Keeping the BPO edge

EVEN as we welcome news of our country’s good global standing as a choice destination for business process outsourcing (BPO) investments, we’re concerned that the government is not looking beyond the industry’s short-term prospects. The Department of Trade and Industry and the Business Processing Association of the Philippines (BPAP) reported today that the country was named this year’s best BPO destination by the National Outsourcing Association (NOA) of the United Kingdom—a distinction we held two years ago but was snatched by a competing nation last year.

The country bagged the 2009 Offshoring Destination of the Year award during the Fourth NOA Awards held last week in London.

NOA is the UK’s outsourcing trade association.

For this year, the Philippines edged out Egypt, Malaysia, Russia and Sri Lanka for the award.

The nominees were judged on the bases of country advantages and appeal to UK companies, level of market penetration in the UK, and the areas of outsourcing available in the country.

Despite this recent feat, a report by the United Nations Conference on Trade and Development (UNCTAD) showed that first-wave BPO destinations like the Philippines have been losing market share to next-wave sites.

In its report, UNCTAD said the combined market share of the first-wave sites—the Philippines, Canada, China, India and Ireland—had shrunk to 80 percent from 95 percent in 2004.

The report blamed the cut in market share to the entry of destinations such as Malaysia, Singapore, Czech Republic, Hungary, Poland and Romania into the BPO sphere.

The UNCTAD noted that there is a trend towards geographical diversification, which is only rational as businesses don’t want to be caught flat-footed when a catastrophe—either natural or man-made—renders their BPO site inoperative.

But in the Philippines, the private sector has long been clamoring for greater state intervention in the education system, which is key to keeping if not improving the country’s competitiveness in the BPO sphere.

The BPAP and other industry groups have been complaining of the high turnover rate and of the low hiring rate—both indicating the workforce’s lack of preparation for BPO jobs.

Another rising concern is the workforce’s faltering English language skills, which is crucial to maintaining the country’s edge in the call center space.

The industry has put up training centers, but a long-term solution to these problems requires intervention in the country’s education sector, which requires state involvement at the least.

As the private sector expands into the higher value-added non-voice segment of the offshoring business, the Philippine education system has to keep up with international standards.

Besides improving English language skills, educators need to beef up the country’s skills inventory by ensuring that many graduating students meet internationally-accepted standards in the fields of accounting and finance, graphic arts and animation, among a growing number of business functions that are being outsourced.

Beyond the education system, the government has to provide the proper incentives so infrastructure support to the BPO industry is available.

We’re not just talking here about having the MRT operate 24/7—but even here the government, which has taken upon itself the burden of operating the Edsa line, is far from holding up its end of the bargain.

Despite the need to raise money for the post-typhoon reconstruction, the funds allocated for key infrastructure projects should be used as originally planned. These include the expansion of the capacity of the MRT and the two LRT lines, as well as the planned establishment of new lines.

On the communications front, the government should ensure that its response to populist calls to limit telecom industry profits do not discourage the private sector from investing not only in the maintenance and improvement of their existing networks, but also in building the networks of the future.

The task ahead is something that will require the attention of future political administrations, and so should form part of the agenda of presidential-wanna-bes. –Manila Times