Interview: David Rizzo
How can the Philippines ensure the orderly decentralisation of business process outsourcing (BPO) growth as urban areas reach maturity?
DAVID RIZZO: There is an increasing degree of competitiveness in Manila and Cebu, with the latter no longer qualified as a tier-2 market and offering any cost advantage over Manila. When talking to customers about how to diversify risks and minimise the impact of potential disruptions to business, from public transport strikes to typhoons, as well as diversification of opportunities from what might be an existing Manila solution, Cebu is traditionally suggested.
Depending on a customer’s maturity in the outsourcing and offshoring space, tier-2 and tier-3 cities may be tapped for expansion as sites. It is more likely that mature customers are already in the Philippines, whether in Manila or Cebu, and therefore have more confidence to move into a tier-2 environment, as they understand the value propositions of the country. These customers would also look to diversify their risk and decrease concentration in heavily populated areas, while hoping to benefit from factors such as ease of recruitment, lower attrition rates and higher retention rates. Although BPO players are seeking to decentralise and invest into tier-2 sites, we are also conscious that many customers are looking at the availability of seasoned talent and leadership, despite heightened competitiveness and higher attrition. Many less mature companies that are looking to outsource for the first time, whether they are legacy organisations with a hard stance against outsourcing or new firms which need to quickly build their capabilities, may establish themselves in a regional centre other than Metro Manila.
From a BPO perspective, we are able drive decentralisation by engaging in dialogue with our existing customer base, where an established relationship and trust factor exists, and bring them into provincial markets where they can avail of more competitive prices, enjoy better retention rates and de-risk their current footprint by providing broader solutions.
What value proposition do tier-2 cities and provinces offer BPO centres vis à vis Metro Manila?
RIZZO: Third-party studies by industry associations like the Information Technology and Business Process Association of the Philippines and the Contact Centre Association of the Philippines have identified and coined the term “next wave cities” to highlight suitable environments across the archipelago that meet the criteria BPO customers seek whenever they look to locate in a tier-2 or tier-3 site. This includes availability of suitable labour, quality of colleges and universities in the area, and adequate infrastructure. Educational institutions in tier-2 locations also need to be able to graduate talent that meets the expectations of the industry, with solid conversational ability in English a top priority. There has been growing awareness of the needs of the BPO industry from local government units in terms of talent gaps; however, the gap will continue to be an obstacle for expansion, as there are expectations that growth rates for tier-2 and tier-3 sites should be the same as for tier-1 centres during the industry’s early years. With regards to infrastructure, the industry seeks everything from suitable facilities to build into – whether in the form of a mall or new office block, all with Philippine Economic Zone Authority certification – to the availability of public transportation, as 98% of our employees utilise public transport to travel to or from work.
The infrastructure and stability of the telecoms environment has advanced greatly over the past five years. The country was previously limited in its telecoms capabilities, particularly with regard to tier-2 markets and last-mile sites, to provide strong bandwidth support to customers from around the world. As a result of the improvements, more viable tier-2 options have emerged and success has multiplied.
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