Outsourcing: Gopinathan Padmanabhan, Executive VP and Head of Global Delivery, MPhasiS (Part 4)

Sramana Mitra: What are the competitive dynamics of these cities? When you’re setting up a center in Mangalore, is it very competitive? Are there other Indian companies setting up operations in Mangalore?

Gopinathan Padmanabhan: Yes, there are. All of the key players are aware of the dynamics, the cost structure, and so on. Everyone follows the same strategy of spreading out their workforces in multiple locations. I told you the advantages of these locations. The disadvantage is a limited supply of manpower. While we do have the universities, the available people, and so on, there is a limit on the number of people you can hire and sustain in the location. What is the sustainable number of people I can manage in the location? I can go and hire 1,000 people, but can I maintain a workforce of 1,000 trained people and provide services and meet my SLAs while handling attrition? That is a challenge.

The number of people you can have in each location varies. Based on experience, we have worked out that in this place, I can have 300, 500, or 700 people on a sustainable basis. Beyond that, I will not be able to ramp up any further.

SM: Is that the sweet spot for these second tier and third tier cities, 300 to 500 people on a sustainable basis?

GP: In some of the larger locations like Mangalore or Baroda, we can go up to 1,000 or 1,500. It’s a mixture of service offerings. But in one particular area, you can have at the most 200 or 300, or 400 people. In some of the smaller locations like Raipur, Indore, and so on, you can have at the most 500 or 600 people. Beyond that it is not sustainable.

SM: If you have 500 or 600 people, Wipro has 500 or 600 people, and Infosys has 500 or 600 people, that’s a lot of pressure for talent in those locations as well, right?

GP: That is correct. Everybody is looking for greener pastures, or spaces unoccupied and talent unoccupied. They are trying to open more and more locations where others haven’t come in yet to tap into that particular town and the surrounding towns. But the moment one goes in there and stabilizes, somebody else will go there, and the first thing he’ll do is start to poach the people who are already working at the other company because the trained manpower is available.

So, there are certain dynamics of operating in these towns and cities, and there are limitations. There are also local language requirements. The good news from other countries’ perspectives is that these kinds of opportunities are spreading to more and more tier two and tier three locations across the country.

SM: It’s actually very encouraging because people are getting trained, and there are operations being set up, local jobs being created. All of this is very good for the long-term growth of India.

GP: It’s going beyond that. Now, people are talking about rural BPO. In rural areas, villages, and small towns, people are setting up small shops. It started off as a CSR [corporate social responsibility] initiative, and today it is also being run for profit. It combines CSR with a for-profit objective. More and more entities are setting up rural BPO operations in small villages and doing more of the low-end work, for example, when new customers fill out forms, and so on, those forms have to be scanned, uploaded, and cleaned up. Low-end BPO work is also moving to rural areas.

SM: Do you do that kind of work, the low-end rural BPO work?

GP: Most of the large players don’t. If they want, they contract out to others who are doing it. None of the larger companies have set up rural BPO on their own. There are small entities that do this and go on offering their services to the larger entities. On their own, they cannot go and win customers. So, they depend on the larger players to get the customers and manage the client relationships

SM: Are you involved in some of those relationships? Do you have customers who are looking for that kind of low-end work, and do you have rural BPO vendors you work with?

GP: We are not in that area. We are looking at them. Many vendors do contact us. We’re evaluating them. We’ve looked at them, but we have not taken the plunge yet.

This segment is part 4 in the series : Outsourcing: Gopinathan Padmanabhan, Executive VP and Head of Global Delivery, MPhasiS
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