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BPOs face uncertain post-pandemic future

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A woman teaches an online class amid the coronavirus outbreak in Pasig City, March 12. -- REUTERS

By Jenina P. Ibañez
Reporter

THE business process outsourcing (BPO) industry is looking at an uncertain future where large global corporations either re-shore jobs or diversify their outsourcing destinations in response to the impact of the novel coronavirus pandemic on business.

In the Philippines, the outsourcing industry is expected to lose clients to other countries with stronger internet infrastructure that can support work-from-home (WFH) programs.

“Different countries have handled the pandemic very differently, and some have suffered a lot more than others. So I think that will prompt some of the large companies to take a more balanced approach to their location strategy and perhaps not put all their eggs in one basket,” Matchboard Managing Director Sharon Melamed said in a Zoom interview. Matchboard is an Australia-based outsourcing matching service.

She said big companies in Australia understand the limitations of internet coverage in the Philippines.

“Unless that dramatically changes, they may look to have alternative destinations serving particularly premium customers where they just can’t afford to have long wait times and outages.”

Kristine A. Romano, McKinsey & Company Philippines Managing Partner, said contracts are at risk of being canceled as BPOs in the Philippines only have around 40% of their staff working from home. In India, she said, companies have 60-80% of their manpower working at home.

In addition to contracts being shifted to other countries, Ms. Romano said companies may also re-shore jobs.

“There will be a push from various governments to onshore jobs. For now, we’re seeing it’s mostly manufacturing jobs that are being incentivized to be onshored, but if the crisis deepens or worsens, that might lead to even services being onshored,” she added.

Alorica Asia President Rainiero “Bong” Borja said in a recent television interview that some US-based companies are already temporarily reshoring jobs, especially for sectors like e-commerce that now need strong online support. He expects outsourcing to bounce back, noting that the sector is working with local telecommunications companies to improve WFH connectivity.

The outsourcing industry recorded $24.8 billion in revenues and 1.23 million direct employees in 2018. The sector is a key driver of real estate development and household consumption, which in turn fuels nearly 70% of gross national product.

Ms. Romano said that the recovery of the Philippine outsourcing industry may not be as quick as it did after the 2008 global financial crisis.

“The unique thing about this time around will be because it’s so global… There is now a question, not just of offshoring and reducing costs and getting efficiency gains, but also about resilience. Because they won’t just want to offshore to one country given again the risk — if that country is on lockdown, then their operations will be disrupted. So there’s now an additional consideration on resilience,” she said.

Matchboard’s Ms. Melamed also said that data security may pose a problem for large companies wary of a WFH setup, but notes that some technologies have reduced contact center agents’ access to sensitive data.

Many companies, she said, are closing down amid fallout from the pandemic.

“Many Australian businesses are suffering and even collapsing… and this is inevitably causing a reduction of (outsourcing) headcount in the Philippines.”

LOWER TARGETS
Contact Center Association of the Philippines (CCAP) President Jojo Uligan in a virtual press conference said the call center industry will have to revisit the 4-5% revenue growth target set at the start of the year.

As the global tourism and hospitality industries face challenges and the online retail and logistics industries continue to grow, he said contact centers have been reassigning employees from lower to higher-demand sectors instead of cutting jobs.

“So far, we are not hearing any of our clients shutting down or bringing back the jobs in their geography,” Mr. Uligan said.

But CCAP, which has 123 member companies, also said that 30-35% of employees work from home, and up to 20% work on site.

CCAP Board Director Tonichi Parekh said the remaining employees often don’t have the infrastructure to allow them to work from home.

“During the first part of the lockdown, most of our member companies made sure that they were also taken care of,” she said, including providing 50% salaries for non-working employees.

Mr. Uligan said CCAP is working with telecommunications companies to address internet concerns.

“We give them all the data, the issues our people are getting while we implement work-at-home. Others, we provided them with WiFi or dongles for them to be able to operate.”

NEW MARKET: SMALL BUSINESSES
The Philippine outsourcing industry may, however, attract new demand as small businesses in other countries look to outsource jobs in order to cut costs.

“The focus will be on costs. When the world is in a recession, there’s a lot of focus on cost savings, and a more flexible work force and outsourcing is exactly that,” Outsource Accelerator Chief Executive Officer Derek Gallimore said in a phone interview.

Mr. Gallimore said demand had been plateauing in recent years as 90% of multinational companies are already outsourcing. But he said that the 40 million small and medium-sized enterprises (SME) in the “high-cost English speaking world” — with only 0.5% currently outsourcing — may soon begin to consider the service.

“This is going to be a huge demand for outsourcing in the future… Now, with globalization and technology and the tools, it’s easier and more accessible for SMEs.”

Real estate service provider Santos Knight Frank, Inc. had said that the Philippines’ competitive costs, including lower rent and operating costs, will be an opportunity for increased outsourcing.

Mr. Gallimore said sectors that can expect to see more activity, particularly e-commerce, food provision, government, health care, pharmaceuticals, logistics, video conferencing, and entertainment streaming.

To do this, the Philippine outsourcing industry needs a public relations boost, the industry professionals said.

“The Philippines needs to position its outsourcing services to be the high-quality, professionalized outsourcing services,” Mr. Gallimore said.

Matchboard’s Ms. Melamed said the Philippines must improve its internet infrastructure, as well promote their services to businesses that are cutting costs.

“Come out with educational blogs, e-mail outreach and being very proactive at this time — telling businesses that they can help their business survive and thrive and get through this,” she said.

Rey C. Untal, chief executive officer and president of the Information Technology Business Process Association of the Philippines (IBPAP), said in an e-mail that the industry can gradually shift to a “new normal.”

“As should be expected, this will mean the widespread adoption of new practices that were, to a certain degree, underutilized prior to the COVID-19 pandemic. This includes the extensive use of tools like Zoom, Microsoft Teams, Hangouts, and Webex. We also anticipate seeing more businesses and employers initiating and implementing blended WFH (work-from-home) and on-site operations.”

He said reshaping the industry will require multi-agency and multi-industry cooperation “to ensure our country’s continuing relevance in the global marketplace despite and amid the challenges.”

The Department of Information and Communications Technology recently said it will work to make internet connectivity faster and cheaper after the lockdown is lifted, encouraging smaller telecommunications and cable TV operators in the provinces to connect homes to the internet.

AUTOMATION BUNDLES
The outsourcing industry is not new to questions about the risks that automation poses to contact center jobs.

“Being able to speak good English, especially for the Philippines, is no longer a big advantage because now we have chatbots which can do the work faster with lower cost,” Advance.AI Co-founder and Chief Operating Officer Dong Shou said in a Zoom interview.

He said Philippine BPOs must urgently upskill workers.

“Train workers to work with AI (artificial intelligence) systems to get them familiar with these kinds of technologies, some systems. Redeploy humans to higher value processes like data analysis and critical judgment… and leave this kind of repeated work to machines.”

Ms. Melamed, however, said that while other countries have a technological advantage, the Philippines has a unique opportunity to “bundle” both technology and talent.

“A BPO might be able to say ‘pay us per customer under management, and we’ll include in there not only all the people-side but all the technology-side.’ So bundling everything together…because the competition is really huge on both fronts,” she said.

“The Philippine BPO industry has been the admiration of so many countries in its ability to recruit and train huge numbers of people at lightning speed, and the opportunity is now to extend this into the automation sector as well.”





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