Outsourcing gains acceptance, boosting BPO optimism

Tight labor market, corruption, competition still top investor concerns

(Manila, Philippines, August 17, 2010) – Increasing acceptance of outsourcing appears to have benefited the Philippine BPO industry as client companies focus on cost-saving and productivity-enhancing measures. Clients are also outsourcing more complex processes, increasing the value of services offered by the industry, according to the results of a recent industry forum and a related survey.

BPO executives attending an industry briefing and survey respondents alike are overwhelmingly optimistic in their forecast for the next 12 months. Close to 80% of BPO companies see expansion of between 6% and 80% in their workforce in the next 12 months. “Our previous survey showed a return to optimism in the industry. The current survey shows that sentiment achieving momentum,” said Oscar Sañez, BPA/P CEO.

The range of services offered by the industry has continued to expand beyond process-based services to more complex, judgment-based services, a trend observed in successive quarterly surveys. Back-office; IT, data and software; and knowledge-based processes in finance, medicine, and legal services are among the increasing number of high-value offerings provided by respondents’ companies. In all, respondents’ companies are engaged in delivering services in more than 20 sectors.

Industry executives also attribute their positive business outlook to improved perception of the Philippines following national elections in May. Almost 90% of respondents indicated that the automated election had a significantly positive effect on investor and client perception of the country, while almost 60% cited the smooth transition to the new administration as a confidence-boosting development in the perception of investors.

Greater optimism in the regulatory and business environments following the election is expected to raise the Philippines’ profile as a stable investment location. BPO executives anticipate a productive working relationship with the administration of President Benigno Aquino III. Thirty percent more respondents anticipate a stronger relationship with the current administration than with the previous administration.

“The Philippines has a window of opportunity to enhance its country brand and increase positive visibility to investors,” said Outsource2Philippines CEO Michael Alan Hamlin.

However, respondents also identified potential hurdles to expansion. The tight labor market and corruption are still viewed as top investor concerns. Almost 60% of respondents cite labor as a primary, secondary, and tertiary concern. Developing and retaining capable middle managers was also identified as an emerging issue. As BPOs continue to shift to increasingly complex services, labor concerns are expected to intensify.

Government corruption has consistently ranked high in terms of risk associated with doing business in the Philippines, and 35% of respondents cited corruption as their top one, two, and three concerns.

Competition from emerging BPO centers has become a bigger threat, due in part to aggressive marketing campaign efforts. Up-and-coming centers in Africa, Latin America, and Asia, such as Egypt, Costa Rica, and China have increased concern over the competitiveness of the Philippines, with almost 40% of respondents indicating increased competition as a top one, two, or three risk.

“While the outlook is positive, the industry is realistic about potential threats,” said Gillian Joyce G. Virata, BPAP executive director for information and research. “Respondents appear not to take the outlook for granted and remain vigilant.”

The online survey was commissioned by the Business Processing Association of the Philippines (BPAP) and Outsource2Philippines (O2P) and conducted by TeamAsia from June 20 to July 29. The survey had a response rate of 26% and invitations were sent to 685 BPO executives in a broad range of sectors, including voice, back-office, IT, finance, legal, medical, and creative services.

About BPA/P
The Business Processing Association of the Philippines (BPA/P) is the umbrella organization for the fastest-growing industry in the Philippines: IT and business process outsourcing (IT-BPO). BPAP serves as the one-stop information and advocacy gateway for the country’s key O&O services sector and has over 200 company members, including five association members. For more information, visit www.bpap.org.

About O2P
Outsource2Philippines (O2P) provides a cost-effective, timely mechanism for companies to receive professional support in analyzing the suitability of outsourcing selected operations to the Philippines, and in implementing outsourcing programs. For more information, visit www.outsource2philippines.com.

About TeamAsia
TeamAsia is an award-winning strategic marketing communications firm that develops place, corporate, and personal brand strategies, creative concepts, and marketing communications programs for its clients. It specializes in non-traditional communications channels, including the Web (e-Mail, blog and Podcast marketing, online brand advertising and website development, search engine marketing), contact center services, direct marketing, public relations, events, and innovative experiential and direct marketing communications collateral. For more information, visit www.teamasia.com.