Outsourcing News for October 2011 | MicroSourcing
Sovtware Development of the Philippines Posts higher Earnings
The Philippines’ software development industry had seen an increase in export revenues and employment last year, based on a report by Tholons, a services and investment advisory firm.
In 2010, the industry posted $725 million in export revenues. More than half (57 percent) were from the US market, while one-fourth of this figure came from the United Kingdom. Other markets that contributed to this growth include Canada, Japan, Europe, Australia, Middle East, and countries in the Asia-Pacific.
When it comes to job opportunities, a total of 44,962 were employed in the industry in 2010, up by 27.60 percent compared to 2008 and 2009 with only 35,300 full-time workers. Top services for foreign clients were application maintenance, software testing, and custom application development. In the local scene, sources of revenue were product engineering and system infrastructure support service.
This Tholons study was done to assess the current situation of the local software industry. It was commissioned by the Philippine Software Industry Association (PSIA), with funding from the Commission on Information and Communications Technology (CICT). According to PSIA President Nora Terrado, despite the financial crisis, the software development industry remains committed to reaching the goal of the Philippines to become the outsourcing location of choice.
BPO is not the Answer to Poverty in the Philippines
The business process outsourcing (BPO) industry has become one of the key revenue and employment generators for the Philippine economy. However, a recent study from the Asia Development Bank Institute (ADB) states that the government should not rely on the industry in dealing with the poverty situation in the country.
In a study by F. Tech Tschang, Associate Professor of Strategic Management at the Singapore Management University, he looked at the information technology (IT)-enabled services industries in China, India, and the Philippines. He said IT-BPO cannot be considered as a solution to lessen poverty since it does not help those who are poor and less educated. He added that while the impact of the BPO industry to the economy is significant, it is much less on a “per-person basis”.
In the State of the Nation Address of President Benigno Aquino III, it was reported that the BPO industry generated more than 30,000 jobs early this year, and more job opportunities are expected for the rest of 2011. However, Mr. Tschang said this does not help a large part of the population. Only those with better education benefit from the industry. This increases the difference between people who have better education and those who don’t.
Meanwhile, Socioeconomic Planning Chief Cayetano Paderanga said the BPO industry does not directly reduce poverty, but since it generates jobs, it still has a huge effect on the situation. He added that the government has direct programs to ensure that “nobody will be left behind”.
Industries spending more on IT outsourcing
According to a study by sourcing advisory firm TPI, international sectors like retail, manufacturing, telecoms and media in Europe, the Middle East, and Africa (Emea) increased spending on IT outsourcing on the three quarters of this year compared to the whole period of 2010.
For this year’s third quarter, the manufacturing industry posted €1.5bn in IT outsourcing spending, compared to only €1.4bn in the same period last year. Consequently, for the first three quarters of 2011, the sector spent €5.8bn compared to €5.6bn in all of 2010.
As for the retail sector, it had already invested €1.4bn. This was higher than the figures posted last year.
On the other hand, the financial services industry, the sector that posted minimal spending in 2010, has reduced expenditures on IT outsourcing services, spending only 48% of last year’s total. According to TPI, during the third quarter of 2011, Emea financial services sector invested €1.6bn in IT outsourcing, a far cry from the €2.7bn of 2010. Reduced IT spending was also seen in energy, healthcare, and pharmaceutical sectors.
According to Martyn Hart, Chairman at the National Outsourcing Association, IT outsourcing has become a way for sectors like retail to maximize efficiency and entice consumers. A significant increase in outsourcing activity was seen in the retail sector as companies aim to be more competitive through advanced IT solutions and upgraded infrastructure that outsourcing can provide at low risk.
More opportunities await 65,000 Filipino job seekers who wish to enter the Information Technology-Business Process Outsourcing (IT-BPO) workforce, thanks to the P500-million budget approved by President Benigno Aquino III.
Funding for programs that will enhance the workers’ skills needed in the IT-BPO industry
The funding will be used by the Technical Education and Skills Development Authority (TESDA) and the Business Processing Association of the Philippines (BPAP) for a training program that will enhance the workers’ skills needed in the industry.
BPAP Chairman Alfredo Ayala said Filipinos are already known as world-class workers and the country is considered as the top call center destination. The goal is to be number one in IT-BPO services. The training program will help the industry in getting talent with the right skill set.
Non-voice BPO such as legal, health care information management, publishing, animation, game development, and software development will be highlighted in the training program.
Other organizations such as the Animation Council of the Philippines, Call Center Association of the Philippines, Game Development Association of the Philippines, Healthcare Information Management Association of the Philippines, National ICT Confederation of the Philippines, and the Philippine Software Industry Association are selected to collaborate with TESDA and BPAP.
The government sees the training program as a significant factor to realize the IT-BPO industry’s Roadmap for 2016, which is to generate 4.5 million jobs and post $25 billion in export revenues.
By 2012, business process outsourcing (BPO) firms in the country can post revenues reaching US$14 billion.
Revenue growth for BPO firms
Fred Ayala, Chairman of industry body Business Processing Association of the Philippines (BPAP), said non-traditional outsourcing services such as engineering, sales and advertising, game development, and other knowledge-process outsourcing services are making the mark in the local outsourcing scene. He added that this year, they are expecting the industry to post about $11 billion in revenues, with a 20-percent growth next year as BPO firms expand service offerings that include new knowledge-intensive processes.
Meanwhile, BPAP Senior Executive Director Gillian Joyce Virata said the country’s BPO industry may post P2- P3 billion more if they continue to offer non-voice outsourcing services.
Voice-based outsourcing gets the lion’s share of the entire Philippine BPO industry. In fact, the country is now considered the top call center destination. Virata said that while voice-based work will still grow or even double in the next few years, its portion in the industry will decrease since non-voice services are growing faster.
Finding the right talent remains a challenge, which is why BPAP continues to ramp up its initiatives to further improve the skills of available workers in the country.
PH BPO Goal for 2016
The business process outsourcing (BPO) industry of the Philippines remains confident that it will meet its accelerated revenue goal of $25 billion by 2016.
In the International Outsourcing Summit being held at Sofitel Philippine Plaza, Business Processing Association of the Philippines (BPAP) Chairman Alfredo Ayala said this 25-percent growth rate can be reached through a strong partnership between the government and the private sector.
Based on the BPAP 2016 master plan, the accelerated case scenario for the country’s BPO industry is $25 billion. In the best case scenario, the target is $20 billion which translates to a growth rate of only 15 percent.
Ayala said BPAP had met its 2011 goal when it comes to demand generation. The challenge is still meeting that demand by finding enough talent with the right skill set.
Department of Trade and Industry Secretary Gregory Domingo said the industry has been dealing with the talent issue since 2003. With the current situation, meeting the target of 80,000 to 100,000 new employees for the industry may be difficult.
To resolve the problem, the government is working with the academe and related organizations. Aside from the initiatives in the education system, the Congress is also helping the industry through the passage of the Data Protection and Privacy Law, as well as the Republic Act that focuses on the welfare of BPO workers especially those who work at night.
PH BPO - ICT Compliance Codes
Together with the Department of Labor and Employment Region 3 (DOLE3), the business process outsourcing (BPO) sector and Information Communication Technology (ICT) groups formed an agreement called Voluntary Code of Good Practices. This symbolizes DOLE’s effort in preserving camaraderie among firms in Central Luzon. The code involves the TC-BPO/ICT or the Tripartite Council in BPO and ICT and includes voluntary compliance to labor standards and occupational safety and health standards.
Geraldine Panlilio, Assistant Regional Director of DOLE3, said the Voluntary Code of Good Practices covers benchmarking, policy consultations, training programs, and social dialogues to encourage cooperative growth among BPOs and ICTs.
Other objectives of the code are related to health, safety, security, and the environment. It also covers factors such as strengthening DOLE's collaboration and partnership with different government agencies for unified strategies, approaches, and programs in the advancement of BPO-ICTs, among others.
Those who support the code are expected to follow proper monitoring mechanisms through self-regulation, best practice/s recognition, and benchmarking.
Leopoldo De Jesus, DOLE’s Regional Director, said this is an initiative that aims to establish and maintain good relationships between labor and management in businesses in the area.