The success of the voice segment of the business process outsourcing (BPO) industry has enticed many clients to fold non-voice, higher-value process outsourcing services into their offshore BPO operations in order to expand and compete more effectively and economically. These higher-value non-voice services include the outsourcing of data-based business activities known as knowledge-process outsourcing (KPO), finance and accounting outsourcing (FAO) and IT outsourcing (ITO). The Philippine government has recognised the importance of the non-voice knowledge industry for the opportunities it holds for skilled graduates at home, as well as for the growth of the offshore industry as a whole.
Advanced Skills
KPO, FAO and ITO require an array of highly specialised capabilities. These include data integration and advanced technical analysis in areas including engineering, clinical research, software and IT development, and legal and accounting processes. The time difference between the Philippines and its main KPO clients (the US and the UK) represents a competitive edge. For instance, a US client can dump data into its Philippine KPO office at the end of the US working day. The Philippine knowledge worker can analyse the data and be ready to suggest next steps by the following morning. KPO firms thus need employees with exceptional educational qualifications and extensive training. For example, financial sector KPO services could require staff with degrees and certifications, such as chartered financial analysts. The KPO industry may eventually become a consultative one in which data is used by KPO analysts to predict business trends and help craft strategy.
Global Prominence
The global KPO market is expected to expand at a compound annual growth rate of 23.12% from 2013 to 2018, according to the Global Knowledge Process Outsourcing Market 2015-19 report, on the back of demand from companies in developed Western economies. Processing and analysing the massive amounts of data gathered and stored in these companies’ IT systems requires data analytics to track performance, develop business strategies and improve operational efficiency.
Consultancy firm Tholons noted an increase in FAO, ITO and KPO services being offered in the Philippines. “We believe that the question regarding long-term sustainability and growth of the country’s IT-BPO industry will hinge on the ability of government and stakeholders to properly transition its existing talent pools to adapt from its current BPO-orientation towards higher-value services,” Manuel Ravago, Tholons’ president for research, said in a 2014 overview of outsourcing destinations. “This transition should be focused on undertaking systemic improvements across the country’s IT-BPO ecosystem. Improvements pertaining to education and curriculum development, telco infrastructure, and supporting industry-policy frameworks are among the critical enablers that should be considered by stakeholders.”
Next Steps
Some work remains to be done before KPO can take off in the Philippines. One of the major challenges is resolving the different legal, licensing and compliance regulations mandated by each company’s home government. Another is identifying the key areas of demand for knowledge-based services. Once that is determined, the government and the education system will be able to align the training of the labour force towards areas of core specialisation.
In its 2016 roadmap, industry group IT and BPO Association of the Philippines identified state assistance required to take the next steps towards establishing a knowledge-based offshore economy. These included education reforms, investor incentives, new support for remedial training and enhancing marketing and promotion efforts on both the international and local levels. Many analysts have also urged the government to prioritise making systematic improvements to the country’s telecoms infrastructure.
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