For many years, India was considered the global leader for all things outsourcing – this could be seen primarily due to their huge pool of IT graduates, British-influenced culture and let us not forget to mention the sheer numbers by population of available human resources. Today however, The Philippines is an emerging contender, with more American companies as well as other multinational corporations transferring their operations from India to the Philippines. While India still has a larger share of the global BPO market, the Philippines is rapidly catching up. In this week’s blog post we discuss the differences and similarities between both countries, highlighting the growth that we are to see in the coming years here in the Philippines.
Why companies are outsourcing
“Offshore outsourcing enables companies in developed countries to conduct business operations through a more cost-efficient means by tapping the stream of highly skilled workers in developing countries, commanding wages that are far lower than those in developed countries. Even factoring other costs such as business setup and infrastructure access, cost savings through outsourcing is estimated to be about 20–40%” (Asian Development Bank, 2007).
India’s BPO background
Let’s take a brief glimpse at the BPO industry in India. Initially low-end work such as data entry and call centre activity was outsourced to India. With increasing confidence of the companies, value-added work such as processing of accounts and other non-core functions came to India. The success of these early pioneers encouraged a host of others to set up their own back office operations in India. Banks such as Citibank, HSBC and Standard Chartered and other companies such as Dell and Hewlett Packard set up their own captive operations.
Nowadays, just like the Philippines, India is growing at a fast pace. The BPO sector in India offers a wide range of services, just like the Philippine BPO industry. They offer services including customer support, email support, web design, web development, content writing, proofreading, and accounting among many others. In India, they have facilities already available. They also have business process outsourcing training ready for new employees.
However, according to a study by Assocham and KPMG, released in April 2014, India has lost about 70 per cent of all incremental voice and call-centre business to competitors like the Philippines and East European countries. In the ongoing decade, the survey said, India might lose around $30 billion in terms of foreign exchange earnings to the Philippines.
The Philippine Advantage
The Philippines is rapidly catching up to India in terms of servicing the rising BPO market, here a few reasons which support this:
1) Economic Growth
The strong affinity between the United States and the Philippines. There is also alignment in governments, and the regulatory environment is conducive to growth. Therefore, the Philippines is an ideal location from an economic perspective. Low labour costs provide an opportunity for organisations to provide customer-facing services at very attractive rates, while still providing that high level of quality customer care that providers are looking for.
2) Quality Talent
In anticipation of sustained industry growth, the Philippine government has implemented a series of initiatives to support talent development in BPO. For example, as part of the government’s Industry Public-Private Partnership Initiative, universities in the Philippines have now begun creating BPO-specific curriculum. As a result, more than 90% of all BPO employees are college graduates, with degrees in IT, communications, business and sciences. This enables companies to outsource everything from customer care to skilled technical services, such as engineering, architecture and software development (BPAP, 2012). The Philippines is currently ranked number one in the availability of knowledge-based jobs and workers in the whole world (KPMG 2013).
3) English and Western Culture
The Philippines is one of the largest English-speaking countries in the world with the official languages being Filipino (Tagalog) and English. Many analysts also recognise the Philippines as the most westernised of the Asian markets and has been ranked number one globally in terms of quality of English and Western cultural affinity (The Talent Index generated by O2P and the Everest Group, 2013).
The customer-service orientation of the Filipino labour force also proves to be a huge plus, as attested to by Mitchel Chang of Trend Micro. According to Chang, Filipino professionals are service-oriented, responsive and passionate and speak strong English. This ability and command of the English language is not only a plus when dealing with voice services, but also when working together with BPO employees for non-voice services – you are able to communicate what needs to be done and getting it correct without misunderstandings due to language barriers.