|  Factors like-- sky-rocketing price, capacity problem, high attrition rates, wage inflation and shortage of talent are driving business process outsourcing firms to move towards tier-II and tier-III cities. Thanks to this move, the estimated $9.5 billion sectors of export and domestic revenue are under the ray of hope about maintaining its cost advantage.
According to India IT Services Executive Report 2007, the rising costs and local capacity constraints are most compelling reason to tier 2 cities such as Chennai, Hyderabad and Pune and tier 3 cities such as Jaipur, Chandigarh, Mysore and Ahmedabad.
The rising salary at call centres is another reason for moving station. They have augmented 15-20 per cent in the last three years and continue to rise.
WNS, for instance, has 1,200 people in Nashik, a tier II city. It is looking for expanding its noteworthy appearance in tier II cities.
However, the journey to smaller cities is not always free from imperfections as in the case of Infosys BPO chairman T V Mohandas Pai discovered. Recalling Infosys BPO's experience in Mangalore where it runs a 500-seater operation, Pai observed that the firm did not get power supply for the first seven months.
Pai said that we had to deploy generators for our operations. The experience was not inspiring. Of late occurrence, we have been given land in Mangalore for a campus. But the transport link between Mangalore and Bangalore is not sufficient. The frequency of flights has to increase since travelling by road consumes a lot of time.
He, however, added that Infosys BPO was keen on tapping the talent in secondary and tertiary cities. The experience of OfficeTiger and Genpact, though, appears to be better.
The companies maintain the state governments which have been very helpful in addressing their needs.
For instance, the power situation in Jaipur is far better than we would face in Gurgaon, said Tyagi, adding that operating costs would be certainly lower in a city such as Jaipur.
Also, the real estate comes cheap for companies. The firms save almost 20-40 per cent on land acquisition or renting commercial office spaces in smaller towns.
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