Outsourcing: Gopinathan Padmanabhan, Executive VP and Head of Global Delivery, MPhasiS (Part 3)

Sramana Mitra: Are most of your financial services customers U.S. customers?

Gopinathan Padmanabahn: As is the case for most of the typical Indian IT services companies, our revenues are split broadly across the U.S., India, and the rest of the world. The U.S. constitutes about 65% of our revenues. India constitutes about 15% to 17% of our revenues. The rest of the world constitutes about 18% to 20% of our revenues. That’s the rough split in the BFSI space also.

SM: That gives us a picture of financial services. What about this trend of the second tier and third tier cities in India developing as BPO destinations? If you could, give me more color on that. What are the dynamics in each city; why did you choose those cities; what are you experiencing in those cities; what is involved in getting a BPO operation in a second tier or third tier city up to speed? What size workforce can be supported in those cities?

GP: Today, even in advanced work such as application development, coding, and so on, people have started moving out to smaller locations. I mentioned our presence in Mangalore, which is sort of a tier two city in the state of Karnataka. Bangalore is the capital, and Mangalore is a smaller town. It’s kind of a sleepy coastal town, a beautiful place to live in. There are a few reasons why people are moving there. One, the price points are distinctly lower. You get about a 15% to 20% cost savings because the cost of living is lower. The rest of the costs, real estate costs, are substantially lower than in the major cities. Two, some of the cities like Baroda and Mangalore have a lot of educational institutions near them. It’s not difficult to attract talented, qualified people to come and work for you in those locations. That’s the second thing – availability of manpower. Third, as you may be aware, in Indian IT, one of the challenges is attrition. Attrition levels are peaking, but the demand always far outweighs supply for talent. Despite the huge population, when you look for talented people with specific technical skills, along with soft skills like communication and leadership skills, availability is limited. And all top companies are vying for the cream of what’s available in the country. The attrition of talent is a little bit higher in the [larger] cities. In these locations, they’re far better. The workforce is relatively stable. The longevity with the company is longer. That’s the third advantage you get in these locations.

SM: What is the comparative metric? If were to have a Bangalore attrition compared to a Baroda attrition rate or a Mangalore attrition rate, what kind of comparison would you see?

GP: Attrition rates in the industry vary across application services and infrastructure services, which is BPO. If you consider that, attrition rates have been very high, roughly 40% to 50% annually in international BPO. In the rest of BPO, it’s far higher. It depends on the kind of work that you do, but some of the voice work and so on has a lot of less qualified people. So, the attrition levels are even higher. There’s  about 10% to 20% variation in the annual attrition rates between large cities like Bangalore, Chennai, and Pune compared to an interior location or tier two location like Mangalore or Baroda.

SM: Even in those cities, in the voice BPO area, you’d still have to deal with serious attrition?

GP: Absolutely. Voice BPO is not the most attractive job being offered among all possibilities. It becomes stressful. Throughout the day, they take calls, and the typical customer service customers tend to get abusive and impatient and so on. [Some people] who are just entering the workforce don’t have the patience to handle that level of stress.

SM: The BPO work that you’re doing in these tier two and tier three cities, is it mainly in regional languages or is it still in English?

GP: It’s a combination. One of the main reasons we have multiple locations is because of the need for regional languages. But in all of these locations, there are also customers who expect service in English. In these locations, we have a mixture of people. Depending on the customer’s requirement and the target population we service, a portion of them will work with English knowledge. The rest will be people who speak the local language and maybe a smattering of Hindi. Even if they don’t speak English, we hire them because they provide services in the local languages.

This segment is part 3 in the series : Outsourcing: Gopinathan Padmanabhan, Executive VP and Head of Global Delivery, MPhasiS
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