Upgrading BPO workforce skills is key

by Rey Gamboa (The Philippine Star) – Apr 3, 2018

The face of the business process outsourcing (BPO) industry is one that has shown the fastest change in the last couple of years, and this is largely due to the equally fast changing world of information technology and developments in artificial intelligence.

Today, BPOs are no longer synonymous to pictures of call centers peopled with rows and rows of call center agents attending to queries and concerns of customers from other parts of the world, visual images that were made famous two and half decades ago.

There will still be call center agents, but as many BPO experts predict, they will no longer be the predominant employees of this industry. And yes, there will still be a strong demand for new hires, albeit with different skill sets.

The global BPO industry is embracing new challenges that will allow it to grow by six percent annually for the next six years, if we are to believe a report prepared by global property firm Cushman & Wakefield, despite all the new technology innovations and political rhetoric of labor protectionism.

New jobs

For the Philippines, some 700,000 new jobs requiring medium and high skills will be created until 2022. This will augment an already strong local workforce of 1.25 million employees with better paying jobs more suited to global outsourcing needs.

We’re talking here of people who are knowledgeable enough to provide financing, accounting, human resources, web design, coding and other services as well as knowhow in digital technology, mobile applications, cloud computing, and more.

Other new jobs that will be on the market will need expertise on cybersecurity, mobile app development, social media, and data science mobile app development.

This shift in knowledge process outsourcing (KPO) will allow this information technology subsector to grow by six to 6.5 percent annually, and to provide a revenue stream for the country of $40-to-$55 billion by 2020.

Competition

Despite the optimistic outlook, challenges abound. Already, American outsourcing companies with offices in the Philippines are impatient with the shortage in higher skilled personnel and middle managers, while specialized training companies have their hands full trying to fast track the skills upgrading of potential new hires.

If it’s any consolation, Filipinos are regarded as better candidates for new emerging jobs in the global BPO industry, better than Indians or Chinese, or the nationals of upstart countries like Bulgaria, Romania, Egypt, Mexico and Columbia that are all eyeing a share of the market.

But our countrymen and the Philippine government cannot rest easy because there are other countries like Malaysia that would be only too willing to bet on their workforce now that the income potential is much higher given the higher skill set.

China and Malaysia also have an education system that is more attuned to tweaking given the fast-changing demands of the BPO industry. Philippine universities and colleges, therefore, will need to be able to come up with more solid curriculum to support KPOs.

The Philippine Economic Zone Authority (PEZA) has already initiated moves to establish Knowledge, Innovation, Science and Technology (KIST) parks near universities and colleges, similar to the Ayala Technohub in UP Diliman, that can focus on providing a steady stream of competent KPO hires, but more needs to be done on the part of the educational system.

Technology, innovation, and R&D have never been a strong component of our educational system, even in the leading universities and colleges of the country. Still, it’s never too late to start now.

Tax reform disincentive

That said, there are other challenges that pose as threats to the continued robustness of the country’s BPO/KPO sector, and the current momentum of the government to reform its tax incentive system is considered the biggest.

As mentioned earlier, competition in the BPO industry remains on high gear. From a net worth of $140 billion in 2016, the industry is estimated to grow to $260 billion by 2020, largely buoyed by heavy investments in robotic automation in the next years.

At this time, tinkering with tax incentives for this IT sector, when huge capital investments are required in both hardware and software upgrading and innovations, in the medium term could be a risk that can drive away new investors and make existing players consider relocating to other countries.

Other challenges

While the Philippines has a better English-speaking labor force, it cannot compete with Bulgaria or Romania, which has workers that can speak all major European languages, or have a larger talent pool of developers with deep technical expertise.

The Philippines also has one of the slowest internet speeds in Asia, a clear disadvantage compared to other fiercely competing countries like India, China, and Malaysia. We also have a higher power and telecommunications cost.

Our wages are also becoming less competitive compared to emerging competing countries like Bulgaria and Romania, and we have too many holidays. There’s a huge time difference between the Philippines and the United States, and this will work in favor of Mexico and Colombia.

There are other threats that remain on the horizon, foremost of these would be the election promise of US President Donald Trump to bring back jobs to Americans. The Philippines received more than $30 billion in revenues from the US in 2017.

Still, the local industry remains optimistic, with forecasted revenues reaching $38.9 billion by 2022 representing 10 percent of the country’s GDP. We cannot afford to relax at this stage when so many uncertainties abound.