HOW WILL THE

PHILIPPINES MAINTAIN
ITS COMPETITIVE
POSITION VIS--VIS STRONG
REGIONAL RIVALS?
10 TIPS ON HOW THE COUNTRY CAN
MAINTAIN ITS BPO LEADERSHIP
With Manila currently ranked in second place among leading global BPO locations (just behind
Mumbai), and 7 Filipino cities listed in Tholonss leading Global 100 BPO Locations (2013)
report, the country is in a strong position to benefit from the surge in activity resulting from strong
regional growth. But it will need to maintain and even heighten its focus to maintain its position.

This period has been variously termed the Asian Century reflecting the enormous impact Asian
economies are having on global markets as the latter recover from the financial meltdown of 2008, and
look for opportunities to expand. But Asian markets are not just being driven by growth in sales. India
and the Philippines lead the list of locations that offer attractive Business Process Outsourcing support
services for back offices, call centres, Global Business Services, and the like.
BPO and Offshoring combined mark the Philippines fastest growing sector, nearly doubling since 2006,
and hitting $15.3 billion in revenue this year (17% growth over last year, with the same growth percentage
predicted this year) and employing nearly a million people, with approximately 120,000 joining the workforce
every year. In fact, BPO now brings in nearly three times as much revenue as tourism does, each year.
The Philippines main competitor for BPO investment, India, is feeling the heat: D S Rawat, General
Secretary of Indias Associated Chambers of Commerce and Industry (ASSOCHAM), warned earlier
this year that Indias BPO industry was losing 70% of all incremental voice and call centre business to
competitors like the Philippines. Quoting a new ASSOCHAM-KPMG joint study, Rawat estimated that in
the next decade India might lose $30 billion in foreign exchange earnings to the Philippines, which has
become the top destination for Indian investors.
Indeed, there has been a steady stream of Indian BPO firms opening centres in the Philippines to benefit
from the large pool of well-educated, English-speaking, talented and employable graduates.
While government incentives embedded in the Investment Priorities Plan (2007) have worked, the country
needs to continue sending out the positive message to maintain its position.
The Oxford Business Group warns however that while much of the BPO growth is coming from international
players building up their Filipino operations, the countrys neighbours are clamouring to cash in on the
action. The Philippines will have to set itself some stringent targets to remain the location of choice for
BPO, with China emerging as a significant rival and Malaysia also raising its BPO profile.

www.ssophilippines.com

HERE ARE 10 POINTS THE PHILIPPINES WILL NEED TO

BEAR IN MIND TO STAY AHEAD IN THE BPO RANKINGS:
WATCH THOSE RANKINGS!
The latest global BPO destinations report by US-based consultancy firm Tholons, lists 7 Filipino cities
among the top 100, with two in the top 10. Manila climbed one space in this years list and now ranks just
behind Mumbai, having consistently moved up in the rankings over the past few years. That is the good
news. But the Philippines should track whos entering the league tables, too, and target its activities
accordingly. Three Chinese cities ranked in the top 20 of Tholonss list last year, and other countries are
starting to appear. This is no moment to be caught snoozing.

MAKE ENGLISH LANGUAGE A PRIORITY

Again and again, the reason the Philippines outranks other (sometimes cheaper and more experienced)
destinations is because of the high level and quality of spoken English. Add to that the natural cultural
affinity Filipinos have for the US, in particular, and the large numbers of Filipinos working abroad, and
you have a strong basis for cultural understanding. That is not something that is easily taught, and may
be just the differentiating factor to tip the balance its way, given the trend towards knowledge-based.

CONTINUE TO PROMOTE A SKILLED AND EDUCATED WORKFORCE

While other countries may offer cheaper resources, almost 30% of graduates in the Philippines are
employable, compared to 10% in India, where the training consumes considerable amounts of time,
according to an ASSOCHAM report. More specifically, a McKinsey Global Institute study quotes 30% of
generalists and 30% of F&A professionals in the Philippines as being suitable for work in a multinational
organization, ranking the Philippines higher than countries such as China, India, or Malaysia. For life
science professionals, researchers, and analysts, 20% of the Filipino labour pool is considered suitable
for global work, again outranking China or India. These statistics imply immediate returns.

CARRY ON WITH GOVERNMENT INCENTIVES AND INITIATIVES

The launching of the Association of Southeast Asian Nations (ASEAN) Economic Community in 2015
could boost growth in the Philippines BPO sector, as major international firms will be encouraged
to optimize and rationalise their operations following the lowering of trade and employment barriers
in the region. It is important that the Philippines build on these kinds of initiatives, and keep working
at reinforcing the incentives embedded in the 2007 Investment Priorities Plan. In addition, there are
specialized programs addressing near-term issues (e.g., near-hire voucher program), and IBPAP is
coordinating with the government, particularly the Board of Investments, to promote the country to ITBPO firms overseas.

CONTROL THE PESO

The low cost BPO industry is sensitive to currency fluctuations, as an unfavourable shift against a clients
native currency can wipe out the cost arbitrage so carefully won. The Filipino BPO industry is being
threatened, warns the Business Process Association of the Philippines, by the steadily appreciating local
currency, which is eroding the competitiveness of the countrys fastest-growing industry. This would be
doubly damaging where other Asian countries currencies are falling against the dollar.

EXPAND BEYOND CALL CENTRES, AND MARKET TO NEW COUNTRIES

The call centre sector today comprises 80% of the total BPO industry in the Philippines, with 80% of the
call services provided for the US market. While this is working well, it makes the Philippines vulnerable
to any currency or other changes between itself and its main BPO partner. It would be advisable to
promote itself both to Asian neighbours, as well as European customers, to dilute its dependency on
the US, and benefit from the potential upswing in business in other regions of the world. To this extent,
promoting strength in languages other than English will be a plus.

www.ssophilippines.com

INVEST IN GROWTH INDUSTRIES: HEALTH

With much of the added value in shared services coming from Centre of
Expertise- or Knowledge-type services, the Philippines would do well to
invest in upskilling its workforce to support growth industries like Legal
and Medical Transcription (driven by changes in US health care). Note,
for example, that while in 2003 there were just 9 registered companies
providing medical transcription, by 2008 this had increased to 43.

MAKE FINANCE & ACCOUNTING YOUR DIFFERENTIATOR

The Philippines is becoming a regional and global hub for shared
services centre corporate backroom operations, especially for financial
services such as accounting and bookkeeping, account maintenance,
accounts receivable collection, accounts payable administration,
payroll processing, asset management, financial analysis and auditing,
management consulting, inventory control and purchasing, expense
and revenue reporting, financial reporting, tax reporting, and other
finance-related services. BPO work can also expand to financial leasing,
credit card administration, factoring and stock brokering, logistics
management, and cargo shipment management. By building up
knowledge and process expertise specifically for these functions, the
Philippines can attract new companies.

GROWTH
CONTINUES
Information Technology
Business Process
Association of the
Philippines (IBPAP)
president and chief
executive officer Jose
Mari Mercado forecasts
another 17% rise in ITBPO revenues this year
[2014], much of it driven
by the back office space,
health care sector, and
engineering services.

KEEP INVESTING IN QUALITY INFRASTRUCTURE

BPO firms require world-class infrastructure to serve their clients. This
means telecommunications as well as office buildings, roads, airports,
etc. The Philippines, like other countries in the region, still has abundant,
low-cost real estate in major urban areas that will cater to the needs of
foreign investors. But with countries like Malaysia touting their Digital
capability, the Philippines needs to take care to ensure it does not fall
out of the spotlight. While the government has said it hopes to see more
Filipino BPO centres break into Tholonss top 100 by 2016, more will need
to be done to improve infrastructure and promotion to support this.

AND FINALLYMAKE A SPLASH WITH INNOVATION

The one thing that will drive interest and capture the global markets
attention is taking a lead in innovation that supports BPO. This means
nurturing technology companies that are developing automating
capabilities; encouraging a free-thinking work culture where employees
consider creative contribution as an asset, rather than transactional
processing; and developing active partnerships with the local BPO
industry to ensure universities and learning institutions are providing
the right skill sets in graduates. For example, the IBPAP is working
with the Technical Education and Skills Development Authority and the
Commission on Higher Education to develop programs that will equip
graduates with the skills needed in the IT-BPO sector. A small country
can have a big impact. Innovation, technology and knowledge will lead
the way.

Sources:

2013 Top 100 Outsourcing Destinations, Tholons

IT and Business Processing Association of the Philippines
New York Post: Philippines is the New Capital of Call Centres. Good News Pilipinas. 2 February 2012. Retrieved 30 June 2012.
Manila takes No 3 slot in BPO ranking. Investvine.com. 2013-02-21.
Strong peso hurts Philippine call centres. Investvine.com. 27 December 2012.
Business Processing Association of the Philippines (BPAP). 2007. Offshoring and Outsourcing Philippines: Roadmap 2010. BPAP: Manila.

www.ssophilippines.com

Unlock Value, Improve Productivity

and Maintain Your Competitive Edge
by Attending:

19 20 August 2015, Manila

Featuring a line up of 20+ speakers with combined
experience of more than 200 years in delivering
shared services across the region and the globe, you
will discover and take away practical techniques to
apply and improve service delivery.

Click Here to Download

Agenda