Philippines government change could hurt BPO

MANILA –This country’s IT business process outsourcing (BPO) aspirations may have survived the recent global recession, but would it remain healthy after its so-called “chief engineer” steps down from office a few months from now?

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This question was raised by local journalists here on Monday shortly after outgoing Philippine President Gloria Macapagal-Arroyo trumpeted the success of the US$7.2 billion local BPO industry which grew largely during the president’s nine years in office.

Arroyo, who was vice-president in 2001, was sworn in as president after then-Philippine president Joseph Estrada was forced from office amid peaceful street protests following allegations of corruption. Reports of corruption dogged the Arroyo administration as well. A poll last year indicated that 66 per cent of the population was opposed to a charter change that would have extended Arroyo’s term.

Next Wave Cities

A critical part of the of the country’s ICT strategy is the development of a cyber corridor that will expand technology knowledge centres to 10 other cities outside of Manila and Cebu City, which are currently the hotbed of ICT and BPO activities.

These so-called Next Wave Cities included Metro Laguna, Metro Cavite, Metro Pampanga, Iloilo, Davao, Bacolod, Metro Bulacan, Central Bulacan, Cagayan de Oro and Lipa, which are traditionally rural and agricultural areas. Increased broadband connectivity and network redundancies are being built-into these areas, and the government is offering a four-year tax break, for companies investing in these municipalities.

Asked if this and other plans are likely to be endorsed by any of the contending parties, Gillian Joyce Virata, executive director for information and research at the Business Processing Association of the Philippines (BPAP), said she hasn’t met with many positive reactions.
“We’ve approached some people but they appear not to be very receptive. However, we continue to be hopeful,” she said during a press conference at the 10th e-Services Global Sourcing Conference and Exhibition at the SMX Convention Center in Pasay City. She said there remain tremendous potential for the country’s back office IT operations that are pushing business data processing, database management, finance, logistics, human resources and insurance management apart from contact centre operations.
Many politicians however, are “old-school,” lamented one government official, who asked not to be named. “They don’t realize IT’s potential.”
Industry observers here say the BPO industry will survive, but be “re-spined” as someone else’s idea.
Cash cow
The head of one foreign BPO outfit operating in the Philippines, however, expressed optimism.
“I don’t think, anyone would like to kill a cash cow,” said Ralph Schonenbach, chief executive officer the Trestle Group, a Swiss company.
“People in the industry are talking about how fantastic the Philippines is as a BPO destination,” he added.
During the conference, one of Australia’s biggest BPO companies announced plans to expand its operations in the Philippines.
Philip Hadcroft, general manager for strategy of Salmat Ltd., said the company will ramp up hiring it its new BPO solution centre in McKinley Hill, a former military port that was transformed into an industrial, commercial and residential hub in the 1990s.
Hadcroft refused to comment on political developments, but said his company’s plans indicate confidence in the country.
“We are presently employing 100 people in the facility, but we are configured to grow to 800 within the next three years,” said Hadcroft.
He said it is still unsure specifically what type of BPO service the centre will specialize. “The expertise will be driven by market demand but it will have like have something to do with digital data management.”
Salmat has maintained services operation in another Manila suburb since 1986.
BPO in unlikely places
BPO services are springing up in the most unlikely places, according to Monchito Ibrahim, commissioner for the Commission on Information and Communications Technology (CICT).
For instance, he said many Filipino start-ups are offering medical transcription services for a large number of U.S.-based hospitals, and some outfits are providing editing services and content development services for periodicals in the States.
“But you won’t get the companies to reveal their client’s names because most customers don’t want it known that their back-office processes are done in the Philippines,” Ibrahim said.
“A financial planning firm would likely want their clients to believe portfolio research is being carried out by the company’s researchers rather than economists based in Manila.”
Improved broadband connections are also feeding an underground online economy, which Ibrahim can only smile about when mentioned.
“The US$9.2 billion BPO revenues only speak about the numbers we can measure. There are thousands of individuals providing some sort of online services to foreign clients,” Ibrahim sad.
These run the gamut from architects, Web designers and freelance writers bidding for assignments on sites such as e-Lance to college professors making an extra buck by doing high school homework and projects for students abroad.
The analyst group Everest Research has placed the Philippines on the third spot in total BPO market breakdown in estimated revenues for 2008. The country was also named by the U.K’s National Outsourcing Association as the Best Offshoring Destination of the Year for 2007 and 2009.
Organizers of the e-Services conference expressed optimism that the country will attain its goal of capturing 10 per cent of the global BPO market share in 2010.


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Nestor E. Arellano
Nestor E. Arellano
Toronto-based journalist specializing in technology and business news. Blogs and tweets on the latest tech trends and gadgets.

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