Philippines Looks Beyond Call Center for Outsourcing Growth

Last year's terrorist attacks in India and the unforeseen unraveling of one of its most successful IT services providers, Satyam, has some IT customers finally getting serious about creating a more geographically dispersed portfolio of IT outsourcing providers.

Government and industry leaders in the Philippines would like to see their country take on more of the IT and business process outsourcing tasks that might otherwise flow to the subcontinent. The Philippines' offshore market has grown 46 percent annually since 2004, according to the Everest Research Institute, the research arm of Dallas-based outsourcing consultancy Everest Group. The Southeast Asian country could emerge as a leading destination for business process outsourcing work if buyers are looking to expand their offshoring footprint beyond India, according to the recent Everest Research Institute Report "The Silent Knight: The Philippines' Emerging Non-Voice BPO Capability".

One problem the island nation faces is the notion that it can handle only call center and low-level services work. Indeed, call center services account for about two-thirds of the US$6.8 million in professional services the Philippines exported last year. Although the government has articulated interest in expanding beyond voice-related services, "the strategy could be more focused than it is at present," says Mark Kobayaski-Hillary, London-based outsourcing analyst and author of the book Who Moved My Job? "They are building up the infrastructure and spreading the industry throughout the country, but I think they could position the IT industry better when selling the proposition." IT services companies in the Philippines, for example, could find a niche serving mid-market corporations perhaps, says Kobayashi-Hillary.

That's not to say the Filipino outsourcing market has been stagnant. Just a few years ago, the BPO industry employed just 4,000 people. Today, 100 times as many people work in the industry, making the Philippines the second largest low-cost BPO destination after India, according to the Everest Research Institute. The goal of industry leaders is to see 1 million Filipinos working in IT and business process outsourcing by 2010 so the country can capture 10 percent of the total global services market.

The Business Process Association of the Philippines (BPA/P-think of it as the Filipino NASCOMM) is promoting the region to potential customers around the world and pushing its own government to invest in training programs, infrastructure improvement, and business development beyond the metropolitan area of Manila. "The government sees (the industry) as a major source of jobs and local wealth generation," says Kobayashi-Hillary.

At an outsourcing conference in Pasay City in February, President Gloria Macapagal-Arroyo said that despite the global recession, now is a "time of opportunity" for the Philippines. According to local press coverage of the event, the president said in her keynote speech that the country must focus on building telecom infrastructure to lower the cost of connectivity, creating a supportive legal environment for the IT services industry, and harnessing human capital to address the industry requirements.