The Competitive Advantage of the Philippines II

Despite being a newcomer in the global BPO industry, the Philippines have steadily increased its foothold as a top outsourcing destination.

Rest of Asia ready to grab BPO jobs from India, RP--study
INQ7.net, Agence France-Presse
Last updated 08:44pm (Mla time) 11/05/2006

THE PHILIPPINES and India have to boost their overall competitiveness, as Asian countries gear up to get their share of the global offshore outsourcing pie, a recent global study showed.

These top two outsourcing destinations will eventually compete with China, and other Asia Pacific countries that have similarly positioned themselves as outsourcing destinations, the latest Offshore City Competitiveness Report of market research firm neoIT showed.

The study noted that companies have "moved beyond India" and the Philippines into not so well-known cities in the world since companies want to create a "global footprint."

China and Eastern European countries are starting to attract offshore outsourcing deals because of specific language skills required.

China is particularly keen on toppling India in the "services globalization arena," the study added.

Meanwhile, Malaysia, Thailand, Vietnam, Sri Lanka, and Pakistan are emerging as alternative outsourcing destinations in the Asia Pacific region.

Companies outsourcing their non-core business processes are now looking for multiple locations that cater to specific requirements, the study said.

Manila is currently known for its strengths in English voice-based customer care services, which mainly caters to North American-based companies. It is also an ideal destination for back-office processing activities, such as payroll and accounting, the study said.

Manila has been a global services hub of many multinational companies, and has a "good talent supply" from universities, the study added.

The neoIT study identified two categories used to identify outsourcing destinations: generic and enterprise-specific factors. The generic factors include cost, human capital, infrastructure, risks, and environment. The enterprise-specific factors, on the other hand, include language compatibility, physical proximity (of offshore facility to the company), socio-economic affinity, and the availability of sector-specific expertise. The supply of middle managers and attrition rates are also considered.

Taking into account these categories, the study concluded that the National Capital Region of Delhi is the "most suitable location." This was, the study noted, despite the eroding cost advantage and supply constraints of these cities.

"A lot has been said about India's eroding cost advantage and supply constraints," senior neoIT consultant Sabyasachi Satyaprasad said Saturday.

"But the fact remains that in terms of talent supply and cost arbitrage, India is still the leader," said Satyaprasad, whose company is headquartered in San Ramon, California, with offices in India and the Philippines.

Industry analysts closely watch profit-margin trends of Indian outsourcing companies for signs their competitive edge is eroding.

But Satyaprasad said in an interview with Agence France-Presse that there was no sign of that happening and Indian outsourcing giants like Infosys, Wipro and Tata Consultancy Services routinely report profits that beat market expectations.

New Delhi, Bangalore, Hyderabad, Mumbai, Pune, Chennai and Kolkata were the seven most favored sites worldwide to locate offshore, said the report, assembled from feedback from over 60 clients.

The study also included Manila as among the top 10 cities in the world for offshore outsourcing jobs. Other cities identified were Ho Chi Minh and Shanghai.

The Competitive Advantage of the Philippines

FROM THE PHILIPPINE DAILY INQUIRER:

As India gets too costly, BPOs turn to Philippines

By Riza T. Olchondra
Inquirer
Last updated 02:30am (Mla time) 10/03/2006

HIGH salary and transfer rates in India are making that country less appealing to business process outsourcing (BPO) firms --a trend the Philippines can take advantage of by accelerating information technology (IT) training among students, an executive of a US firm said Monday.

Jim Sanderson, vice president and chairman of applications developer Lawson Software, said India could readily provide large companies with 10,000 people or more with its big number of IT professionals but its BPO costs were rising 15 percent, compared with relatively stable costs in the Philippines.

“We see that small to medium sized companies looking to hire a few hundred to a few thousand professionals with three to five years’ experience have a better environment in the Philippines,” Sanders told the Inquirer.

He also noted that the attrition rate in India is about 30 percent, compared with 10 percent or so in the Philippines.

“A new Indian IT person expects to be promoted within six months and (to get) a 20-percent raise in six months, then another 20 percent on his first year, and so on,” Sanders said. “If he doesn’t get it, he will go to another company. Being a software developer, rather than being a project-related company, we [at Lawson Software] can’t have that kind of attrition.”

Sanderson said his company is optimistic that its investment in Filipino technology workers will result in a long-term partnership with the local workforce.

The potentials and skills of the workers were what drew them to the Philippines, preferring it over other countries in the region, he said.

Sanders warned, however, that the Philippines had to make IT education and training more accessible to young Filipinos to cash in further on the BPO trend and to keep other countries such as China from catching up.

China has started emphasizing English language classes from grade schools to universities to make its massive workforce more attractive to foreign companies, he noted.

In 15 years or so, this generation of English-speaking, IT-trained Chinese professionals could be luring companies away from both the Philippines and India, he said.

“English proficiency and people skills, while important, would not be enough when that time comes,” Sanders said.

“The Philippines must increase the talent pool of professionals with more advanced IT and English skills in order to continue attracting BPOs and other foreign-invested companies.” With INQ7.net