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Philippines gains in outsourcing

Posted on September 16, 2014

THE PHILIPPINES has improved its attractiveness as a site for back-office services against 50 other locations in the latest survey by global management consultancy A.T. Kearney.

Voice-based services remain a key offering by Philippine-based outsourcing firms. -- BW File Photo
The Philippines rose two places to 7th spot among 51 countries in The 2014 A.T. Kearney Global Services Location Index, whose results were released to media yesterday.

The 2011 index placed the Philippines 9th out of 50 countries.

The 51 countries in the latest study were selected on the basis of remote services activity and state initiatives to promote the sector, among others, according to a summary of the latest study.

They were evaluated against 25 indicators grouped under three measures, namely: financial attractiveness, which had a 40% weight; people skills and availability, 30%; and business environment, 30%.

“The metrics used to evaluate location attractiveness were determined from responses to A.T. Kearney surveys, other industry questionnaires, and knowledge obtained in client engagements over the past five years,” the summary explained.

“The relative weights of each metric are based on their importance to the location decision, again derived from client experience and industry surveys,” it added.

“Because cost advantage is typically the primary driver behind location decisions, financial factors constitute 40% of the total weight in the published index.”

The results summary showed that improvements in two key measures -- people skills and availability, as well as business environment -- offset a fall in the third measure, financial attractiveness, yielding a higher overall score for the Philippines.

Specifically, the country improved its total score to 5.75 this year from 5.65 in 2011, as the grade for people skills and availability rose to 1.48 from 1.31 while that for business environment increased to 1.21 from 1.16 -- offsetting a drop in score to 3.06 from 3.18 for the heaviest measure: financial attractiveness.

“The Philippines is an industry powerhouse, rising two places this year and with an export sector second only to India,” the report summary read.

“Philippine industry is one of the most sophisticated in the world and its qualified labor force is one of the deepest,” it said.

“Countless companies operate centers -- mostly in central Luzon but also in several tier 2 locations around the country,” it continued, adding: “With traditional strengths in call centers, the industry is expanding into higher value-added voice services, as well as into IT (information technology) and BPO (business process outsourcing) offerings.”

India, China and Malaysia stayed in 1st to 3rd slots, respectively, this year. Egypt, which ranked 4th in 2011, sank six places to 10th. Mexico rose two notches to take the 4th place, followed by Indonesia which stayed 5th, and Thailand which went up a spot to 6th. Ranking between the Philippines and Egypt in this year’s top 10 are Brazil, up four notches to 8th spot, and Bulgaria which went up one step to 9th.

The lowest 10, in descending order, were: Uruguay, Colombia, Portugal, Jamaica, France, South Africa, Singapore, Australia, Israel and Ireland.

The only other Southeast Asian country on the list was Vietnam, which fell four places to 12th spot this year.

The latest report tracked three “waves” of back-office service development. The first, which started before 2000, involved setting up back-office units in low-cost developing countries, which “was complicated, expensive... but it also delivered significant savings.” The second, which began in the mid-2000s, involved contracting of third parties to provide non-core services. The third, starting the mid-2010s, employs automation for high-volume jobs.

“Technological advances have allowed robots to take over the jobs of individual analysts,” the summary read.

“It... renders virtually meaningless the location where a task is performed. Similarly, advances in connectivity have given rise to a new class of freelance outsourcers that also make geography irrelevant.”