Philippines BPO outsourcing market expected to grow

Experts widely predict that despite the global economic downturn, the demand for business process outsourcing will continue to increase – particularly as firms get creative about ways of driving down costs.

Amid this trend, there is evidence that traditionally smaller outsourcing markets such as the Philippines are advancing on larger rivals like India.

The Philippines Information Technology Report Q2 2009, a new market report published by Business Monitor International, predicts that the value of all outsourcing contracts in the Philippines will increase from $2.3 billion in 2008 to approximately $4 billion in 2013.

Those five-year growth projections are based on rising incomes and the currently low PC penetration of the country’s market, which – in combination – make it more likely to see significant expansion than other nations in the region.

According to the report, services growth within the IT services sector is buttressed by a strong presence within business processing outsourcing and call center services in particular. In fact, Business Monitor International says that call centers alone are expected to deliver 30 percent of all outsourcing revenues in 2009.

Indeed, figures from Everest Research Institute show that the Philippines currently commands a 15 percent share of the world’s call center market, the Wall Street Journal reports.

According to the Journal, at least some of this growth can be attributed to companies’ desire for a back-up plan for their call center functions in case the primary country is faced with a natural disaster or political crisis – and the Philippines is increasingly the "plan B" of choice.

"The Philippines has established itself as the go-to location for contact-center work, thus, it benefits from a ‘halo effect,’ " Frances Karamouzis, vice president of research at technology-services consultancy Gartner, told the news provider.

BusinessWeek reports that S.C. Johnson, JP Morgan and Siemans are three companies that have chosen the Philippines as a BPO destination to accompany similar operations in India.

To capitalize on the growing interest in the Philippines for both back-office and front-office BPO services, the government has launched an initiative known as "Next Wave Cities."

This plan is aimed at expanding the reach of IT-BPO beyond the largest hubs such as Manila and Cebu by investing in infrastructure and technology for 23 cities that could host outsourcing companies.

"Now more than ever, ICT will play a crucial role in our nation’s future," said Ray Anthony Roxas-Chua III, head of the Commission on ICT in the Philippines. "The IT-BPO sector, for example, has remained resilient in the midst of the current global economic crisis."

Low office rents and a young population looking for work are two more incentives for BPO service providers to center operations in the country.

Meanwhile, the country also hopes to sell itself on its reputation for excellent communication skills. Indeed, oDesk research has identified a large English-speaking student population and a cultural affinity with Western markets as some of the reasons behind the country’s massive outsourcing growth in recent years.

These skills could be critical in supporting the company’s growth within an increasingly competitive market, as more firms look for multi-faceted outsourcing "partners," rather than just providers.