The mid-sized market was seen outsourcing more compared to larger enterprises while using different suppliers.
Increase in BPO and ITO contracts
The mid-sized market posted a 124% increase in business process outsourcing (BPO) and information technology outsourcing (ITO) contracts through the past five years, with each valuing between $10m and $25m, according to a Forbes G2000 report shared by Information Services Group (ISG). Meanwhile, contracts breaching the $25m mark increased by 72%.
Much of the growth identified in the G2000 range came from the smallest division which is composed of companies that have not or have minimally outsourced before, said Deborah Card, Partner at ISG. She added that only 25% to 30% of the firms belonging to the group have tried outsourcing before 2008.
Moreover, Card said some of the factors that make outsourcing marketable to mid-sized firms are its cost saving feature and the fact that it is easier for them to do so because they do not have legacy systems.
Other processes which are usually procured by the segment are Infrastructure as a Service (IaaS), Software as a Service (SaaS), and Business Process as a Service (BPaaS), but for companies that do not want a full-on outsourced operation, they turn to the cloud.
However, Card said those that are new to outsourcing are showing the same mistakes that bigger organizations made before. These include lack of preparation and planning for management turnover and poor forecasts on what to expect out of the operation.
President Aquino Fully Supports PH BPO Industry
During the International Contact Center Conference and Expo (ICCCE) held in Pasay City, President Benigno S. Aquino III restated that he fully supports the business process outsourcing (BPO) sector of the Philippines. He noted that the sector was able to grow and hold its position in the global outsourcing arena because Filipinos, the government, and private companies are working together.
Furthermore, he said the BPO sector displayed exemplary traits for other sectors, and showed resilience against the changing market.
In fact, one of the government’s goals is to improve the country’s knowledge process outsourcing (KPO) sector and they are trying to achieve that by refining the partnership of the Department of Science and Technology and the Commission on Higher Education as well as investors.
On the academic side, the Service Management Program is now being included in the curriculum of schools such as the Asia Pacific College and the University of Makati.
Across all levels, the President said they are working on the competencies of the Filipinos with other programs like the K+12 platform and augmented budget allocation for state universities and colleges. Another initiative is the Training for Work Scholarship Program or TWSP for skills training and development in other sectors.
Anti-Cybercrime Law to Attract more BPO Investors to the Philippines
The Business Processing Association of the Philippines (BPAP) lauded the passing of the Cybercrime Prevention Act of 2012 as it is anticipated to boost investor confidence and the business process outsourcing (BPO) sector of the Philippines.
The bill was signed into law by President Benigno S. Aquino III last week, which became Republic Act No.10175. The ruling aims to penalize those who are involved in child pornography, online libel, hacking, cybersquatting, identity theft, etc.
Also, the Data Privacy Act was recently signed into a law which strives to protect personal data collected by private and public organizations.
According to BPAP President Benedict Hernandez, the Cybercrime Prevention Act will reinforce the country’s image as a strong player in the high-valued IT-BPO arena. He noted that the provision will be especially beneficial to IT-BPO firms in the country, as most of its processes and information depend on the internet.
Moreover, Hernandez stated that a 20-percent increase in revenues from $11 billion in 2011 to $13 billion this year is expected for the sector and that these developments will help the overall growth of the Philippine IT-BPO industry.
According to the Business Processing Association of the Philippines (BPAP), the revenues of the country’s software outsourcing industry will rise in 2013 due to an increase in market demand.
Meanwhile, the industry currently has a 27% growth rate, said Nora K. Terrado, President of Philippine Software Industry Association (PSIA). Terrado added that the 30% year-on-year target in 2013 will result to an increase of $1.5 billion in revenues and a 25% growth in employment which will reach about 80,000 personnel.
In 2011, the local software industry grew 27%, with $993 million in revenues and 50,000 employees.
Other growth contributors identified by PSIA Director Tae Abe-Abion are Filipino innovations such as marketing efforts to promote the country as software and ITO (information technology outsourcing) destination, as well as the large qualified workforce.
In line with that, BPAP Chief Executive Benedict C. Hernandez cited the software outsourcing sector as one of the key contributors of the local outsourcing industry. Hernandez added that the Philippine software sector is gaining foothold in the global market and that the robust growth of the segment indicates its capabilities in a rapidly developing market.
Call centers in the Philippines are not alarmed with the impressive performance of the peso against the dollar for the past consecutive weeks, with the peso opening at P41.61 to the US dollar last Wednesday. In a press briefing, the Contact Center Association of the Philippines (CCAP) said they are not "overly concerned" with the rise and fall in foreign exchange rates.
During the media launch of the International Contact Center Conference & Expo (ICCCE) 2012 in Makati City, CCAP President Benedict Hernandez said they are always on the lookout for the ups and downs of the exchange rate, but are not fixating on the issue. The Philippines is still perceived as a feasible destination for call center operations.
Filipino call center employees make PH leading destination for voice-based processes
Hernandez added that the work ethic and skills of Filipino call center employees are key factors that make the country a leading destination for voice-based processes.
On the other hand, CCAP Executive Director Jojo Uligan said should the peso appreciate beyond P41, it would be detrimental to call centers. Moreover, he said it will affect the operations of call centers as expenses are in pesos but clients pay them in dollars. If the peso further strengthens against the dollar, they would have to increase pricing of services. This will then result to more challenges as existing clients will surely be displeased and charging new ones at a higher rate will result to fewer leads.
Issues that will affect the business process outsourcing (BPO) industry, including the appreciation of the peso, will be discussed at the ICCCE 2012 on September 18 and 19 at the SMX Convention Center in Pasay City.
With financial challenges like the crisis in Europe and slow recovery of economies worldwide, global IT spending is anticipated to get stifled in different levels.
2012 Global IT Spending
An IDC analyst said smartphones, tablets, storage technology, software, and networking products are the main key drivers of IT spending, which should increase six percent from 2011 to $2.1 trillion if based on constant currency. On the other hand, Andrew Bartels, an analyst at Forrester, predicts a lower growth rate at 3.6 percent. However, in terms of US currency, Bartels expects a 1.3 percent growth and IDC forecasts a four percent growth.
IDC analysts and Forrester’s Bartels may disagree on certain aspects, but both sides agree that global economic uncertainties and better-than-expected strength of the US dollar against other major currencies are hampering the growth of IT spending.
In a recent blog entry, Bartels wrote that the 2012 forecasts for the IT market remain glum and that a 3-4 percent growth is mediocre. Also, global economic growth needs to improve before any strong activity in tech markets can be seen. Forrester said last January that business and government IT spending would increase 5.4 percent in US dollars.
Bartels noted that other emerging market regions such as India and China are also experiencing a slowdown in economic growth.
Bullish Philippine Peso at P41.615
The peso reached its highest value against the US dollar since 2008, which is P41.57, but before closing, it reached P41.615.
The appraisal was said to be brought about by talks regarding the implementation of the US government’s economic stimulus package from the Federal Reserve which, according to a Bloomberg report, will lessen financial strain and enable an increase in demand for assets in emerging markets.
Also, compared to the 130,000 average estimate in a Bloomberg survey and 141,000 jobs produced in July, the Labor Department said payrolls in the world’s largest economy increased by 96,000 in August. The three consecutive weeks wherein the peso retained a strong position are anticipated to raise inflation targets for 2012 and 2013, said Bangko Sentral ng Pilipinas (Philippine Central Bank). Economists predict that policy makers will retain low interest rates this week.
Jose Vistan, Head of Research at AB Capital Securities Ltd. in Manila, said foreign investments in equities are in fact strengthening the peso. He added that confidence in the country’s economy improved, with a high inclination of a rating upgrade.