Outsourcing News for July 2014 | MicroSourcing
According to the Philippine Statistics Authority (PSA), total gross revenue growth posted by local industries for the first quarter of 2014 is lower at 6.3 percent, compared to the same period of 2013 with 9.5 percent.
Lower revenue growth for business process outsourcing sector
Slowdown was said to have been triggered by slower activities in the bank services segment which only grew by 6.7 percent from 18.1 percent, and business process outsourcing sector, which falls under the private services segment, with 5.1 percent growth from 14.8 percent.
Meanwhile, the transportation and communication sectors posted bullish figures with 15.7 percent – coming from the negative growth of 0.1 percent during Q1 of last year.
The second fastest growth rate was seen in the real estate segment. It grew from 12.1 to 13.4 percent this year.
The PSA mentioned that even if other sectors posted positive growth, it was at a slower rate. In fact, the trade sector grew by 7.1 percent from last year’s 11.1 percent, and the manufacturing sector with 2.2 percent from 6.6 percent during the same period.
However, growth in employment improved, from 1.3 percent during the first quarter of last year to 1.4 percent this year.
Philippine BPO Compound Annual Growth Rate until 2018
One of the highlights in the Research and Markets’ report "Outsourcing Market in the Philippines 2014-2018" is the projected 13.9 percent compound annual growth rate (CAGR) of the Philippine outsourcing market until 2018.
The Philippine outsourcing market is composed of three segments: voice BPO, non-voice BPO, and IT outsourcing and ESO.
It was also found that as the call center segment continues to grow, the country is looking at other outsourcing services to reinforce growth throughout the industry. In addition to that, knowledge-based outsourcing is on the rise while industry-centric outsourcing services depend on communication and industry-specific language.
As for countries, India and the Philippines are cited as having graduates who are skilled in Math and Science.
More and more companies have been observed to outsource HR, and F&A processes to cost-effective outsourcing hubs. The ongoing trends in the global outsourcing market pushed the Philippines to increase revenue margins and focus on processes related to engineering and healthcare.
Industry experts were solicited for inputs on the Outsourcing Market in the Philippines 2014-2018 report. Information included in the report also focuses on the growth of the outsourcing prospects and landscape in the Philippines in the coming years.
The report, the Outsourcing Market in the Philippines 2014-2018, has been prepared based on an in-depth market analysis with inputs from industry experts. The report focuses on the outsourcing market in the Philippine landscape and its growth prospects in the coming years. The report also includes highlights from the key service providers such as Accenture PLC, Convergys Corporation, JP Morgan Chase & Co., and Teleperformance SA.
PH Real Estate Industry Driven by Miltinational Firms and BPOs
Real estate services and consultancy agency CBRE Philippines recently said the Philippines is one of the countries with rising occupancy rates, and it continues to draw strong interest from multinational companies including business process outsourcing (BPO) firms.
CBRE Global Research found that the cost for premium office properties had increased an average of 2.3 percent globally since 2000. Their report also noted that the Philippines is one of the top 12 out of 52 countries with the largest annual increase in real estate rates with an estimated 9.3 percent. In addition to that, it is found that within Southeast Asia, it is among the top five growth markets when it comes to rising prime office rates.
Factors that are considered in computing the annual percentage increase are domestic costs of prime office take-up and sheer volume - graded within a 12-month percentage increase which started in the first quarter this year.
However, CBRE stressed that even with the rising rates for prime office in the Philippines, it is still one of the most competitive in Asia with $35.90 per square foot per annum. The cities listed in the report as having the most expensive office properties are Mumbai, New Delhi, Hong Kong, Beijing, Tokyo, Shanghai, Singapore, Guangzhou, Ho Chi Minh, Brisbane, and Taipei. Rates in these cities are from $66 to $241.92 per square foot annually.
CBRE Chairman, founder, and Chief Executive Officer Rick Santos said the country is ready to accommodate multinational companies that are looking to expand, as well as potential clients in the business process outsourcing (BPO) sector.
Call Center Industry of the Philippines Continue to Thrive
The recent report of the Philippine Statistics Authority (PSA)-National Statistics Office states that for 2012, the call center segment posted the fastest growth rate and was the largest in the business process outsourcing (BPO) sector of the country.
According to 2012 Census of Philippine Business and Industry for BPO posted at the website of PSA, 404 call centers operated in 2012, which is 49.8 percent of the 818 companies across the entire BPO sector.
The voice segment also has the highest number of employees with 364,454 as of Nov. 15 last year, or 83.5% of the cumulative 436,500 in that period. As for earnings, the segment posted P249.873 billion in revenues, or 73.8% of the P338.179 billion from the entire BPO sector.
As for establishments, call center operations were followed by computer programming operations with 243 establishments or 30%. Data processing, on the other hand, had 51 setups or 6.3 percent, and other services related to information technology (IT) taking up 31 operations or 3.8 percent. Meanwhile, medical transcription accounted for 3.2 percent or 26 operations.
PH Outsourcing Segments Receive Government Grants
Data from the Philippine Statistics Authority shows that the national government allotted more than P100 million in subsidies to help fund the business process outsourcing (BPO) sector’s programs.
Back in 2012, a P119.1-million grant was given to the BPO sector particularly the call center and computer-programming segments - P118.8 million was given to the call center segment, while P329,000 was allotted to the computer-programming segment.
According to the PSA, the grants are a type of financial assistance from the government, which can also be in the form of tax holidays and tax privilege to promote growth in an industry.
Data also found that employees in the software-publishing segment received higher annual compensation per worker compared to call center employees - the voice segment is employing the highest number of workers and contributed the most profit.
In 2012, the BPO programs employed 436,500, according to the PSA. About 83 percent of those jobs were in the call center segment, or 364,454 of the total BPO workforce. As for compensation, the BPO activities provided P154.9 billion in total salaries or P354,932 annually per paid employee.
Call center activities paid 77.9 percent in compensation or P120.7 billion of the total compensation paid by BPO activities.
UK's Scarce Manpower Drives Outsourcing Growth
In a survey of 2200 small UK firms conducted by Freelancer.co.uk, it was found that outsourcing activity increased 35 percent this year. Outsourcing destinations are developing nations such as India, Pakistan, and the Philippines. China posted a 20-percent growth of the total outsourcing work from UK small businesses.
Meanwhile, respondents said they will be hiring more freelancers abroad in 2015, while 43 percent said they are looking to outsource more work overseas.
UK businesses outsource mainly because they lack manpower to work on specific tasks such as complex programming and IT, and to save on costs which will enable them to increase margins and capacity. Forty-eight percent said they outsource work so they would not have to turn customers away.
Fifty-two percent of the respondents also said outsourcing is enabling them to grow over the past 12 months. Meanwhile, 42 percent of small business owners said with the increasing demand for innovative solutions and services, and to compete with advanced industry players, they resort to outsourcing.
According to Bill Little, European Director of Freelancer.co.uk, operational cost reduction is no longer the main driver for UK businesses to outsource. They are more focused on increasing the capacity of their operation so they are able to accommodate more of their clients. In fact, UK small businesses are seen maximizing incoming work that they can’t do themselves.
The business process outsourcing (BPO) sector of the Philippines is having a hard time in supplying its IT segment of the needed talent. The job openings are said to offer higher pay grade compared to the voice sector.
BPO sector struggling to provide IT talent
One of the examples cited is the talent shortage in Davao. Samuel Matunog of the Software Industry Association of Davao said major business process outsourcing (BPO) companies are now operating recruitment offices. Only 1,000 IT graduates are produced in the region each year.
He noted that even if the volume of fresh grads could sustain the requirements of outsourcing companies in Davao, those which are based in Cebu and Manila are likely to take part of the talent pool as well.
IT graduates need to have the right skills in Computer Science and IT management to make it in the IT-BPO sector. As for the voice sector, graduates of other courses can be trained.
IT graduates can command a higher salary in the outsourcing industry with some companies offering P40,000 at the entry level. Call center agents, on the other hand, are offered P12,000-14,000 for entry level positions, but could be easily scaled once they gain experience.