MEA IT Expenses
Research and consultancy firm Gartner predicts that overall IT spending in the Middle East and Africa (MEA) region will increase by 6.3 percent, from $88.51 billion in 2011 to $93.87 billion this year.
Peter Sondergaard, Gartner’s Senior Vice-president and global head of research, said the growth rate throughout the region was larger in 2011 compared to what it is now. He added that the cloud, social media, mobile, and information are four factors that will affect IT organizations and technology providers in the Middle East, but then again growth for the organizations could be hindered by challenges such as the market for cloud services, talent shortage, and large volumes of data to be handled.
These challenges will then push CIOs in the Middle East to outsource construction of infrastructure and application environments. With ample bargaining power and proper vendor management skills, CIOs are likely to land good outsourcing deals, added Sondergaard.
It is expected that the banking and securities industry, particularly in the Mena region, will post the fastest growth, followed by transportation and healthcare.
PH BPO industry targets 19% increase in revenues
The business process outsourcing (BPO) industry of the Philippines is targeting an increase of 19 percent in revenues reaching $13 billion this year. According to Martin Crisostomo, External Affairs Executive Director at the Business Processing Association of the Philippines (BPAP), this is about $2 billion higher than last year’s $10.9 billion.
Crisostomo said the organization is expecting an increase in earnings this year due to an escalation in demand for voice-based and non-voice processes by companies that are striving to remain competitive. Furthermore, he anticipates that the voice segment will grow and propel the country’s revenues. Also, most Filipinos are proficient in the English language, making the country a favoured outsourcing destination especially for call center work.
The non-voice segment is also predicted to grow due to an increase in the demand for high-end processes such as financial services or accounting, health services information management, and software development.
BPAP remains confident that the industry will reach its revenue goals. However, they are taking into account the pending bills in the US that urge firms to bring jobs back home.
Philippines' Call Center Market Share higher than India's
Even with the Philippines’ recent win in the call center outsourcing segment, India remains ahead in terms of overall services exports. In fact, India’s business process outsourcing (BPO) industry is currently valued at $15 billion, while the Philippines is only at the $9 billion mark. Also, there’s a huge difference between the size of the industry and range of services of both countries.
According to research firm Everest Group, the call center sector accounts for $7.38 billion of the $9 billion BPO industry of the Philippines. This is slightly higher than India’s voice-based services exports valued at $7 billion. The country has dominated the voice-based sector due to the Filipinos’ cultural compatibility with the Western culture and better English accent.
However, even though the country’s BPO industry posts a faster growth rate, it will take more time before it reaches India’s current standing. Moreover, when it comes to non-voice processes, there’s a huge difference between both countries, said Amneet Singh, Vice-president, Global Sourcing, Everest Group.
WNS’ CEO Keshav Murugesh stated that when it comes to data-based work, India definitely surpasses the Philippines. On the other hand, Swaminathan D, CEO and MD of Infosys BPO, said the Philippines is the second outsourcing location of choice of clients because it is able to supply candidates with various skillsets. He cited that Manila alone can provide 100,000 certified accountants for the finance & accounting segment which is a strong suit if they want to delve into the F&A market.
Operational costs in India are 5-15 percent lower compared to what the Philippines offers. Another advantage of India is it has several domestic BPO hubs which can provide more flexibility, whereas the Philippines merely has two known locations which are Cebu and Manila, and offers limited alternatives for clients.
US Businesses urged to Create more Jobs Locally
US President Barack Obama urged the Congress to grant tax rewards to companies that provide employment to US citizens. The President said the Congress needs to make adjustments in the country’s tax code for companies such as Boeing Co. So it will be easy for them to create more job opportunities to the country. In his recent visit to Boeing Co.’s jet factory in Everett, Washington, he was delighted that it had produced thousands of employment opportunities to US citizens.
The President noted that businesses in the US created 3.7 million new jobs in just two years, adding that even if labor and operational costs are way higher locally than in China, the quality of products will definitely be better, and that will be the country’s way to be globally competitive.
Furthermore, he said that companies that outsource jobs shouldn’t get tax breaks and help should be extended to technology companies and other businesses that set up operations in the country.
Meanwhile, the annual White House report indicates that the US will have a stronger economy this year and produce two million jobs. The report also predicts that the average unemployment rate for this year will be around 8 to 8.6 percent.
India still top Asia Pacific region for wage increases
According to a Salary Increase Survey done by consultancy firm Aon Hewitt, Indian employees will get an 11.9% salary increase in 2012. This is slightly lower than the 2011 hike at 12.6%, but India remains the top country in the Asia Pacific region to give the highest salary increase. Survey also indicates that the marginal drop in figures is brought about by a cautious approach of business owners towards economic uncertainty.
This would be the 10th consecutive year that India will dominate the Asia Pacific region for wage increases. Meanwhile, lagging behind India in terms of salary increases in the Asia Pacific region are China which is predicted to post 9.5%, and the Philippines with 6.9% for 2012. Other countries in the Asia Pacific region that are likely to have wage increases are Australia (4.6%), Hong Kong (5%), Japan (2.8%), Singapore (4.8%), and Malaysia (6.2%).
The Compensation Consulting Practice Leader of Aon Hewitt, Sandeep Chaudhary, said business views are recently indicating positive signs. Increase rates could mean that companies are prioritizing the talent of employees, while closely monitoring the economy.
The rates of salary increases in India are as follows: general/entry level workers are likely to get 11.8%, junior manager level at 12.3%, middle management at 12%, and senior management at 11.1% this year.
The recent "Data Center Outsourcing Market in the EMEA Region" report by market research resource Research and Markets shows that the demand for data center outsourcing in EMEA (Europe, Middle East, and Africa) will post a compound annual growth rate (CAGR) of 11.4% from 2010 to 2014.
Cost of data center infrastructure and operations is expected to drive the market. It is also said that the market in EMEA is looking for greener data center solutions. However, data security still poses issues that may affect the growth of this market.
Data center outsourcing market
Another report entitled “Data Center Outsourcing Market in the EMEA Region 2010-2014” was released by TechNavio. It is a documented analysis of the EMEA region, aimed at decision makers so that they can have a better understanding of the trends affecting the growth of the market. An analyst from TechNavio commented that there is a steady increase of environment-conscious firms that are looking for greener data centers.
Since maintaining multiple data centers is costly, companies decide to outsource the process to reduce expenses. Frequent maintenance of power supply and cooling systems can be simply managed by the service provider.
According to Information and Communications Technology Office (ICTO) Deputy Executive Director Alejandro Melchor, with the large number of licensed healthcare professionals like nurses and recent triumph in the call center sector, the Philippines is predicted to become one of the prime providers of healthcare information management services. He added that for the country to remain competitive, it should tap “high-value-chain” services.
Targeted healthcare sectors
ICTO identifies healthcare information management outsourcing as one of the four targeted areas for growth. Other viable segments are finance and accounting, HR outsourcing, and animation and creative process outsourcing.
Not only does the healthcare sector focus on basic back-office medical transcription, it also includes top tier services like clinical coding, disease management, revenue cycle management, and pharmaceutical benefits management.
Melchor said healthcare information outsourcing is a favourable sector, and the country is definitely the primary outsourcing location of choice. He added that the recently sanctioned landmark healthcare law “Patient Protection and Affordable Care Act” by the Obama government, and the steady increase of senior citizens in the United States provide opportunities for the country’s outsourcing industry. Furthermore, the US needs $530 billion dollars-worth of services to apply the measure - definitely a huge market for outsourcing destinations like the Philippines.
ICTO is hoping to team up with the Business Processing Association Philippines (BPAP) and the Healthcare Information Management Outsourcing Association of the Philippines in creating strategies for the four targeted sectors.
Department of Science and Technology Secretary Mario Montejo said they plan to focus on the outsourcing sectors for 2012. He added that the country needs to produce better graduates by means of partnering with other educational organizations.
BPAP predicts that the country will reach $25 billion in export revenues by 2016 and provide 1.3 million direct and 3.2 million indirect jobs.