Outsourcing News for January 2012 | MicroSourcing
PH BPOs Unfazed by Anti-outsourcing Plans
With at least half of the call centers in the Philippines serving US-based firms, the Business Processing Association of the Philippines (BPAP) appears to be reassured amid President Barack Obama’s mass petitioning for businesses to bring jobs back to the US. The outsourcing body also believes that the Philippines’ flourishing BPOs will see no adverse effects as the anti-outsourcing bill is being processed.
Martin Crisostomo, BPAP’s Spokesperson, stated that business process outsourcing is no longer a mere tool or a solution for businesses to stay afloat, but is now considered as a major factor to stay competitive. Furthermore, he strongly believes that outsourcing is here to stay and is now part of globalization.
In his State of the Union address, Pres. Obama said companies that are providing jobs to US citizens should be rewarded and prioritized, and not those businesses that transfer processes to offshore locations. Benefits such as tax deduction shouldn’t be given to firms that outsource work overseas, but should be given to companies that bring jobs back home.
Economic crises affecting IT outsourcing sector to slow down activity in software exports
The National Association of Software and Services Companies (Nasscom), the trade association of the IT-BPO industry in India, will possibly predict slow activity in software exports due to incessant economic problems affecting the information technology (IT) outsourcing sector.
According to a Nasscom official, there’s a possibility that the growth rate prediction for this year will not be surpassed, though a double-digit growth for 2012’s fiscal year would still be attainable.
For this year, Nasscom members such as Infosys, Tata Consultancy Services, and Wipro are believed to be having a hard time in explaining the situation and are still in the process of negotiating, when in fact the organization’s officials are usually ready with a forecast by this time of the year.
Another Nasscom official added that they are still waiting for the revenue forecasts from companies, saying it does not look clear, and goal revisions may be in order this year.
There may be a slowdown, but the industry can reach the target for 2011-12. It is expected to post a 16-18 percent growth rate or $70 billion. On the other hand, IT research and advisory firm Gartner has reduced its IT spending predictions from 4.6 percent to 3.7 percent.
Meanwhile, Infosys Chief Financial Officer V Blakrishnan assumed that clients are now more cautious when it comes to IT spending. This has led to an indefinite forecast for the sector.
Increase in outsourced services
As firms look out for the status of Europe’s dwindling economy, BusinessMirror anticipates that private investments, particularly outsourced finance and legal services made by UK-based firms to the Philippines, India, and other Southeast Asian countries, will dramatically increase.
Southeast Asia is being eyed by UK firms as a refuge for diversified investments, said an official of the UK Trade and Investment. The official added that it is improbable for UK officials to restrict private companies from outsourcing overseas, like the pending bill in US that discourages companies to move business functions offshore.
Meanwhile, Filipino nurses in the UK were reassured by the official that amidst the crisis, jobs will not be lost. Nearly 600,000 business process outsourcing (BPO) employees in the Philippines are concerned over the result of the anti-outsourcing bill, which is strongly supported by US President Obama.
Indian firm Infosys got 14 European clients, with two being the largest deals in the $500-million range. TCS landed a total of 10 large deals, including four European contracts. HCL, on the other hand, got 18 large contracts valued at $1 billion.
With an unimpressive unemployment rate of 8.5% and an inactive economy, US President Barack Obama is once again pleading for US firms to source locally. Even though he focused more on manufacturing jobs during his State of the Union speech, he also cited the adverse effects of technology to unemployment.
The President harked back to the day before recession immobilized the economy, when technology was merely being used by firms and then was gradually adopted, resulting to loss in job opportunities. He said the country will not go back to a weak economy brought about by outsourcing, debt, and fake profits.
Obama shared a proposition wherein firms that are providing jobs will be rewarded and those that are outsourcing offshore will not get benefits like tax deductions.
Some jobs still likely to be outsourced offshore
However, software coding and computer hardware management jobs will likely be outsourced offshore since majority of US’ talent pool are not equipped with such skills.
Som Mittal , President of Indian software industry body Nasscom, said the IT industry of India greatly helps in building innovation to the US economy, and he is hopeful that rebuilding US would lead to desired results.
BPO Industry Included in PH's "7 Big Winners Sectors"
Foreign investors are believed to be noticing the notable changes in the Philippine business climate. Members of the Joint Foreign Chambers (JFC) believe that this can improve the foreign direct investments (FDI) of the country which could reach $75 billion this year.
The group presented 471 recommendations to boost the growth of the Philippine economy, including the seven major industries, to Malacañang. The recommendations identified agribusiness, business process outsourcing (BPO), creative industries, infrastructure, manufacturing and logistics, mining and tourism, medical travel, and retirement as the “Seven Big Winner Sectors” of the country’s economy.
Senior Adviser of the American Chamber of Commerce John Forbes believes that flow of foreign investments to the country will improve this year. In fact, there is already growth in the number of inquiries from other countries.
He added that one of the key factors that clearly help lift investor confidence to the Philippines is the unwavering support shown by the government, specifically the recommendations entitled Arangkada Philippines 2010 submitted by the JFC.
JFC is set to present a 130-page First Anniversary Assessment which will show the progress of the Arangkada 2010 and 471 recommendations at the Grand Ballroom of Marriott Hotel.
Low Supply of IT Talent a Challenge for the IT-BPO Sector of the Philippines
XMG Global’s founding President and Chief Analyst Lauro Vives said the growing demand for information technology-business process outsourcing (IT-BPO) will be a problem as the country currently lacks talent with the needed knowledge and skill set, and this will remain a challenge.
This may even result to a monotonous growth predicted to be between 19 and 21 percent for 2012, whereas the Business Processing Outsourcing Association of the Philippines (BPAP) assessed a 20-percent growth for the previous year.
Vives said since the country’s BPO sector is in the process of moving towards providing high-end services, companies nowadays turn to hiring non-Filipino candidates to fill higher-value positions. He added that experienced local IT workers are beginning to see and grab more opportunities in other ASEAN countries like Malaysia, which can lead to an increase in labor costs in the country.
XMG also predicts that due to the high attrition rate among high school and college students, a one-percent decline in the number of educated candidates is possible within the next five years.
Meanwhile, global recession is anticipated to have a minimal effect on the country’s call center sector, and the economic woes in Europe may push companies to invest in outsourcing to the Philippines.
BPAP and CHEd have both signed a five-year partnership to improve the country’s curricula and provide training programs for teachers. A “BPO 101” class is proposed to be included to the educational system and a standard global competitive test (GCAT) for call center hopefuls is set to be implemented as an added measure.
BPO Revenues Catching up with Remittances
Department of Transportation and Communication (DOTC) Undersecretary Rene Limcaoco said the business process outsourcing (BPO) industry closely lags behind OFW remittances in terms of earnings for the Philippine economy, but will continue to grow and match revenues from Filipino workers who are working overseas. This is likewise stated in the 2011 report from the industry body Business Processing Association of the Philippines (BPAP).
The report also states that the BPO industry contributed around $9 billion or 4.8 percent of the country’s gross domestic product, and it is predicted that it will be on the same level with the remittances of OFWs reaching nearly $25 billion in 2016.
The targeted revenue for the BPO sector this year is $11 billion.
The Philippines is now considered as the top global outsourcing location of choice in terms of voice-based services.