RuralShores: Bringing jobs to rural India
Editor’s note: This is the final post in a three-part series. The first two parts, an interview with Dipra Mukhopadhyay, who is a member of NSDC’s core investment team, can be found here and here. This final part is an interview with Murali Vullaganti, co-founder and CEO of RuralShores, one of NSDC’s early investees.
RuralShores is a business process outsourcing (BPO) company focused on generating rural employment. The Bangalore, India based firm hopes to provide employment to more than 100,000 rural youth by setting up centers in each of India’s 500 rural districts. To help stem the tide of rural young people who migrate to cities in search of jobs, RuralShores creates employment opportunities in small villages. RuralShores was started by a group of likeminded and senior executives from organizations including Ernst & Young, Hewlett Packard (HP), HDFC Bank, Mastek, and Wipro Technologies.
Vullaganti co-founded RuralShores in 2008 and has been leading it ever since. Currently, he also serves as vice chairman of NASE (National Association of Social Enterprises) in India and founding director of Compassites Software, a technology ideation company headquartered in Bangalore. In his previous role as the managing director of Steria (earlier known as Xansa India), Vullaganti grew Steria’s offshore information technology and BPO operations in India. Prior to Steria, Vullaganti worked as a Regional Director for EDS Asia Pacific, which is now HP. Having lived in the USA for 15 years and Singapore for five years, Vullaganti has held several senior executive positions at large IT and BPO organizations globally.
Sriram Gutta (SG): After a 15-year illustrious career in India and abroad, what prompted you to start RuralShores?
Murali Vullaganti (MV): When I was MD of Steria in 2006, I read a newspaper story of how the famed Indian economic growth story was bypassing the villages where 75 percent of the Indians lived. Much of the growth was taking place in the big urban centers of Bangalore, Delhi, Mumbai and Chennai. The villages continued to languish with not enough jobs and economic growth, particularly for the youth. I knew that many unemployed young people in rural areas were migrating to the cities in search of jobs, but that this trend was causing multiple social and economic problems. Cities were getting congested, placing pressure on housing, transportation and public services, which were poor to begin with. Cost of living was rising, making savings difficult. At the same time, the exodus of rural youth into cities was devastating the centuries-old social fabric of rural India, which was built on the social and economic security provided by the joint family. Families were being split and parents were losing the assurance of having children nearby to take care of them.
I often wondered what businesses can do to stem this tide of rural migration. Is it even their role to do so? Isn’t this solely the government’s responsibility? Can a private business organization create social value in a self-sustaining manner?
SG: So you believed that private enterprises can sustainably deliver social value. Tell us more about how you conceptualized RuralShores.
MV: At Xansa, we were setting up IT and BPO centers in major metropolitan areas such as Delhi and Chennai and recruiting an average 400 people per month. However, due to the talent crunch and high employee attrition rates in the cities, we began to hire youth from the villages and brought them to the cities where the BPO jobs were located. The youth from the rural areas were just as talented and hard working. However, there were major problems with bringing youth from the villages to the cities. Firstly, the people who moved to the cities for jobs were not able to bring their families with them. Secondly, they were not able to save much even though they were earning more than what they would earn in the villages – largely due to the higher cost of living in the cities. Finally, the social structure of extended family was affected since many of the rural youth lived with their parents and siblings at home in their villages. Consequently, we observed that these rural youth moving to the big cities were not particularly happy, and neither were their family members in the villages.
This is when I thought “rather than bringing people to the jobs, why can’t we bring jobs to the people?” This idea led to the business model that eventually made RuralShores a reality. The model involves setting up a national network of small BPO centers (each with about 200 to 250 seats) in remote rural areas owned and managed by local entrepreneurs. The corporate office of RuralShores provides the technological, marketing, operational and management support needed by these entrepreneurs. This approach helps create jobs and economic development in rural areas and keeps rural families united, while minimizing the impact of rapidly rising costs of hiring and retaining BPO workers in cities.
SG: Even with 35 to 45 percent lower costs and significantly lower attrition rates compared to their urban counterparts, rural BPOs (with the exception of some captive units) haven’t scaled enough. Is there a problem with the model or do most entrepreneurs fail at the execution?
MV: A rural BPO needs to have a very robust business model to sustain. We have also faced several challenges when we started five years ago. The most challenging one was infrastructure i.e. electricity and telecommunication links, which causes critical infrastructural bottlenecks in remote locations. There was a need to build adequate redundancies to deliver high-quality service from rural locations. Even though the villages were connected to the electricity grid, power supply was erratic. Therefore, an electricity generator was always kept on standby, thereby increasing the costs. At RuralShores, we have started looking at alternate sources of power. In fact one of our centers at Sonari near Lucknow in Uttar Pradesh now runs on solar power.
For telecommunications, we tied up with two service providers, one acting as a backup for the other. Many a time they had to remain connected to our clients’ back-end servers and such redundancy was essential to maintain high availability. This also leads to additional costs.
Given the lack of opportunities in rural India, recruitment was seldom a challenge. However, training new recruits took longer because most of them were not familiar either with English … or with computers. They also had to be trained on softer aspects that employers took for granted in case of employees in urban areas. These included expected standards of grooming and behavior in a professional environment, importance of planning leaves of absence among others. In the initial days, sometimes the entire group of employees failed to turn up for work without informing because there was a marriage in their village. Likewise, there would be lot of absenteeism during harvesting season because many of our employees would need to help their families in the fields. Based on such experiences, RuralShores created a standard manual, which was henceforth used for foundation training during the induction period.
SG: Some of the critics of rural BPOs have highlighted the limitations of rural BPOs in terms of the type of work they can do. In your experience, are there enough employable people to take up more skilled work (like KPO)? Can organizations build training programs to up skill such people?
MV: The rural youth are immensely focused and talented. It is all in the training. The gestation period of skilling is longer but once they come up to speed, there is no looking back for them. Good people who are enthusiastic to learn are easily available. The availability of local opportunity helps them save more money as they stay at home and earn. We have seen tremendous passion for the work among our employees. Through our existing 17 rural centers across India, we are performing a wide variety of process work, from basic data entry to KPO work. Our journey till date has seen us add a wide variety of processes from clients cutting across a number of industries. We have been able to hire good engineers for the KPO work.
Definitely, organizations can build training programs to up skill the rural youth. Their zeal for learning and proving their worth is amazing. This untapped potential of rural people can be utilized to answer the lack of available talent pool in cities, high attrition rates, and high training costs; while reducing costs significantly.
SG: RuralShores has already raised more than one round of equity. Did your experience in the corporate world make it easier for you to raise funds?
MV: Yes, it did to a certain extent, particularly in the first round. The promoters have brought in their equity in two tranches, which has been supplemented by investments from external partners. (The) same investors have also invested in the second round in RuralShores, reinstating their faith in the business model and also their satisfaction at the growth of the company.
SG: How was the experience working with NSDC? How do you see them differently (due diligence process, team, etc.), if at all, from other investors?
MV: NSDC was very thorough in their due diligence. They had experts from different areas – content and curriculum design, financial modeling, understanding the business model and approach, and also due diligence on the management team. What was also interesting was that in spite of experts looking at each area – they moved forward relatively quickly without wasting time on inconsequential matters, that they knew from experience that an enterprise will overcome soon enough.
SG: Post investment, what kind of a relationship do you have with the NSDC? Apart from funding, do they also help you on the operations? Are there specific areas you think NSDC should get involved in?
MV: NSDC is very involved and focused on sharing best practices across partners. They are facilitating and driving the business enablers like Industry certification, content design, and experts/third-party providers like trainer certification, delivery monitoring, and assessments and so on. They are also putting in their efforts to get state governments and PSUs to come forth and participate actively in the skilling space.
We believe that NSDC should put in lot more effort in evangelizing with public sector organizations (PSU) and state governments in partnering with skills providers for employment and go beyond the CSR/grants and subsidies. For example, governments and PSUs need to either directly or indirectly work towards taking on skilled people (who have passed the 10th to 12th class levels), but have thereafter acquired specific skills through a recognized training partner and not just get stuck on the educational degrees/diplomas.
Specifically for RuralShores – there is a clear proposition for skilling rural India and taking employment to where they are versus displacing them to cities. In this scenario – it is important that NSDC puts an extra effort in bringing the state governments and PSUs to recognize that at a policy level there needs to be a change to enable outsourcing of work to rural areas as a special case rather than clubbing with normal outsourcing.
SG: NSDC has a mandate to skill 150 million people in the next 10 years. As an investee, does this put pressure on you to go after massive scale?
MV: The tension and pressure is required so that we innovate along with NSDC and train and employ people as per our plan – this kind of pressure is good to have and we would like to do our best.
SG: Now that you have spent 5 years in the social sector, would you recommend your friends from the corporate sector to be social entrepreneurs?
MV: Definitely, if you have the passion to make a difference to the community you live in. The work is challenging but as you go down the road, you come across so many likeminded people who come into your eco-system and are ready to help you. The profits depend on the prudence of the people running the business, but the satisfaction of making a difference and earning the goodwill of many, makes it all worth it!