Generating around 1.3 million jobs and 21.3 billion US dollars in revenue in 2016, the Philippine IT-BPO industry is poised to generate around 55 billion US dollars in revenue by 2020. And this year, the industry has a rosy outlook.
Here are some of the developments to look out for in the BPO and SSC industry this year:
1. BPO will continue to drive the office market
It is predicted that the BPO industry will yield an 8 percent annual growth in full-time employees this year until 2020. According to the IT and Business Process Association of the Philippine (IBPAP), the industry is ‘shifting toward higher value BPO services’ and the provinces present tremendous growth opportunities.
Data from SSON Analytics shows that compared to the SSCs, BPO hubs are more diffused across the country and outside city centers.
BPO Distribution Across the Country: Data from 2000 to 2015. The graph shows how the BPO hubs are distributed across the country. Graph courtesy of SSON Analytics. To view full interactive report, register here.
2. BPO revenues will overtake OFW remittances
The BPO industry is well-poised to overtake the country’s primary source of dollar income, the overseas Filipino workers’ remittances. OFW remittances is pegged at 6 percent annual growth while the BPO revenue is at 15 to 18 percent annual growth. New BPO hubs are also coming to the country.
The IBPAP estimates that the industry will generate $28.9 billion in revenues in 2017 and eventually surpass OFW remittances this year. The association also expects the industry to reach up to $55 billion dollars in revenues by 2020.
Of course, this overtake is also due to the slowdown in OFW remittances caused by the economic downturn in developed countries and a decrease in oil prices. BPO’s steady growth in the country will therefore offset this stagnation in OFW remittances, which is vital to the buoyancy of the Philippine economy.
3. The BPO sector will be affected by the political climate
In a KPMG report, titled “Global IT-BPO Outsourcing Deals Analysis”, 64.7 percent of total outsourcing services contracts in the Philippines came from the United States, followed by the United Kingdom at 9.2 percent, with Australia and France being two other key outsourcing markets. The Philippine industry will never be isolated from the global political landscape.
A cloud of uncertainty, however, hovers over the BPO industry worldwide due to the United State’s foreign strategic policy (FSP) uncertainties. According to Bullhorn’s Trends Report 2017, firms in the US ranks the US foreign strategic policy as third in their list of key challenges, next only to talent shortage and pricing pressure. Thus, a majority of the employers in the US ranks outsourcing recruitment processes as their least priority in 2017.
Philippines, Still a Leading SSC destination in Southeast Asia
Just like the BPO industry, the shared services sector is also on a roll. According to the latest SSON Analytics report, with a 64 percent upsurge in Shared Services Centers (SSCs) in the ASEAN region from 2010 to 2015, the Philippines is poised as the top destination for shared services.
Courtesy of SSON Analytics. To view the full report, register here.
At present, the Philippines hosts one quarter of all shared services centres across the ASEAN region (33.4% for captive/hybrid SSCs and 35.1% for MNC SSCs).
In a separate report by SSON Analytics focusing on the Philippines’ BPO and SSC market, with more and more businesses looking to jump-start operations in the country, the Philippines’ SSC industry has, in fact, overtaken the BPO industry as the primary driver of growth in the Philippines since 2010. It means that are more new entrants in the SSC sector than in BPO.
BPO versus SSCs: Data from 2000 to 2015. The graph shows that BPOs outnumber SSCs, but SSCs overtakes BPO in terms of growth in new entrants year on year. Graph courtesy of SSON Analytics. To view the full report, register here.
The BPO industry is robust and the outlook for the industry is rosy. Experts believe it will be able to generate around 55 billion US dollars in revenue by 2020, despite the uncertainties posed by the political climate across the globe. The Philippine captive SSC sector, on the other hand, is still driving the shared services growth in the country. While BPO hubs outnumber SSC hubs, the SSC sector has already overtaken the BPO industry in terms of new entrant growth rate.
There is an overarching challenge to the general offshoring and outsourcing industry, however: The vagueness of the Trump presidency’s foreign strategic policy. As such, the industry is advised to prepare for possible consequences of this political uncertainty (e.g. shorter and more flexible contracts).