BPO industry expects more dramatic growth ahead

In grabbing control of the global business process outsourcing (BPO) industry from India, the Philippines may have finally found the key to long-term, sustainable economic growth that will lift the country out of Third World status.

Up until two years ago, India had been the world’s biggest BPO provider. While BPO includes service support, sales and marketing, technical support and front and back office operations, the biggest money earner remain the inbound and outbound calls, which is why most Filipinos still think of the BPO industry in call center terms.

Calls to and from customers are the bread and butter accounts of BPO companies, and it is the primary reason the Philippines was able to become the world’s dominant player. In general, Filipinos speak English better than their Indian counterparts, and since the US is the biggest call center market in the world, it was inevitable that American companies would transfer their business to the country which was once their colony.

According to Martin Conboy, president of the Australian BPO Association, the BPO industry in the Philippines will soon be the powerhouse of the economy since it continues to remit millions of dollars to the country without having to send workers abroad. And those remittances are expected to continue to grow in the near to mid-term.

“Through BPO, Philippines will be the powerhouse of the global economy in few years because it is a magnificent place to supply people who are great workers when it comes to software,” said Conboy.

Conboy also added that the Philippines produces a large number of skilled and talented workers that unfortunately, are not being utilized to the max. Not so with BPO companies. In this industry, a person’s skills determine how far up the totem pole the employee goes.

Already transitioning to developed status

Because of the BPO industry, the Philippines is already transitioning to a developed country, Conboy added.

“In 12 years, the economy in the Philippines will double and the BPO industry is about to be the biggest contributor to the GDP, which Overseas Filipino Workers (OFWs) contribute the most through their remittances,” said Conboy.

GDP or Gross Domestic Product is the sum total of all goods and services produced by a country in a given year, excluding earnings from its expatriate workers. If the past record of the industry is used as the basis, then the industry’s future — and that of the country — can only be considered as bright.

Nora Terrado, president of the Software Industry Association of the Philippines, said that this year the BPO-software industry in the Philippines has so far posted 20 percent growth compared to the same period last year, driven by increased demand from the US and Australia.

According to a report from the Business Processing Association Philippines (BPAP), the IT-BPO and global in-house center industry in the Philippines has grown at an annual rate of 30 percent over the last decade, faster than the growth of the global offshore services market. As it has grown, the industry has also diversified significantly in breadth, scale, and maturity of services.

Said the BPAP: “IT-BPO industry is the Philippines’ most important generator of jobs. Its contribution to GDP was approximately five percent in 2011, and it is the Philippines’ third-largest net foreign exchange earner after tourism and remittances from an estimated 10 million overseas workers.

“Its contribution to economic development is centered not only in the nation’s National Capital Region, but also in other highly urbanized areas throughout the country, or Next Wave Cities. Employment in these cities was estimated at 150,000 at the end of 2011.”

End nowhere in sight

Despite its impressive growth in the past decade, the BPO industry in the Philippines is still on the rise. Industry leaders maintain a positive outlook that the end of this growth is still nowhere in sight.

From its beginning in 1999, when Cyber City set up an outsourcing facility at the former United States Air Force base in Clark, Pampanga, the growth of the industry has been steady. Not only has this helped the economy, but it has also created jobs for Filipinos nationwide, since roughly one out of five BPO jobs are now located outside Metro Manila.

Indeed, the industry has made the lives of Filipino workers easier because the starting pay is close to double the minimum wage. Also, the industry offers quality jobs for the country’s large labor pool.

But now, there’s a problem: filling the demand for qualified workers for this fast-growing industry.

Although Filipinos are known to be good in English, a huge number of the population is not really used to using this language in daily conversation. The largest number of English-speaking Filipinos remains concentrated in the Metro Manila area and the key cities. The supply may seem to be running short.

But according to Rainerio “Bong” Borja, president and country manager of NCO and APAC, and founder of the BPAP, the lack of quality manpower is not an issue but only a challenge.

“I’m not convinced it’s a problem because if you look at our raw ingredient, we have 400,000 college graduates, and all of those graduates are looking to be employed and take on white-collar work. Very few of those 400,000 took up college to end up as farmers or factory workers or other kinds of jobs. All of them, or most of them would rather end up working a white collar job. And there is no other industry that’s actually employing in the same massive numbers as we are. So basically, if you talk about availability of white-collar work we have a monopoly of that,” he told The Manila Times.

Proactively addressing the issue

The BPO industry has become such a key cog of the economy that it was even mentioned in President Benigno “Noynoy” Aquino’s recent SONA.

The government is not blind to the potential manpower shortage that can mar the growth of the industry. What better way to address the issue of manpower than to partner with government institutions and universities, where the “raw ingredient” comes from.

“We have different partnerships with government agencies. TESDA has P400 million in funds put in the industry, so we are training 65,000 scholars who are almost employable and near hires. We are training them on industry specific training and 70 percent are converted into hires. If you do the math, that’s 47,000 out of 65,000 trainees who are hires,” Benedict Hernandez told The Manikla Times. He is the president and CEO of BPAP and the Operations Lead for Accenture BPO Services Delivery in the Philippines.

Hernandez said that everyone in the industry is being proactive in supplying the manpower that they need to meet the demand. He said there is actually no problem; it is only that the tremendous growth in the industry has led to a rapid surge in the demand for quality manpower.

“The demand is huge, and the need to add supply of manpower is essential for the growing industry,” he said.

Aside from TESDA, the industry is also working with the Commission on Higher Education (CHED). There is already a pilot deployment of the Service Management Program, where college students can enroll while in school and learn IT-BPO skills they need. “This program is ideal for any service industry as we teach them universal skills such as service orientation, business communication, and also fundamentals of IT-BPO, among many more,” said Hernandez. This is already being done in four universities, and they expect to throw a wider net in the near future.

US anti-outsourcing bill

Industry leaders have been paying close attention to the upcoming US presidential elections because incumbent President Barack Obama has made an issue of challenger Mitt Romney’s outsourcing of jobs that are desperately needed by the stagnant US economy.

With the US economy in such a weak state – unemployment is slightly below 8.3 percent as of this month — the “Bring Home Jobs Act” pushed by Obama could be a threat to the growing BPO industry in the Philippines.

Should Obama win another four year term this November – most surveys indicate that he has a good chance of defeating the gaffe-prone Mitt Romney – then there could be a stumbling block to the continued growth of the industry.

But people in the industry seem to think otherwise. “The US Senate rejected the bill already. There is a similar bill that comes up every now and then, although personally, I think this type of bill is perfectionist in nature. We support the rationale of the rejection of this bill, because outsourcing makes American companies more competitive. It is said that the 2,500 multinational companies create more jobs in the US domestically and therefore outsourcing actually supports the American demand for employment,” said Hernandez.

Also acting in the Philippines’ favor is continued globalization, which makes controlling private companies next to impossible. “It is very difficult to actually restrict the US private companies to determine where they will have their products manufactured or where they have their products serviced anywhere in the globe, that is part of globalization. Just like an HP computer which I have is actually made in Taiwan, it is not made by HP in the US. It’s coming from places where the service can be done at lower cost without sacrificing quality, or better service at lower cost. So they can’t say they have to move it back to the US and sell these computers at higher cost and make the consumer pay more for every call they make. So it’s going to be difficult to reverse that trend I think,” according to Borja.

Health issues

There are other issues.

Although the risks are high, the industry still employs over half a million workers to date. Since the BPO industry is known to service consumers outside the country, particularly in the US, workers have to adapt to the time difference, and that means working at night.

The British Medical Journal came out with an analysis of studies that involved more than two million night shift workers, stating that shift work disrupt the body clock and have an adverse effects on lifestyle. This has been linked to an increased risk of high blood pressure, diabetes, heart attack and stroke caused by lack of blood in the brain.

The BPO industry here in the Philippines says it is not bothered by this issue. “We have all sorts of international labor organizations that say that but there is really no study that singles out BPO workers. Of course we pay huge attention to the health of our workers; we must continue on attracting and maintaining a performing workforce and we continue to find ways in order to do that. We invest a lot in health and wellness programs for our workers, paying attention and incorporating WHO campaigns on wellness programs, but we haven’t really seen any study that singles out BPO employees,” said BPAP’s Hernandez.

Even so, the industry takes pride in providing the best health care benefits possible. “We definitely believe it puts a toll on people’s health and lifestyle so we go through extensive means to work with employees and health care professionals to make sure that our employees are briefed and educated on the proper lifestyle when you work at night,” said Borja.

He added that the industry has some of the best HMO or health care benefits compared to other industries because they want to make sure that their employees are well looked after.

“I think there’s a lot more focus on what we are putting into we call preventive health management rather than a reactive one. This means that there’s a lot of workshops and seminars that our companies run to educate people and to make people aware on how to look after themselves given this kind of work,” said Borja. So indeed, prevention is still the key. And when all else fails, employees can merely bring out their HMO card, and the rest is taken care of.

The near future

The BPO industry is not far from the target income and growth that it targeted at the start of the year. There are currently an estimated 650,000 Filipinos in the industry workforce, and the number is still growing.

“We are probably at around $11.3 billion in revenue, we are projecting at $20 billion at the conservative estimate, or $25 billion by 2016 at an aggressive estimate. So you can imagine that’s a huge increase that’s growing by double from $11.3 billion to $20 to $25 billion. Our run rate is something around $11.3 billion so we are looking to grow by almost double, or more than double in the case of the aggressive estimate,” said Borja.

With these numbers, he said they have to be confident that they can generate the manpower to support that because the revenue can be equated to the number of people that they employ.

“For example, we are calculating to make $25 billion sop we need 1.3 million people to employ. In the conservative, we need 900,000 people to make $20 billion. Right now we are currently employing I think about 650,000 today,” says Borja.

And to BPAP, working with the government will ensure the industry’s continuous growth. “Through the Public-Private-Partnership Program we are doing, we can maintain the growth of the industry if we continue to do this.”

A better option

The rise of the BPO industry has another seemingly unappreciated effect. It gives qualified Filipinos the choice of staying home instead of looking for better-paying jobs abroad.

Although the Philippines has been exporting manpower since the 1970s, it is only in recent years that the ill effects of the brain drain has been realized. Not only is the country losing its best and brightest minds, but the social cost of broken families has become clear, with juvenile delinquency and cheating spouses not uncommon among OFW families.

The industry gives workers a better option.

“There’s no need for the OFWs to go outside the country to work. Through BPO, they can stay here in the country with their family,” said Teleperformance’s Lynn Ventilla.

Ventilla said that present growth path of the BPO companies do have problems recruiting qualified manpower but this kind of challenge has always been present.

“The challenge has always been there but we are still surviving, and in fact, growing despite that. The government has never left us. They are continuously supporting us,” said Ventilla. “The reason why we are still seeing confidence for the industry is because there are many organizations that are helping us, especially non-government organizations (NGOs)”.

Since the Philippine economy has become so dependent on the BPO industry to provide employment and boost the country’s dollar reserves, it only makes sense for the government and the private sector to make sure the industry remains healthy.

Based on its present state, therefore, the Philippine BPO industry is more than just healthy. If it were an athlete, its stature would be considered Olympian. Or, as the Australian Conboy said, it’s a powerhouse. –MADELAINE MIRAFLOR REPORTER AND SHEILA MAÑALAC CORRESPONDENT, Manila Times