India: Outsourcing goes rural, with a few hiccups

India’s business process and IT services outsourcing companies are beginning to look to small towns and villages for their next wave of expansion, according to a new report from the Wall Street Journal.

It’s a move that won’t likely have a dramatic effect on the American middle class–as these are the types of jobs that were already lost long ago, or that most American job seekers lack the IT skills to do. But it could have a tremendous impact here, the WSJ suggests.

“Every year, about 114,000 new graduates with engineering backgrounds enter the job market, but more than half of them are from small towns and villages, according to a report by Zinnov Management Consulting Pvt., a Bangalore-based firm that advises on business strategy,” the paper says.

“[But] many graduates from engineering schools in rural areas are reluctant to migrate to bigger towns or cities, even though they may be qualified for jobs offered by outsourcing companies.”

As the IT outsourcing business — which the WSJ says generated $69 billion in revenue from exports this fiscal year — drives cultural and economic changes in India’s cities, that means that rural youth have in large part been left behind.

“RuralShores Business Services Pvt., for example, runs back-office outsourcing services such as data entry, bookkeeping and expenses handling at offices in small towns and villages, providing rural youth with job opportunities,” writes the Journal’s Dhanya Ann Thoppil. “It is one of 12 finalists in The Wall Street Journal’s Asian Innovation Awards.”

“The impressive economic progress India is experiencing today is only limited to the urban areas and benefiting the middle class and above,” Thoppil quotes Murali Vullaganti, who co-founded RuralShores in 2008, as saying. 

Along with RuralShores, NextWealth Entrepreneurs — started by Sridhar Mitta, the former chief technology officer of Wipro Ltd. — is using a franchise model to set up offices in towns and villages, the paper said.

Similarly, Tata Chemicals Ltd., which is part of the multibillion dollar Tata Group, also has a nonprofit arm that runs outsourcing centers in rural areas.

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