Outsourcing News for March 2014 | MicroSourcing
Q4 2013 Investor Sentiment Index
In Manulife Financial Corporation’s Investor Sentiment Index (ISI) last Q4 of 2013, the Philippines ranked first out of the 10 countries surveyed for investor optimism. It was also the first time for the country to be included in the list. The Philippines got a score of 66, establishing itself as the leading Southeast Asian country in the ISI.
According to Ryan Charland, President and Chief Executive Officer of Manulife Philippines, the country has been posting strong GDP growth for two straight years in 2012 and 2013, and slowly gained recognition as a key player in the developing markets space in Southeast Asia.
The executive added that the positive outlook echoes the growing confidence of global clients towards the Philippine economy, especially because of its tenacity amidst natural disasters and volatile business environments.
Other Asian countries got lower scores. Malaysia got 48, Indonesia posted 41, Japan with 18, China got 17, Singapore had 13, -11 for Taiwan, and Hong Kong posted the lowest score with -13.
Canada and the United States were also strong players, scoring 32 and 22 respectively.
The collective sentiment for Asia is 22, same with US’ and is a jump from Q3 2013’s score of 15. However, if the Philippines was excluded, overall sentiment would just be 16.
The formula for the index score is the percentage of respondents who say it’s a good time to invest minus the percentage of respondents who say it’s a bad time to invest.
The business process outsourcing (BPO) sector of the Philippines is considered as a key contributor to the growth of the local economy. This is because it is a source of foreign currency earnings and it makes the country an ideal investment destination. However, competition is getting tougher as nearby countries such as Vietnam, Malaysia, and Indonesia are gaining traction in the BPO space in Southeast Asia.
Seven of the Philippines’ thriving cities were recently included in Tholons’ "2013 Top 100 Outsourcing Destinations". Manila ranked second and Cebu is steadfast at 8th place. The rest of the Philippine cities were newcomers in the list: Santa Rosa, Davao City, Bacolod, Baguio, and Iloilo.
BPO sector one of the main sources of the country's export earnings in hard cash
These cities, as well as the emerging ones, are contributing to the growth of the economy by means of the services exports that they deliver to companies abroad. According to a report from Bangko Sentral ng Pilipinas (BSP), the outsourcing sector was one of the main sources of the country’s hard cash in 2013 with export earnings of $13.3bn.
Meanwhile, the tourism industry posted earnings of $4.8bn, which is much less compared to the $22.5bn foreign exchange receipts from the overseas Filipino workers’ remittances.
Moving forward, the IT and Business Process Association of the Philippines anticipates that 120,000 new jobs will be created in the country’s BPO sector over the next three years, making the total of 1.3 million. Revenues, on the other hand, will double, reaching $27bn as international investors expand their operations.
In a press briefing in Makati, Convergys Corp. CEO and President Andrea Ayers said though there are several disjointed segments in the business process outsourcing industry, consolidation will be faster compared to 10 years before. This event is driven by the rising number of clients who are looking to expand operations, and in order for providers to support the growth, they would have to invest in new and expensive technology.
A lot of the clients are globally acclaimed companies looking for service providers that have almost everything that they would need in one go.
The executive added that mergers in the BPO space are making it harder for smaller providers since they have limited offerings and are not able to keep up with the changes in the industry. There’s also a mismatch with the size, scale, and services.
Pivotal factors for BPO firms
Technology is one of the pivotal factors for BPO firms, alongside location and infrastructure.
In this day and age, clients are more concerned with data, privacy, and security. They are looking out for their customers and are very careful in selecting a provider, and because smaller players can’t keep up with that, they get the short end of the stick.
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Davao an alternative location for BPO operations in the Philippines
A recently published article at Cushman & Wakefield Philippines, a branch of real estate services company Cushman & Wakefield New York, identified Davao City as an alternative location for business process outsourcing (BPO) operations in the Philippines.
Data from the firm’s research report were based on the Next Wave Cities (NWC) analysis from the Business Process Association of the Philippines two years ago, and the geohazard maps created by the Ateneo de Manila University’s Mapping Philippine Vulnerability to Environmental Disasters plan.
The study indicated that the factors that make Davao City a preferable alternative to BPO locators are its low climate and geophysical risks, its infrastructure that received high scores in the NWC test, and sound business environment.
According to Ivan C. Cortez, OIC at Davao City Investment Promotion Center (DCIPC), they are expecting more foreign property consultants to begin construction for BPOs and similar organizations in Davao City. The incoming projects will be joining bigger players that are already operating in the area.
Cortez added that apart from traditional services in the global outsourcing market, non-voice processes such as applications and software development, analytics, big data, and mobile are also gaining traction in the services export industry of Davao.
Outsourcing Services Sector Driving PH Real Estate Prices
Since the business process outsourcing (BPO) industry of the Philippines is expected to remain strong in 2014 and the country continues to prove that it is one of the premiere investment destinations in Asia, more office properties are set to be occupied. Experts, in turn, anticipate that property prices may increase in the near future.
CBRE Philippines stated that property take-up will not be concentrated in Metro Manila alone, but will also be felt in the provinces. Metro Cebu, Mactan, and Clark were also identified as regions having the ideal environment for both leisure and business.
According to property analyst and program director for real estate and senior adviser for Wong Bernstein Business Advisory, Enrique M. Soriano III, emerging central business districts will be taking center stage as the office market continues to grow. Some of the non-CBDs are Davao, Cebu, and Iloilo.
CBRE Philippines noted that the growth of the local BPO sector is one of the key contributing factors to the accelerating property occupancy, alongside tourism and rising demand for expat housing.
Makati, Cebu, Boracay, and Bonifacio Global City are known to have properties that are sought after by the budding market, and CBRE said developers might look into investing in the segment.
According to a research report initiated by the Department of Science and Technology-National Research Council of the Philippines (DOST-NRCP) last year, those who are employed in the business process outsourcing (BPO) industry of the country are generally happy with their lucrative jobs. However, they stated that their stint in the industry is not long-term because of health and social challenges.
Almost 700 BPO workers joined the "Health and Social Policy Issues of BPO Workers in the Philippines: Is Happiness at Work Attainable" survey conducted by researchers Nimfa Ogena and Soccoro Rodriguez. Fifty-one percent of the respondents were from Metro Manila, 21 percent from Cebu, 15 percent from Davao, and 13 percent from North Luzon.
Respondents from the BPO industry happy but planning to leave
Ogena pointed out that even if majority of the respondents are happy with their jobs in the BPO industry, a lot of them are planning to leave in the next 12 months. Most of the respondents are in the voice segment, while others are in the non-voice segment which includes software development, back office, medical transcription, and engineering.
Some of the survey questions covered issues such as health and well-being, happiness, and problems that need to be addressed by the local government.
When asked why they want to join the BPO industry, 77 percent said they want the high salary, 65 percent said they want to gain experience, and 64 percent said it’s because of the benefits package.
As for the health aspect, the study revealed that 50 percent were of "average health" and 25 percent were "healthier than average".
The researchers sought the assistance of BPO supervisors in the selected test sites so they could validate the online responses of employees properly.