The Future of Outsourcing is in the Philippines
stefanie is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
It is now 2 am and call center agents in the Philippines are sipping their lattes from Starbucks during a break. Some are smoking their packs of Marlboros and talking about the latest outburst from an irate customer. Welcome to the world of outsourced voice services that are predominant in the Philippines. The Philippines has overtaken India in 2011 in terms of call center business that has proliferated in the country. It is poised to grab India’s dominant share of the Business Process Outsourcing (BPO) industry as well. To give his opinion on the matter along with mine is Jonathan Vicente who used to recruit and train call center people. He is now a solicitor for Philiam Asset Management Inc.
Stefanie: Why do you think call centers are a growing phenomenon in the Philippines?
Jonathan: It could be cultural. Filipinos have a high tolerance for irate customers. Turnover of agents is high in the US. This is also true in the Philippines but it is more manageable. Filipinos also have a neutral accent that can easily be understood.
Stefanie: You are correct in your observation as the big companies are already here. An example is Convergys (NYSE: CVG). With its latest facility in Baguio City, this will be its fourteenth location within the country. Each facility is equipped to handle thousands of inbound calls every day for clients in industries such as financial services, retail, healthcare, collections and telecommunications. It is the largest private employer in the Philippines. It has excellent manpower training and development programs and retains the best employees.
Stefanie: What do you think are the skills that the Filipinos have that make it possible for call centers/BPOs to locate in the country?
Jonathan: Aside from the neutral accent and the cultural advantage, Filipinos are great in Information technology. This is not just your basic computer skills. They can easily be trained in short courses like Microsoft Certificate Programs that are recognized worldwide.
Stefanie: I get what you mean. There is another big company here in the Philippines that employs qualified technical people—Accenture (NYSE: ACN). It was named 2009 Partner of the Year by Microsoft Enterprise Alliance (along with Avanade, a business technology service provider majority owned by Accenture)—for the fifth time, and two years in a row (2008-2009). It is also ranked No. 2 in the infotech services category of Fortune magazine’s 50 World’s Most Admired companies list in 2009 In its site, it published that the company generated net revenues of US$27.9 billion for the fiscal year ended Aug. 31, 2012.
Stefanie: What would it take for the Philippines to overtake India in the BPO industry?
Jonathan: There are a lot of businessmen from India who are risk-takers. What the Philippines needs are entrepreneurs who can see opportunities in the market and act on them.
Stefanie: India-based call centers and BPOs are also expanding operations to the Philippines, including big name companies like Compvue, iOPEX, OmniGlobe, and TCS.
A foreign bank like HSBC (NYSE: HBC) even outsourced their call center operations in the Philippines to cater exclusively to HSBC clients worldwide. HSBC in the Philippines provides a comprehensive range of financial services: personal, commercial, corporate, trade services, treasury, cash management, capital markets services, trust services; and custody services.
You are correct that entrepreneurs in the Philippines have to take advantage of the need for knowledge process outsourcing like legal services, medical transcription, animation, web design, accounting and business analysis. One example of a Filipino company is SPi Global. SPi Global, the largest Filipino-owned business process outsourcing (BPO) company, was named among the world's top 100 BPO players by industry research group, Global Services. That is a big step for the Philippine company.
The future looks bright for the Philippines in terms of investments in call centers and BPOs. This is because it has a skilled talent pool and good investment climate in the country. It is not just about cost-effectiveness but about skills quality and competence in the work at hand. The government has been giving incentives and tax breaks for investors. The local entrepreneurs should take note as well and grab the opportunity to start something world-class.
Jonathan Vicente is a solicitor for Philam Asset Management Inc. which offers mutual funds in the Philippines. He doesn't own or offer any of the mentioned stocks in this article.