Growth prospects for the BPO industry

J. Albert Gamboa

Posted on May 01, 2015

Among all domestic industries today, business process outsourcing (BPO) is the biggest contributor to the Philippines’ gross domestic product (GDP). Major financial institutions such as the Bangko Sentral ng Pilipinas (BSP) and the Philippine Stock Exchange (PSE) have stated on record that outsourcing will soon overtake the value of remittances from overseas Filipino workers (OFWs) currently estimated at 10% of annual GDP.

The BPO sector is predicted to become the country’s largest source of foreign exchange earnings starting 2017. By then, our No. 1 individual OFW remittance source -- Manny Pacquiao -- would have retired from boxing at the ripe old age of 39, hopefully while still on top, to focus on his political career.

More seriously affected, though, are the incomes of millions of OFWs in the Middle East’s petroleum-exporting nations due to the sharp dip in fuel prices. Signs of deceleration in the growth of money sent home by Pinoy migrant workers were most pronounced in November 2014 when it declined by 2.0%, with OFW remittances forecast to slow down further this year.

But this will be offset by the double-digit percentage increase in the number of jobs created by the BPO industry annually. The likes of OFW Mary Jane Veloso need not look for menial labor abroad any more if they upgrade their skills and seek livelihood in the local outsourcing sector. We are, in fact, second overall among the world’s offshoring destinations, next only to India’s pioneering BPO industry.

In the voice or call center sub-sector, we have already surpassed India as global leader since 2010. As for the knowledge process outsourcing (KPO) sub-sector which includes software development and financial backroom services, it would only be a matter of time before Filipino KPOs wrest the topmost rank from their Indian counterparts.

BPO companies from such countries as Australia have set up shop in major Philippine cities. One of these locators is the Telco Services Australia (TSA) Group, a leading outsourced sales and services provider for consumer, residential, and business customers Down Under. It is also the largest provider of telemarketing services to Telstra, Australia’s largest telecommunications firm.

TSA recently signed a contract with Directories Philippines Corp. (DPC) to market and sell Yellow Pages print and digital products and services to small and medium enterprises (SMEs) in the Philippines. TSA Group Director of Operations Andrew Mault disclosed that TSA’s 17 years of direct sales and marketing experience and DPC’s market leadership and dominance in telephone directories publishing would provide the country’s SMEs with customized marketing solutions.

DPC President Ricardo Bautista said: “Our partnership with TSA enables us to reach more SMEs and better serve their advertising needs. This also allows Filipino consumers who are ready to buy, to connect with a wide variety of legitimate and trustworthy businesses whenever, wherever, and however they are searching.”

Telstra Chief Executive Officer David Thodey was also in town last week to inaugurate the company’s 14th contact center facility in the Philippines. News reports quoted him as saying: “When we first came here, we were attracted by the country’s desire to build the BPO market, the great personality and character of the Filipino people, the culture, and willingness to work. We’ve seen a real change in the last three years. We’re now getting real thought leadership from the teams here in terms of best practices. ”

During the 2nd Annual Philippine Investment Conference last March 25, PSE President Hans Sicat recognized the BPO industry as one of the main GDP growth drivers along with consumer spending, manufacturing, and the so-called “demographic sweet spot” that the Philippines will enjoy for at least one generation beginning this year

BSP Deputy Governor Diwa Guinigundo considers the outsourcing industry as both pro-cyclical and anti-cyclical since BPOs have the tendency to grow regardless of economic conditions. In an interview with the Call Center Association of the Philippines, he noted that if times are good, offshore companies need to outsource non-core services to remain competitive, but when their economies are not doing well, they have to resort to outsourcing because of the need to cut on costs.

Mr. Guinigundo described the BPO industry as “a conflict-proof sector that would continue to contribute significantly to the Philippine economy.” As of end-2014, the total number of BPO employees in the country has reached one million and the industry’s workforce is expected to grow exponentially in the years to come.

J. Albert Gamboa is the CFO of Asian Center for Legal Excellence and Senior Advisor of KSearch Asia Consulting Inc.