stock as well. The environment for
direct investment will improve, leading to an active institutional investment
market.

However, Bangalore’s quest towards becoming the BPO capital of India is
likely to face two major hurdles in the near future largely on two counts–infrastructure
and HR. The city is in dire need of investments for roads, power supply and even
safe drinking water. Bangalore has no doubt one of the best manpower pools in
the country. However, as the city-based companies grapple with a high attrition
rate, they could come under more pressure on account of the mad scramble among
the BPO companies to attract the best talent. Moreover, high-end BPO jobs, which
would require high-end skills, might have to face tough competition from the
more glamorous and paying IT jobs.