The latest Tholons Top 100 Outsourcing Destinations report revealed that the Philippines moved up as one of the top destinations for business process outsourcing. Manila, Philippines is now number two in the outsourcing index, pushing Mumbai to the third spot and breaking India’s potential top six spots in the list.
The rest of Indian cities in the top 10 are Bangalore - taking the top spot, Delhi at fourth, Chennai at fifth, Hyderabad at sixth, and Pune at seventh spot.
Manila and Cebu City, ranked 8th, retained last year’s positions, whereas the last two spots in the top 10 are Krakow, Poland (9th), and Shanghai, China (10th).
Mark Maddocks, CIO at Cambridge University Press, noted that they have chosen the Philippines as an offshore destination for its low attrition rate, low cost of operations, and stable wage inflation rates.
The organization started its first offshore captive in the country nearly five years ago, with 40 staff composed of software developers, testers, and support for online digital products. It now boasts 250 people divided into 18 teams working on different processes, and is anticipated to reach 300 by next year.
Bonifacio Global City (BGC), one of the central business districts (CBDs) in the Philippines, is set to launch more office spaces due to the strong demand in the business process outsourcing (BPO) sector.
According to KMC MAG Group, a real estate firm, the demand of office spaces from BPOs operating in the country will continue to rise since more companies are setting up and expanding operations.
KMC MAG cited its 2015 Metro Manila Property Outlook where it was stated that there will be nearly 560,000 square meters (sqm) of office space made available in CBDs this year - almost all of which will be found in BGC. Moreover, the outlook showed that BGC’s current office spaces stock reached 778,867 sqm, and 956,290 sqm are already in the works starting this year until 2018.
The office take-up in BGC declined by 44.1 percent to 94,500 sqm compared to 2013 where building turnover activity was particularly high. The report also revealed that office space rent in BGC is P850 per square meter.
One of the factors cited in the report as to why firms prefer BGC is because of the lower taxes imposed by the local government compared to other business districts in the country.
According to an online survey done by research firm Information Services Group (ISG) on 500 top IT leaders, the first quarter of 2015 recorded the lowest annual contract value of closed deals in IT outsourcing in the last 10 years.
It was discovered that only $3.5 billion in annual contract value was closed in the first quarter, which is 27 percent lower than the first quarter of 2014.
John Keppel, President at ISG, said weakness was recognized in the mega-deal market for the first quarter, but contract values were particularly dragged by weakness in the Asia-Pacific and Europe, Middle East, and Africa (EMEA) regions.
He added that Asia Pacific’s performance almost peaked during the first quarter of last year, making it hard to compare with this year’s performance. However, even with its robust outsourcing environment and positive outlook, the region was still included in the list due to its recent performance.
ISG pointed out that coming from one of its strongest years, the slowdown in the IT outsourcing industry was expected. This is due to the fact that 2014 had stable buyers’ market, a rise in contract restructuring, and an increase in mega relationships. But, the agency’s analysts noted that the slow start in 2015 is not an indication of the industry’s future.
Meanwhile, IT outsourcing activity in the US is anticipated to remain strong throughout the year, and the slowdown in Asia-Pacific and EMEA are considered as positive signs that there’s more for the industry down the line. In line with that, the market and segment itself are continuously evolving - making way for new opportunities, improved flexibility and capabilities, and lower costs.
Keppel also pointed out that buyers are still looking for the perfect combination through testing. They are also found willing to switch providers to achieve the results that they want. This can go from market testing current provisions to evolve into a more modern, cloud-enabled IT sourcing solutions setup.
As for larger deals (contracts worth over $30 million annually), a 25-percent decline was seen in terms of volume and value compared to last year. Smaller deals, on the other hand, are stable and at a steady flow.