Challenges For The Outsourcing Industry In The Philippines

Challenges For The Outsourcing Industry In The Philippines

Owing to the combination of its cost-competitive workforce and infrastructure, a large pool of English-speaking, college-educated employees, effective government incentives and a service-focused culture, the Philippines has become one of the top business process outsourcing (BPO) locations within the short space of the past two decades. Of the more than $110 billion annual global industry, outsourcing to the Philippines accounts for almost 10%, or $10 billion annually, and is set to grow even more vigorously over the next couple of years. While presenting a great opportunity for the Philippines and its educated and skilled workforce, this rapid growth also presents several challenges. At the 2010 International Outsourcing Summit in Manila some of these challenges, concerns, trends and developments were addressed by the approximately 300 participants from the IT BPO and shared services sector. Human resources challenge  By the end of 2010 the business process outsourcing sector in the Philippines employed an estimated 530 000 workers. In order to expand the industry at a rate of 30% per annum, as envisaged by the Philippine IT-BPO Road Map 2016, to the level where its annual revenue is $25 billion, the labour pool needs to grow by 130 000 workers annually, and by 2016 the sector will need an addition 180 000 workers annually. Although 400 000 students graduate from tertiary institutions in the Philippines annually, only an estimated 50 000 to 60 000 consider a career in BPO. The demand for talent will therefore significantly outpace the supply of educated workers, and those jobs may well go to other outsourcing locations, unless the industry in the Philippines can find a way of...
Challenges of Business Process Outsourcing

Challenges of Business Process Outsourcing

Business process outsourcing (BPO) has many obvious advantages for companies which decide to outsource one or more of their non core functions or services to lower-cost or higher-value locations. However, there are also risks or challenges associated with this strategy, and it is important that a company is aware of these when embarking on the BPO path. Security risks Thomas Duening and Rick Click explain in Essentials of Business Process Outsourcing that “mitigating risks is a primary concern for any BPO initiative: outsourcing necessarily entails ceding control of formerly internal processes, a prospect that is frightening to managers on many levels.” In many instances, BPO client companies also share information with their outsourcing partners that may be of great interest to their competitors. International innovations in data security have to a large degree helped to mitigate the risk of sharing sensitive data with service provider companies. However, client companies have to ensure that their BPO service providers adhere to the client’s security policies and that all work done adheres to up-to-date security procedures, and therefore the issue of security should be addressed in contracts with BPO service providers and in service level agreements. Duening and Click advise that both client and service provider should also review their internet security policies, keeping in mind the following principles: 1) limiting access – i.e. the fewer people with access to a system, the better; 2) developing a secure password policy; 3) establishing a procedure for granting access rights; 4) having backup and emergency procedures in place before going live, including disaster recovery and actions to be taken in the event of a...
How To Choose An Outsourcing Company

How To Choose An Outsourcing Company

Business process outsourcing (BPO) is essentially a business strategy to move back-office functions and services – that is, those services that are not part of an organization’s core competencies, such as call centre operations, technical support, payroll administration, etc – offshore to service providers in lower-cost, higher-value locations. As a strategy, is has revolutionized, and continues to transform, large companies, and, increasingly also small and medium-sized companies. Internationally, five BPO hotspots have emerged: India for technical and engineering services; China for technical and manufacturing services; Mexico for manufacturing services; the United States for analytical and creative functions; and the Philippines for administrative services. From a business process outsourcing perspective, these countries have comparative advantages in these respective services. Steps in the process When a company decides that if there are advantages to outsourcing one or more of its services, there are a number of steps which will assist in choosing a suitable outsourcing partner. In Essentials of Business Process Outsourcing (2005), Thomas Duening and Rick Click describe the process in six steps, as follows: establishing a BPO analysis team, representing the company’s IT, finance, human resources and strategy departments; conducting a current state analysis, which involves mapping a company’s internal business processes; identifying core and noncore activities; identifying BPO opportunities by distinguishing between high-cost and low-cost functions and high-productivity and low-productivity functions; modeling the BPO project by looking at costs and risks; and 6) developing and presenting the business case for outsourcing. Finding the right outsourcing partner Finding the right business process outsourcing partner for your company will be crucial in maximizing the potential for BPO success. It is...
The Benefits of Outsourcing

The Benefits of Outsourcing

What is meant by outsourcing According to Collins English Dictionary (2009), “outsource” is defined as 1) to subcontract (work) to another company, 2) to buy in (components for a product) rather than manufacture them. However, in recent years, “outsourcing” has increasingly come to mean the subcontracting of services, rather than manufacturing, to another company, and more specifically IT and other so-called “back room” services, i.e. those services which do not directly involve the customer, such as accounting, human resources, data processing, etc. The practice of outsourcing these services has come to be known as “business process outsourcing”, and together with IT services the industry is generally referred to as the IT BPO sector. The history of outsourcing What is remarkable is that whereas in 1989, just over 20 years ago, no such industry existed, by 2009 the global IT BPO and shared services industry had grown to such an extent that it was generating revenues of US$110 billion per annum. The obvious reason for this phenomenal growth is that the industry mirrors the growth of information technology (IT) itself, the way computer software and its applications have come to change the way all companies operate and do business. Technology has created the means and the method for working faster, more economically, and more efficiently, and one of those methods is to subcontract elements of a business which are not the main concern of the enterprise. In the 1990s companies began to focus more on their core business while outsourcing those functions not necessarily related to their core business. Whereas outsourcing initially referred to the use of services by another...
Why The Philippines Is Successful At Business Process Outsourcing

Why The Philippines Is Successful At Business Process Outsourcing

It is estimated that the 2011 GDP of the Republic of the Philippines stands at between $213 billion and $215 billion, of which approximately $11 billion or 5% has been earned by the business process outsourcing (BPO) industry. While the Philippines’ economy is the 45th largest in the world, it has a population of 92 million people, making it the 12th most populated country in the world. In addition, 12 million Filipinos live and work outside the Philippines. It is therefore little wonder that Filipinos have seized the opportunities offered by the global trend of large companies, and increasingly small and medium-sized companies, to move back-room business operations offshore in order to save costs. The traditional view of Filipinos working far from home in menial jobs and contributing towards their country’s GDP largely with their remittances is changing rapidly to a view of the Philippines as a top outsourcing destination, increasingly providing skills- and knowledge-based services to companies of the developed world. Business process outsourcing has provided the Philippines with an industry capable of generating large numbers of high-paying, fulfilling jobs at home and producing real wealth for this developing country. English the key to voice-based BPO The Philippines is the third largest English-speaking country in the world. Both Filipino and English are recognized as official languages, and used in government, business and the media, and taught in schools from elementary level onwards. According to the 2002 basic education curriculum in the Philippines, roughly the same amount of teaching time is spent on Filipino and English at elementary, primary and secondary levels, with slightly more time spent on English...