Retail Energy Manufacturing Financial Services Government Technology Health Care Transportation Other


Finance Marketing Operations Economics Strategy Human Resources





Powered by

Rural BPO Programme: Impact and Implications

Faculty Contributor : S Nayana Tara, Professor
Student Contributors : Ashis Nayak, Tushar Rathee, Siraj Singh, Rachit Srivastava and Tshering Wangdi Yolmo

Indian governments, both state and central, have often been accused of being ineffective in their efforts to achieve social welfare. The Rural Business Process Outsourcing (BPO) programme launched by the Karnataka Biotechnology and Information Technology Services (KBITS) in the year 2008-09 has been a welcome exception to this scenario. The department has been successful in generating jobs for people in the rural areas through rural BPO centres. This article examines the efforts of the KBITS department, explores the limitations of the programme and concludes with recommendations based on the analysis.

Bangalore is known all over the world as the ‘Silicon Valley of India’. This showcases the power of the Information Technology sector in building developing economies. The state of Karnataka has benefitted immensely due to the development of this sector. But, the situation outside the city limits is a far cry from this glorious scenario. As observed, getting gainful employment is difficult in non urbanized or rural areas even for graduates 1 .

The Rural BPO programme provides subsidies to private companies and entrepreneurs in order to incentivise them to set up BPO centres in rural areas which would provide employment to rural citizens. The programme is aimed at generating additional sources of employment for people belonging to the lower income groups to allow them to attain a better standard of living as well as to create trained manpower. A BPO unit could be voice-based, data-based or a combination of both, and is generally engaged in customer interaction, financial and accounting services, call center and medical transcription services, engineering and design data management, insurance and medical services or data management 2 .


The Governance Framework was at the heart of this study. It is a framework that provides an excellent way to study any government related problem or initiative.

Exhibit 1 The Governance Framework

Based on the goal of setting up a hundred BPO centres and creating one lakh jobs to empower people, the government drafted policies of providing grants of up to 40 lakhs for each BPO centre. The aim was also to have a minimum employment for a hundred people in each of the BPO centres. The KBITS department helped the government in forming the strategy and in coming up with the required processes. Through detailed discussions with the stakeholders, the outcomes of the rural BPO scheme have been studied in detail.


I was planning to shift to Bangalore to get a BPO job. But then to everyone's surprise, the BPO came to my village
A delighted rural BPO employee

There are sixteen BPO centres operating in the state under the rural BPO development programme scheme. Some of these BPO centres have been established as late as January 2010. The programme has been an immediate success with the rural people. Those who earlier had to travel to Bangalore to work in the BPO sector, now have the opportunity to work in their village itself.

The entrepreneurs realize that the potential for making money is immense. However, currently most of the BPO centres are making losses, but are steadily moving towards breaking even. They hope to break even in the near future because they believe that the model is sustainable and breaking even has not been very difficult for most of the BPOs. The promoters are generally pleased with the level of talent rural areas offer in this profession.

There is a gold mine here; talented youngsters from rural areas could be wonderful assets
A promoter of a rural BPO centre

The following were some key findings that are characteristic of the functioning of rural BPOs:

Selection Process

The BPO centres invite applications through advertisements in local/vernacular newspapers. Close to a thousand candidates applied in each centre when the advertisements were floated for the first time. The selection process includes a written test followed by interviews.

Fluency in English is not a prerequisite. However, the candidates should be willing to learn. Computer skills are also not mandatory as the number of people with such skills is limited in the rural areas.

After speaking to several BPO employees during the course of the project, it became apparent that the opportunity to work in a BPO centre is much sought after by the villagers because of the following reasons:

  • The opportunity to master skills like communication in English attracts people as they feel that it will make them more eligible for marriage in their community.
  • People in rural areas in general have high aspirations. They see this as an opportunity to change their attitude and improve their lifestyle.


The clients are handled independently by the BPO centres, right from soliciting of their business to the execution and conclusion of the deals. There is no government intervention, be it in getting projects or delivering the output. Several projects come to the BPOs through personal contacts of the promoters. One of the BPOs has an IIM Ahmedabad alumnus as its promoter. Some of the promoters are veterans of the BPO industry and have been able to successfully leverage their contacts to get projects while in one of the BPOs the promoter is the local MLA which is again helpful in getting projects.

The BPOs under KBITS do not interact amongst themselves mostly due to a lack of the drive to network and sometimes due to the large quantum of work that makes it difficult for them to communicate with each other. As a result, no mechanism exists whereby they could share the projects that they are working upon, which sometimes results in them foregoing projects due to resource constraints.

Incentive Schemes

All the employees are employed at a basic salary level of Rs. 3000-4000. However, they get incentives for exceeding the targets set for them. After a certain period of time, based on their expertise, some get promoted to the position of team leaders. This increases their prestige in their social group which has a positive impact on the satisfaction level of employees and also motivates the employees to work harder.

Limitations and Common Problems

Language: A common problem across the BPO centres is the shortage of skilled labour in their catchment areas. The trainers often find it difficult to train the employees to the satisfactory skill levels required to work on a project. In a case illustrating this problem, a BPO could not take a huge project from a company from north India which required data entry in Hindi as the employees were not comfortable in that language.

Procuring projects: Another major problem the BPO centres face is in obtaining clients in the initial stages of their operation. Rural BPO centres, being a very new concept, still remain unproven. The rural BPO industry will take some time to establish credibility and create a brand image.

Lack of discipline: The employees sometimes do not behave professionally. Many of the BPO centres have cited problems with punctuality. Currently, not many of these centres have proper HR practices in place to ensure discipline among employees.

Interference by local authorities: A few BPO centres face acute problems due to local politicians who tend to hamper the operations of the BPO centres. One of the BPO centres (Mandya) had to be shut down because of issues with the local politicians. However, on the contrary, some of the BPO centres have used the involvement of local MLAs in popularising the BPO initiative among the locals.

Attrition: There have been problems of attrition as people leave the BPO centres for other options like higher education and better jobs. As a result, the firms are finding it hard to maintain the employee level at hundred per cent.


The recommendations cited below attempt to holistically address the issues faced by both the BPO centres as well as the government:

Flexibility in the Terms of Subsidy Awarded

The BPO terms should fix the number of people to be employed with respect to some local economic indicator, like the per capita income of the district, which could also serve as an indicator of the area’s educational level. In the initial phase, there should be some grace period during which the entrepreneur can increase the BPO centre’s strength up to the stipulated number.

Assistance in Starting a BPO

The entrepreneurs feel that the most troublesome phase is the first year when they have limited number of projects and not so well trained man-power. Help from the government in the initial stage would be very helpful for the entrepreneurs. The Government of India will be undertaking the census in 2011 which would require a huge data entry operation. The introduction of the unique user IDs will also require data entry operations of a huge magnitude. The government can give preference to the rural BPO centres for these and many other such projects.

Development of the Talent Pool and Training

A major challenge faced by the BPO centres is with regard to the skill level of the local population. The training programme should ensure that the employees receive adequate training for the job that they are expected to perform. To establish these standards, the government can study other BPOs not covered by KBITS to come up with the standards, which can be made a part of a Standard Operating Procedure (SOP).

A pipeline of workers also needs to be built, for whom, the skill set should include knowledge of computers as well as that of different languages, including the local language Kannada, English and Hindi. For this, the BPO centre itself can try to organize monthly visits by school children of classes 10-12 to get familiar with computers on the premises of the BPO centres.

A Hundred Employees per BPO

The number ideally should be determined by keeping in mind the location of the BPO and the local economic conditions. The number should be an average number, for example, the number of employees should be hundred on average during a quarter. This would allow the local entrepreneur to deal with seasonality issues tied to the agricultural sector and also allow for flexibility in managing manpower. To curb excessive hiring and firing, tolerance levels can be established.

Specification of Work Conditions

There exists the possibility of workers being exploited by being forced to work overtime. To prevent this, a maximum number of working hours per week can be mandated. BPO centres should be required to have a common area like a canteen where basic refreshments can be made available and people can get together during lunch.

Interaction between BPOs

The BPO centres can interact among themselves in different ways. Interaction can happen between BPO centres operating under KBITS, between all rural BPO centres, and between all rural and urban BPO centres. This would help them share best practices as well as pitch for projects together which will allow them to take up projects which they may not be able to take up individually. This would also make them capable of pitching for projects for large clients which have more than one requirement, thus conferring upon them the advantages of a large scale operation with the management efficiency of a small scale set up.

Business Development

BPO centres should ideally have business development teams, and these teams should collaborate across different BPO centres. This would lead to more stable cash flows as well as more efficient manpower management.


To curb attrition, the BPO centres should ideally offer some incentives. This can include “Employee of the Month” awards, cash benefits for surpassing targets, promotions based on performance etc. Employees who wish to get higher education should be encouraged to take up distance learning courses, and contract systems for a year or longer should be the norm.


The rural BPO programme started by KBITS is a wonderful effort to improve the lifestyle of the rural citizens by providing them with better employment opportunities. The programme aspires to have a hundred BPO centres within the next couple of years which would provide employment to about ten thousands of rural men and women. A number of loopholes still exist in the operational aspects of the project but these can be sorted out. The idea is a sustainable one that could possibly be one of the solutions for poverty alleviation and can add to the overall growth of the nation. The project has opened up interesting prospects for the rural youth who can now aspire to compete with their urban counterparts.


Rural BPO Programme, KBITS department, Entrepreneur, Information Technology, Governance Framework


S Nayana Tara is a Professor in the Public Systems area at IIM Bangalore. She can be reached at

Ashis Nayak (PGP 2009-11) holds a Bachelor's Degree in Computer Engineering from National Institute of Technology Calicut. He can be reached at

Tushar Rathee (PGP 2009-11) holds a Bachelor's Degree in Electrical Engineering from Indian Institute of Technology Madras. He can be reached at

Siraj Singh (PGP 2009-11) holds a Bachelor's Degree in Mechanical Engineering from National Institute of Technology Allahabad. He can be reached at

Rachit Srivastava (PGP 2009-11) holds a Bachelor's Degree in Electrical Engineering from UCE Burla. He can be reached at

Tshering Wangdi Yolmo (PGP 2009-11) holds a Bachelor's Degree in Sciences from Christ College, Bangalore. He can be reached at


  1. Indo Asian News Service, 2009, “Rural BPOs: Karnataka's latest in IT revolution- The Economic Times”, , last accessed on Oct 12, 2010
  2. Website of Department of IT, BT and S&T, , last accessed on Oct 12, 2010
All materials copyright of the Indian Institute of Management, Bangalore © 2014
Feedback . IIMB Website . About Us. Guidelines for Contributions. Disclaimer