Philippines Strengthens its Position in Outsourcing   

Hungary for expansion, Philippine-based business process outsourcing (BPO) companies are now charging into other markets in the hope of further driving revenues up. Although predominantly focused on the USA and European markets, Philippine BPOs realized the current untapped potentials in the Asia Pacific region and the viability of other types of services.  

Officials of industry association Business Process Association of the Philippines (BPA/P) last week said that the industry in the Philippines is expected to expand by 100 percent this year. The contact center industry, a sub sector, is expected to grow by at least 70 percent.  BPA/P, the umbrella organization of BPOs in the Philippines, said much of the growth would be spurred by other non-voice-related services such as back office outsourcing and software development such as animation.   International Finance Corporation (IFC) Country Manager Vipul Bhagat said that the strong performance of the BPOs serves as the opportunity for the World Bank group to provide a "catalyzing" support for such forms of foreign direct investments (FDIs).  

EMERGING MARKETS
The most common type of outsourcing that Philippine-based BPOs under take are front office outsourcing, (FOO) such as contact center services, where language proficiency is a crucial element. Lately, many Philippine companies are also getting into another type of outsourcing, which is back office outsourcing(B OO).  BPA/P says it is logical for Philippine BPOs to try to penetrate other markets. Because of the 12-hour time difference between the contact center companies and their clients in the US, the facilities in the Philippines are underutilized during the day. This is driving Philippine BPOs to consider expanding into other areas to maximize the investments in their facilities.   The Philippine Board of Investments (BOI), the Commission on Information, Communication and Technology (CICT) and the BPA/P forecast investments in outsourcing this year to rise by 42 percent or around US$225 Million.

A study by the McKinsey global consultancy firm showed that there are at least 120 outsourcing companies in the country. The same report stated that the BPO revenues are expected to reach US$10 billion by 2010.   Philippines' Socioeconomic Secretary Neri, in an earlier statement, said that while contact centers are at the forefront of the country's BPO industry, "we should indeed diversify our outsourcing work beyond call centers." BPO companies also get into medical and legal transcription, and data-entry type of services, to name a few.   Aside from animation, financial services back office type of outsourcing would do well for the local BPO industry. The Philippine accounting system is similar to accounting system of the US. With the country’s commitment to comply with the International Accounting Standard -- a worldwide standard --even non-US and European companies can take advantage of the opportunities that the Philippines offers.  

Beefing up back office outsourcing opportunities is a more logical step to address a worldwide growth opportunity. Investments in the global BPO sector are expected to hit US$641 billion by 2009. The BPO industry is expected to increase its workforce up to two million by 2010. Around 500,000 of these would be for the call center industry. This means other types of back office services would require more knowledge workers.  

MORE PREPARED THAN OTHERS
Compared to other countries in the region, the Philippines is more prepared to take advantage of business outsourcing deals outside of the US. In fact, the Zurich-based Trestle Group, which is involved in funding small and medium enterprizes (SMEs) engaged in business process outsourcing (BPO), described as "significant" the potential of the Philippines as an outsourcing hub. "For organizations seeking sourcing destinations that include strong English language capabilities, Asian-based, well- established organizations, industry support and value for investment, the Philippines should definitely be included in the assessment," said Trestle Group Chief Executive Officer Ralph Schonenbach and COO Bernhard Janischowsky. "A recent visit to the Philippines reinforced the market's perception that this is a country that has significant potential as a sourcing destination,” they said in a statement.   They cited the Philippines for attracting companies with global reach. Among them are Deutsche Bank, Coca Cola, JPMorgan, HSBC, AOL, Siemens, and Dell. The executives of the Trestle Group are convinced that the Philippines can handle other services such as application development and maintenance, animation, graphics and web, engineering and CAD, and transcription services. In gauging the country's potential, the Trestle Group used the criteria on investment, language capabilities, geographic proximity, maturity of the industry and strategic positioning for a region.  

VOICE SERVICES
Aside from back office outsourcing, there is an emerging demand for Asian language voice services within the Asia-Pacific region. Jojo Uligan, Contact Center Assoc executive director, said Philippine-based contact centers are getting inquiries from prospective clients in the Asia Pacific region. Japan, China, Korea and Thailand are inquiring about the capabilities of Filipino call center agents in other Asian languages.   Uligan said it would not be difficult to find Filipinos fluent in other Asian languages because there are overseas Filipino workers (OFWs) who return to the Philippines after their foreign assignments. He said contact centers jobs may even work as incentives to bring some Filipinos home. Given the relatively low cost of services in the country, some Asia Pacific countries are also thinking of outsourcing from the Philippines because of the quality of the labor pool, including the capability for multilingual support.  

Last May, listed call center Paxys Inc., disclosed to the Philippine Stock Exchange (PSE) that it has acquired an Australian company providing back office financial services. "Salary Pty Ltd. (Smart Salary) is Australia's second-largest outsourced remuneration packaging administration company. Salary packaging administration is an Australian Taxation Office approved means allowing employees to effectively structure their income through a combination of cash and approved employee benefits," Paxys said.  
-- 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.)