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Job boom: Indian outsourcing braced for eight million more
…and makes a home in smaller cities

By Nick Heath

Published: Tuesday 06 May 2008

India will gain about eight million outsourcing jobs over the next decade as the industry booms in smaller cities, according to official forecasts.

Minor cities in India will snap up about two million of these jobs, according to a report of India's top 50 cities for IT and business process outsourcing (ITO and BPO) by industry association Nasscom.

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Currently 90 per cent of the industry's workforce are based in India's top seven ITO and BPO cities but the report says this will drop to 75 per cent over the next decade as employers turn to smaller alternatives.

Overburdened roads and oversubscribed universities in the seven key centres, such as Bangalore, Chennai and Hyderabad mean the industry needs to develop smaller cities such as Amedabad, Coimbatore and Visakhapatnam, the report states.

These smaller "tier two and three cities" will be needed to provide about 50 per cent of the required skills in both ITO and BPO, where talent shortage remains a large constraint, according to the report.

But it says the government needs to begin building infrastructure and education facilities in the smaller cities to underpin this future growth.

Dr Ganesh Natarajan, chairman of Nasscom, said in a statement: "We now see the time as being right to spread this development to a new set of locations, provided the requirements of the industry can be met."

In a statement, Nasscom president Som Mittal said: "The development of only a few select set of cities has put severe pressure on the infrastructure, costs and also increased migration of resources.

"We see immense potential in the next set of locations if the right steps are taken now."

The government recently backed a one year extension of a tax break for software companies and Mittal said he hoped the government would create more Special Economic Zones, where companies enjoy other tax benefits.

The study looked at 100 metrics such as business environment, government support, infrastructure, the knowledge pool and skill-set availability, operating cost and social and living environment in the 50 Indian cities.

The report is aimed at guiding government investment in infrastructure and education and the location of future ITO and BPO development centres.