About the Industry
The Department of Trade and Industry (DTI) defines BPO (business process outsourcing) as the "delegation of service-type business processed to a third-party service provider." The industry is generally divided into the following sectors: Contact centers, back office services, data transcription, animation, software development, engineering development and game development.
The Philippines gained considerable traction as a BPO location based on the availability of professionals with the required language skills, cultural affinity with the US (the main BPO market), and strong customer service orientation of its workforce. This government openly acknowledged the industry as key driving force for growth and employment in its Medium-Term Philippine Development (2004-2010).
Companies outsource because they would rather focus on their core business functions while outsourcing or sending non-core and routine tasks for others to accomplish. Its growth can be attributed to two main drivers.
Local and Global Scenario
The global offshore services market is growing at a healthy albeit slower pace, and will more than double by 2016. Compaines now regard outsourcing far more as a means to reduce costs for business operations.
Overall, the outlook for Asia/Pacific's BOP market remains positive with the Philippines aiming for 10% of the total BPO market or about US$25 billion.
The year 2011 saw the industry attain about $11 billion revenues while full-time employees (FTEs) reached about 640,000. The industry is expected to post roughly 20% revenue growth for 2012.
Positive effects of promoting the industry
Heightened Public-Private Partnerships (PPP) or greater collaboration among stakeholders, including government, industry and the academe, is expected to buoy growth and lead the industry to meet Road Map targets and contribute to 9% of GDP by 2016.
The contribution of the BPO sector to the Philippine economy is undeniable. The industry has given Filipinos jobs with above industry compensation and career paths that will make them stay in the country rather than seek employment abroad. As such, the value proposition of the country is anchored on the availability of a skilled and scalable workforce.
Although lower labor cost in the country vis-a-vis other location is a primary factor in attracting BOP jobs, the sector, nonetheless offer a premium wage structure compared to local firms and domestic-oriented industries. The resulting higher disposable incomes led the Asian Development Bank (ADB) to conclude that the wholesale and retail sector tops the list of industries where the BOP industry has the strongest linkage.
Since the sector depends on human capital, the quality of the telecommunications network, and the quality of institution, the government created the enabling environment which reaped benefits for both service providers and country, fuelling to the overall economic development.
- From the demand perspective, the globalization intensified BPO activities with the lowering of barriers to trade. This allowed companies to explore alternative locations to lower operating costs without sacrificing the quality of service.
- From the supply standpoint, rapid advancements in information and communication technology (ICT) made deliver services via the Internet in a cost efficient and timely manner. Thus, while outsourcing and offshoring have long been part of tactical strategies of companies, it increased dramatically in the past decade with the depth and coverage of services evolving into higher value offerings