by: Sarah Joson
Renowned commercial real estate firm CB Richard Ellis Philippines, Inc. (CBRE) said the business process outsourcing (BPO) sector of the Philippines is still a major contributor to the growth of investments in the Philippines.
During a forum held in Makati, John Corpus, Corporate Agency and Brokerage Director at CBRE, said the Philippines has overtaken India in providing voice services to information technology firms and Western banks. Moreover, he explained that for every BPO job, 2.5 more jobs are produced in administration, construction, and services. This also goes for the office market where the outsourcing sector is likewise cited as a growth driver. Office occupancy in major business districts peaked during the fourth quarter of 2014.
CBRE also pointed out that the rates of Prime and Grade A buildings in Metro Manila slipped from 2.53 to 2.13 percent quarter-on-quarter.
Furthermore, CBRE Philippines Chairman and CEO Rick Santos said even with the increase in office property rates throughout CBDs, investors are willing to pay for the quality and value in those areas.
Also, during last year’s fourth quarter, the total office occupancy rate in Makati, Fort Bonifacio, Alabang, Quezon City, and Ortigas is said to be at 97.87 percent.
One of the biggest issues in the business process outsourcing (BPO) industry of the Philippines is the high staff turnover rate. However, many experts have observed that BPOs are coming up with better strategies to make their employees stay.
Tower Watson, a global professional services company, revealed the results from their survey wherein the attrition rate in the Philippine BPO sector decreased to 20 percent last year, which is said to be the lowest since 2007.
Back in 2011, the attrition rate was at 33 percent, while in 2012, it clocked in at 24 percent, and just two years ago, it posted a 26-percent staff turnover rate.
According to Vangie Daquilanea, Global Data Services Practice Head of Towers Watson Philippines, the BPO sector has utilized several strategies in talent acquisition, one of which is expanding operations and sourcing from areas outside the National Capital Region (NCR). Some of the provinces that the industry is seen tapping for sourcing are Cebu, Davao, and Southern Luzon. This somehow affected the movements and attrition activity in NCR.
The report also noted that wages in Central Visayas are lower by 23 percent versus the wages in NCR, making the region a feasible location for BPO firms. The Towers Watson report also reinforces another survey where Cebu was named as one of the top 8 outsourcing destinations in the world.
In Citibank’s recently released ‘2015 Annual Outlook’, the Philippines is pegged to outperform China in terms of economic growth in 2016 on account of the country’s growing foreign direct investments, strong domestic upswing in business and industry, and highest-ever remittances from overseas Filipino workers. The forecast also stated that India will likewise outpace China.
On the other hand, China is expected to slow down as it gears up in addressing national challenges such as high public debt, over-investment in real estate and infrastructure, reduced domestic consumption, and regional imbalances. China is also said to be preparing for a “more sustainable” GDP growth.
Last year, the Philippines posted an economic growth of 6.9% during the fourth quarter. As for the entire fiscal year 2014, the country posted a GDP growth of 6.1%, which is similar to the rates posted by other major Asian countries. Growth is predicted to reach 6.5% in 2015, and 7.3% for 2016.
China posted a growth rate of 7.3% last year, and 2015 and 2016 estimates are 6.9% and 6.7%, respectively. The report also pointed out that China is on thin ice as it continues to work on both growth and reform. This could lead to a drop in GDP growth where expansion could fall somewhere in the range of 6-7%.
Growth in the Philippine economy is linked to the continuous efforts of President Benigno Aquino III to improve the economy by means of strict anti-corruption campaigns and improved fiscal management reforms. These then resulted to upgrades by major debt watchers - right on the heels of an increase in foreign direct investment. Another growth factor is the increased public spending particularly in the business process outsourcing (BPO) industry and construction. Large-scale investors in the car and electronics manufacturing industry are also expected to expand operations in the country.
by: Sarah Joson
According to the UK Outsourcing Index for 2014 created by outsourcing provider Arvato and analyzed by industry specialist NelsonHall, the total IT outsourcing (ITO) contracts closed last year posted a total value of £3.44 billion and 75 percent or £1.05 billion of that is composed of contracts from the utilities and energy sector. Those deals likewise represent the 187% of the year-on-year rise in the sector, from the £373 million spent on all outsourcing deals back in 2013.
The report also found that last year, UK’s outsourcing market was worth £6.65bn - £3.1bn of which comprised closed deals for business process outsourcing orders. In addition to that, hybrid contracts that comprised BPO and ITO arrangements were valued at £109 million.
Infrastructure management was the most outsourced IT service with a total £899 million spend, followed by application management at £772 million, and network management with £485 million.
Other findings in the report also pointed out that deals from the public and private sector being carried out remotely are only 8% of the total £2.49 billion.
According to Debra Maxwell, Managing Director of Arvato UK, people still confuse outsourcing with offshoring, but the study underpins that UK delivery is still crucial in the outsourcing segment since the requirements and needs of customers become more complex.
In latest Cloud Readiness Index report, it was revealed that the Philippines climbed four spots to the 10th place, from the 14th place in 2011, on account of its bullish business process outsourcing sector.
Cloud technology is having centralized data storage and remote access to computer resources and services by means of groups of remote servers and server networks. It can be public, private or a combination of both.
According to Bernie Trudel, Chairman of the Asia Cloud Computing Association (ACCA), the BPO sector is identified as the key contributor mostly because it highly depends on the Cloud for innovation and improvement.
Trudel, who is also the Cisco Asia-Pacific Chief Technology Officer, said another advantage for the country is freedom of information as it is crucial to the progress of the Cloud.
ACCA has dubbed the Philippines as one of the “dedicated improvers”, together with Malaysia, Taiwan, and Thailand.
However, amidst the country’s low scores in government regulations and telecommunication infrastructure aspects of the index, the Philippines has been consistently improving in the cloud readiness parameter.
Japan is the leader of the ranking, and in fact has been on top for three consecutive years now, while Australia, Thailand, and New Zealand climbed four spots.
The index, which is currently on its 3rd installment, evaluates 14 countries against 10 indicators, which include infrastructure and regulatory systems, to see if which one is prepared for Cloud computing adoption.
According to the National Economic and Development Authority (NEDA), the Philippines can use its position as the chairman of the largest global economic gathering in the last 19 years - the Asia-Pacific Economic Cooperation (APEC) Meeting, to leverage its services sector.
From January 31 to February 7, NEDA will host four events at the Asia-Pacific Economic Cooperation (APEC) Senior Officials Meeting to be held at the Clark Freeport Zone, Pampanga.
The services sector contributes 56.7 percent to the gross domestic product (GDP) of the country, and is the largest contributor to its growth during the fourth quarter of last year.
Emmanuel Esguerra, Deputy Director-general at NEDA, said the services sector could use a little more push for its potential to be maximized. He also pointed out that the country’s APEC chairmanship can enable local small and medium enterprises (SMEs) to make it to global value chains (GVC). In addition to that, he said out of all the APEC economies, the Philippines has the highest GVC participation in optical and electrical equipment.
Last year, the services sector posted a full-year growth average of six percent, similar to the figures posted during the fourth quarter of the same year. Also, the business process outsourcing (BPO) sector is eyeing to have 1.3 million full-time employees and $25 billion in revenues by 2016. The sector currently has 1.052 million workers.