Forbes Column 08: How to Save the World’s Back Office

Please read my new Forbes column, How to Save the World’s Back Office. In it, I discuss Gram IT, a rural BPO project promoted by Satyam. There is also a video segment that you can watch here.

I would love to see more projects like this come about, get funded, and scaled in the commercial domain in India. I see rural / small town BPO as a very interesting opportunity for the next phase of India’s evolution as the world’s back-office.

Entrepreneurs in India: TAKE THIS ON.

Here are some back-of-the-envelope numbers:

If you can build a company of 50 rural BPO operations of 100 people each, and charge your clients $2,000 per annum per person, you would have a $10 Million revenue company. Let’s say you pay $1,200 per annum per person in salary. After including infrastructure and cost of sales, you can probably get to $2.5 Million (25%) in operating profit.

You can also get to those numbers by doing the same business in small towns, with say 250 people per operation, and build 20 such operations.

I also believe, that the Sales and Marketing costs can be much lower because you would be marketing to Indian outsourcers, who in turn are marketing to the International companies. These BPO companies are reeling under 20% attrition and 15% salary hike rates. Instead, you will have a stable business of 5% or less attrition and salary hikes. If you can present a reliable option for multi-tiered outsourcing to these companies, they will likely embrace you. And once you have established yourself, proved out your model, they will acquire you for a fat chunk of money.

Your big challenge would be training and infrastructure, but those are manageable challenges in my view.

It looks to me as though India can absorb hundreds of companies that roughly emulate the GramIT model. And it is a perfect double bottomline opportunity as well.

One final point. The Indian Government ought to provide serious funding, subsidies and tax breaks to entrepreneurs who venture into this world. In fact, I would argue, these are the entrepreneurs who should legitimately never be taxed.

This segment is a part in the series : Forbes Column 08