Government dropped the ball in the IT-BPM industry
The country’s Information Technology-Business Process Management (IT-BPM) industry faces serious threats from the widespread use of chatbots (or bots) and artificial intelligence. Unfortunately, the Duterte administration has not acted fast enough to help the industry pivot.
Our IT-BPM industry began to take-off in 2007. Back then, the Philippines was known as an outsource supplier for simple services like directory assistance for telecommunication companies. In time, it expanded its range of services to include tele-marketing and tech assistance. Collectively, these services are known as “voice-based business processes.”
Through the years, the Philippines has reigned supreme in voice-based services due to our English proficiency, neutral accent, and ability to understand American slang. Working to our advantage too is our natural sense of empathy and service-oriented culture. These traits are important for service-conscious clients like banks, hotels and airlines. The Filipino’s soft skills have made him the global leader in voice-based business processes, taking 18% of the global market share.
The industry has also diversified to more sophisticated IT-BPM processes. Although not as widespread, we have also become proficient in clerical work, legal and medical transcription, multimedia processing, animation, and professional services (e.g., accounting and engineering). But the lion’s share of the industry is still voice based. The IT-BPM industry generated $26.3 billion in revenues in 2019 and provided jobs for 1.3 million of our countrymen.
But the road ahead does not look promising. See, demand for voice-bases services is rapidly declining given the prevalent use of chatbots and artificial intelligence. Bots are becoming increasingly intelligent and cognitive, thanks to deep learning. When on the phone or on chat, it is now almost impossible to distinguish between bots and human beings. Thus, it is only a matter of time before bots replace call center agents. In fact, Citibank Global CEO Michael Corbat, said that human call centers will be a thing of the past in as early as three years.
The Philippines stands to lose hundreds of thousands of jobs and billions of dollars in revenues in the voice-based segment if it does not pivot. Even at this late stage in the game, the government’s plans to pivot is only a mere concept.
It is truly lamentable that the government has not prepared the industry to level-up and climb the value chain in IT-BPM services. A study conducted by the IT and Business Process Association of the Philippines (IBPAP) shows that the following sub-sectors will be in high demand in the next three years (enumerated from highest to lowest): Animation and game development; Healthcare and Information Management; Global In-House Center; Software development and; General back-office processes like bookkeeping. Also in demand will be services relating to robotics, artificial intelligence, and cloud technology.
Unlike the Philippines, India successfully migrated out of voice-based services as early as 15 years ago. It purposely transformed itself to be a specialist in higher paying, technical services such as software development, data analytics, cloud technology, and the like. They achieved this by making massive investments in education and upskilling their workforce. Technical training programs were made available to all, university curriculums were upgraded and the government aggressively promoted engineering and the sciences among their youth. As a result, India is today’s superpower and gold standard in high level IT-BPM’s.
The Duterte administration did not make a commitment to education nor did it make any meaningful investment in up-skilling our workforce. This left us vulnerable to the demise of voice-based BPMs. It is a shame since we have the basic assets to be a world leader in IT-BPM’s.
Since we will have a new government in 14 months, our hope is that our new leaders will pay due attention to preserving our market share in the IT-BPMs space. The faster we upskill our workforce, the more rapidly we can migrate out of voice-based services and into non-voice services of higher technical value.
Again, it starts and ends with education. There must be closer cooperation between the academe and the IT-BPM industry to allow deeper collaboration in curriculum development. IT-BPM companies must allow more internships to better integrate students into the industry and provide them hands-on experience. Universities must work closely with IBPAP to allow them to generate graduates with the right skills. Above all, the Department of Education and the Commission on Higher Education (CHED) must aggressively promote technical courses and make them accessible to the majority.
I recently spoke to Derek Gallimore, the man behind Outsource Accelerator (OA). OA is the world’s most authoritative independent source of information on business process outsourcing in the Philippines. Although Gallimore agrees that the voice-based segment of the industry is fading, there is still a large market to be had among small and medium sized businesses (SMBs) in the English speaking world. SMBs are a market the Philippines could pivot to.
Let us not even consider conglomerates anymore, declared Gallimore — 99% of them are already outsourcing. The bigger opportunity is in servicing the SMBs of the world. There are over 60 million of these businesses across the high-cost English-speaking countries and only 0.5% of them are outsourcing today. So there is huge growth potential in this part of the market — a market that previously, due to technology cost and accessibility, was unable to access outsourcing. The opportunity is so profound that it can potentially generate 60 million new jobs for Filipinos over the next 20 years.
The outsourcing jobs demanded by SMBs include accounting, coders and program developers, E-Commerce and Digital Marketers, Customer Service and Account Management, and Administrative Assistants. To prepare our workforce to effectively fill this demand, the Department of Education, CHED, and the Technical Education and Skills Development Authority (TESDA) will do well by offering courses on the standards and legal forms that apply in the United States, Canada, the United Kingdom, Australia, New Zealand, Ireland, and Singapore. Communication skills, analytical thinking and proficiency in basic computer programs must also be improved.
Regardless of how our authorities plan to deal with the IT-BPM industry, two things are certain. First, the voice based sector, a sector we have been dependent on, is certain to fade away to irrelevance. We must diversify if we are to preserve the revenues and jobs from the industry. Second, there is no escaping it, upskilling our workforce is something the government must invest in.
Conversely, if the government fails to act with haste to save the industry, we might as well say goodbye to 1.3 million jobs and the $26.3 billion in revenues that keeps the economy afloat.
Andrew J. Masigan is an economist
Twitter @aj_masigan
