The Philippines’ new pillar of industrial growth

The Philippines has many traditional industries, but IT Business Process Outsourcing (IT-BPO) is the one experiencing unprecedented growth. Oscar Sañez, CEO of the Business Processing Association, explains its success and the opportunities the Philippines offers.

Early morning around Manila’s prime financial district along Ayala or even in the former backwater village called “Libis” in Quezon City, one would have to navigate your way through a maze of young people rushing out of office buildings to catch a cab ride or to spend a couple of extra hours in a lounge or a nearby Starbucks. The face of these new commercial districts is now painted with a lot of young workers speaking perfect English and donning the latest trends in fashion and mobile gadgets. What used to be half-empty buildings at the aftermath of the Asian crisis in 1997, are now busy commercial districts humming 24 hours daily and teeming with hundreds and thousands of “knowledge workers” creating new value for the global business community and a new bright spark to the local Philippine economy. Welcome to the new IT-BPO industry, a new global industry that has placed the Philippines on the world map.

With total IT-BPO revenues reaching more than US$5 billion by the end of 2007, from US$1.5 billion in 2004, the Philippine IT-BPO industry is expected to grow by about 40 percent this year, following an average growth rate of 50 percent for 2004–2007. This achievement, coupled with a full-time employee base of more than 300,000 at the end of last year, makes the Philippines the global #2 player in the Business Process Outsourcing market, next only to India. In October 2007, the UK National Outsourcing Association awarded the Philippines the “Offshoring Destination of the Year” award.

Several important ingredients are responsible for the Philippines’ capturing a significant portion of the global market share, such as the following:

  • A robust talent pool (450,000 English-speaking college graduates yearly) renowned for excellent communication skills, warm inter-personal skills, customer-focused orientation, high problem-solving capabilities, and close affinity to the Western culture;
  • An enviable operational cost advantage that is highly competitive with any IT-BPO supplier country in the world, including India;
  • A world-class telecommunications network infrastructure that is perfect for IT-BPO operations; and
  • An investor-friendly and competitive financial incentives and investment package schemes for IT and IT-enabled services investors, whether third-party service providers or captive regional shared services centres.

With these attributes, analysts (Gartner, Frost & Sullivan, Everest, etc.) have been quick to put the Philippines in the top echelons of the global IT-BPO industry as an eminent IT-BPO service provider. But despite these impressive credentials — doubling revenues each year since 2001 — the Philippines will certainly not rest on its laurels as it treads a more difficult path towards achieving growth.

Call centres - developing rapidly

Given the advantage the Philippines has in English language proficiency, it is understandable that the Customer Care sector of BPO had become the most developed business, currently comprising two-thirds of the whole Philippine BPO industry. But Call Centres are not our only advantage. We now have several outsourcing companies serving foreign clients in the field of Finance outsourcing, HR Outsourcing, Logistics Outsourcing, Publishing Outsourcing, Legal and Medical Services Outsourcing, IT Software Development and Application and even creative arts like Animation, Engineering and Design Process and Gaming development. Many multinational have also centralized their back-office support in the Philippines.


A Roadmap to Success

Recognizing the tremendous potential for the Philippines to become a global IT-BPO destination, the Business Processing Association of the Philippines (BPA/P), the umbrella organization that represents this fastest-growing industry in the Philippines with its more than 200 members plus 5 association members, published its first report called Offshoring & Outsourcing Philippines: Roadmap 2010 together with top research firm McKinsey and Company. This 216-page report made a comprehensive gaze of both the global and Philippine IT-BPO industry, examining closely significant factors that contributes to its growth — or even possible inhibitors — and then set in motion a comprehensive set of initiatives to support an aspirational goal of achieving a 10-percent global IT-BPO market share equivalent to $13 billion in revenues and close to 1 million full-time industry workers by 2010. The Roadmap made it clear that in order for the Philippines to sustain growth, it is important that the various stakeholders involved with the industry should commit to leading and executing several important programmes.


Talent development – ensuring a deep bench of qualified workers

With 450,000 students graduating from various disciplines, from business to technical courses, there is already an assured talent pool that can be pulled in to the system to help grow the industry. Under Roadmap 2010, BPAP and its co-workers and other significant stakeholders have already set in place complementary efforts to assure the delivery of at least another 300,000-600,000 workers that the industry needs to support the annual goal.

Another initiative is the awareness campaign to promote career opportunities within the industry and erase common misconceptions about it, like being a “dead-end” job or a career with no future, particularly among young people and their parents and even school officials, in order to increase the number of candidates.

Funding the education of students is also another significant effort in order for these students to start their career in the IT-BPO industry. BPAP is working closely with its partners to find necessary funding resources for the education of these deserving students while they labour through their studies, with the end-in-view that they will become permanently part of the IT-BPO labour pool.

Lastly, the strengthening of both high school and college curricula to boost suitability of graduates to industry-related jobs is also part of the agenda under Roadmap 2010. The industry and BPAP will continue working hand-in-hand with academia to help students boost their skills set and create a highly-competitive work force.


Infrastructure development – creating a globally competitive workplace

BPAP

Currently, IT-BPO locators in the Philippines are concentrated in several areas around Metro Manila, particularly in prime areas like Makati, Pasig, and Quezon City. This is deemed detrimental to the industry, since it creates undue pressure, particularly on costs, which is a relevant and primary concern of potential investors and locators.

As part of BPAP’s objectives under Roadmap 2010, BPAP is helping accelerate the development of what it calls Next-Wave Cities, particularly those in other urban areas in the provinces north and south of Metro Manila that will serve as alternative yet viable IT-BPO areas and in the process help decongest Metro Manila’s already crowded locations. BPAP’s priority is to make available quality, accurate, and complete information to potential locators, local governments, property developers, and even utilities in order to assist them in their decision-making.

To achieve this, BPAP is undertaking two prime efforts: information and developmental services. Under information services, BPAP, with the ICT development arm of the government, the Commission on Information and Communications Technology or CICT and the Department of Trade, is producing a City Scorecard, an analytic tool that will help locators assess the readiness and capacity of cities as a potential IT-BPO hub. The scorecard will also help the cities understand their capability of attracting investors to locate in their area.

Of course, the Philippine telecommunications infrastructure need not be ignored, with its fully redundant system that can accommodate even the heaviest volume of calls and transactions made over the phone, making it another vital component for the continued success of the Philippine IT-BPO industry. The Philippine telecommunications companies continue to invest heavily in continuously improving their networks to be able to cope with the heavy telecommunications demands of the IT-BPO industry.


Creating the right business environment

Manila

Another key factor that investors and locators consider when making important investment decisions is the presence of a sound business environment, particularly in four areas: financial incentives, investor support, perceived risk environment, and overall support from government.

It is a known fact that the Philippines has one of the most investor-friendly financial incentives regimes in the world that continues to be a driver for attracting investors. The Investments and Incentives Code of the Philippines is closely being looked at by BPAP and its partners and other stakeholders and help harmonize and simplify it. We also believe that more can be done to provide support for potential and existing local and foreign investors via a process that goes all the way through, from initial decision to securing incentives and finally during actual start up.

BPAP is also playing an important role in improving perception and the country’s overall investment climate and risk profile. The organization has already outlined a clear and concise agenda in terms of improvements that it deems necessary in areas of legislation, government regulatory policies and continued and unbiased enforcement of existing regulations. It will continue to provide hard yet fair information on business risks in order to provide balance toward risk perceptions that may be provided by external sources.

We are also looking closely at existing national government support to the IT-BPO industry as a matter of priority and importance. BPAP has taken a leading role in voicing its position in matters that would affect not just the overall health and welfare of the industry, but also national competitiveness and global image, in matters like data privacy, cyber crime, intellectual property protection, and labour-related issues like wages, holidays, productivity incentives, night-work prohibition, etc. BPAP, true to its role as industry champion, is making sure that the voice of the entire IT-BPO industry is heard by the government and Philippine legislative bodies.

As part of its avowed role as industry champion, BPAP will also pursue industry promotion efforts through various audiences here and abroad. In partnership with government agencies like the Philippines’ Board of Investments (BOI), BPAP will promote the industry and the country as well as a preferred IT-BPO location.


The test of the pudding is in the eating

As the tie that will bind all of these initiatives together, BPAP has built a professional team composed of stalwarts in their respective industries to see to it that Roadmap 2010 is treading in the right direction. Called “Team 2010,” BPAP believes that a lean yet strong, credible, reliable, and professional team of experts is necessary to unite the industry and be able to execute the above-mentioned initiatives with dedication, enthusiasm and passion.

To find out more about the opportunities that the Philippines has to offer, contact:
Business Processing Association of the Philippines www.bpap.org

The Philippine Embassy, 6-8 Suffolk Street, London SW1Y 4HG
E: (Commercial) dtilondon1@aol.com or pticlondonuk@aol.com
E: (Tourism) infotourism@wowphilippines.co.uk




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