The business process outsourcing (BPO) industry, the fastest growing sector in the Philippines, expects to rake in more outsourcing and offshoring (O&O) accounts this year despite the economic drag caused by a weakening global economy. The industry's players share the same optimistic outlook for 2008 evidenced by news of expansion programmes by BPO companies.
IBM Daksh Business Process Services Philippines opened its third and largest call centre in the Philippines in September 2007. It plans to fully operate the 1300-seat facility in the third quarter of this year, targeting to hire people from the cities of Navotas, Caloocan, Malabon and Bulacan as well as provinces in the north.
Outsourcing in the Philippines is driven by the growth of the contact centre sector. But aside from customer care, other services are beginning to make a solid mark in the world market.
This year, the strong demand for back office, engineering and financial services is expected to boost the industry's revenue by another 40%, to $7bn. Headstrong, a US-based firm providing consulting, application and business process outsourcing and product development, is planning to expand its Manila operations, citing clients' growing interest in the Philippines as the major factor for its decision.
Based on initial data sent by local BPO companies to the Business Process Association-Philippines (BPAP), the industry's revenue for 2007 is projected to reach $5bn, a 47% increase on revenue in 2006, and $13bn by 2010. At present, the industry is reported to be employing 320,000 workers, a number analysts anticipate will rise to 1m by 2010.
According to the Roadmap 2010, a comprehensive report on the local O&O industry, prepared by BPAP and published in October 2007, the Philippines aims to capture 10% of the $450bn BPO world market by 2010. In addition to creating new jobs, this targeted growth is expected to encourage the real estate sector and be of particular benefit to the telecommunications sector, which is projected to experience a 283% jump in revenues by 2010.
However, there is still the challenge of recruiting qualified people. Because of this, the majority of contact centre companies provide free short-term training in English, so applicants will have the required level of professionalism and communications and problem-solving skills. Companies are asking for government support to help minimise the burden of polishing graduates to fit the labour requirements, especially since the state is also reaping the rewards of the industry's growth. The Institute for Development and Econometric Analysis reported that the Philippine government is earning PhP3bn ($81.1m) annually from the O&O industry.
Apart from internal difficulties, another growing concern by BPO companies is a possible US recession, which will have a negative impact on global economies. It is feared that overall weaker economies might result in company cutbacks, starting with their outsourcing services. In addition to this, the continuing rise of the peso has affected the industry as most contact centre and BPO contracts are fixed in dollars at the beginning of a project, pegged against the existing exchange rate at the time of the contract signing.
So far, industry players have reported that profits for 2007 decreased by 15%. To cushion the appreciation of the peso, companies are now hedging in dollars with banks, pegging the rates at PhP38 ($0.93) to PhP40 ($0.97) against the greenback.
The industry is currently gearing up for the 8th e-Services Global Sourcing Conference and Exhibition, the biggest gathering of local and international industry stakeholders, to be held February 11 and 12, 2008 in Manila. More opportunities for emerging players and locations will be discussed during this event, with special focus on the emerging collaboration between Philippine BPO firms and their counterparts in other countries.
India, for instance, is one of the country's major competitors in the global outsourcing market, but the influx of BPO clients to India have caused it to establish its own facilities in the Philippines. At least 12 Indian BPO firms are currently operating in the country.
Despite the expected external bumps ahead, the Philippine BPO industry is confident it will still grow by 40% to 50%, both in terms of revenue and employment, this year. This will be achieved as BPO companies focus on educating and hiring more qualified employees as well as marketing the Philippines as a leading outsource and offshore services location.