Outsourcing: From India to the Philippines

India is still what most people think of when the topic of outsourcing is discussed. However, a number of multinational companies have taken a big leap to move from India to the Philippines to look for better and greater returns on investments.

Business leaders have been saying that outsourcing in India has arrived at a near-term peak and momentous expansion from this point forward will result in higher spends and lower quality delivery. Today, efforts are being carried to move capacity from India to the Philippines.

Looking at current events in the Philippines, we can get a better idea what is going on.

Sykes, a large U.S.-based contact center and IT support organization with operations in both India and Philippines, shifted much of its Indian capacity to the Philippines, where it already has more than 7,000 employees.

GXS (formerly known as GE Information Systems), a large IT organization with locations throughout the world that has had a presence in India for years, decided to direct all functions with a strong customer component to Philippines because of "better economics and results." Company analysis also indicated that costs were increasing disproportionately in India.

Dell shifted 1000 jobs from India back to the US because of quality problems. What is less well known is that during that same period, Dell increased the number of jobs in Philippines by over 1000.

These are but only a few of the global companies that had before set grounds in India but now enjoying the high “ROI” from the Philippines which will result to a long term settlement if the BPO industry will continue to receive support from the Philippine government.

Philippine Outsourcing Edge on Finance and Accounting

The Philippines is becoming the fast favorite of global companies in terms of outsourcing. With over $2.1 billion in outsourcing revenues last year, the Philippines has soared into third place behind India and China. A latest study by neoIT ranks the Philippines as the number two best haven for BPO services and was positioned better than India in terms of ‘Financial Benefit’.

Fueling the recent growth explosion in the outsourcing industry in the Philippines are higher end outsourcing services such as Finance and Accounting, Financial Intelligence Research, Web Design, Software Development and Animation. This is again supported by being ranked #1 in the availability of knowledge-based jobs and workers worldwide in a survey conducted by the US based Meta Group. This is singularly factual in Finance and Accounting outsourcing. The Philippines has the biggest number of accountants in Asia. The country has graduates over 105,000 finance and accounting majors, and produces over 3,000 CPAs every year. Filipino accountants are also distinguished for their flexibility in working with multiple accounting standards. Another distinctive edge of the Philippines comes from a high level of proficiency in English.

These up to date developments and market outlook provide a realistic ground to single out the Philippines as the target destination for FAO investments.

Philippine Outsourcing

Another opportunity for Philippine Outsourcing Industry has just came up when the Switzerland based food company, Nestle S.A. , reveals that it has picked the Philippines as its outsourcing site for its shared service center for financial and employee services.

The company decided to establish Nestle Business Services AOA in the country because of talent availability and cost efficiency.

The financial services that will be outsourced consist of accounts payables and receivables, and accounting operations while employee services include payroll, human resource administration, time management and benefits administration.

The shared service center is another denoting affirmation of the Nestlé group’s continuing confidence and commitment to support the long-term economic growth of the Philippines.

Philippine Outsourcing Awakens the Philippine Property Market

A growing number of MNC's and SME's from around the globe that have decided to put up an offshore location in the Philippines has revive the Philippine Property Market.

Prior to the Philippines being the choice of destination among top sourcing companies, the country's property market has not been like the way it is today. Way back the year of 1997, most offices in Makati City, the central business district of the Philippines, were uninhabited.

Mitch Locsin, executive director of the Business Process Association of the Philippines, the local BPO industry group, looked back how cheerless Makati was in those days. “The buildings were empty with office space priced at 300 pesos ($6.5) per square meter.”

At present, the tide has changed in favor of property real estate owners. Booming demand for office spaces and condominiums is highly jumping because of a rise in outsourcing to the Philippines. This scenario has been a red hot topic in the international property real estate developers.

On the front page of the Singapore's Straits Times Newspaper, the most popular broadsheet in the city-state, reporter Alistair Mcindoe analyzed the state of the Philippine property sector. It was bullish and very encouraging. Here is the full text of his report.

However, Philippines' real estate developers seem to be unable to provide the demands for enough office spaces for new investors coming in the Philippines to establish their own satellite office here. It is because more businesses doing back office operations for their US client-company have opted to hold offices in rent-to-own apartment buildings or in converted houses inside residential subdivisions than to wait long to rent a corporate office in Makati, Ortigas, Eastwood and The Fort Global.

If we cannot supply office spaces for today's demands, how can we accommodate the ever growing Philippine Outsourcing which is expected to employ 920,000 Filipinos by 2010 as businesses expand and new investors are coming in?

Philippine Outsourcing Aging Workforce boon to BPO Industries?

Is it indeed a benefit to BPO industries to have maintained aging workforce in the Philippine Outsourcing?

Of course not. I highly dispute that aging workforce is an emerging benefit to BPO industry.

Most of the tasks involving business process outsourcing require more than just basic knowledge in internet technology. Perhaps the functions these individuals can do efficiently are sales and telemarketing and occupying top level management. Aside of those, I highly doubt their skills competencies.

Computer systems play a central role in keeping modern businesses running smoothly, and functions such as email, internet, logistics, finance and administration are vital to such efficiency.

Now that we are in an era where things have become fast and rapidly changing, I am skeptical that these individuals have the endurance to cope with it.

Let me propose an argument, here. If sales and telemarketing can be done by younger ones more effective than these aging workforce, does the BPO industry still need them?

Philippine Outsourcing Professionals for European Markets!

The ever increasing number of US companies investing and adopting the idea of outsourcing to the Philippines is attracting more multinational companies from Europe to emulate the activities of successful US-based business entities that have reap million of dollars from trusting the Philippines' capabilities in the outsourcing industry.

The testimonials and insights about their experiences in outsourcing to the Philippines imply that they would rather initiate contract extensions and project expansions to a Philippine-based BPO to provide them services such as customer service, medical and business transcription, IT, research, etc...than relocating to an Indian-based BPO.

These opportunities are overwhelming. However, the big question remains to be unanswered. Does the Philippines have enough available pool of qualified and skilled workers to do the job?

The Philippine government figuratively has been advertising through printed media that it has enough labor pool. It may be true, but are they qualified in terms of skills required in the BPO industry? Are they finance, accounting, engineering, economics, marketing and IT graduates?

The e-services Philippines mentioned in their report that the Philippines has more than 100,000 accountants and business related college graduates every year.

Good to know that, however if the Philippines would want to get the largest share of the European markets, the government and concerned institutions need to continue expanding the labor pool of qualified candidates of technically skilled professionals and liberal arts graduates to meet the growing demands of outsourcing.

Can the Philippines really supply the outsourcing requirements of the European markets?

Philippine Outsourcing at a glance...

Philippine outsourcing had not been like the way it is today two decades ago. India was then the king of providing business services in the BPO sector. But the tide has change in favor of the Philippines.

Ranked somewhere at the bottom spot twenty years ago, however, because of the English language competencies of her labor pool attracted leading multinational sourcing companies to try the ability of the Philippines to provide business services.

At present, though India still considered to be the number one outsourcing destination, the Philippines is fast catching up to grab the spot where India has been holding for the last twenty years.

With the trends on how US and UK companies look for a BPO company, the Philippines can outrank India. These companies do not solely consider the cost benefit but largely wanting a BPO entity that could give them both cost benefit and quality production for themselves and their clients as well.

In that aspect, the Philippines is far better than India.

What do you think?