Sustaining PHL’s growth as IT-BPM hot spot

The Philippines remains to be a prime hot spot for offshore information technology and business processes management (IT-BPM) services that the country serves as a model for other countries.

The country is one of the world’s leading outsourcing destinations for business process and IT-enabled services. The cost-competitiveness, excellent talent base, proven track record in dealing with global customers, strong English language ability, proximity to key markets and improving infrastructure have all contributed to its continued success.

Looking onward, however, as the shape of the industry evolves and matures, moving toward higher value-added deliverables such as big data analytics, digital media and creative services, which will be increasingly delivered remotely over the Internet, will the Philippines be able to keep up?

Jack Madrid, president and CEO of the IT Business Processing Association of the Philippines (IBPAP), seems to think so.

In talks with BusinessWorld columnist Flor G. Tarriela, Mr. Madrid said that in 2022, the IT-BPM industry employed 1.55 million Filipinos, contributed over $31 billion to the economy and was the second largest source of foreign exchange earnings.

In the next six years, the industry has the potential to add one million more new jobs and generate over $59-billion revenue, representing 8% of the Philippines’ gross domestic product.

“Without a doubt, the industry is, and will continue to be an indispensable pillar of our economy,” he was quoted as saying.

Mr. Madrid stated during a previous press briefing that the sector hopes to make Philippines the world’s top experience hub for digitally enabled and customer-centric services while promoting inclusive and sustainable growth throughout the nation.

He said that the IBPAP’s growth target of 54% will be driven by IT-BPM firms setting up and expanding rural operations.

Upskilling the local work force will be one of the goals of the IT-BPM sector in order to support the industry’s growth target. This is shown in IBPAP’s plans to increase the number of high-skill positions over the next six years, with a 13% increase in revenue per FTE by 2028.

Mr. Madrid told Ms. Tarriela that the Filipino talent will be the basis of the industry’s future growth, adding that aside from excellent communication skills and English fluency, Filipinos are world-renowned for their adaptability, creativity, empathy, and resilience.

Due to their special skill sets, Filipino providers may now provide services to clients worldwide in a variety of sectors, including financial services, healthcare, hospitality, animation, and IT technical assistance.

He added that the BPO sector, which demonstrated the adaptability and resiliency of the Filipino population and led to the creation of 255,000 new employment from 2020 to 2022, was one of the pandemic’s silver linings.

Mr. Madrid went on to further claim that despite increasing inflationary pressures and constricting regulatory frameworks, the positive economic trajectory nevertheless stayed its course.

Carrying office space, business demand

The industry contributes by preserving jobs, creating new opportunities, encouraging rural development, promoting investments, and increasing demand for real estate.

Real estate services firm JLL Philippines affirmed this with a statement they released in January about the real estate industry’s resilience against global economic headwinds like skyrocketing inflation and interest rates alongside the depreciating peso.

“The IT-BPM industry is likely to carry the market in trying times. In 3Q22, IT-BPM firms made up 85.3% of Metro Manila office transactions, higher than the 6% share taken by POGOs (Philippine Offshore Gaming Operators),” JLL Philippines said.

“Continued activities from the IT-BPM sector are anticipated as they further scale up operations which may offset the impact of the probable POGO exit in the market. The Bangko Sentral ng Pilipinas expects IT-BPM earnings to see 9% and 5% y-o-y growth in 2022 and 2023, respectively.”

Mr. Madrid was quoted as saying that “the future is bright as a growing number of global business services are incorporating offshoring and outsourcing into their strategic initiatives to improve efficiencies and optimize costs in multiple geographies.”

“The sustained growth will be spurred by next-generation business models and assets, the talent and skills supply-demand gap, and ongoing cost optimization. Expansion across select industry horizontals and verticals, and increased digital adoption by traditional players will also be key drivers of growth in the coming years,” he said.

Measures moving forward

This pursuit of growth may face challenges in the coming years, and in order to maximize the country’s growth potential and reinforce its global competitiveness the country must take measures. Mr. Madrid outlined several of them.

Supply chain talent resilience, he said, will be essential in the midst of a talent battle that is heating up due to greater attrition rates and rising demand for specialized and emerging capabilities like automation, cloud computing, data analytics, and cybersecurity.

Hybrid work models must be included into company initiatives. Around the world, 70% of IT-BPM businesses claim to have used hybrid work arrangements. 80% of local IT-BPM workers in the Philippines said they preferred a hybrid work approach.

On this point, Mr. Madrid had previously told the media that they have called for partners in the telecommunication industry to build infrastructure to support the IT-BPM industry outside Metro Manila, where many companies are now keen on expanding.

“As a whole the Philippines is more than holding its own and in retaining its position. What’s more important in the coming six years is how much more market share we can capture. It’s there and it’s ours for the taking,” he had said.

“Our industry has been the focal point of what I believe to be a global desire for more flexible work, location-independent setups. The future of work is already happening… It’s loud and clear that an overwhelming majority in the Philippines, but even across other parts of the world have shown that the future is going to be about finding that optimal balance.”

The strategic imperatives that IBPAP will work on with industry and government partners are described in the IT-BPM Industry Roadmap 2028. They include enhancing business accessibility, tackling the talent shortage, and bolstering our digital infrastructure.

The nation’s ability to capitalize on new trends and avoid looming threats from around the world will be crucial to the industry’s survival. The Philippines has to keep focusing on building a strong talent pool, a stable regulatory framework, and an infrastructure that is more conducive to investment. — Bjorn Biel M. Beltran