Business Process Outsourcing in the Philippines

Whatever the size of an organisation, business process outsourcing (BPO) is an increasing trend. In 2010, 60 percent of the CEOs of global companies believed that BPO played a very significant function in helping the business model (Forbes Insights Survey). Nearly every company outsources some part of their operations. Oxford Business Group predicts that in the next two years, the business process outsourcing market will reach $250 billion. The Philippines has an estimated 10% to 15% share of the world's BPO marketplace. This is despite the fact that the Philippines' local BPO sector has grown at a rate of compound annual growth of 10 percent over the last decade. The Philippines is consistently ranked amongst the top five outsourcing destinations.

Datamark ranked the Philippines as the best offshore BPO destination in 2016 because of its rapid and steady growth. Tholons placed the Philippines at number three in its 2017 TSGI Top 20 Digital Nations List. The index assesses the country's ranking, offers location strategies to investors, countries, governments and agencies, as and multinational corporations. Tholons initially looked at digital change and innovation as factors that determine the level of competitiveness of cities and nations.

The BPO sector in the Philippines is the largest private sector employer in the nation, generating about 1.3 million direct employment in 2017. The number is projected to grow to over 1.7million in the coming years. In spite of the BPO slowdown, the Philippines' steady growth trajectory continues to attract many investors from abroad to establish or expand their operations here.

What is Business Process Outsourcing, or BPO?

BPO refers to outsourcing business processes. This refers to the hiring of an agency or professional to carry out certain operations and tasks that aren't normally performed within an organization. BPO could be national, local or offshore. Companies can outsource non-core functions like back office work as well as highly specialized technical services (data analytics to consulting) from high-skilled and technical companies.

Manufacturing companies were among the first to outsource business processes. They hired external service providers to manage large parts of their supply chain. Global BPO began to flourish thanks to the internet and advances in the world of communications. Companies were able to easily hire workers from other countries.

Control issues were an issue during the beginning of BPO. Many executives worried about the risk of delegating important tasks to individuals from other countries. These concerns have been addressed by outsourcing companies by implementing innovative methods of management and oversight.

Globalization and technical innovation continue to inform how business is done across the globe. This is the case for BPO employees, service providers, as well as the BPO industry. BPO is constantly evolving. BPO has transformed from a cost-saving tool to a strategic plan for the majority of companies.

Although effective BPO campaigns are still able to reduce costs, executives and veterans have learned to concentrate on the business, not only the bottom line. Managers assess BPO initiatives by looking at short- and long-term business benefits, including increased productivity, technology agility, and customer satisfaction.

BPO services can be categorized into front and back office activities. Back office was originally used to describe the area of an office in which employees are not in direct contact with customers. Popular back office BPO services include accounting, finance, human resources and IT.

Offshoring, in particular can be accomplished through back office procedures. This is because the work does not require a core competency and can easily be performed in remote areas. The benefits of back office BPO include savings on labor, overhead and rent, improved productivity, and access to critical talent that is not available in the local workforce.

Front office outsourcing refers to the subcontracting of activities that are client-facing, including contact center services. Certain companies consider customer service to be essential business functions, however it is still one the top outsourcing activities. BPO is often associated with offshore call centres. India and the Philippines have been leading the world in outsourcing voice services for a long time, because of low labor costs, large talent pools, and a high English proficiency in these countries.

Outsourcing Opportunities

The Philippines was once an overwhelmingly agricultural nation, but it is slowly moving towards manufacturing and services. The Philippines has seen an increase in entrepreneurial opportunities, as well as a wide variety of jobs. The Philippines is attractive to foreign investors because of its low labor costs, low living expenses, and the talent pool of English-speaking, young, educated and customer-oriented workers.

There are numerous advantages outsourcing work to the Philippines. Even though artificial intelligence could replace low-skilled BPO workers, higher-skilled middle- and skilled positions will be created as long the workforce continues to adapt and improve its capabilities. From the beginning, government support was significant in the BPO business. Today, both the government as well as the private sector work together to support the expansion of the industry. They provide courses in training and other similar activities that make use of the advantages of AI and automated.

In accordance with the Philippine Development Plan, the BPO industry is essential for the country's top ten priority sectors of development. Programs by the government that promote investment are tax breaks, tax exemptions and simplified trade processes.

Outsourced Voice and Non-Voice ServicesBPO Call Center Industry in the Philippines

The Philippines has overtaken India as the world's largest call center capital. Call center firms continue to improve their quality of service and delivery, as well as the scope of work, and technology. Businesses from all over the globe are setting up BPO operations here for the first time, or expanding existing businesses. New investment pledges from firms in Europe and Asia Pacific are also expected to further increase BPO growth. Economists predict that voice segments will continue to expand at a a strong pace.

Non-Voice Segment of the Outsourcing Sector in the Philippines

Although the voice services segment continues to generate the highest revenues, the non-voice segment (healthcare back office, health care software development, game development, animation and other knowledge-based services) is rapidly catching up. This sector will experience an increase in demand for skilled workers.

Why is BPO the fastest growing industry in the Philippines?

There are many compelling reasons companies choose to move their operations from India or onshore to the Philippines.

Compatible Cultures

A successful outsourcing project can be achieved through effective communication between the outsourced personnel and the local clients. Outsourced staff must not only have excellent language skills but also be sensitive to the local culture. This is an area where the Philippines surpasses other outsourcing destinations.

Low Costs

Low business costs are the main reason for outsourcing in all developing countries. Low labor costs are another advantage of outsourcing in the Philippines. These include professional services, office rental and office equipment as well as food and accommodation. Taxes and health care costs are also lower than those in developed nations.

Highly educated, highly-skilled staff

Each year, 3 million graduates of the Philippines high-quality higher education system are able to enter the job market. In addition, Manila offers a strong professional certification system and continuing education. It is possible to find staff with virtually any specialization in the Philippines.

Economic Stability and Growth

The recent briefing by the Economist on The Philippines described several positive developments that signal continued economic growth and stability.

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