Political, economic woes dampen BPO investor interest

But RP still biggest threat to industry’s top two

MANILA, Philippines—While still ranked among the top providers of information technology and business process outsourcing services in Asia Pacific, the Philippines will have to do something about its perceived weak political and economic environment if it wants to be a step ahead of the competition.

According to a recent Gartner report titled “Ten leading locations for offshore services in Asia Pacific and Japan for 2010,” the Philippines figured in the list of top destinations for IT and BPO services in the region, but was given a not-so-favorable rating in the areas of economics and politics.

“While low cost is an important factor, the political and economic environment remains a concern for many companies when moving business to offshore locations,” the report stated.

Thailand, Vietnam and Indonesia were on the same boat as the Philippines in terms of its political and economic environment, as far as the study was concerned.

Rating highly in the political and economic environment category were mature markets like Australia, Singapore and New Zealand. These countries also led the ratings for language, cultural compatibility, globalization and legal maturity, data and intellectual property security and privacy.

Almost all countries in the region got good to excellent ratings for infrastructure, except for Indonesia and Vietnam. Most locations were likewise rated good to very good for language and cultural compatibility, with the exception of China, Indonesia, Thailand and Vietnam.

Vietnam emerged as the cheapest destination for IT and BPO services in the region, but also got the worst rating for data and intellectual property security and privacy. It also got fair or poor ratings for every other criterion.

Still touted the region’s leaders in offshore IT and BPO services were India and China, the world’s most populous countries. Among the emerging threats to their leadership position was the Philippines.

“Countries such as Malaysia, the Philippines and Vietnam have continued to strengthen their position against leading alternatives, while Indonesia has entered the top 10 for the first time,” Gartner research vice president Jim Longwood said.

“Some of these countries have invested considerably and leveraged increased demand for lower-cost services. The global financial crisis forced many organizations to place a greater emphasis on cost optimization,” he added.

But the study also stressed the need to focus not just on keeping costs down, but on improving in other areas.

The Gartner survey used 10 criteria in its evaluation: language, government support, labor pool, infrastructure, educational system, cost, political and economic environment, cultural compatibility, globalization and legal maturity, and data and intellectual property security and privacy. –Abigail L. Ho, Philippine Daily Inquirer