BPO industry expects more dramatic growth ahead
Written by MADELAINE MIRAFLOR REPORTER AND SHEILA MAÑALAC CORRESPONDENT
In grabbing control of the global business process outsourcing (BPO)
industry from India, the Philippines may have finally found the key to
long-term, sustainable economic growth that will lift the country out of
Third World status.
Up until two years ago, India had been the world's biggest BPO provider.
While BPO includes service support, sales and marketing, technical
support and front and back office operations, the biggest money earner
remain the inbound and outbound calls, which is why most Filipinos still
think of the BPO industry in call center terms.
Calls to and from customers are the bread and butter accounts of BPO
companies, and it is the primary reason the Philippines was able to
become the world's dominant player. In general, Filipinos speak English
better than their Indian counterparts, and since the US is the biggest
call center market in the world, it was inevitable that American
companies would transfer their business to the country which was once
their colony.
According to Martin Conboy, president of the Australian BPO Association,
the BPO industry in the Philippines will soon be the powerhouse of the
economy since it continues to remit millions of dollars to the country
without having to send workers abroad. And those remittances are
expected to continue to grow in the near to mid-term.
"Through BPO, Philippines will be the powerhouse of the global economy
in few years because it is a magnificent place to supply people who are
great workers when it comes to software," said Conboy.
Conboy also added that the Philippines produces a large number of
skilled and talented workers that unfortunately, are not being utilized
to the max. Not so with BPO companies. In this industry, a person's
skills determine how far up the totem pole the employee goes.
Already transitioning to developed status
Because of the BPO industry, the Philippines is already transitioning to
a developed country, Conboy added.
"In 12 years, the economy in the Philippines will double and the BPO
industry is about to be the biggest contributor to the GDP, which
Overseas Filipino Workers (OFWs) contribute the most through their
remittances," said Conboy.
GDP or Gross Domestic Product is the sum total of all goods and services
produced by a country in a given year, excluding earnings from its
expatriate workers. If the past record of the industry is used as the
basis, then the industry's future — and that of the country — can only
be considered as bright.
Nora Terrado, president of the Software Industry Association of the
Philippines, said that this year the BPO-software industry in the
Philippines has so far posted 20 percent growth compared to the same
period last year, driven by increased demand from the US and Australia.
According to a report from the Business Processing Association
Philippines (BPAP), the IT-BPO and global in-house center industry in
the Philippines has grown at an annual rate of 30 percent over the last
decade, faster than the growth of the global offshore services market.
As it has grown, the industry has also diversified significantly in
breadth, scale, and maturity of services.
Said the BPAP: "IT-BPO industry is the Philippines' most important
generator of jobs. Its contribution to GDP was approximately five
percent in 2011, and it is the Philippines' third-largest net foreign
exchange earner after tourism and remittances from an estimated 10
million overseas workers.
"Its contribution to economic development is centered not only in the
nation's National Capital Region, but also in other highly urbanized
areas throughout the country, or Next Wave Cities. Employment in these
cities was estimated at 150,000 at the end of 2011."
End nowhere in sight
Despite its impressive growth in the past decade, the BPO industry in
the Philippines is still on the rise. Industry leaders maintain a
positive outlook that the end of this growth is still nowhere in sight.
From its beginning in 1999, when Cyber City set up an outsourcing
facility at the former United States Air Force base in Clark, Pampanga,
the growth of the industry has been steady. Not only has this helped the
economy, but it has also created jobs for Filipinos nationwide, since
roughly one out of five BPO jobs are now located outside Metro Manila.
Indeed, the industry has made the lives of Filipino workers easier
because the starting pay is close to double the minimum wage. Also, the
industry offers quality jobs for the country's large labor pool.
But now, there's a problem: filling the demand for qualified workers for
this fast-growing industry.
Although Filipinos are known to be good in English, a huge number of the
population is not really used to using this language in daily
conversation. The largest number of English-speaking Filipinos remains
concentrated in the Metro Manila area and the key cities. The supply may
seem to be running short.
But according to Rainerio "Bong" Borja, president and country manager of
NCO and APAC, and founder of the BPAP, the lack of quality manpower is
not an issue but only a challenge.
"I'm not convinced it's a problem because if you look at our raw
ingredient, we have 400,000 college graduates, and all of those
graduates are looking to be employed and take on white-collar work. Very
few of those 400,000 took up college to end up as farmers or factory
workers or other kinds of jobs. All of them, or most of them would
rather end up working a white collar job. And there is no other industry
that's actually employing in the same massive numbers as we are. So
basically, if you talk about availability of white-collar work we have a
monopoly of that," he told The Manila Times.
Proactively addressing the issue
The BPO industry has become such a key cog of the economy that it was
even mentioned in President Benigno "Noynoy" Aquino's recent SONA.
The government is not blind to the potential manpower shortage that can
mar the growth of the industry. What better way to address the issue of
manpower than to partner with government institutions and universities,
where the "raw ingredient" comes from.
"We have different partnerships with government agencies. TESDA has P400
million in funds put in the industry, so we are training 65,000 scholars
who are almost employable and near hires. We are training them on
industry specific training and 70 percent are converted into hires. If
you do the math, that's 47,000 out of 65,000 trainees who are hires,"
Benedict Hernandez told The Manikla Times. He is the president and CEO
of BPAP and the Operations Lead for Accenture BPO Services Delivery in
the Philippines.
Hernandez said that everyone in the industry is being proactive in
supplying the manpower that they need to meet the demand. He said there
is actually no problem; it is only that the tremendous growth in the
industry has led to a rapid surge in the demand for quality manpower.
"The demand is huge, and the need to add supply of manpower is essential
for the growing industry," he said.
Aside from TESDA, the industry is also working with the Commission on
Higher Education (CHED). There is already a pilot deployment of the
Service Management Program, where college students can enroll while in
school and learn IT-BPO skills they need. "This program is ideal for any
service industry as we teach them universal skills such as service
orientation, business communication, and also fundamentals of IT-BPO,
among many more," said Hernandez. This is already being done in four
universities, and they expect to throw a wider net in the near future.
US anti-outsourcing bill
Industry leaders have been paying close attention to the upcoming US
presidential elections because incumbent President Barack Obama has made
an issue of challenger Mitt Romney's outsourcing of jobs that are
desperately needed by the stagnant US economy.
With the US economy in such a weak state – unemployment is slightly
below 8.3 percent as of this month — the "Bring Home Jobs Act" pushed by
Obama could be a threat to the growing BPO industry in the Philippines.
Should Obama win another four year term this November – most surveys
indicate that he has a good chance of defeating the gaffe-prone Mitt
Romney – then there could be a stumbling block to the continued growth
of the industry.
But people in the industry seem to think otherwise. "The US Senate
rejected the bill already. There is a similar bill that comes up every
now and then, although personally, I think this type of bill is
perfectionist in nature. We support the rationale of the rejection of
this bill, because outsourcing makes American companies more
competitive. It is said that the 2,500 multinational companies create
more jobs in the US domestically and therefore outsourcing actually
supports the American demand for employment," said Hernandez.
Also acting in the Philippines' favor is continued globalization, which
makes controlling private companies next to impossible. "It is very
difficult to actually restrict the US private companies to determine
where they will have their products manufactured or where they have
their products serviced anywhere in the globe, that is part of
globalization. Just like an HP computer which I have is actually made in
Taiwan, it is not made by HP in the US. It's coming from places where
the service can be done at lower cost without sacrificing quality, or
better service at lower cost. So they can't say they have to move it
back to the US and sell these computers at higher cost and make the
consumer pay more for every call they make. So it's going to be
difficult to reverse that trend I think," according to Borja.
Health issues
There are other issues.
Although the risks are high, the industry still employs over half a
million workers to date. Since the BPO industry is known to service
consumers outside the country, particularly in the US, workers have to
adapt to the time difference, and that means working at night.
The British Medical Journal came out with an analysis of studies that
involved more than two million night shift workers, stating that shift
work disrupt the body clock and have an adverse effects on lifestyle.
This has been linked to an increased risk of high blood pressure,
diabetes, heart attack and stroke caused by lack of blood in the brain.
The BPO industry here in the Philippines says it is not bothered by this
issue. "We have all sorts of international labor organizations that say
that but there is really no study that singles out BPO workers. Of
course we pay huge attention to the health of our workers; we must
continue on attracting and maintaining a performing workforce and we
continue to find ways in order to do that. We invest a lot in health and
wellness programs for our workers, paying attention and incorporating
WHO campaigns on wellness programs, but we haven't really seen any study
that singles out BPO employees," said BPAP's Hernandez.
Even so, the industry takes pride in providing the best health care
benefits possible. "We definitely believe it puts a toll on people's
health and lifestyle so we go through extensive means to work with
employees and health care professionals to make sure that our employees
are briefed and educated on the proper lifestyle when you work at
night," said Borja.
He added that the industry has some of the best HMO or health care
benefits compared to other industries because they want to make sure
that their employees are well looked after.
"I think there's a lot more focus on what we are putting into we call
preventive health management rather than a reactive one. This means that
there's a lot of workshops and seminars that our companies run to
educate people and to make people aware on how to look after themselves
given this kind of work," said Borja. So indeed, prevention is still the
key. And when all else fails, employees can merely bring out their HMO
card, and the rest is taken care of.
The near future
The BPO industry is not far from the target income and growth that it
targeted at the start of the year. There are currently an estimated
650,000 Filipinos in the industry workforce, and the number is still
growing.
"We are probably at around $11.3 billion in revenue, we are projecting
at $20 billion at the conservative estimate, or $25 billion by 2016 at
an aggressive estimate. So you can imagine that's a huge increase that's
growing by double from $11.3 billion to $20 to $25 billion. Our run rate
is something around $11.3 billion so we are looking to grow by almost
double, or more than double in the case of the aggressive estimate,"
said Borja.
With these numbers, he said they have to be confident that they can
generate the manpower to support that because the revenue can be equated
to the number of people that they employ.
"For example, we are calculating to make $25 billion sop we need 1.3
million people to employ. In the conservative, we need 900,000 people to
make $20 billion. Right now we are currently employing I think about
650,000 today," says Borja.
And to BPAP, working with the government will ensure the industry's
continuous growth. "Through the Public-Private-Partnership Program we
are doing, we can maintain the growth of the industry if we continue to
do this."
A better option
The rise of the BPO industry has another seemingly unappreciated effect.
It gives qualified Filipinos the choice of staying home instead of
looking for better-paying jobs abroad.
Although the Philippines has been exporting manpower since the 1970s, it
is only in recent years that the ill effects of the brain drain has been
realized. Not only is the country losing its best and brightest minds,
but the social cost of broken families has become clear, with juvenile
delinquency and cheating spouses not uncommon among OFW families.
The industry gives workers a better option.
"There's no need for the OFWs to go outside the country to work. Through
BPO, they can stay here in the country with their family," said
Teleperformance's Lynn Ventilla.
Ventilla said that present growth path of the BPO companies do have
problems recruiting qualified manpower but this kind of challenge has
always been present.
"The challenge has always been there but we are still surviving, and in
fact, growing despite that. The government has never left us. They are
continuously supporting us," said Ventilla. "The reason why we are still
seeing confidence for the industry is because there are many
organizations that are helping us, especially non-government
organizations (NGOs)".
Since the Philippine economy has become so dependent on the BPO industry
to provide employment and boost the country's dollar reserves, it only
makes sense for the government and the private sector to make sure the
industry remains healthy.
Based on its present state, therefore, the Philippine BPO industry is
more than just healthy. If it were an athlete, its stature would be
considered Olympian. Or, as the Australian Conboy said, it's a powerhouse.
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