BPO firms target smaller cities for finance services

BPO firms target smaller cities for finance services

New Delhi: Jaipur, Ahmedabad, Indore and Nashik are emerging new destinations for outsourced finance and accounting (F&A) work as they provide back-office firms with a deep pool of labour with a commerce background, and help cut real estate and operating costs, including salaries, by up to 40%, says a technology consulting firm.

Most of the F&A work that is outsourced to India by global players involves payroll, tax, and accounting-related work as also more complicated work, including regulatory reporting, compliance, management reporting, analysis, treasury, risk management and capital budgeting. This, in turn, requires a workforce with a strong commerce background.

Research done by the the local arm of Everest Research Institute, a Dallas, US-based research firm, shows that Ahmedabad produces a total of 25,000 graduates a year, of which one-third are commerce graduates. Around 22,000 people graduate every year from Jaipur’s colleges, of which 2,400 have a commerce background. Indore has about 3,000 commerce graduates every year and Nashik, 2,500.

Other cities such as Nagpur, Chandigarh, Bhubaneshwar and Mysore also have a significant population of commerce graduates, Everest said.

“B.Com graduates account for about 17% of the overall graduates in India and there is a higher preference for (commerce) as an education stream in Central India, including Maharashtra and Gujarat," said Nikhil Rajpal, vice-president, global sourcing practice at Everest’s Gurgaon office.

Mumbai-based business process outsourcing firm WNS Global Services Pvt. Ltd employs more than 4,000 F&A agents, operating out of Pune, Mumbai and Nashik. The firm, which has been in Nashik for more than five years, employs more than 1,200 people there —half of whom are F&A agents. It is looking at expanding that base in the city though it did not reveal any numbers.

“Nashik has a lucrative market as it is more data-oriented. It has an employable commerce graduate pool for F&A work. The attrition level is much below than the metros and that helps us move such F&A work where the stickiness of employable pool of people is high," said Sulakshana Patankar, WNS’ chief operating officer of enterprise services.

Other business process outsourcing firms that have a F&A presence in these cities include Genpact Ltd, India’s biggest BPO firm, which does some F&A work out of two offices in Jaipur. Of its 2,100 employees in Jaipur, more than 300 are F&A agents doing reconciliations, closing and reporting, financial spreading and underwriting order to cash management work for clients.

“Operating out of Jaipur provides access to a bigger pool of accountants as employee retention is good and operating costs are competitive. Jaipur and Jodhpur generate the maximum number of accountants in India. We expect to grow beyond 5,000 employees in Jaipur over time and a good proportion of it would be F&A agents," said Diwakar Singhal, centre head, Jaipur, for Genpact.

The back-office arm of Mphasis Ltd, a unit of Electronic Data Systems Corp., also has a presence in Ahmedabad and employs around 350 people for both F&A and customer-service related work.

Cost savings, too, will favour F&A expansion in Jaipur, Ahmedabad, Indore and Nashik. “Compared to a metro such as Mumbai, where the total annual operating cost per F&A agent would be around $21,000 (Rs8.61 lakh), operating out of these four cities help firms save anything between 30% in Jaipur and up to 42% in Indore," Everest’s Rajpal said. The savings at Ahmedabad are pegged at a third while Nashik saves 38%, according to Everest data.

Typically, the top expenses for a BPO firm are on account of personnel, real estate, and utilities costs such as telecom and power.