Why Small Indian Cities and Towns Are Attracting BPO Firms

Business process outsourcing (BPO) firms in India are exploring small towns and cities to expand their customer care services, especially in the telecom and banking sector. Even as the metros and the tier-1 cities continue to be the preferred destination for the BPO firms, many companies are walking in the reverse direction and thinking about taking their business to smaller towns or semi-urban areas.

Reasons underlining the trend to set up BPO firms in small towns and cities

The reasons behind the growing trend to set up BPO units in small towns and cities are many and varied. The new BPO policy finalised by the government is one of the reasons that is acting as catalyst in this matter.

As per the new policy that was finalised last month, the government is seeking to create 48000 call centre jobs. The government has offered financial incentives to companies that are willing to set up their BPO units in small cities and towns. This financial inclusiveness by the government is encouraging many BPO firms to take advantage of the fresh avenues.

One of the reasons for this growth trend is the expansion in the banking and financial services. The Jan-Dhan Yojana of the government provides financial services to the lower stratum of the society.

Under this scheme more than 160 million accounts have been opened till the end of May, 2015. Such results are encouraging firms to head towards smaller cities and semi-urban areas.

Advantages of setting up BPO firms in small towns and cities

Small towns and cities offer a number of advantages for BPO firms to set up their units as compared to the metro cities, which account for 80 per cent of the 1 million BPO jobs in the country. The cost of operations is much lower in such places as compared to the metro cities. The churn in the workforce is also much less in the small cities. BPO firms can also avail a talent pool of candidates possessing multilingual skills.

As the metro cities are concentrated with BPO firms, even the attrition rate in companies is much higher there. It is expected that the attrition rate will also be lower in the small towns and cities as they do not poses a large number of BPO firms.

Challenges of setting up BPO firms in small towns and cities

There are a few challenges involved in establishing BPO units in non-metro cities and small towns. The lack of proper infrastructure such as power and adequate bandwidth can act as hindrance to plans of setting up of BPO units in such places.

The deficit of suitable candidates for senior positions and a shortage of professionals with fluent English speaking skills are also factors that can stand in the way of this trend.

BPO services that are being offered from small towns and cities

BPO firms are working towards moving various services to non-metro cities. Domestic voice services, non-voice processes, back-end office jobs including logistics, finance, accounts and human resource are a few of the services that are currently offered by several firms from their units set up in non-metro cities or small towns.

Companies planning to establish their BPO units in non-metro cities

There are a number of companies that are either expanding their existing branches or establishing new units in non-metro cities and small towns. In 2014, Aegis Ltd. from Essar Group had added 7 new branches in non-metro cities to its list of 25 branches in India.

RuralShores Center

RuralShores Center

RuralShores, a BPO firm from Bengaluru is planning to add 5 new branches in small towns and cities to its 20 existing branches in India in 2015. Hinduja Global Solutions Ltd. (HGS) [stock quote] and Serco Global Services are also planning to take advantage of this trend of setting up centres in semi-urban areas or non-metro cities.


According to the National Association of Software and Services Companies (Nasscom), BPO firms have the potential to create about 100,000 jobs in small towns and cities.

For competitive and inclusive growth in the industry, BPO units must take the initiative to establish their presence beyond the metros and look for opportunities in small towns and cities.

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