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BPOs move to tier-II, tier-III cities
Along with many other strategies, the most effective and common strategies used by IT-BPO firms to reduce their cost and increase the
employee satisfaction are:

1.Hiring freshers
2.Hiring non-engineering background students.

These strategies help to counter talent shortage, wage inflation and high attrition rates. The most important factor here is wage inflation. Wage inflation is usually seen at the middle and higher levels. It does not take place at the lower levels (freshers). Wages account to approximately 70-75 % of the total expenses of a BPO.
Why shift to tier-II and tier-III?
The latest mantra of BPOs to overcome talent shortage, sky high real estate costs, wage inflation and high attrition rates is to move to tier-II (Chennai, Hyderabad and Pune) and tier-III cities (Jaipur, Chandigarh, Mysore and Ahmedabad). Smaller cities also have a good mix
of talent. WNS has already setup its center in Nasik, a tier-II city and it has 1200 employees in it. Also, India has a large pool of talent, reason being the demographic spread in India. In 2007, Tata Consultancy Services carried out 30% campus recruitments from tier-I cities, 15-20 % from tier-II and the rest from tier-III cities.

But we have the other side of the coin as well.
  • Wage inflation cannot solely be decreased by moving to smaller cities since similar salaries are being given to all the employees of a company all over India irrespective of their locations.
  • It is also very difficult to find project managers in smaller cities. There are many skilled people in smaller cities but proper training is required to polish their skills.
  • Government is in support of BPOs to move to tier-II and tier-III cities. But there is not enough infrastructure to make this happen.
  • A very small number of available talent pool in tier II and tier III cities are talented enough for voice work (spoken English, voice quality, neutral accent etc). The potential employment level of a few cities are:

    24% in Pune
    22% in Delhi
    20% in Mumbai
    18% in Chandigarh
    11% in Vishakhapatnam
    9% in Hyderabad
    6% in Hubli
    5% in Thiruvananthapuram