Outsourcing News for December 2013 | MicroSourcing
Bullish Philippine Economy
According to the Institute of International Finance (IIF), the Philippines will retain its momentum as one of Asia’s fastest growing economies. The industry body said the Philippines economy will expand seven percent this year - a slight dip from the 7.5 percent posted during November, but is positioned in the high end of the government’s 6-7 percent target.
The IIF also said the growth of the country’s gross domestic product (GDP) will also be a strong 6.8 percent for 2014.
However, 2015 is expected to be a different story as IIF predicts a lower 6.5 percent GDP growth, which is below the 7-8 percent target of the government.
Meanwhile, the IIF said even with the recent super typhoon disaster which devastated the central region of the Philippines, growth will remain strong due to the ongoing reconstruction programs, rising remittances, and accommodative policies.
Socioeconomic Planning Secretary Arsenio M. Balisacan said the government remains positive on growth despite expansion challenges in the short term.
For the fourth quarter of this year, GDP growth is projected to be at 4.1-5.9%, with an average growth rate of 7.4 percent during the first nine months of 2013. For 2014, growth is forecast to be sluggish during the first quarter, but is seen to improve as reconstruction efforts pick up.
The recently released "Healthcare IT Outsourcing Market - By Application [Provider (EHR, RCM, LIMS) Payer (CRM, Claims Management, Fraud Detection, Billing) Life Science (ERP, CTMS, CDMS) Operational (SCM, BPM) & Infrastructure (IMS, Cloud Computing)] & Industry - Global Forecast To 2018" report predicted that the global HCIT outsourcing market will be valued $50.4 billion by 2018, from $35 billion in 2013, by means of a CAGR of 7.6 percent.
Factors fuelling the healthcare IT outsourcing industry
The report identified the rise in demand for affordable healthcare amongst health institutions and facilities around the world as one of the key factors fuelling the HCIT industry. Since both the public and private sectors are seeking better quality healthcare, this then adversely affects the costs for healthcare providers. Reasons that are believed to be causing the rise in healthcare costs globally are lack of universal coverage of insurance, slow recovery from recession in some countries, impeded cash flow in healthcare organizations, costly innovations, and the growing number of aging population in selected regions. The rise in costs prompts providers to look for ways to reduce expenses and one of which is on the IT side (installation and application).
The report also included information on the opportunities in key markets: North America, Europe, APAC, and rest of the world. The market is then segmented according to application into provider outsourcing, payer outsourcing, life sciences outsourcing, operational services outsourcing, and infrastructure outsourcing. The market has also been segmented by industry.
Organizations seen in the market are healthcare insurance companies, healthcare providers, clinical research firms, biotechnology companies, and organizations in the pharmaceutical segment.
A market research report by IDC called ‘The Four Pillars: How Services Firms and Providers Must Evolve to Ensure Sustainability Delivering Next-Generation Services’ was recently published by Reportbuyer.com.
Four pillars determining the progression of the business and IT services market
According to the report, the four pillars that are now determining the progression of the business and IT services market are social, mobile, analytics, and cloud technology.
The report highlights IDC’s take on how the four factors are affecting the services markets - even the seven key geographic markets (United States, Canada, Latin America, Western Europe, CEMA, Japan, and APEJ), and what service providers need to do to keep up with the changes in demand and trends in the market.
According to the VP of Outsourcing, Managed, and Offshore Services at IDC, David Trapper, social, mobile, analytics, and cloud technology are widely influencing the way buyers and businesses procure IT services as these now emphasize on standardized, host-based offerings that are easy to modify according to the market’s preference, location, and scale.
He added that service providers using traditional methods are predisposed to modify their business models by focusing on the processes and not the IT deliverables, enter new markets, reinforce local strategies, and become significant business partners to their clients.
Global Outsourcing Trends from 2013-2017
International Data Corporation (IDC) recently released its ‘Worldwide and US Business Process Outsourcing (BPO) Services 2013-2017 Forecast’, a report which indicates that in 2017, the global BPO industry will grow 5.7 percent with a total value of $209.4bn. Moreover, the US market will post a growth rate of 4.3 percent and will be valued at $97.3bn.
Datamark Inc. released similar findings in its ‘Ten Business Process Outsourcing Trends for 2014’, where it was stated that the BPO market in the US is likely to increase further due to the rising costs of offshoring to emerging markets.
The report also identified that the rising demand for American-accented English and Latin American Spanish contact-center services providers, desire to work with a geographically-nearer outsourcing partner (so time zones would be similar), and the rising cost of labor in China and India are also affecting the decision of business executives to move processes back onshore the US; or providers situated in nearshore regions.
Datamark also highlighted in their report the findings of business advisory firm AlixPartners and electronics trade association IPC regarding the onshoring movement.
AlixPartners found in their study that the cost of manufacturing in the US is now more similar to Mexico’s and the segment is working to attain cost parity with China by 2015. IPC, on the other hand, reported that 14 percent of electronics companies that took their survey said they are considering moving operations back home, or set up new ones in North America next year.
According to the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP), the Philippine economy is expected to finish strong this year with 7-percent growth, which will be carried over to 2014 wherein the nation is set to implement recovery plans from the recent super typhoon.
GDP growth forecast could reach up to 7%
The organization released its Economic and Social Survey report for 2013 where it was stated that the gross domestic product (GDP) could grow up to seven percent this year, which is the maximum goal that was initially set by the local government (6-7 percent). On the other hand, the UN body gave a slower forecast at 6.2 percent in its September report.
Moreover, it is predicted in the report that the Philippines will grow 6.7 percent in 2014 which may possibly accelerate because of the reconstruction efforts at the wake of Typhoon Haiyan.
The target GDP growth rate of the government for next year is 6.5-7.5 percent.
Meanwhile, UNESCAP noted that the stable flow of remittances from overseas Filipino workers will also reinforce the Philippine economy as long as the outlook for receiving countries remain stable and issues and challenges are addressed immediately.
However, for 2014, China is anticipated to grow 7.3 percent while the Philippines is seen to grow 6.7 percent.
In terms of inflation, UNESCAP said the Philippines’ consumer prices will only increase at an average rate of three percent for 2013, and 3.9 percent next year even with the robust performance of the economy. However, the projections are still within the 3-5 percent target range set by Central Bank for 2013-2014.
Philippine Property Sector reinforced by BPOs
According to Rick Santos, founder and chairman of property consultancy firm CBRE Philippines, growth in the Philippine real estate segment will not slow down in the coming year.
During his recent interview with BusinessMirror, he said the Philippines showed that it was a key player among the countries in Southeast Asia with its multiple credit rating upgrades and office space take-up activity in the region.
CBRE shared that for Q3 of 2013, 97.3 percent of Metro Manila’s offices were already occupied. The thriving business process outsourcing (BPO) sector was cited as the key driver for the demand in offices in Bonifacio Global City, Quezon City, and Alabang.
Meanwhile, office space demand for traditional business operations is going strong in the Makati Commercial Business District but is outpaced by Taguig in terms of upcoming office space share up until 2016. Taguig is projected to have 37 percent, while Makati would have 24 percent.
However, low demand is seen for the luxury residential properties. Nevertheless, by 2019, Quezon City is anticipated to post the highest turnover of residential condominium units: 45,135 units or 22 percent of the entire local market share.
In terms of price range, midmarket and affordable condominium properties account for 82.16 percent of the market.
According to Information Technology & Business Process Association of the Philippines (IBPAP), the hiring rate for business process outsourcing (BPO) workers in the Philippines’ National Capital Region (NCR) is expected to slow down and employment rate will increase in the provinces because of the improving business environments and infrastructure projects in those areas.
PH BPO Sector Looking for Candidates Outside Manila
IBPAP Senior Executive Director Gillian Joyce G. Virata said with the industry’s current strong position, both the government and private sector anticipate an increase in job placement activities for BPO companies that are set to operate in rural areas in three years’ time.
She added that from the current 75:25 (NCR: Provinces) ratio of employment rate, they are looking to shift it to 60:40. In addition to that, it was found that 2007 posted the most disproportionate ratio of NCR employees and non-NCR employees at 82:18.
The shift in hiring proportions is not taking effect as fast as it should because as provinces continue to grow, NCR is developing alongside it as well.