The Philippines has been seen by many corporations as a popular destination to outsource their IT needs. It is known as the “sunshine industry” that eclipsed the geo-political climate of the country and is now more than just a profitable enterprise for providing well-paying, high-quality jobs to millions of Filipinos while reassuring economic activity and investments across the globe. The country’s success as a BPO haven has seen its rise as a global leader in rendering various value-added outsourcing tasks like customer support, services from billing specialists, technical support, telemarketing services, human resources, and more. It also remains one of the most resilient sectors even in the face of the COVID-19 pandemic.
In this blog, be acquainted with the core reasons for what gave rise to the Philippine BPO Industry. Read ahead.
BPO Industry in Philippine Context
Now delving into the national context of BPO, the fastest-growing arm is the information tech-BPO (IT-BPO) sector. And currently, the IT outsourcing companies have sub-sectors that divide the specializations of the workforce into the following categories:
- Call centres
- Back-office tasks (data management and marketing)
- Medical transcription
- Software development
- Game development
- Animation
- Engineering design
Common Setup of BPOs in the Philippines
On the other hand, Manila, Cebu City, and Davao City serve as the hotspot of BPO offices where most foreign companies open their base. And along with opening their doors for business, they set up their companies between two standard practices.
Captive Market
Businesses employ this setup when they need a more cost-effective model to run their core business activities. It involves planning that requires a high level of managerial control and a long-term strategy. Doing so allows the company to limit the risk of disclosing sensitive and confidential business details to another party.
When utilizing this business model, there are two ways how companies do it:
- Build-Operate-Transfer Model – Businesses open up in a designated area through a third-party service provider. At first, the provider has to oversee the workforce, requirements, and operations for a certain period. But after the contract expires, the client will take over the management of its operations.
- Start from Scratch Model – Businesses build their resources in the location of their operations. It means starting a new company and handling requirements with due diligence until they become operational.
Third-Party Outsourcing
Used by the BPO industry in the Philippines, there are two types of third-party outsourcing:
- Dedicated Development Center– This setup is advantageous for companies with long-term and specific requirements for delivering the product or service. A development centre is a usual partner for companies developing software or any tech product.
- Project-Based Outsourcing – This setup is favourable for activities with no regular schedule or pattern. The costing method of this type typically involves computing the time and resources used to deliver the service or product.
The Roadmap to Success: 5 Key Factors That Contributed to the Growth of the BPO Industry in the Philippines
These factors made it possible for the Philippines not just to hit the ground running but have also ensured the Philippines’ steady rise as a world player in BPO services.
- Filipino work ethic. Filipino employees are more patient, a trait that comes in handy when talking to furious customers. In addition, their high problem-solving capabilities and close affinity to the Western culture set them apart from other similarly skilled workforces.
- Focus on growing industries. The country trained their sights in both voice, and non-voice sectors in the Philippines, such as healthcare information management, global in-house centres (GICs), animation, and gaming.
- Incentives. Investors are given various incentives, such as tax exemptions on imported equipment, tax holidays, freedom to employ foreign nationals, and simplified import procedures.
- Key legislative changes. Global organizations favoured looking to outsource in the Philippines because of the government’s quick approach to passing key legislative changes. For instance, the Data Privacy Act, which puts into place stringent international quality data privacy standards, ensures that sensitive information is managed daily and remains secure.
- Bill Gates. When the BPO industry was still in its nascent stages, the Microsoft founder’s donation of free Microsoft Apps to the PCPS program saved large expenditures for the government with its capability for fast and effective computer systems when businesses were launching their operations.
Why BPO Has the Highest Rate of Growth Among the Industries in the Philippines
Highlighted here are several compelling reasons businesses have been switching their processes to the Philippines instead of keeping them onshore or choosing other outsourcing destinations like India.
Low Costs
In any developing country, the engine that propels the outsourcing industry is its lower cost of business. Healthcare and tax costs are much lower than those in developed countries. Other products and services that benefit from low labour costs like office rental, office supplies, professional services, food, and lodging are also very feasible in the Philippines.
Competitive Pricing
The Philippines’ service providers render a competitive price for high-quality output. So companies from the United Kingdom, United States, and other countries relish a significantly reduced operating cost.
Compatible Cultures
One critical factor to the success of an outsourcing project is effective communication between outsourced staff and customers or local employees. Moreover, this is an area where the Philippines outshines other outsourcing destinations as outsourced staff must also possess natural sensitivity to the local culture in addition to superior language skills.
More Highly-Educated, Highly-Skilled Talents Available
Every year, around 3 million new graduates of the Philippines’ world-class higher education system enter the job market. And at the centre of it, Manila has full professional certification and a constant education system, so it is possible to find staff with virtually any specialization in the Philippines.
Moreover, since the growing BPO industry offers competitive benefits and salaries, more and more professionals are joining the workforce. And because of training and development programs, the career path is also attractive. Hence, it entices many job seekers and creates a pool of highly skilled talents.
Wide Workforce Pool
The BPO industry expanded beyond the capital into other major cities with more demand for service providers. It means more professionals are in the hiring market, and it’s just a matter of hiring the right staff for your business.
Economic Growth and Stability
The recent country briefing of economists in the Philippines described several positive improvements in the country that signal continued economic growth and stability.
Strong Government Support
Companies can take advantage of the policies and programs that the government has. In addition, streamlined procedures and reforms for enterprise registration and taxation make it easier to fulfil the duties of an employer.
The Philippine BPO Industry amid the COVID-19 Pandemic
With governments plunging work-from-home measures for companies on a global scale, it is no surprise that the BPO industry in the country saw an unprecedented growth rate on the back of the pandemic.
According to the Information Technology and Business Process Association of the Philippines, the BPO sector remains a steady rise despite the pandemic, with a 1.8% increase in headcount and a 1.4% increase in revenue.
Impacts and Opportunities for the Philippine BPO Industry
The COVID-19 pandemic carried out radical changes in how businesses operate worldwide. Not only has it allowed more remote workers to offer services to companies based overseas, but it has also accentuated the areas of businesses that need automation to enhance the bottom line. Hence, the impact of these changes on the BPO sector will be beneficial.
Furthermore, as technology solutions (like automation, AI) or freelancers with minimal overheads replace traditional outsources of roles such as data processing, transcription, and a large proportion of call centre work, it is also perceived as a threat or an enabler to the pace of de-globalization of work.
But regardless of how you see it, it’s here to stay. And that is why despite the apparent risks and issues of the shift in the working environment, the BPO industry is still hopeful for future growth. BPO companies in the Philippines take advantage of the new technologies and use new practices in catering to clients’ needs and requirements to stay competitive in the global outsourcing market.
Conclusion
The Philippine BPO industry is on the rise and will continue growing. With the vast population of offshore outsourcing, competitive environment, and lower cost of living, the Philippines is a great place to invest in this booming sector. The country also has a deep bench of a skilled and motivated workforce that could help its business process outsourcing (BPO) industry attract more foreign clients and generate business leads for them. In short, the Philippines has all the elements needed to be a top global BPO powerhouse.
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