Will artificial intelligence (AI) kill our business process outsourcing sector? Our earnings from BPO, along with overseas remittances, have been a vital boost to our foreign exchange inflows, helping make up for our pitifully low merchandise export performance relative to our neighbors. Our country has unusually higher levels of both; each brought in the same amount of $38 billion in revenues in 2024. BPO’s multiplier effect spans a vast network of secondary industries, including real estate, retail, transportation, and food services, and directly provides jobs to nearly 2 million mostly college-educated youth. But the global outsourcing landscape is being dramatically reshaped by the rapid advance of automation and AI—not to mention United States President Donald Trump’s moves to reshore jobs back home—and many worry about the future of our BPO industry, especially with the education crisis the country finds itself in. Should we?

BPO spans a wide range of services, including customer support; IT services; finance and accounting; human resources management; medical coding, billing, and telemedicine; legal processes; and increasingly, high-value knowledge process outsourcing (KPO). The bulk of the sector’s workforce is in voice-based services (customer service, telemarketing). Traditionally the industry’s backbone, these services are now among the most vulnerable to the AI revolution. Google Duplex and AI platforms from Amazon and Microsoft can now simulate human conversations, replacing live agents for basic customer inquiries and transactions.

The most immediate threat lies in repetitive and rules-based tasks, particularly those in low-complexity, high-volume functions like customer service and data entry. Robotic process automation can take over routine data processing tasks. Jobs that entail entering, sorting, or validating structured data can now be done faster and more accurately by machines. First-level IT troubleshooting, like password resets or software configuration, is increasingly being done via AI-driven service desks and knowledge management systems.

Unfortunately, these are the tasks that make up most of what our BPO workers do. Surviving the onslaught of AI on the industry requires a deliberate shift toward higher-order functions that cannot yet be automated. We must equip our workforce for the jobs that increasingly require critical thinking, data analysis, and programming, which appear to be the future shape of BPO. It’s worrying that the long-felt jobs-skills mismatch among our college graduates appears to be growing rather than abating, and with our students’ dismal rankings in international educational performance ratings, it’s hard to be optimistic about our BPO outlook.

And then there’s the problem of inferior infrastructure in internet connectivity and digital systems, energy adequacy and reliability, transportation, and other support infrastructure, which remain uneven across the country. This has limited the growth of BPO operations beyond major urban centers like Metro Manila, Cebu, and Davao. We are also hampered by persistent governance issues like inconsistent policies, sudden changes in tax rules, and data privacy issues, which all deter new investments or destabilize the operations of those already here. Meanwhile, other countries like India, Vietnam, and even countries in Eastern Europe are aggressively competing for outsourcing contracts, armed with more advanced technical capabilities or more attractive investment incentives.

Grim as the picture may seem, we cannot surrender the fate of the sector to a decline that need not be inevitable, provided we act swiftly. Urgent actions and investments to upgrade our workforce capacities are crucial. Business and government must work together to equip workers with the needed higher-order skills such as data analytics, AI model management, cybersecurity, business intelligence, and more. We must closely track the rise of KPO and other IT-enabled services and attune our education and training programs to allow our BPO industry to transition into more complex and less automatable roles. Demand is rising for services that require human judgment, contextual understanding, and specialized expertise. These include health information management (including medical coding, transcription, clinical data analytics); finance and accounting beyond basic bookkeeping (more complex financial analysis and standards compliance); and legal process outsourcing (paralegal support, document review, contract analysis).

It is said that the next phase of the BPO evolution will be less about cost savings, but more about capability, agility, and innovation. I will argue and explain in another article why there is hope, and AI and robotics need not spell the demise of the Philippine BPO sector.

cielito.habito@gmail.com