Philippines strong in non-voice BPO: Study

By : |January 30, 2009 0

BANGALORE: Out of the $35-37 billion offshore BPO market in 2008, India remained the leading offshore destination with 35 percent market share. With a size barely 1/10th of India, the Philippines represented a healthy 15 percent of the offshore BPO market and has emerged as a key destination for English-based work especially for the North American market, states a press release. Growing at 46 percent annually since 2004, the US$6.8 billion Philippines’ offshore market today employs over 450,000 people, mostly for voice-based services. The Everest study, The Silent Knight: The Philippines’ Emerging Non-Voice BPO Capability, which includes contributions from the Business Processing Association of the Philippines (BPAP), shows that the Philippines is now poised to emerge as an important destination for non-voice offshore BPO work for buyers looking beyond India to grow their offshoring footprint. It is noteworthy here that by 2012, the offshore BPO market will have an addressable opportunity of $220-280 billion, and as much as 90 percent of this addressable market opportunity will be in non-voice BPO services.

The Everest Research Institute study shows that while the scale of work is currently low, a number of providers are already leveraging the Philippines for a vast scope of non-voice functions. However, there remains limited awareness of the Philippines’ real capability in non-voice services, which has grown significantly over the past three years.

Says Nikhil Rajpal, Principal, Everest Group, “Success in voice-based BPO services has positioned the Philippines as the second largest low-cost BPO destination after India, and both countries combined account for 50 percent of the offshore BPO market in revenue terms. In non-voice BPO, most current activity and scale in the Philippines is concentrated on transactional services. Whereas almost all types of non-voice BPO functions are now being delivered from the Philippines, their maturity varies, so while we see relatively high activity and maturity in Finance & Accounting and transcription services, there has been only some activity recently in HRO, with even lesser in Procurement Services. Further, while there has been an increased traction in judgment-intensive knowledge services such as research, analytics and legal services, the scale and maturity remains low.”

The Filipino government is focused on development of the non-voice BPO industry, providing incentive programs to attract investors as well as providing grants and infrastructure developments.

Says Jimit Arora, Research Director, Everest Research Institute, “A number of factors are favoring the growth of non-voice BPO in the Philippines. These include acceptance as a key destination for customer service and support; competitive costs; sizable pool of English speaking talent; and a starting base of captives and suppliers. There is strong cultural similarity between the Philippines and the United States, making it easier for Filipino agents to relate to U.S. customers.”

“In terms of operating cost per employee for transactional back-office work, the Philippines offers about 75 percent and 70 percent respective savings over tier-II cities in UK and US, which is somewhat lesser savings as compared to India, but sizably more than other offshoring destinations like Monterrey (Mexico) and Prague (Czech Republic). Again, in terms of graduates per annum, at 480,000, Philippines lags behind India’s 30,00,000, but is much ahead of Egypt, Argentina, South Africa and Mexico”, adds Jimit.

However, according to Nikhil, managing talent-related constraints will be critical to ensure operational success in the Philippines. He says, “Philippines will need to address four key talent-related challenges – scalability of entry-level talent; availability of specialized skills; availability and quality of managers; and migration of skilled talent.” Challenges regarding shortage of entry-level talent exist in India as well as the Philippines. According to the NASSCOM-Everest study, “Roadmap 2012 – Capitalizing on the Expanding BPO Landscape”, released last year, while the number of people required to support impending growth of BPO in India are available, unless the current focus on “ready-to-eat” talent is altered, the future growth may lead to a shortage of approximately one million entry-level graduates by 2012.

However, availability of specialized skills, access to quality management talent, and talent migration are challenges that are much more pronounced in the Philippines as compared to India.

Concludes Nikhil, “Given the nascent stage of the Philippines’ non-voice BPO market and prevailing talent-related challenges, the Philippines is unlikely to replace India as the leading non-voice BPO delivery location.” However, the Philippines can still serve as an important satellite delivery location for such services, and it is time the world starts taking note of its non-voice BPO delivery capabilities, he adds.


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