Global Economy Unlikely To Weaken Philippine BPO Industry, Say Top Executives

Source: Http://www.allheadlinenews.com

Date: February 11, 2009 7:13 a.m. EST

Author:   Kris Alingod - AHN Contributor

Manila, Philippines (AHN) - Prospects for the Philippine Business Process Outsourcing (BPO) industry are positive despite a global recession. And the reasons are not, as some may think, due to an Australian premier's reported outsourcing of some operations to Manila, nor India's industry being wracked by the Mumbai attacks and the $1 billion Satyam accounting scandal.

About 400,000 people are currently directly employed in call centers in the Philippines, a Southeast Asian nation known for its relatively good English. There were only a couple of thousands in 2000, according to Dan Reyes, Philippine president of Sitel, which has more than 155 centers in 27 countries worldwide.

Revenues reached $6.5 billion last year, adds Oscar Sanez, president and CEO Business Processing Association of the Philippines (BPAP).

"The current economic environment will create positive opportunities for the Philippine BPO industry," Reyes tells AHN. "We remain to be competitive both on cost and quality and with companies trying to stay afloat during these hard time, the Philippines offer[s] a compelling reason to offshore."

Sanez also thinks the U.S. recession is a chance for the local industry to grow. "Certainly there are challenges, and many of our clients are already affected," he says in a phone interview. "On the other hand, there is a big opportunity, this is the time they [American companies] need a lot of help for cost-savings. JP Morgan, HSBC, IBM announced their expansions early last year."

He admits that "growth may be tempered a little bit" but said the whole outsourcing concept is very young. He cites room for growth especially in industries that have yet to begin outsourcing, such as retail, heavy industries and engineering services.

Mass lay offs have been reported in some call centers in Manila. Advanced Contact Solutions Inc. (ACS) is said to have shed 889 agents last November, while Accenture Philippines has let go of about 500 employees. Miami-based Epixtar, which filed for bankruptcy protection in 2005, was taken over by Amberbase Solutions last month.

Philippine President Gloria Macapagal-Arroyo has denied that ACS has laid off workers, and Accenture has said its dismissals were part of a redundancy program. The clarifications may have been unnecessary, as the negative news has not elicited significant concerns among agents.

Alex, who maintains a blog about call centers at aftercallblogs.blogspot.com and works at Capital IQ, a financial information company managed by Standard & Poor's, thinks the weak global economy will not affect the local industry. "If the 'major players' will start to pack up then its a different story... India will first feel the pressure before the Philippines," he tells me over the shout box in a forum at pinoycallcenter.com.

"This is a challenging time for U.S. companies, it is also their turn jockey for position," he adds, using some Filipino.

The moderator of the forum, Gee Villadolid, echoes the sentiment. "They can't deny the fact that the Philippines has one of the lowest rates when it comes to salary and we have the knowledge/capability to give a world class service," she says.

Both Alex and Gee expressed no concerns about the news about Epixtar, a reflection perhaps of the general attitude among agents towards the industry's prospects this year. More attention, and some excitement, has been paid to the trend of using malls in Manila as call center sites.

Ohio-based Convergys, which has 75,000 employees in over 70 countries, is planning to expand its Philippine operations by opening a facility in Glorietta 5, a mall at the heart of the nation's business capital. Another U.S. firm, Stream Global Services , is set to open a 1,500-seat center in June at SM Annex, a mall in Quezon City.

And it's not just American businesses that are outsourcing in the Philippines. Telecom Corp., New Zealand's biggest touchtone phone company, is sending 250 jobs to the country to save on costs. The office of John Brumby, premiere of the Australian state of Victoria, last month faced questions whether it had begun outsourcing. The Age quoted state spokesman Tim Pigot in a report as saying Telstra was chosen as a telecommunications partner because it was Australian-owned. Telstra is said to have used the offshore services of TeleTech, which has sites in Manila, for the premiere's media office.

Some talk has been devoted to whether the Mumbai terror attacks and the $1 billion accounting scandal at Satyam Computer Services in India will affect growth of BPOs in the Philippines.

"Companies that have exposure in those locations are now looking aggressively to mitigate their risk and therefore looking at countries like the Philippines," according to Reyes. But Sanez says," Much of the growth of comes from the size of the market, not so much the market shares. We don't know if we will benefit from that... Nobody wishes a terror attack anywhere [and] any negative report on the industry affects everyone because its a global industry."

Asked if they are concerned about President Barack Obama's campaign rhetoric that some have called "anti-outsourcing," both executives stood firm in their belief in the free market system. As a candidate, Obama had pledged to create jobs that cannot be outsourced and tax policies to discourage American companies looking to bring jobs abroad.

"At the end of the day, it is the companies that will decide [whether to outsource]," Sanez quips. "They are rational CEOs, for many of them, it's a matter of survival... It's Obama's fiscal policy versus the whole outsourcing equation... the economic equilibrium will take over."

Reyes thinks "the realities of a global economy will endure" and that Obama intends to "awaken the American public of the necessity to be competitive and if they don't do something about it, then the grim reality will unfold right in front of their eyes."  END