Business process outsourcing in the Philippines

Business process outsourcing or BPO is an emerging industry in the Philippines.

Overview

This industry is regarded as one of the fastest growing industries in the world. International investment consultancy firm McKinsey & Co. predicts that the demand for outsourcing services will reach $180 billion in 2010, with the customer contact services, finance and accounting, and human resource sub-sectors taking up the biggest shares. When it comes to the trend in primary business requirements, experts are seeing a shift from cost-effectiveness to skills quality and competence. This development all the more strengthens the Philippines' position as an emerging global leader in the BPO industry ("BPAP 2006").

The BPO boom in the Philippines is currently led by demand for offshore call centers. The Philippines raked in offshore service generating revenues of $2.1 billion in 2006, placing third behind India and China and slightly ahead of Malaysia. That's up 62% over the $1.3 billion it gained in 2004, and a huge increase from the start of the decade when the outsourcing industry in Manila employed just 2,400 people and the industry had revenues of merely $24 million. It is estimated that 200,000 people are working in 120 BPO (mostly Contact Centers) in the Philippines in 2006. Overall, Philippine BPO is forecast to earn US$11 billion and employing 900,000 people by the year 2010 ("Shameen 2006").

The recent growth spurt in the outsourcing industry in the Philippines has been fueled not by traditional low-value-added call centers but more higher-end outsourcing such as legal services, Web design, medical transcription, software development, animation, and shared services. Though call centers still form the largest part of the sector, the Philippines has begun leveraging its creative design talent pool, its large pool of lawyers, and its professionals in accounting and finance ("Shameen 2006").

To achieve and sustain this rapid growth, the Philippine government is offering significant fiscal and non-fiscal incentives to attract foreign direct investment in these industries as part of the 2006 Investment Priorities Plan. The IPP was prepared by the Board of Investments (BOI), as the lead agency in promoting investments, focused on the sectors identified in the Medium-Term Philippine Development Plan (MTPDP) 2004-2010 ("PBOI 2006").

Majority of the BPO facilities are located in Metro Manila and Cebu City although other regional areas such as Baguio City, Bacolod City, Cagayan de Oro, Clark (Angeles City), Dagupan City, Davao City, Dumaguete City, Lipa City,Iloilo City and Legazpi City are now being promoted and developed for offshore operations.

The Philippines' Center for International Trade Expositions and Missions (CITEM) report for 2004 cited the Philippines as among the top 10 choices for offshore operations. Consultancy firm McKinsey & Co has been tapped to draft a five-year roadmap for the country's BPO industry.

Legal and medical transcription

These companies do mostly medical reports, discharge summaries, operative reports, therapy/rehabilitation notes, chart notes, and hospital and clinic reports using state-of-the-art software and equipment from the U.S. They can transcribe up to 1,000 lines per medical transcriptionist per day at a 98% average accuracy rate, and they conduct training programs for their transcriptionists to continuously upgrade their performance. Most of them offer 24x7 services and have an average turnaround time of 24 hours, with the ability to deliver output in 3 to 6 hours in emergency cases.

The industry is now in the process of pursuing certification for individual companies’ services to further promote the country’s capabilities in this area. An industry alliance is also now being forged to ensure the sector’s continued growth in partnership with the government. Inclusion of medical transcription subjects in medical courses is likewise being pushed, to further expand the country’s pool of skilled medical transcriptionists.

Finance, logistics and accounting

The Philippines is fast becoming a regional and global hub for shared 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 such as financial leasing, credit card administration, factoring and stock brokering; as well as for logistics management, and cargo shipment management.

Accounting primarily for these companies’ choice of the Philippines as the location for their shared backroom operations is the country’s rich pool of low-cost yet English- and IT-proficient business, accounting, HRM and engineering graduates. Moreover, the World Competitiveness Report 2001 ranked the Philippines 16th of 49 countries for “International Business Experience.” These professionals are also particularly noteworthy for their marked customer service orientation, superior work ethic, high degree of trainability, flexibility, multicultural adaptability, and loyalty. Rounding up the Philippines’ advantages as a BPO destination are its strategic location, the availability of prime yet low-cost real estate in the country, its good and increasingly cost-competitive telecommunications and other business infrastructure, its expatriate-agreeable lifestyle, and its progressively IT-supportive policies and incentives.

oftware Development and Animation

The Philippines is ranked #1 in the availability of knowledge-based jobs and workers worldwide, and ranked 4th among Asian nations in terms of labor quality, according to a survey conducted by the U.S. based Meta Group. Aside from the huge pool of productive, trainable and multi-skilled labor force, the country competes in the quality of its managers and information technology (IT) staff and engineers. The unique edge comes from a high level of proficiency in English (the Philippines is the 3rd largest English-speaking country in the world) ("Gov.ph 2007").

Fueling the recent growth spurt in the outsourcing industry in the Philippines are more higher-end outsourcing services such as Web design, software development, and animation ("Shameen 2006").

Filipino animators do well in the global market for animation, which is fast growing due to the increasing popularity of animation as an entertainment medium not just for free and cable TV and the movies but also for computer games, as well as an advertising medium, a graphics medium for Internet content, and an information and educational tool.

Their services range from full 2D and 3D animation, including pre- and post-production services such as layouting, in-betweening, clean-up, digital background production through scanning and pre-compositing, color styling, special effects creation, and digital ink and paint application, to flash animation and web design, graphic and art design, mobile applications, and art and animation training.

Major studios like Disney, Marvel, Warner Brothers and Hanna Barbera have offices in the Philippines ("CNN 1995"). Some of the latest works of Filipino animators include scenes in Pixar's Finding Nemo, Paramount Picture's Barnyard and Twentieth Century-Fox's Anastasia ("ABS-CBN Interactive 2004").

Next to India, the Philippines is also fast becoming a software and web development outsourcing favorite among various countries abroad. A lot of companies in the United States and Europe are coming to the Philippines to avail of low cost but high quality software and web development.

References

*ABS-CBN Interactive 2004, [http://www.abs-cbnnews.com/storypage.aspx?StoryId=53733 "Barnyard: A showcase of Pinoy artistry"] , viewed 18 March 2007
*A.T. Kearney Inc. 2005, [http://www.atkearney.com/shared_res/pdf/GSLI_Figures.pdf "A.T. Kearney Global Services Location Index 2005"] , A.T. Kearney Inc., viewed 11 February 2007
*Beshouri, CP, Farrell, D & Umezawa, F 2005, [http://www.mckinseyquarterly.com/article_page.aspx?ar=1684 "Attracting More Offshoring to the Philippines"] , The McKinsey Quarterly, 2005 No. 4, viewed 18 March 2007.
*Business Processing Association Philippines 2006, [http://www.bpap.org/itesict/itesict.asp "ITES & ICT Sectors"] , viewed 18 March 2007
*CNN.com 1995, [http://www.cnn.com/SHOWBIZ/misc/9510/cartoons/ "Filipino animators in 'toon' with the times"] , viewed 18 March 2007
*Gov.ph Philippine Government website 2007, [http://www.gov.ph/cat_economy/whyphil.asp "Why the Philippines?"] , viewed 18 March 2007
*Inquirer.net 2007, [http://technology.inquirer.net/infotech/infotech/view_article.php?article_id=52700 "BPA/P taps McKinsey for BPO roadmap 03/03/2007"] , viewed 22 March 2007
*McKinsey 2005, [http://www.mckinsey.com/mgi/publications/Philippines_offshoring.asp "The Philippines' Offshoring Opportunity"] , McKinsey & Company, viewed 18 March 2007
*Namasivayam, S 2004, "Profiting from Business Process Outsourcing", IT Professional, January-February 2004, pp. 12-18.
*Philippine Board of Investment 2006, [http://www.boi.gov.ph/portal/page?_pageid=113,109260,113_109313&_dad=portal&_schema=PORTAL "Investment Priorities Plan"] , viewed 19 March 2007
*Philippine Department of Trade and Industry 2003, [http://www.magellan-solutions.com/downloads/DTI-META.pdf "META Group cites RP as Asia’s ‘Bright Spot’ for outsourcing"] , viewed 18 March 2007
*Shameen, A 2006, [http://www.businessweek.com/globalbiz/content/sep2006/gb20060919_639997.htm "The Philippines' Awesome Outsourcing Opportunity"] , BusinessWeek Online, viewed 11 February 2007
*The Epoch Times 2005, [http://en.epochtimes.com/news/5-5-9/28593.html "Philippine Call Center Boom Outgrows Manila"] , viewed 18 March 2007

ee also

*Call center industry in the Philippines Manila
*Cyberservices
*Medical transcription
*Philippine Cyber Corridor
*Offshoring
*Outsourcing
*Call center