Philippines climbs up a notch in global off-shoring survey

THE Philippines’ ranking as a preferred location for business-process outsourcing (BPO) and call-center operations inched up amid the global financial crisis, but still lagged behind neighboring countries, according to a survey of multinational companies. In its Global Services Location Index 2009, A.T. Kearney said the Philippines climbed from eight to seventh place out of 50 countries considered attractive locations for off-shoring service activities. The country scored a total of 5.60 points.

The government is banking on the growth in the off-shoring business such as BPO, call centers, medical transcription and other e-services to help address the country’s unemployment. Official estimates peg investments in this sector reaching more than $1 billion a year.

The survey analyzes and ranks the top 50 countries worldwide for locating outsourcing activities, including IT services and support, contact centers and back-office support.

Each country’s score is composed of a weighted combination of relative scores on 43 measurements, which are grouped into three categories: financial attractiveness, people and skills availability and business environment.

The Philippines scored high in financial attractiveness with 3.19 points, but low in terms of people and skills availability and business environment at 1.17 points and 1.24 points, respectively.

Despite the improvement in ranking, the Philippines is still behind its neighboring countries like Malaysia, which ranked third; Thailand, fourth; and Indonesia, fifth.

The Philippines, however, scored better than Vietnam, which ranked 10th.

India remained the most attractive with 6.91 points followed by China with a score of 6.29 points.

“While cost remains a major driver in decisions about where to outsource, the quality of the labor pool is gaining importance as companies view the labor market through a global lens driven by talent shortages at home, particularly in higher, value-added functions,” Norbert Jorek, a partner at A.T. Kearney and managing director of the firm’s Global Business Policy Council, said.

“In response, governments all over the world are investing in the human capital demanded by the offshoring industry,” he added.

The report said that while the global financial crisis slowed recent offshoring moves, the percentage of companies’ staff offshore may very well increase as a result of this.

“Layoffs at home are not translating to layoffs among offshore workers as companies seek to maintain service but reduce costs. Additionally, offshore facilities tend to be more efficient because they are newer and lack years of inefficiencies often built up in onshore facilities,” the report added.

Paul Laudicina, A.T. Kearney chairman and managing officer said the dynamics of global offshoring are clearly shifting as companies re-evaluate the political risks, labor arbitrage and skill requirements in the context of the likely aftermath of the global economic crisis.

“Risk management will take on new importance to protect global service delivery from interruption and ensure capabilities are strategically dispersed rather than concentrated in a few cost-effective locations,” he said.

A.T. Kearney is one of the world’s largest management consulting firms. The firm provides strategic, operational, organizational and technology consulting and executive search services to the world’s leading companies. –Darwin G. Amojelar, Senior Reporter, Manila Times