Gil Guanio: Backroom to the world

Old people keep talking about that time in the deep past when, in Asia, the Philippines was second only to Japan in terms of growth and potential. Decades later, with Japan fully recovered from the nuking of its two major cities and firmly established as one of the two biggest economies in the world, the Philippines has been reduced to exporting people because its economy can not support its own labor force.

With the advent of information technology and the Internet, this has started to change. Now, Filipino workers do not have to leave the country to flaunt their cheapness and various other "competitive advantages" over other migrant workers from other countries. They can do that right here.

"This is the common mistake; the key is technology, not cheap labor," said Gil Guanio, president of Software Ventures International, one of the pioneers in backroom services in the country. What his company does, essentially, is hire itself out to companies abroad to do what is called backroom services.

"We started in 1987 to pursue the global IT computer services market," Guanio said. SVI focused mainly on Southeast Asia and the US in the early 1990s. Since then, the company has grown from 55 employees to almost 3,000 people in three service lines.

These three service lines include computer services that cover software development and maintenance as well as computer production support. "SVI started with this service line," Guanio said. "The other two lines, call center and backroom operations, are fairly new."

SVI telemarkets to the US market from its call center in Ortigas Complex and offers backroom services such as medical transcription work, financial reconciliation, scanning and indexing of documents to help corporations go paperless and managing corporate database.

All three services are required by most corporations, Guanio explained. "For example, Financial reconciliation is a natural extension of the software maintenance service of the financial system," he said. "On the other hand, call centers are not the customer service move needed by the new economy or processes brought about by the Internet revolution."

These are jobs that would cost US-based companies more if done by an in-house staff since they would have to spend on salaries, office space, employee benefits and hardware.

Through the miracles of the Internet, these jobs can be outsourced to literally anywhere in the world that has telephone lines, computers and competent workers.

Not easy

For SVI, however, things did not come easy. Given the country’s limitations in terms of infrastructure, SVI has had to evolve fast and innovative constantly in order to maintain its competitive edge.

"We are dependent on communication lines of the telecom companies," Guanio said. "We developed our own tool sets and methodologies to become competitive."

"Remote processing from a Third World country in a different time zone from the client has its unique problems and puts us in a unique situation," he said.

"Because we could not acquire off-the-shelf tool sets, we were forced to develop them internally."

The one thing SVI has going for it, however, is the ample supply of readily available and professional aggressive labor force. "Computer literate, English-speaking college graduates are the source of our software personnel," Guanio said. "All of the English-speaking college graduate are potential call center agents. The thousands of accountants that graduate every year can easily adapt to backroom operations work."

"The message is not earth-shaking. Just that technology is the key, not cheap labor," Guanio said. "The Philippines is not the only source of inexpensive labor in the world. I do not need to elaborate on China and India."

Cheap labor, Guanio explained, has to be augmented with good management processes, work processes and tools that must be state-of-the-art. The technology platform must also be consistent and compatible with the platform used by clients.

"Most Philippine companies can not afford to use the very expensive platforms used by big US companies," he admitted. But the key to profits and success, he said, are long-term contracts where companies could exhibit an acceptable technology behind the services offered.

In the inbound call center service line for applications like customer services, for example, the application software needed could cost as much as $9,000 per seat, dwarfing the cost of the PC hardware. "Or the telecommunications cost can be as high as $1,000 a month per voice line to the US or as low as $150 a month," he said. "The telecom and technology costs are much higher than the labor cost. Hence, cheap labor alone will not ensure the success of an offshore call center."

Guanio also said building a track record was critical since companies especially in the US look at track records and client references. "This is what takes time but it is necessary to penetrate the market. The marketing investment has to be made and can not be ignored, sometimes it will coast as much as the production facility itself," he said.

Despite the growing automation in the world of business, Guanio pointed out that there were niches in the emerging new economy that the Philippines could focus on. "Computer processing will not always result in full automation. People are still needed to open envelopes, answer phone complaints or requests, process claims and reconcile discrepancies," he said. "This is an area that Philippines companies could focus on."

The jobs that developed economies are way too cool to still be doing, we will inherit.

The field is new, Guanio pointed out. "It can utilize our workforce fast."