US problems threat to local outsourcing

The weak US dollar and rising unemployment in America threaten the business process outsourcing (BPO) sector in the Philippines, an expert said. But another outsourcing industry executive also said that diversification of portfolio was the key to combating looming protectionism of traditional outsourcing markets, like the United States.

In a presentation at the International Outsourcing Summit on Tuesday, Peter Schmitt, DPC Data Inc. chief executive officer, cited a report by Rutgers University economists Jim Hughes and Joseph Seneca that estimated total job deficit in the US would reach 9.4 million by December 2009. The US-based DPC is a leading provider of municipal bond disclosure data, research and data services, according to its website.

Schmitt added that it could take the US almost a decade before its unemployment problem was resolved.

He said it was possible that the US would attempt to discourage offshoring to keep jobs within that country for American workers.

Plus, Schmitt added that the weak dollar may substantially decrease the purchasing power of companies to outsource services. The monetary inflation could also jack up costs brought in by operating on foreign shores, he said as he warned of a potential profit squeeze among firms.

The US remains one of the major markets of the Philippine outsourcing sector.

Sector prepared

Sought for comment, Oscar Sañez, Business Processing Association of the Philippines (BPAP) president and chief executive officer, told reporters that the sector was aware of the challenges that could be brought in by US economic difficulties.

Sañez said that developing the local sector’s capabilities and cost-competitiveness would help it go through rough times ahead. He added that improving employee efficiency by increasing their productivity levels would help the country maintain its edge over other countries.

“Even if we are growing despite the global crisis, it should not be an excuse to be slow, fat and weak,” Sañez said.

The executive added that diversification of portfolios would help the sector retain and further increase employment.

Sañez said that capturing non-voice, higher-value accounts—such as consulting, corporate, delivery, design, human resources, financial, legal, medical, publishing and supply chain management, among others—would ensure that there was a wider variety of services that the local market could offer, which would then make available more outsourcing job opportunities here.

He also argued that US companies could not afford to not outsource during these hard times. He explained that high operating costs, which can be reduced by outsourcing, could make it more difficult for firms to survive. “Either they outsource or they close shop, which results to more job losses.”

The official said that at present, the sector’s non-voice segment was growing at a very fast rate, and will likely compose about 40 percent of the industry this year. –Ben Arnold O. De Vera, Reporter, Manila Times