Economic downturn backs Philippine BPO

Current economic slowdown boosts business process outsourcing market in the Philippines, as companies look for ways to cut cost, says analyst.

PHILIPPINES--Despite the current gloomy economic outlook, the Philippines may still reach its 2008 growth targets for the local business process outsourcing (BPO) market, according to a research firm.

Canada-based XMG said the prevailing economic slowdown may even favor the Philippines' outsourcing industry as more companies that outsource, now look at cheaper ways to operate.

"Due to recent U.S. economic slowdown and poor global outlook, contract for offshore countries such as the Philippines will grow by an additional 7 percent to 12 percent as top multinational companies cut cost and transfer [processes] to cost-effective sites or outsource some of their needs," said Benedict Ferrer, research manger and senior analyst at XMG.

In an e-mail interview Monday, he said: "For this year, the country is on track to meet its revenue targets.

"In terms of revenue, our conservative contract outlook for the Philippines will be an estimated US$4.8 billion to US$5.1 billion by the end of 2008."

However, Ferrer cautioned that "the biggest potential pitfall" would be the lack of suitable candidates required to meet the surge in demand for relevant skills.

The analyst added that the Philippine BPO industry is experiencing difficulty in hiring and retaining highly skilled talents "due to poaching" from other companies, and the flux of workers migrating overseas.

"For the time being, the impact is relatively manageable but this could derail the industry by 2010 if not addressed properly," he said.

Ferrer, however, said significant BPO deals such as the agreement inked between IBM Philippines and Bristol-Myers Squibb, will continue to help spur the local BPO industry. IBM Philippines earlier this month unveiled it signed a 10-year outsourcing deal worth US$324 million (14.4 billion pesos) with the U.S.-based pharmaceutical giant.

In a press statement, the IT vendor said the deal aims to help Bristol-Myers Squibb "transform and support many of the company's global human resource (HR) functions".

In addition, IBM will implement an SAP application and integrate Bristol-Myers Squibb's global workforce data into one portal, which can be accessed by employees, managers and HR professionals based around the globe.

The services will support Bristol-Myers Squibb's operations in the United States, Puerto Rico, United Kingdom, Ireland, France, Germany, Italy, Spain and Belgium, as well as limited support to 40 of its other country locations in the Asia-Pacific, Europe and the Americas.

Ferrer said: "The entrance of BPO companies here in the Philippines will heavily contribute to [lowering] unemployment, and generate additional sources of revenue to various industries due to increase of disposable income."

Joel D. Pinaroc is a freelance IT writer based in the Philippines.