Attaining the forecasted 20-30% growth would normally be quite an achievement for any industry; however, the aspirations of the sector laid out by the Business Processing Association of the Philippines (BPAP) were significantly higher and have certainly been dealt a significant blow recently. In November 2007 the BPAP, in collaboration with McKinsey & Company Global Consultants, published "Roadmap 2010" – a comprehensive, highly ambitious three-year plan to double the industry's worldwide market share from 5% to 10%. Reaching this goal meant maintaining at least 40% growth from 2008-10.
In 2006 McKinsey consultants estimated a global addressable outsourcing market of $450bn, of which only 10-12% had been penetrated. Prospects for the Philippines were considerable and recessionary economies in the Americas and Europe should have forced more companies to outsource. Logic suggests that when economic pressure is high there should be increased demand for low-cost outsourcing, but in this instance the pressure appears to be too great. Not only have decision-making processes been slowed as a result of economic uncertainty, but enormous job losses have led to the resurgence of protectionism. These factors, combined with the collapse of the financial community, have in turn slowed growth in the outsourcing industry. Nevertheless, prospects remain bright for the long-term future of this young sector.
Ray Anthony Roxas-Chua III, the secretary of the Commission on Information and Communications Technology, recently stated to OBG that, "The year 2009 will surely test the resiliency of the BPO sector in the Philippines. Growth has been hindered by delays in decision making among major firms, as well as rising economic protectionism in recessionary economies. On the other hand, quite a few firms will now have to seriously consider outsourcing simply because of their bottom lines. While we might not experience the same level of growth as in the past, we still anticipate a strong growth of 20-30%."
The advantages that the Philippines maintains over competitors regionally and globally are quite clear today. With the third-largest English-speaking population in the world, the Philippines holds a significant lead over most of its competitors. Those countries that do boast large English-speaking populations, such as South Africa, are not able to compete on a cost and/or quality basis with the Philippines. The country produces well over 400,000 graduates per year who are well equipped to perform a multitude of tasks. Low wages, operating costs and a customer-service oriented culture all contribute to round out the Philippines as an ideal outsourcing destination.
The first decade in the lifecycle of the BPO industry has focused primarily on the realm of voice services, such as contact centres (otherwise known as call centres). In fact, call centres in the Philippines jumped from four sites in 1999 to 280 sites in 2008, while in 2007 some 70% of the BPO workforce was employed in a call centre, generating 75% of the industry's revenues. The impressive 50% growth figures achieved during the five years prior to the global economic crisis were primarily on the back of voice services. Today, maintaining the high growth figures is requiring a greater degree of sophistication, with a new frontier emerging to propel further industry expansion as a result.
Diversification in the BPO industry has come via the development of non-voice services. These typically specialise in higher-returns office operations, such as legal, accounting, animation and medical transcription services, and generally require a more skilled workforce, which the country continues to produce in large numbers. In fact, many of the country's educated accountants, nurses and engineers have been forced to seek employment outside of the country due to limited domestic job opportunities. The growing demand for non-voice services means at least some of those overseas foreign workers may find adequate employment domestically. Increasing numbers of multinationals are also attracted to the Philippines in order to set up internal back-office operations.
According to Oscar R Sanez, the CEO of BPAP, "The one advantage we have with non-voice activities is that our universities are even more prepared to train graduates in these BPO functions compared to the generalist functions we hire for the voice sector. The voice sector requires supplemental intensive training courses, particularly in language proficiency and accent neutralisation."
He later added, commenting on the geographic widening of the industry, "While many young people come to Manila to work, we also know the city only produces 25% of the county's university graduates. In the meantime, the telecoms infrastructure in the country's 'Next Wave Cities' is now on par with Manila, driven by the Cyber Corridor project (north-south fibre optic network)."
Although the development of the BPO industry in the Philippines has centred on the greater metro Manila area for the majority of its brief existence, the spotlight is now shifting to what Mr Sanez and the BPAP are labelling as the Next Wave Cities. These second-tier cities now offer a sufficient supply of quality labour as well as adequate infrastructure to support the sector. Cities such as Cebu, Davao and Baguio have emerged not only as reliable alternatives to Manila, but in many instances preferred locations due to their notable cost competitiveness.
While the Philippines' sunrise industry may fall short of achieving the lofty goals it set out for itself before the mounting effects of the US-led economic downturn, it is still arguably the premier outsourcing destination in the world based on quality, value and variety of services. When the outsourcing sector eventually meets the targets set by the BPAP in 2007, possibly in 2011 or 2012 instead of 2010, most experts predict the industry will contribute 8-10% of the country's GDP. Quite an achievement for an industry still in its infancy.