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Outsourcing News for June 2011 | MicroSourcing

BPO firms to tap new markets in Asia-Pacific region to further promote PH BPO industry

To further promote the business process outsourcing (BPO) industry of the Philippines and reach the target annual growth rate of 30 percent, BPO firms in the country are eyeing to tap new markets in the Asia-Pacific region.

According to Senior Executive Director Gigi Virata of the Business Processing Association of the Philippines (BPAP), the country’s BPO industry can enter new markets such as China, Sri Lanka, and India as it has maintained its competitiveness in BPO for call center work and non-voice functions.

However, talent that meets client requirements remains a challenge for the industry. To improve the quality of recruitment and increase the hiring rate in the industry, BPO firms are working together with the Commission on Higher Education (CHED) and the Technical Education and Skills Development Authority (TESDA) to implement training and recruiting development programs.

Meanwhile, businessmen think computerized training and increased use of English in local TV can further improve the English communication skills of Filipino workers who wish to enter the BPO workforce.


Still Hesistant to Outsource

According to an Angus Reid survey done by the American Express Small Business Monitor last April, 38 percent of owners choose to avert difficult tasks but are having issues when it comes to trusting the quality of other people’s work. Meanwhile, twenty-four percent do not want to endure the difficulties of finding and managing new people.

Subsequently, majority of the survey participants say outsourcing is costly and are unwilling to surrender control of their business. The result clearly proves that small business proprietors in Canada would rather resolve tech issues on their own, even if they lack the expertise, than employ support.  

Forty percent chose to be independent by doing office repairs, cleaning, and administrative tasks.

However, a lot of owners admitted that they are incapable of doing it all, particularly technology-related issues. In fact, 59 percent said they gave in to outsourcing and hired outsiders for at least one of their tasks in a span of six months. Some of the most outsourced processes are website-related and technical support.

According to a monthly report by the National Federation of Independent Business, even small business owners at the south of the border are unwilling to hire, not due to management control issues but because of the weak economy and political uncertainty.


PH Services Exports Increased 3.6%

World Bank recently recognized the Philippines as one of the leading global service exporters, thanks to the business process outsourcing (BPO) industry. They also noted that for the country to progress, travel and tourism should also be developed.

According to World Bank senior trade economist Sebastian Saez, the factors that affect the services sector are infrastructure, manpower, and excellence of institutions. “The experience of exporting outsourced business services in the Philippines shows that by creating an enabling environment where the private sector can deploy its creativity, developing countries can reap the benefits that services exports opportunities are opening,” Saez said.

Services exports increased 3.6 percent per year, from nine percent in 1999 to 21 percent in 2009.

The Philippines holds 15 percent of the global BPO industry, with India (37%) at the top spot and followed by Canada (27%).

According to Business Processing Association Philippines (BPAP) chairman Fred Ayala, during 2010, the country’s BPO industry employed around 500,000 people and yielded $9 billion worth of services. The industry plans to reach $25 billion in revenue by 2016 and employ 1.3 million.

World Bank study also emphasized that the tourism sector should be cultivated and reforms outlined in the National Tourism Development Plan (NTDP) should be addressed to maximize the sector’s potential and in the long run, help resolve poverty issues in the country. 


UAE and MENA Seen to Boost Outsourcing Industry

Based on a report done by Dubai Outsource Zone (DOZ), in partnership with research and consulting firm Frost and Sullivan, the global outsourcing sector is predicted to reach $479.3 billion by 2016 due to a significant change in the industry.

The special study, entitled “Outsourcing Opportunities in the MENA Region”, was released during DOZ’s fourth anniversary.

The report highlighted that the UAE and the wider MENA region are prime outsourcing destinations. Moreover, it showed that $370 billion from the global outsourcing market will be reflected as an 8.35 percent compound annual growth rate (CAGR). On the other hand, the MENA region is expected to show a CAGR of eight percent during the period of 2009-2016, while the UAE is expected to gain a 10 CAGR during the same forecast period.

The developments in the industry are also said to be caused by the financial crisis, which also encouraged companies to change policies, practices, and to outsource.

As Dubai becomes the favoured outsourcing destination because it poses as a gateway to the entire Middle East, Africa, and Asia, the MENA region, on the other hand, is known as the second largest outsourcing market after Egypt.

Frost & Sullivan Consultant for Middle East and North Africa Information and Communication Technologies Lindsay McDonald said, “The entire outsourcing industry was based on low cost activities. But now clients are ready to pay a premium if they are assured of high quality services. Due to this trend, governments of well-established outsourcing destinations are in the process of re-aligning their outsourcing industry and its development strategies.”


PH IT-BPO Workforce, US$9.1 B in Export Revenues

Investors consider the Philippines as the “next Asian dragon”, taking note of the 25-percent-a-year growth rate of the country’s IT-BPO industry.

According to Commissioner Ivan John Enrile Uy of the Commission on Information and Communications Technology (CICT), this growth rate is attributed to the world’s biggest firms that establish business operations in the Philippines. Based on last year’s data, approximately 525,000 workers were part of the IT-BPO workforce and US$9.1 billion in export revenues were posted. 

Meanwhile, Uy praised Bacolod in Negros Occidental for being ranked as the 3rd Next Wave City in the country, and 100th city globally according to Tholons International. He added that CICT aims to further prepare cities and areas outside Metro Manila to meet the needs of IT-BPO companies to “decongest Metro Manila, spread economic growth opportunities to other parts of the country, and capitalize on the abundant and globally competitive workforce available in many parts of the country."



Eastwood IT Cyberpark

In terms of employment figures and salaries, Eastwood City Cyberpark in Quezon City is still the number 1 IT park in the country. This is based on the data from the Philippine Economic Zone Authority (PEZA).

In 2010, Eastwood City Cyberpark’s PEZA-registered locators employed 19, 395 individuals. This is a 15 percent increase from 2009 figures and is the highest number among all registered IT parks in the country. On the other hand, the salaries and wages paid out in PEZA-registered firms reached Php7.93 billion, a 15 percent increase from Php6.72 billion posted in 2009.

Eastwood City Cyberpark also posted an increase in the exports category, reaching US$354.19 million from its companies that belong to the outsourcing and offshoring industry.

Jericho Go, FVP for Business Development of property developer Megaworld Corporation, shared this recognition to the cyberpark’s locators and partners that contribute to achieving the goal of providing career growth opportunities for Filipino employees.




Business Strategies Overlooked?

A recent study done by Accenture and Shared Services and Outsourcing Network (SSON) stated that outsourcing providers and clients are mostly consumed by service level agreements (SLAs) and are forgetting business strategies in contracts.

Forty-two percent (42%) of the 600 respondents said their time is spent discussing SLAs rather than business outcomes. On the other hand, 25 percent said they used to do the same thing but have changed the process.

According to Tom Pettit, managing director of North America business process outsourcing at Accenture, although SLAs are vital for IT and BPO contracts, they can also confuse both parties from future developments. "SLAs are an important part of any managed service engagement. They set expectations and necessary service performance targets. However, the overwhelming majority of SLAs are focused on measuring process inputs, rather than business outcomes."

Cutting costs may be the driving force for clients and providers to overlook operational metrics. Fifty-eight percent (58%) of the respondents said they outsource work because they wanted to cut costs, 19 percent did it because they wanted access and capacity, and 12 percent did it for risk reduction.

It is also stated in the study that most of the outsourcing customers fail to gratify some members of the management team, which has become a problem. "The centralization of services, whether in an internal shared services model or in an outsourced model, involves shifts in power and influence, changes in roles and responsibilities, and disruption of familiar ways of working. These are notoriously difficult and often deeply personal issues that require focused and sustained management attention over extended periods of time," said Pettit.