BPO Watch: Philippine Outsourcing Industry Soars to New Heights

By Kathleen Yu

Business Process Outsourcing (BPO) is one of the fastest growing industries in the Philippines today. Since it’s advent, the industry has experienced a steady growth in annual revenue, boasting a 23% increase in 2009 alone. To date, the Philippines covers about 21% of the global BPO market, and is considered a prime outsourcing destination in Southeast Asia.

Foreign investors have expressed a growing interest in the Philippine BPO market, projecting a steady increase in the country’s annual revenues. The Business Processing Association of the Philippines (BPAP) expects a 26% increase in annual revenue for the year 2010, totaling to about 8.5 billion USD. A projected increase of 27% is also expected for 2011, bringing the estimated income to 10.7 billion USD. As the Philippine BPO Industry continues to expand, more and more foreign companies are now outsourcing operations to the country, creating job opportunities for the Philippine workforce.

This has translated to 74,000 new jobs in the year 2008 alone. The BPAP estimates that at least 435,000 individuals are currently employed in the country’s BPO industry; 61% in contact centers, 18.5% in back office KPOs, 9.5% in IT Software Development and Maintenance, 5.4% in Engineering, 3.2% in Transcription, and 2.2% in Animation. However, the numbers are still expected to rise in the coming years, as more and more foreign companies set-up business in the Philippines.

The Philippines is the third largest BPO location in the world, next to India and Canada. Considered as a top Offshore BPO destination, the country boasts one of the fastest growing outsourcing industries in the world. The Philippine BPO sector has grown at an annual rate of 46% since the year 2006. According to the BPAP projection, the Philippines is expected to earn between 8-11 billion USD by the year 2010. Several prominent companies have already outsourced operations in the country, among these are computer giants Dell and IBM, HSBC, Convergys, Teletech and Accenture.

According to BPO Consultant Gregory Kittelson of Kittelson & Carpo Consulting, “The Philippines is on its way to overtaking India as a global BPO provider. More and more companies are now taking advantage of the country’s educated workforce and American accent, low start-up costs, tax-free holidays and easily available infrastructure to set up offices here in the Philippines. The future of the country’s BPO industry has never looked brighter.”

Raising the competitiveness of the Philippine outsourcing industry

The IT outsourcing and business process outsourcing markets

The outsourcing market has traditionally been divided into two major categories: IT outsourcing and business process outsourcing.

IT outsourcing focuses on farming out functions specific to an organization’s Information Technology group. This is an area that took off, especially during the dot-com boom and the 2001 economic slowdown, as multinationals found it an easy way to reduce costs. Activities range from Application Development and Support to Data Center and Infrastructure Management. Business process outsourcing focuses on farming out non-core, somewhat commodity functions common to most organizations (Call centers, Payroll, Payables and Receivables, etc.) and is sub-categorized into Voice-based and non Voice-based BPO.

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