The future of India's BPO sector lies in moving more of its operations to rural parts, according to Kiran Karnik, former Nasscom president and member of IDG's global advisory board. Rural India not only offers lower costs but also an abundant pool of highly-motivated talent.

"Indian companies have been setting up BPOs in various countries including Sri Lanka, Vietnam, China, and Thailand. However, the biggest unexplored market is here. The future destination for the Indian BPO industry is within the country," he said.

Delivering his keynote address at the first national rural BPO conference organised by Byrraju Foundation, the NGO arm of Satyam Computer Services [Get Quote], in Hyderabad, Karnik said Indian BPO companies are moving slowly towards rural areas.

"We face competition as a result of the success we have achieved, coupled with the already-existing problems like lack of talent and the related issue of attrition. Clearly, there is a huge untapped talent in smaller towns and the industry should find ways and means to identify this."

Saying that Indian IT and BPO facilities are being set up as world-class facilities, he said that companies should look at small and cheaper facilities for services like data entry to tide over infrastructure and hiring costs.