BPOs to be spared from US clampdown

Industry and government officials said Wednesday that the Philippine business process outsourcing (BPO) industry would not likely suffer from US President Barack Obama’s crackdown on outsourcing among American companies.

Also, an international information and communication technology (ICT) research firm noted that Obama’s tax plan would neither kill outsourcing activities nor improve the US economy as a whole.

Jonathan de Luzuriaga, Business Processing Association of the Philippines (BPAP) executive director for industry affairs, told The Manila Times through e-mail that the local outsourcing sector was closely monitoring this development, although he said that based on recent reports, industry leaders maintain that “there is little or no effect of such pronouncements in their respective growth plans.”

“Outsourced jobs are usually jobs that the US workforce is not keen on getting into in the first place, and it is a constant challenge for them to fill up these requirements,” de Luzuriaga explained.

On Monday, Obama announced that the US government would squeeze offshore havens and US firms’ ability to profit from outsour­cing jobs in a bid to save $210 billion.

“We are looking at this pronouncement more of an internal US taxation reform initiative that is intended to cover for its increased deficit rather than stopping the flow of work to other countries like the Philippines,” Monchito Ibrahim, Commission on Information and Communications Technology (CICT) commissioner, told The Times in a separate e-mail message. “With a globalized economy, measures like this will not stop companies to move work to places where it can be done cheaper, better and faster if it is the only way they can become competitive and be able to sustain growth even during downturns.”

Ibrahim said the commission and the outsourcing association have actually anticipated the US move, as this was a consistent position of Obama even when he was just campaigning for the presidency.

“This is why, today, we are focusing our promotions to new markets like Europe, Japan and Australia,” Ibrahim said.

De Luzuriaga added that out­sourcing association has been long bent into tapping other markets for prospective clients besides the US. While the US remains the top source of local outsourcing ventures, markets in Asia, Australia and Europe provide new opportunities, he added.

Economic evolution

In a statement also on Wednesday, global ICT research and advisory firm XMG Inc. said, “Offshoring is a manifestation of an ongoing and long-term economic evolution. It will not go away. It cannot effectively be outlawed.”

Latest research done by XMG shows that the global economic slowdown created a “significant spike” in outsourcing destinations, such as the Philippines, as outsour­cing helps firms reduce operating costs and maximize productivity levels, the company said.

Ibrahim agrees. “In this downturn, survival is foremost in the minds of companies. If outsourcing is the best way for them to survive, it will actually protect jobs [that can not be outsourced] back home.”

According to XMG: “The Obama proposal of ending US companies’ ability to defer taxes on profits made overseas will further dampen and squeeze net profitability levels, but not to the point that it becomes the tipping point for repatriating work back to the US or putting the brakes to offshore. The US scenario of ongoing shortages of highly skilled labor for IT and BPO, an aging workforce and the unavoidable high cost of operating in the US continue to make the offshoring a viable business strategy.”
–Ben Arnold O. de Vera, Manila Times