Philippine BPOs must drive higher value

Country's outsourcing players should now focus on becoming high-value services hubs to differentiate themselves from India, urge industry watchers.
Written by Melvin G. Calimag, Contributor

MANILA--With the global outsourcing market share still up for grabs, it may auger well for the Philippines to move up higher in the value chain to further build its image as a BPO (business process outsourcing) destination.

Peter Bendor-Samuel, chief executive of U.S. research and consulting firm Everest Group, said it is time for the Philippines "to take outsourcing to the forefront". Bendor-Samuel was speaking at a press briefing Monday held here at the two-day 9th e-Services Conference and Exhibition. The government-led conference is an annual event that gathers the country's BPO players, particularly in the field of animation, backoffice operations, call centers and software development.

Worth US$7 billion, the Philippine BPO industry market has been growing in double digits over the last ten years. The sector grew by 40 percent last year, though the Department of Trade and Industry expects this figure to drop to 20 percent in 2009.

The reduced forecast should not be cause for concern, said Bendor-Samuel, who noted that it would be difficult for the sector to sustain its growth pace, given that the world economy is currently in recession.

While demand for "lower-value" work such as call centers, is not expected to slow down, he said another window for growth lies in "industry-specific" jobs such as procurement and medical records management, which the country has yet to tap.

"The Philippines is basically known as a BPO destination, while India [focuses] more on software development and engineering," said Bendor-Samuel. "The [Philippines] needs to further capitalize on this image and go deeper into higher-value outsourcing."

He said some 2 billion BPO jobs are expected to be generated this year, with the Philippines and India expected to corner more than 50 percent of the worldwide market.

China, he said, is certainly out of the picture now, or at least for the next five years, because of the country's inability to use the English language proficiently.

"While the Philippines does not have the population of India, it can position itself as a strong alternative since companies nowadays don't outsource their operations to just a single location," Bendor-Samuel said. "That's why the government's strategy to create these next-wave cities outside of major urban areas makes sense. More hubs mean more talent factories."

High value differentiator
Cultivating a niche in high-value outsourcing could be a "differentiator" for the Philippines, said John Romagna, president of U.S.-based Integrated Solutions Technology. He added that local firms must take the initiative to talk to American firms and market higher-value outsourcing jobs, such as claims processing and purchasing.

Romagna was referring to an observation by Winston Damarillo, an officer of the Philippine Software Industry Association (PSIA), who said at the press briefing that Filipino BPO players were not as organized or aggressive as the Indians in promoting its BPO capabilities.

Asked to comment on alleged protectionist policies in U.S. President Barack Obama's economic stimulus plan, Romagna said the Philippines could in fact benefit from the tight immigration rules imposed by the new U.S. administration.

"Restrictions on H1-B visas for IT professionals will give the impetus for companies to outsource higher-value software and engineering services here because the IT talent [will remain] in the country," he said.

At the event's keynote Monday morning, Philippine President Gloria Arroyo proclaimed the country's BPO sector a major reason why the Philippines is "an island of stability amidst the raging economic storm".

Melvin G. Calimag is a freelance IT writer based in the Philippines.

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