Philippines to Give India a Run for its Money as Emerging KPO and Outsourcing Destination

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Research report by outsourcing industry organ gives a lowdown on Philippines current and future outsourcing market growth. Like other, this research study compares Philippines with other major outsourcing countries like India, China in BPO, KPO, and CallCenter markets., the definitive outsourcing industry mouthpiece, has come up with yet another sterling research report that outlines the growth of Philippines as an increasingly attractive alternative to India as not only a call center and BPO destination but increasingly as an KPO hub. According to the report the Philippines has a 103 million English speakers(including 11 million living abroad), and its long spells of American and Spanish rule have made it extremely westernized and that much more appealing as an outsourcing destination.

It is expected that the BPO sector in the Philippines will see healthy growth at 26% in the current year taking the industry revenue to US $9 billion from last year’s US $7.3 billion. That apart the employment generated would rise from 550000 to 600000 in the same period. Of the total revenue voice, related work accounted for US $5 billion in 2009 while, back office or non-voice contributed US $1.1 billion.

The report further quotes that according to a survey 52% of respondents found, outsourcing to the Philippines safer than out sourcing to India, while 31% thought the risks were equal. However, increasing corruption and a tight labor market were bugbears for 21 and 23% respectively of the respondents. There were plans to increase employment by up to 50% in the coming year. What is significant is that 81% respondents found KPO to be a high growth prospect, even though 54% of them felt that inadequate supply of trained labor was a significant impediment.

To put things in perspective however the report points out that the rate of growth of the BPO industry in the Philippines has remained constant at 15% over the past three years. The emergence of new markets for the BPO industry has actually seen the businesses of the traditional strongholds like India, China, Canada, Ireland and the Philippines see shrinkage. India which accounts for 40% of the global call center market earns revenue of US $11 billion to that of US $6.8 billion of the Philippines at 15% global market share.

In so far as the industry structure is concerned most medium to large sized call center and BPO firms like Accenture, AEGIS PeopleSupport, Convergys, eTelecare, Genpact, Sitel, Sykes and Teletech have a presence in the Philippines as have many MNCs with shared service model of operations. These include AIG, Citigroup, Dell, Deutsche Bank, Genpact, Hewlett Packard, HSBC, IBM, Manulife, Safeway and Thomson Reuters. Notably many of these firms employ in excess of 10000 people across different locations.

There are a growing number of homegrown call centers and BPOs competing with the best in the world. Some of the important ones are ePLDT Ventus- owns and controls a slew of IT and outsourcing firms like Vocativ Systems, Parlance Systems, SPi Global Solutions, Infocom Technologies, and Digital Paradise Thailand. IPVG- a publicly listed company on the Philippine Stock Exchange, it controls or has major investment stakes in IP services, internet security, on-line gaming, mobile solutions and BPO companies such as IP-Converge, IP E-Game Ventures, IPCCO, Prolexic, and Influent. Live IT Solutions- holding company of Ayala Corporation Philippines’ leading conglomerate; and Paxys- an investment holding company controlled by Malaysian tycoon, Ananda Krishnan.

The mergers and acquisitions scene is robust in the Philippines as evidenced by frenetic activity among outsourcing related firms. Deals between firms like Integreon and Grail Research, eTelecare Global Solutions and Stream Global Services Inc., Ageis BPO and People Support Inc., and so on are indicative of this trend.

The Philippines government on its part does its best to support the IT and outsourcing industry through its bodies, Board of Investments and Philippine Economic Authority (PEZA). Some of the incentives offered are income-tax holidays, incentives under the Philippine Build-Operate-Transfer Law (BOT Law), essential off-site infrastructure facilities option to pay a special 5% gross income tax instead of all national and local taxes, permanent resident status for foreign investors and their immediate family members, employment of foreign nationals and assistance in the promotion of economic zones.

However investors are wary regarding certain pending legislations like the rationalization of incentives, as well as the more palatable one which involves the creation of a Department of Information and Communications Technology (DICT). These are likely to be decided upon after the May Elections. As far as the legal system of the Philippines is concerned, it is an amalgamation of Spanish law and US common law. Additionally in Muslim areas, Islamic law is followed.

The Philippines’ record in Intellectual Property Protection leaves much to be desired. In fact, at the end of 2009, the Philippines remained on the US Trade Representative’s (USTR) watch list for piracy while Washington-based International Intellectual Property Alliance (IIPA) noted that not much had changed in terms of punishing infringers. Further, according to the International Property Rights Index by the Property Rights Alliance, the Philippines ranked 74th (together with Tanzania and the Dominican Republic) overall out of 115 countries surveyed to India’s 46 and China’s 68. That notwithstanding outsourcers themselves has little to worry about in terms of actually theft of intellectual property or data by their employees. In fact, there has yet to be a major publicized incident involving the lost of intellectual property in the country’s outsourcing industry.

Philippines infrastructure is largely constrained by its geography the country being an archipelago. However, there is a high concentration of mobile phone users in the country. The country is ranked 85th (between Serbia and Morocco) in the World Economic Forum’s Networked Readiness Index for 2008-2009.

All in all to its credit it has to be concluded that the Philippines has been able to get top position in voice based outsourcing and gain a strong foothold in the BPO industry, as well as the KPO sector in spite of its many disadvantages. In fact, the very fact that it is being talked about in the same light as India speaks volumes about the gains made by it. However, for it to consolidate and grow its position and not regress the country has to watch out for the following- the standard of English, brain drain, natural disasters, and political stability. You can find more information about the Philippines outsourcing potential from is the most prominent site in providing reliable information about outsourcing. Its main vision is to offer a platform for outsource professionals from all over the world to share their experience through blogs, articles, vendor analysis, and reports. It provides honest and objective opinion on the globalization issues to its visitors and members. The website is the brainchild of Twin Cities, Minnesota based IT professional Mani Malarvannan who started the site in 2008 using the expertise he acquired by running his own IT consulting services firm Cybelink and very quickly made it the definitive voice of the BPO and outsourcing industry.

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Vipin Labroo


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