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The article discusses the overview, challenges, and prospects of the Philippine Business Process Outsourcing Industry.

The priority of business owners is to grow the business.

What is outsourcing?

The term “outsourcing” means procuring a business process to a third-party provider. Outsourcing is also referred to as onshoring, offshoring or nearshoring, depending on where the external party providing services is located.

Outsourcing began in the 1960s and 1970s when many American corporations expanded operations overseas to take advantage of lower costs. The first companies to do so were in the manufacturing and technology fields, but over time they began outsourcing more complex services such as call centers and software development.

What makes Philippines business process outsourcing worth it?

If you are considering on outsourcing business processes and services to the Philippines, it is important to know the overview of the industry, the benefits of and the challenges, and future prospects.

The Philippines has many advantages that make it a great outsourcing destination:

  • It has a large working-age population, accounting for 63.4% of the country’s total population. This means there are plenty of workers available.
  • The Philippines has a reputation as an English-speaking country, which can be a huge advantage over other countries (such as China) where English may not be spoken as heavily or fluently. You can expect your employees to understand what you’re saying and be able to communicate their own ideas back to you with little trouble at all.
  • The cost of living is low relative to other parts of Asia, making it easier for your company budget to stretch further while still getting quality work done on time and within budget constraints. Rest assured that your outsourced team members in the Philippines would be receiving competitive compensation rates when compared to their counterparts elsewhere.
  • In contrast to Western individualism, the Filipino work ethic is built on group mentality. Because of this, Filipinos are more able to adjust and come together when working as a team. This creates a more effective professional environment where the people are united in their aim to meet and even exceed organizational goals. 

What is the current state of business process outsourcing in the Philippines?

The Philippine BPO industry is one of the fastest-growing sectors in the country. In 1992, the the very first contact center in the Philippines, Accenture group, was established through the efforts of Frank Holz. Accenture is now an industry player that’s projected to earn $29 billion by the end of 2022.

Globally, the BPO industry’s market size is expected to reach $261.9 billion in the same year.

At present, the Philippines is home to a wide variety of BPO firms, from startups to major international conglomerates. In terms of the workforce, some of the largest outsourcing providers in the country may have up to 80,000 employees on their roster.

When it comes to services offered, the Philippine BPO industry delivers a diverse portfolio:

  • Call center services
  • Virtual assistant services
  • Ecommerce services
  • Creative services
  • Data entry services
  • Information technology services
  • Financial and accounting services
  • Digital marketing services
  • HR services
  • Web development services
  • Procurement services

Meanwhile, these are just some of the industries that outsource their processes to the Philippines:

  • Banking and finance
  • Travel and hospitality
  • Healthcare
  • Telecommunications
  • Retail
  • Insurance
  • Manufacturing
  • Legal

The growth of the Business Process Outsourcing industry in the Philippines shaped the country’s place in the global market as one of the leading call center destinations.

What are the challenges in outsourcing to the Philippines?

While the Philippines’ current legal framework has made it simpler for foreign businesses to establish themselves there, recent developments in policies as a result of the COVID-19 pandemic lead to roadblocks to the industry’s expansion in the Philippines.

In the current setup, BPO companies located in designated ecozones are able to enjoy tax incentives under the policies set by the Philippine Economic Zone Authority (PEZA).

In 2020, plenty of companies shifted to a work-from-home (WFH) setup during the pandemic to help curb the spread of the virus. With the easing of community restrictions two years on and with increased vaccinations, the Fiscal Incentives Review Board (FIRB) has issued a “return to office” mandate for those under its program. Those who will continue operating on the WFH setup could no longer enjoy their tax breaks. The response to this mandate has been swift as BPO firms contemplate their options, with many choosing to move away from ecozones and risking giving up their financial incentives that have totaled up to Php26.30 billion (from 2016 to 2019) or more than $479 million in US dollars.

Beyond these legal drawbacks, the Philippines is a country right in the Pacific typhoon belt and averages 20+ typhoons every year, often leading to emergency work closures, significant damage and flooding, and frequent power outages.

What does the future hold for the Philippine outsourcing industry?

The outsourcing industry in the Philippines is likely to continue growing for at least one more decade. Why? Because it’s affordable, reliable, and skilled labor is readily available.

Having said that, automation and AI may render some processes obsolete and replace some industry job roles. Call centers are particularly vulnerable to automation because they rely on the gathering of data and processing of information in order to execute tasks.

Analytics work also has a high degree of automation potential. Many of the tasks that analysts do could be automated by computers or robots: compiling data points into spreadsheets, conducting A/B tests using different algorithms under different user scenarios (for instance), and running machine learning models on datasets with known outcomes—the list goes on. The more complex areas of analysis—creating new metrics based upon existing ones; interpreting patterns in large amounts; coming up with solutions based upon calculations—are difficult for machines but may still be automated over time as they become increasingly sophisticated at these tasks.

The key to keeping the Philippines’ status as an attractive outsourcing destination is to create a culture of innovation by investing in technology and education. This will allow the BPO industry to remain competitive against other countries, as well as create new jobs for Filipinos.

The future of outsourcing is bright. With proper investment in research, education, and creativity, we can ensure that this industry will continue to thrive for many years to come.

Connext Global Solutions helps companies build custom, dedicated support teams in the Philippines. Learn more about Connext Global Solutions.

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