Why Outsource to the Philippines?

The outsourcing industry in the Philippines is growing rapidly and the Philippines is steadily climbing on the list of largest outsourcing destinations. In choosing an outsourcing destination, many companies look at India as the most obvious choice but with the rapidly increasing salaries in India and the retention problems BPO companies have, many companies are turning their heads towards the Philippines. In this section we will have a look at why we belief the Philippines is a great outsourcing destination.

Cultural Compatibility

Unlike India and China, the Philippines has a culture that is very compatible with the western culture. After being a Spanish colony, the Philippines was governed by the United States from 1899 to 1946 and the after effects are still very evident today. Television and movie theaters are almost fully dedicated to American productions and they are shown in English without subtitles. The official language is Filipino but English is the widely-used second language and especially in education and business English is commonly used as the primary language.

Filipinos do not have a strong accent and they have a great natural ability to learn dialects and even local slangs. This is one of the main reasons of the strong emergence of the call center industry in the Philippines. The vast majority of the Filipinos are Roman Catholic and in general, they have the same beliefs and values as most westerners. Even the Filipino sense of humor is very compatible with the western world. In general you will find that Filipinos are easy to work with.

Low Costs

The Philippines is a very low cost country compared to other South-East Asian countries. Salaries in the Philippines are a fraction of those in the western world with the daily minimum wage set at about $8 per day. Newly graduated employees with college degrees from reputable colleges can be hired at about $300 per month. These low costs also apply to all other business expenses such as office rental, utilities, office supplies and third party services.

The one thing that is more expensive in the Philippines are the telecommunication costs. The internet infrastructure is constantly being upgraded and the government realizes that they have to invest in better connections to sustain the current BPO investments, but the connections in the Philippines are still very slow compared to countries like Japan and South-Korea. This also means that good, high bandwith connections come at a very high price. So in overall cost calculations the savings on labor and operational costs are countered by an increase in telecom costs.

Overall the costs are going to be very low compared to the US and Europe and you can expect to operate an offshore team at about 50% of the costs of a domestic team. For more pricing details read our Pricing Structure

Highly Skilled Available Workforce

The Philippines has a very high literacy rate of about 94% with basic education made available to virtually the entire population. The University of the Philippines, Ateneo de Manila University, De La Salle University and the University of Santo Tomas are reputable universities delivering graduates who occupy top positions in both local and international firms. Filipinos are creative and expressive people by nature and many of them choose courses like creative design, multimedia arts, freehand drawing and animation. There are many schools and colleges that provide excellent education and training in these creative fields.

Because of a historically weak local economy, the Philippines always had a hard time providing jobs to the hundreds of thousands of people who enter the workforce each year. This is also the main reason why the Philippines has such a large percentage of their total labor force working outside the Philippines. Most of these overseas workers would of course rather stay in the Philippines with their friends and family but the lack of job opportunities forces them to leave the country. The emergence of BPO in the Philippines is opening up local opportunities and because of the sheer size of the labor force, BPO firms are having little trouble finding highly skilled people for their clients. This is in stark contrast with India where finding and especially keeping employees is a serious problem.

Economic Growth & Stability

One of the things that kept the Philippines from developing fully in the past was the political instability. Even after ousting the dictator Marcos, there have been several coup attempts that have prevented foreign investors from seriously considering the Philippines. As a result these investors chose different destinations like Thailand and South Korea and these countries grew as the Philippines stood still. Finally this situation seems to be changing and foreign investors are rediscovering the Philippines.

The current president Gloria Macapagal-Arroyo is currently serving her second term and in general the Philippines has been quite stable for more than a decade. The current government still has a lot of work to do and there are still a lot of problems concerning the general poverty, corruption, bureaucracy and the large divide between rich and poor. Still, the current government seems to know when opportunity is knocking on the door and they are encouraging the emergence of BPO operations. They have set-up special economic zones and established a Philippine Economic Zone Authority to promote these kinds of investments by granting fiscal and non-fiscal incentives. The emergence of BPO is also finally opening up domestic job opportunities thereby no longer forcing skilled Filipinos to leave their country to work abroad. Salary levels are rising and a middle class is emerging. All these possitive signs become more and more apparent when you look at Metro Manila but also other cities like Cebu City, Clark, Pampanga, Baguio City and Davao City where development and real-estate projects seem to be popping up around every corner.

The Philippines is lifting itself up and as it does it will gain a new reputation as an excellent BPO destination, an excellent tourist destination, a source of highly skilled labor and home to some of the warmest and friendliest people in South-East Asia.