Outsourcing News for August 2011 | MicroSourcing
Excessive Holidays Affecting BPO sector in the Philippines?
As the Philippines becomes one of the strongest outsourcing destinations globally, the Business Processing Association of the Philippines (BPAP) pleaded once again to the local government: “We don’t like more holidays.”
Raymund Lacdao of BPAP is hoping that the Aquino administration will respond accordingly to their call that too many holidays affect the outsourcing sector’s earnings. Since there are 22 holidays every year, he says BPO companies, especially the ones that operate 24/7, are forced to increase budgets for operational and labor costs. “The [declared] holidays in the Philippines has huge impact to our operations. We are serving other countries. It costs us a lot of money.” Another factor he says is the 60-day maternity leave for women and the impending approval of its extension in Congress. This will then increase the impact to the “cost of doing business” in the country.
The outsourcing sector is one of the major industries that helps in keeping the Philippine economy to stay afloat, and the government should look into the internal problems to reinforce the country’s weaknesses.
The diminishing talent pool as well as cut-throat competition are also alarming issues that may put off potential clients. Lacdao said it is possible for the sector to employ at least 4.5 million people in the next six years due to the growth of complex export services such as accounting, human resources, and financial services, among others. However, industry growth is somewhat threatened by issues faced by local BPO companies and lack of consideration by the government.
The Philippine government is partnering with industry body Business Processing Association of the Philippines (BPAP) to further improve the skills of workers who are entering the business process outsourcing (BPO) workforce and help the industry in reaching its revenue goals.
Guaranteed jobs in the outsourcing industry for scholars
In a statement by Department of Budget and Management (DBM) Secretary Florencio Abad, a Training-for-Work Scholarship Program will be launched this year and in 2012. A total of 37,000 out of 58,000 scholars who will take part in the program will get jobs - guaranteed. BPAP Chairman Alfredo Ayala said this will need P350 million worth of investments per year. A faculty trainer development program will also be implemented. This will require P150 million in investments.
These initiatives will help in making sure that the country’s outsourcing industry will remain a major revenue generator for the economy. "For the employment and the revenue potential of the industry, we see this as a reasonable investment that the government should consider," Mr. Abad said.
By 2016, BPAP expects that the industry will have 3.15 million job opportunities and post revenues reaching $25 billion.
According to a Cabinet official, country members of the Association of Southeast Asian Nations (ASEAN) can be protected from economic turmoil of Europe and the US by reinforcing alliances within the region.
During the Credit Suisse ASEAN+India Conference in Singapore, Finance Secretary Cesar V. Purisima said "What is becoming very clear is that [for] countries like the Philippines and other members of ASEAN, we’ll have to look ... at how we can continue to pursue our growth strategy with domestic consumption within our own country, within ASEAN and intra-Asia."
Purisima highlighted that the region is becoming independent from advanced countries and that a part of the dealings are made within Asia, having US as the fifth trading partner - behind China and Japan.
Increased competition in the Philippine BPO space
Though India is responsible for only 2.5% of ASEAN trade, Purisima said that having an ASEAN engagement with India will be very crucial. He also said that the Philippines is heading in the right direction to strengthening partnerships with India. The Philippines is currently ranked third in the list of outsourcing destinations. “We’re seeing increased engagement of Philippine-based companies with Indian companies and Indian companies competing in the Philippine BPO space.” He added that there is a need to work together so both countries can take part in the direction the global economy is heading.
The Philippines BPO Office Demand Rises
According to consultancy firm CBRE Philippines, rents for business process outsourcing (BPO) and traditional offices continue to rise, due to strong corporate expansionary demand that typically affects leasing requirements. Rick M. Santos, chairman and chief executive of CBRE Philippines, said in a statement, “We believe this is just the start of the projected up-cycle for the Philippine property market as determined by real demand and strong macroeconomic fundamentals.”
Multinational and local companies’ high demand for office space in Makati and Ortigas is believed to support the increase in rental levels.
Office locations in BPO-dominant business districts of Alabang and Quezon City experience a more aggressive increase in office rents. From January to March, rent for office spaces in Makati increased 2.65% or P809 per square meter, whereas in Ortigas, rent increased to P554 per sq. m.
Monthly office rent in Alabang surged to P501 per sq. m. and P516 per sq. m. in Quezon City. Meanwhile, rates in Bonifacio Global City and Mckinley also grew with an average monthly rent of P698 per sq. m.
Mr. Santos added that because of supply pressures, office vacancy rates decreased even thought rents continue to rise. The most noticeable drop in vacancy rates is in the Fort Bonifacio district which is now at 1.48%, while Alabang is at 3.08%, Quezon City at 2.79%, Ortigas at 2.96%, and Makati at 4.6%.
International Outsourcing Summit Philippines 2011
Seventy expert speakers and panellists and 300 delegates will come together for the third annual International Outsourcing Summit (IOS) to be held in the Philippines on October 11-12.
According to the event organizer, Business Processing Association of the Philippines (BPAP), it is a great opportunity for all sectors in the IT-BPO industry to evaluate the improvement based on the IT-BPO Road Map 2011-2016, a study that shows estimated annual growth of up to 20% over the next five years, US$25 billion in revenues, as well as 1.3 million direct jobs and 3.2 million indirect jobs.
BPAP’s Industry Affairs Executive Director Raymond Lacdao said voice-based BPO significantly contributes to the industry’s growth, but non-voice, complex services will drive it to its maximum potential. “IOS 2011 was designed to focus attention of the industry on the potential of non-voice, complex IT-BPO services, and to increase the global visibility of the Philippines’ capability for delivering these services,” said Lacdao.
Lacdao added that leadership skills in the industry and reforming of new services will also be discussed in this year’s conference.
Philippine President Benigno S. Aquino III will deliver the keynote address, and president and CEO of LiveIt Investments Ltd. and BPAP Chairman Alfredo Ayala will moderate an “Emerging Markets” discussion during the first day of the summit.
BPO Service Providers worried over Stronger Philippine Peso
The rise of the peso is worrying the BPO industry, and further appreciation might put off expansion plans of BPO companies.
According to Philippine Chamber of Commerce and Industry (PCCI) Chair Sergio Ortiz-Luis, BPOs need to reformulate business strategies if the exchange rate comes to P40:$1. The exchange rate is currently at P42.50 range. This is six percent higher compared to last year.
Ortiz said in a consultation meeting with the Business Processing Association of the Philippines (BPAP) along with other exporters, “They can still live lower than P42:$1 but a lot of the BPO expansion will be put on hold”. He also said that this will have an impact on the image of BPOs of having a competitive edge during the medium term.
According to a report done by PCCI, BPOs’ labor arbitrage will decline if the peso remains strong, which may cause clients to take business elsewhere. PCCI also conducted an industry study which showed that an exchange rate below P37:$1 will take a toll on the BPO industry’s competitive advantage.
A 20-percent growth valued at $25 billion is predicted by BPAP’s medium-term road map which will begin next year up to 2016.
Eastwood Cyberpark Philippines to Open new BPO Building
TechnoPlaza Two is the newest addition to Eastwood Cyberpark, the largest IT-BPO hub in the Philippines. The office building has a gross floor area of 34,000 sqm, with seven floors of office space. It will also have a supermarket at the ground floor and various establishments at the second floor. A bridge way will connect TechnoPlaza Two with the Eastwood Mall.
Megaworld FVP for Business Development Jericho Go said, “As the local BPO industry is forecast to generate US$11 billion this year in revenues, up from $9 billion in 2010, the country’s first and largest cyberpark continues to help the industry grow faster.” With this expansion of facilities, Megaworld aims to help the local outsourcing industry in reaching its revenue goal of $25 billion by 2016.
The Philippines, currently the 2nd top business process outsourcing destination, is predicted to surpass India’s $12.4 billion BPO industry this year. Proof of this is the country’s compounded annual growth rate (CAGR) at 27.6% in 2008, compared to India’s 11.92%.