Tier II towns can challenge leading BPO cities

A recent Hill & Associates assessment of the risk profile of various Indian locations for BPO companies indicates that Mangalore, Hubli and Mysore are regions to watch, "consequent to the proactive steps taken by the Karnataka government".

Hill & Associates is a leading independent enterprise security and risk management consultancy firm. The firm has addressed a wide range of business risks including those covering regulatory and compliance issues. The firm is 70-strong in India.

Since "local transport and infrastructure" and "real estate availability" are the most significant determinants of location risk, it seems that these Tier II cities stand to gain on this front. Following this, Hill & Associates believes that a number of tier II cities might emerge in the medium risk category in the next 2-3 years.

As reported earlier, the study finds that in the business process outsourcing space, Bangalore, Hyderabad and Mumbai have emerged as 'no-risk' locations. But it foresees the emergence of serious contenders to Bangalore and Mumbai which are fast reaching saturation.

"As infrastructure and real estate become more saturated in Mumbai and Bangalore, Hill & Associates foresees locations like Pune and Kochi becoming serious contenders. Chennai in Hill & Associates' estimate is also an important leader of the future," the study says.

However, "vendors sub-contracting work from low to high-risk locations to increase margins was also a noticeable trend among mature destinations like Chennai, Hyderabad, Bangalore and Gurgaon", the study added.

Lucknow emerged the least prepared to handle BPO operations due to the overall poor infrastructure and perception. Concern over Chandigarh is greatest in the area of networking and government support.

While Kochi emerged a high-risk destination, it appeared to Hill & Associates that it was at the cusp of making a transformation towards a medium risk environment due to the availability of real estate and the evolving skills of the labour pool.

Isolating and evaluating "threat to business continuity" was the foremost objective of the inter-location comparison study. The study was undertaken in two broad areas "" location-specific risk and industry-specific risk. Established BPO destinations like Delhi and Noida remain in the medium risk zone because of the apprehensions surrounding infrastructure issues and real estate availability.

Other than risks related to business continuity, the study says that equal attention needs to be paid to the intellectual property that is accessible to third parties, security and integrity that are subject to new variables and regulatory compliance that is difficult to verify.

According to the study, "From the multinational's perspective the way to manage outsourcing risk is to maintain operational flexibility using vendors with a broad geographic presence; attract and build alternative labour and skill pools that deliver work from multiple cities and retain some core functions."