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BPO pendulum swings to Philippines
With Indian companies starting to shift their operations to the Philippines, analysts carry the optimistic view that outsourcing would further shine as the new sunrise industry in the farther end of East Asia.
Companies such as ClientLogic, Dell, GXS, HP, IBM, GXS, Safeway and Sykes see strong growth and high ROI prospects in the Philippines as the reason behind the shift of operations from India. In one of his presentations in the Philippines last June Craig Reines, Teletech vice-president and general manager, pointed out that India's lease rates tripled in the last four years. Attrition rate rose 40 percent a month while wages increased 13 percent for the entry level and 30 percent for the managers.
Other compelling issues such as the size of the labor force, western assimilation, and availability of graduates convinced Business Process Outsourcing (BPO) companies to put the Philippines on their radar screen.
India's labor force in the outsourcing sector is predicted to double from 1 million to 2.4 million four years from now. In 2010, the Philippines may just be attaining 1 million. Other analysts reported that companies in Singapore are also interested in getting involved in the BPO labor and investment markets in the Philippines, particularly the offshore back-office services.
Reines dismissed reports from an international publication that the Philippine job market for outsourcing has the reached its saturation point. Instead, he described the Philippine workforce as "tremendous" and producing "outstanding work". But granting that alarmists would insist that saturation would emerge four to five years from now, Reines said that the potential of utilizing older prospective employees, 35 years old and above, has not been adequately addressed yet.
Some call center executives noted that those older agents, particularly the ones that have families, tend to be more proactive than their younger counterparts. It is not uncommon to find agents who work as part-time employees of other companies not involved in outsourcing during the day. They are the ones striving hard to earn extra income. Call center agents are trained to speak in American-English, and not in Pinoy-styled English or Taglish. They not only are familiar with American idioms, but are able to understand what an American homeowner needs for their home, the kind of car a businessperson drives to work, or what a fifteen-year-old does for rest and relaxation. A familiarity with American geography and cultural mores helps them get into the mindset of the American consumer
MARKET STILL HUGE
With the demand for audiovisual services and information technology increasing, the search by American and European companies for low cost but quality labor is intensifying. Aside from India, other competitors of the Philippines that are all too eager to market their wares include China, Malaysia, Vietnam, Eastern Europe, Russia, South Africa, Mexico, Costa Rica and Brazil. Despite the tight competition, the decisions of many companies to choose the Philippines as their outsourcing base rely on the prospects of higher internal rates of returns (IRR). Sykes, for instance, moved its operations from India because of this, prompting some observers to say that the IRR from its Philippine operations must be significant in size to let go of the former site. The contact center and Information Technology (IT) group based in the US employs 7,000 people in the Philippines.
In his presentation before a regional conference in Singapore, Chalre'Associates Chairman Richard Mills said that strong figures also convinced GXS to go in the same direction. "GXS reported an increase in roughly all of its quality metrics within just a few months of moving the work to the Philippines from its various worldwide locations," Mills said.
The US-based companies are not the only ones setting their sights on the Philippines. Clients in Europe are seriously considering transferring from India. This customer base may provide 100,000 employment opportunities. Some BPO players advise the local sector to undertake an aggressive marketing campaign.
GOVERNMENT UNVEILS NEW OUTSOURCING PLANS
Although not a sole determining factor to influence BPO companies to choose the Philippines, the incentives granted by the government allows newly established companies to gain a "head start", Reines said. He added that the fiscal incentives extended by the Board of Investments (BoI) would prevent potential investments from being channeled to other competitor countries. Incentives, such as income tax holidays, allow them to further lower their unit of cost in production.
For his part, Mills said small to medium companies must be given encouragement to jumpstart their operations. George Kintanar, adviser of the Philippine House of Representatives' committee on ICT maintains the view that incentives will not be revoked that easily. He is thus opposed to any clamor for the removal of incentives. “We don't want to change the rules in midstream. If ever we do that, there should be a process of consultation," Kintanar said. He stressed that call centers, for instance, are just beginning to move forward.
Like Reines, Kintanar also maintains the view that the country is far from the saturation stage. The adviser to the congressmen said that the nearby provinces of Cavite, Laguna, Batangas, Rizal, and Quezon (Calabarzon), which are outside Metro Manila, would be able to respond to the increasing demand for infrastructure and labor. Kinatanar said that he had brought Teletech's requirements to the attention of the Rizal provincial government, which may provide the assistance in responding to the company's need for 10,000 seats.
George Kintanar unveiled a plan to implement "overseas global outsourcing" -- a new marketing strategy that will tap Filipino managers based in the United States to convince American companies to outsource their back office needs here in exchange for financial incentives. The plan was revealed before local government officials and private businesses at a press conference announcing the 1st ICT Calabarzon Conference in Tagaytay Convention Center in Tagaytay City. Kintanar said the plan would be implemented by the Philippine Chamber of Commerce and Industry (PCCI) in joint venture with Filipino-American (Fil-Am) executives and overseas Filipino workers (OFW) in the U.S.
Kintanar disclosed that the government is planning a road show in the U.S. in December, which, among others, will encourage overseas Fil-Ams to do overseas global outsourcing. He said the U.S. continues to be a significant market for outsourcing, as it accounts for more than 50 percent of the global outsourcing market.
The future appears very bright for the Philippines as the momentum continues to build.
---Mio Cusi
(Mio Cusi is a senior reporter for the Manila-based BusinessMirror. Currently assigned to cover the macroeconomic beat, he has written numerous articles on the comparative advantage of the Philippines among other Asian countries in relation to BPO services.) |
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