Local BPO firms united amid growing external pressures

(Last of three parts)

Beginning this month, members of the thriving business process outsourcing (BPO) industry are regrouping under the name Business Process Philippines. Industry proponents decided this would give them a stronger voice amid increasing external pressures from foreign competition and anti-offshore outsourcing legislation.

Business Process Philippines merges the Contact Federation of the Philippines (CFP) and Outsource Philippines. Bong Borja, chairman of CFP, said the move is good for the industry as it allows for a singular coordinated liaison with the government and the academe. The move also reflects the irreversible trend in the ranks of call centers and contact centers, which currently represent the majority of outsourced operations in the country, to go into full BPO service.

Ramon Dimacali, chairman of Outsource Philippines, said call centers and contact centers are now realizing that the natural extension of their operations is to become full BPO providers. Because they already have the call centers that handle customer queries in real-time, it makes sense that they would also ask to manage the entire process that leads to those queries, Dimacali said.

"It is a strategy to keep their customers, who can easily move their call center operation to another outsourcer. But if a call center also manages, for example, a short, defined system that leads to a query, then it becomes a barrier to a customer’s migration," Dimacali said.

The trend is also obvious to Borja in his role as president of the contact center operations of PeopleSupport in the Philippines. He said clients now expect more productivity from them by doing up-selling and cross-selling on top of their traditional customer care services. "They already paid for the calls (we handle) so they might as well take full advantage of it. Outsourcers with good customer relationship management (CRM) are well-positioned to take on this," Borja said.

Competitive Landscape

Based on the 2003 Philippine Call Center Industry Benchmark Study, there are over 1,000 Filipinos hired every week to work in the industry, and 700 of them end up working for the top five call centers. At this rate, the industry expects to grow by 100 percent and have over 40,000 call center seats this year.

But the study shows that the world’s two most populated countries, India and China, are still leading. India is expected to increase its total call center seats by 65 percent or 158,000, while China is estimated to improve by 41 percent or 53,500.

Philippine outsource service providers, however, are unfazed by these numbers, knowing that the business is also being decided based on quality. Gil Guanio, president of Software Ventures International (SVI), is confident that the Philippines can battle it out with India primarily because Filipinos speak English a lot better.

"We cannot beat India in software development but in call center and BPO, it’s a neck-and-neck battle. They have advantage in terms of number of people but I don’t think they can change their diction. The biggest call centers in the US are here. I also know one or two of them wanting to pull out from India and move here. One reason I went to this business is because I know Filipinos speak English well," Guanio said.

In the last three years, SVI has steadily branched out into call center and BPO services, but still maintains its original line of business, which is offshore software development.

The same language issue makes members of the local BPO industry feel undaunted by the possibility that China might eat into their market. They also argued that the current efforts of the Chinese government to popularize English in their education system will take awhile to bring the desired results and don’t even guarantee market dominance.

But the saying "if you can’t beat them, join them" rings true since even Indian contact centers are opening their shops in the country. It’s the best confirmation that the Philippines is already a force in the BPO global market, but one that makes some local players uneasy. Although Borja believes it’s a positive development that will result in more job opportunities, others consider it "the silent invasion of India." Joining the over 63 outsource contact centers in the country today are Indian companies Daksh and Spectramind.

Anti-BPO Sentiments

In the United States last month, Representative Bernard Sanders announced that he was introducing a bill that would discourage American companies from expanding their operations overseas. Those who continue to do so to the detriment of the American middle-class workers could be stripped of government financial aid.

Called The Defending American Jobs Act of 2004, Sander’s proposed legislation is one of the latest moves in the US that voice out the growing uneasiness of some labor groups toward offshore outsourcing.

Virgilio Peña, newly appointed chairman of the Commission on Information and Communications Technology (CICT), said the resistance from the US labor sector could hurt the country’s BPO bid. "If the US starts clamping down on outsourcing overseas, then it becomes a deterrent to the growth of the industry. But I think the market will continue to grow because outsourcing is now recognized around the globe as a business strategy," he said.

Guanio, on the other hand, thinks the US is in the best position to understand that when their companies operate globally, they have to use global resources to get reasonable rates. "For the US to say that we only have to get the people from them – that’s wrong... There is a backlash about contracts being sent out of the US and we can’t help that," he said.

He added another point: US companies often pirate the best people in countries like the Philippines. In other words, what goes around comes around.

Meanwhile, Borja said the BPO trend simply mirrors what the US automotive sector went through before. After pioneering car production, US manufacturers eventually had to compete with Japanese carmakers, triggering the same labor concerns for offshore BPO today. He pointed out that this occurrence is almost cyclical within the US economy yet it has stayed robust and the people have moved to jobs with higher value.

Things To Do

The Business Process Philippines has identified some measures to ease the external pressures on their industry. In particular, contact center outsourcers realize the need to scale up their manpower fast to meet their growth target of 70 percent to 100 percent this year. This task depends on how well they can continuously train their people, promote them to middle and upper management positions, and forge successful partner-ships with the academic community for a curriculum that supports contact center requirements.

At present, the industry has academic tie-ups with the University of the East and universities in the Visayas.

Borja said they also have to continue promoting the Philippines abroad as a BPO hub while actively expanding their operations outside Metro Manila. At the same time, they should increase the use of call center seats by doing BPO work in the daytime, he added.

"The US is a 24 x 7 economy. During the day we cater to the US’ overnight volume. At night we can cater to the daytime volume. Customers right now are the ‘anytime, anywhere customers’ so we to have support them 24x7," Borja said.

To maximize call center seats, Dimacali added that BPO providers should also pursue other markets like Australia, which is another English-speaking country but from another time zone.

Guanio, for his part, believes it would be good too if the country sells its offshore services not from a low-cost standpoint. "I have fewer people but my rates are high. My reason is that we are Filipinos so (the income) should end up here and not there. We are Pinoys. Let’s bring the work here," he said.

This year, the call center industry alone expects to reap revenues of $180 million to $200 million. Of course, this will happen if the industry continues to attract new players and increase its take-up rate of applicants from the current low of five percent to at least 10 percent.

All these should help fight the external pressures the industry is experiencing. As Borja said: "We can’t control what they do but we can do something to fix our own backyard."