The Philippine economy is showing no sign of slowing down. In fact, it isn’t a surprising forecast anymore that the country’s gross domestic product (GDP) growth will rise to up to 7.5% within 2018. A significant factor that contributes to this exponential development is the Philippines’ two top earners of foreign exchange: overseas Filipino workers (OFWs) remittances, and the Business Process Outsourcing (BPO) industry’s revenues.
When it comes to one of the most popular (and certainly one of the most trusted) countries for business process outsourcing (BPO), the Philippines has always been a top choice. Reuters even notes that the nation has dethroned India as the country with the most call centers in the world.
The 2017 A.T. Kearney Global Services Location Index ranks the Philippines, which it describes as “an industry leader,” 7th in its overall Index, with it gaining high ground in high-value fields such as engineering and legal BPO. Additionally, the country is ranked third highest in the Top 20 Digital Nations list, just below India and China.
The Current Philippine BPO Industry Landscape
- Over the past decade, the BPO sector has seen an annual growth rate of around 10% and has become not only the country’s largest source of private employment but also is the second-largest contributor of foreign exchange earnings after remittances. (Oxford Business Group)
- The BPO sector posted the most job openings last year, with an overall rise of14%, according to JobStreet.com’s outlook report. (ABS-CBN News)
- The industry grew 12.3% in 2017 from 2016, which, according to the Philippines’ Socioeconomic Planning Sec. Ernesto Pernia, is a “sign of maturation of the sector, of the industry.” (ABS-CBN News)
- As of November 2017, the BPO industry has employed about 1.15 million people. (Reuters)
- It’s predicted that the industry’s projected total income range will reach $40 to $55 billion by 2020 and will increase employment by providing a total of about 1.3 to 1.5 million new jobs in the coming years. (ASEAN Briefing)
What Makes the Philippines a Strong Hub for BPO?
Despite being a small cluster of islands just off the coast of mainland Asia, the Philippines emerged as one of the most influential players in the BPO industry. This can be attributed to the following key features:
- High English Literacy Rate
- The Philippines ranks 3rd in Asia for English proficiency, according to EF EPI. The country also has an excellent literacy rate at 96.9%.
- Learning the English language is integrated within the school curriculum, with Filipino children learning it as early as their pre-school years. Additionally, there is a deep American influence found in entertainment and media brought about by the two countries’ amicable relations.
- This is evident in the way Filipinos speak: there is a high chance that an everyday conversation is peppered with English words ingrained even in the ordinary man’s vocabulary.
- The A.T. Kearney Index also notes that Filipino workers, especially in the BPO industry, have “neutral accents that are more closely align[ed] to American customers.”
- Compatibility with Western Culture
- The subject of Western colonization has always been a controversial subject for Filipinos, but a benefit that being under Spanish and American rule gave the country is its deep connection with the Western values and cultures, even in the present.
- This, along with the country’s natural disposition for hard work, perseverance, hospitality, and humility, made for a culture that can embrace the notion of smoothly working with and adapting to the nature of other nations, from the East to the West.
- Steady Pool of Competency in Budget-Friendly Costs
- Quality is so often equated to high prices, but the Philippines makes an exception. Even for lower costs, Filipino BPO workers can produce quality work.
- While it can cost a lot to outsource specific tasks such as digital marketing or voice services, this is no problem when you opt for Philippines-based BPO companies, who offer these services at lower rates that are even start-up friendly.
The Threats to the Philippine Outsourcing Industry
- Perhaps the biggest foreseeable threat in the Outsourcing Industry in the Philippines is the rise of Artificial Intelligence, which may dilute the biggest advantage the Philippines has in this sector: English proficiency.
- Other AI applications may also take over 40,000 to 50,000 “low-skilled” or process-driven jobs, according to IT & Business Process Association of the Philippines (IBPAP) president and CEO Rey Untal.
- The industry is also nearing a “plateau” — where growth is significantly slower than previous years. Annual growth is expected to slow down to 9% until 2022 compared to the annual growth rate of 17% in the past six years.
- Untal attributes this to security risks posed by the Marawi crisis. This was a substantial concern for potential locators, leading to a decline in the BPO sector’s contribution to the total leased office space in the country.
- These threats, however, are signals that the outsourcing industry should move into higher-level skills and higher value-added services, according to Pernia. The Philippines’s outsourcing sector must move from call centers to big data analytics, app development, and related fields.
- Additionally, this does not mean that the BPO industry will halt on job generation. Notwithstanding the industry’s beginning shift to artificial intelligence and the forecasted growth plateau, there will still be a strong demand for BPO workers, especially since the industry has always hired candidates for many different specializations, not just for customer service.
After gaining tantamount support from the Philippine government years back, the outsourcing industry has played a crucial role in strengthening the country’s economic progress and improving GDP growth throughout the years. And in 2018, the industry shows no sign of crashing down, especially when the state is poised to grow.
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