Companies in various States are shifting to Tier II and Tier III cities to attract talent and cut operational expenses and they need to thank Karnataka for showing the way.

Way back in 2004, Karnataka, which started the IT boom in India, acquired 200 acres in Mangalore and 250 acres in Mysore to help IT companies to set up shop in smaller cities.

What started as a trickle then has now become a flood. Now, you have BPOs in places such as Belgaum, Gadag, Hassan, Haveri, and others. In fact, keen on promoting Tier II BPOs, Karnataka in 2009 launched a scheme for providing jobs to 1 lakh people in Tier II BPOs.

If Bangalore showed its potential to the world, Mysore showed India what a Tier II city could do.

Last year, Mysore with its 53 companies contributed Rs 1,000 crore worth of software exports and showed that there could be huge savings for companies moving to smaller cities.

Of course, while there is growing enthusiasm in this field, there are also some minor concerns, which can fortunately be addressed.

MeritTrac recently conducted a study in Karnataka and found that only one in four engineers in smaller cities in Karnataka are employable by IT firms.

Improvement areas

The report said that, while spoken English skills and analytical ability of the students tested need improvement, the gap could easily be bridged. Hoping that Tier II BPOs can contribute immensely to the industry, Nasscom released a study titled ‘Location Roadmap for IT-BPO Growth' a few years ago.

According to this study, Tier II cities could account for three million BPO jobs by 2018, which was projected to be 40 per cent of the potential employment of the BPO sector as of that year.

And while many States have started developing their Tier II cities, Karnataka has already started developing its Tier III cities.

MNC BPO

In fact, in 2010, Shimoga became the first Tier III city in the State to have a MNC BPO when the UK-based Xchanging plc decided to set up a 1,000-seater in this town, which can be expanded to 2,000 seats if required.

And the success of Karnataka is also spurring enthusiasm in North Indian States. In 2008, Nasscom pointed out that Tier II and Tier III cities in South India have more penetration of BPO companies than cities in North India. However, all that is set to change with States in North India planning to follow Karnataka's lead in developing Shimoga.

Rajasthan wants to develop its own Tier II and Tier III cities such as Ajmer, Jodhpur, Kota, Bikaner and Udaipur as BPO destinations.

And while they are busy with their plans, the next wave in the BPO domain will undoubtedly come from the South, with Karnataka in all probability leading the charge.

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