DATE POSTED: 09/23/2008

Business process outsourcing is regarded as one of the fastest growing industries in the world, and is an emerging industry in the Philippines. The Philippine BPO industry is growing primarily because of high demand for offshore call centers. Clients who chose to set-up BPO operations, as well as those considering to start BPO operations in the Philippines consider the large volume of English-speaking workforce, high literacy rates, good work ethic, low labor costs, good educational infrastructure producing a steady flow of high qualified individuals, and good communications with North America and Europe as the main reasons for offhoring their back-office and customer-related needs to Manila, the capital of the Philippines. These advantages set the Philippines apart from India.

A study entitled ‘From 1989 to the Present: A Story of BPO in the Philippines’ by David Kinnear, co-founder and Head of the BPO Council (a voluntary, public-private collaboration with the Philippine-American Chamber of Commerce in New York and the Philippines Department of Trade and Industry), found that “India’s well-publicized economic rise and apparent disposition for BPO, combined with past political issues in the Philippines, have perhaps overshadowed the Philippines’ undeniable business potential as a global BPO center. However, its true potential is now fast-emerging – this being fueled by major government support and investment in infrastructure improvements such as the new airport and the so-called Cyber-Corridor. These are major investments with world-leading growth and success in mind. The vision for growth is attractive – and results are already in evidence. The strategic importance of this activity is clearly understood by none other than the Philippines’ president herself.”

The Philippines has a 95.9% literacy rate compared to India’s 52% literacy rate. This is the reason why most clients who transfer complex work offshore choose the Philippines over India. “In complex or particularly data-sensitive BPO scenarios, we’ve focused on the Philippines, given [the] consistently high education standards and markedly lower rates of turnover among staff versus other locations. We place heavy emphasis on sound management and good employment practices to encourage staff well-being, long-term loyalty, and tenure,” says Peter Holland, North American operations director for DDC HRO – the human capital and human resource BPO business of the DDC Group.

Recently, De La Salle University Graduate School of Business and Ateneo de Manila Professional Schools announced that they will offer post graduate courses intended to help produce supervisors and mid-level managers for the BPO industry. This is good news for the local outsourcing industry as this will address the need for competent personnel for middle and upper managerial positions.

Aside from the advantages of outsourcing in the Philippines, India’s new tax ruling favors Philippine BPO firms. In the first week of September, India’s Income Tax Appellate Tribunal ruled that all local call centers should deduct tax at source on payments made to foreign companies for support services abroad. According to British banking giant Hong Kong and Shanghai Banking Corporation (HSBC), the changes in India’s tax scheme bodes well for the Philippines’ BPO industry as it will negatively impact India’s competitive outsourcing position.

In the Philippines, the local government encourages growth in the ICT and BPO sector through favorable tax and regulatory policies designed to attract investments into the country. The local government continues to enhance the Philippines information infrastructure, provide a regulatory environment conducive to growth, promote BPO services, and develop IT parks and zones.

Additionally, Gartner Inc., the world’s leading information technology research and advisory firm, recently unveiled its list of the top 30 locations for offshore services in 2008. The report suggests that India is not the only country that comes to mind when considering outsourcing work overseas. Gartner listed Australia, China, India, Malaysia, New Zealand, Pakistan, Philippines, Singapore, Sri Lanka, and Vietnam as the key outsourcing locations within the Asia Pacific region.

India seems to acknowledge the Philippine outsourcing industry’s strength, as Indian BPOs are losing pure voice contracts to Philippines BPOs. In fact, Indian BPO companies are opening centers in Manila to support their existing customer care businesses while others buy Philippine BPOs. Last month, India’s Aegis BPO bought PeopleSupport Philippines for $250 million.

Author: Kim G.

Author: Outsourcing Insider

Outsourcing Insider consists of a team of regular blog contributors who writes topic about outsourcing and its relation to other industries like social media, finance, healthcare, sales and marketing, contact centers, and data and research.