As with other business process outsourcing (BPO) and business process management (BPM) centres around the world, the Philippines is gearing up to face the significant challenges and opportunities presented by recent advances in automation. The IT-BPO industry in the Philippines generated $24.7bn in revenue in 2018, with call centres accounting for approximately half of the total. However, as automation does away with the need for many low-skilled jobs, greater attention is being paid to fostering the higher-value knowledge process outsourcing (KPO) industry, which includes creative process outsourcing, corporate digital solutions, and the development of software and video games. “BPO industries and creative companies are already working together to generate value-added chains of production,” Dan Reyes, CEO of US BPO firm Genpact, told OBG. “They lobby together to influence policy-making, and the successful integration of processes is the next step.”
The Philippines is gearing up to face the significant challenges and opportunities presented by recent advances in automation.
According to the latest statistics from the IT and Business Process Association of the Philippines (IBPAP), KPO accounted for about one-third of the BPO industry in 2016 and an estimated 42% in 2017. In 2016 IBPAP published the Philippine IT-BPM Roadmap 2022, a comprehensive, six-year development plan to expand opportunities, analytics, intelligent automation and new models of service delivery. A major goal of the roadmap is to raise the share of revenue from animation and games from $56.2m in 2016 to $123.6m in 2022, for a compound annual growth rate of 14%. According to the Department of Trade and Industry (DTI), the games industry generated around $100m in revenue in 2018, largely via the provision of services to international game developers and producers, including France’s Ubisoft, which opened a new development studio in the capital Manila halfway through 2018.
The Game Developers Association of the Philippines aims to capture 1% of a global market worth more than $100bn by focusing on providing endto-end games and game-related services such as art, audio services and programming outsourcing to international studios. Ultimately, the development of value-added production could set the stage for the local creation of content and intellectual property.
A Solid Base
The Philippines has done well in successfully establishing an investor-friendly environment for the KPO industry. The country’s first Microsoft-certified development studio, Synergy88 Digital, is based in Quezon City and serves more than a dozen international clients with an array of motion capture and digital art services.
In April 2018 US-headquartered Unity Technologies – the company behind a real-time 2D, 3D, augmented and virtual reality development engine – announced it would partner with local real estate firm ArthaLand to establish a centre of excellence in Metro Manila’s Bonifacio Global City. The centre will train designers, artists, programmers and project managers, and offers an indication of the potential to galvanise international participation in Philippine creative industries by acting as a one-stop shop for potential clients to meet prospective partners.
Animation has been successfully outsourced to the Philippines since Fil-Cartoons was established as a subsidiary of US powerhouse Hanna-Barbera Productions in the late 1980s, and companies like Manila’s Toon City continue to provide services to US motion picture and entertainment companies including the Walt Disney Company, Universal Pictures and Warner Bros. Local Filipino animators netted more than $150m in revenue in 2015, according to figures from the DTI, driven largely by contracts from Japanese, French and Indian studios.
In addition to its solid fundamentals, there are a number of potential growth avenues for KPO. The global industry is continuing to advance animation techniques, particularly with the use of 3D-rendering algorithms. However, there are few mid- to large-scale BPO companies in the Philippines that provide creative process outsourcing and digital animation services, underscoring ongoing possibilities for growth.
Industry leaders such as the US DreamWorks Animation and Pixar have yet to establish studios in the Philippines, and there is ample room for further investment in the segment. Manila-based StraightArrow, which serves clients in the UK, the US and Australia with digital marketing and a number of other creative services, is one of the only KPO businesses to employ more than 200 people. Smaller-scale operations, including Brace Digital Solutions, Jigso Digital Solutions and Outsource Digital Solutions, also serve multinational clients in the space.
Another potential growth avenue for KPO is the Cagayan Special Economic Zone in northern Luzon, which has begun pioneering financial technology (fintech) and cryptocurrency services. In 2018 the zone became the first in Asia to license offshore virtual currency exchanges; this saw revenue triple as fintech firms and various other investors committed more than $8bn to spearhead the next phase of the Philippines’ BPO development.
Construction design is another prospective growth segment, particularly as the government’s P9bn ($167.4m) Build, Build, Build infrastructure programme comes into effect, and drives the participation of international engineering, procurement and construction companies in Philippine projects.
Similarly, some industry stakeholders believe that KPO services concerned with artificial intelligence (AI) present a significant growth opportunity in the field of medicine. “The BPO companies providing services to health care companies will lead the adoption of AI tools,” Patrick Parungao, head of the Manila office of digital and IT services provider UST Global, told OBG. AI technology presents a number of potential applications in the sector, like remote treatment and more accurate oversight of patients’ clinical developments.
A successful transition to these and other high-value services will require training, with the Philippine IT-BPM Roadmap 2022 forecasting that low-skilled jobs will account for 27% of IT-BPO careers by 2022, while mid- and high-skilled jobs will make up 46% and 27%, respectively. The Philippines is an attractive BPO destination due to numerous factors, including its low cost and the high degree of English language skills; however, more investment in training will be needed to successfully develop higher-value services and keep up with global KPO advancements.