Investments in Outsourcing, Healthcare and More

Fries said that Ikea, the world’s largest furniture retailer, plans to open several stores in the Philippines in the next six to eight years. If the investment pushes through, he said it will create thousands of jobs and have a positive impact on local employment and the economy.

Swedish companies that invest in the healthcare sector may also hire more Filipino healthcare professionals.

Fries explained that businesses look at factors like rule of law, good judicial system, and absence of corruption and red tape when they establish market. He hopes for more balanced growth in the Philippines, with different regions having more opportunities to develop socially and economically.

Swedish Market Potential

He stressed that trade between Sweden and the Philippines is “much too small,” and the Swedish government sees a huge potential for increased investments. Information technology, business, electronics, agricultural products, clothing and shoes are some Philippine exports that may have potential in the Swedish market.

PH BPO Sector Remittances

The central bank chief said the country’s balance of payments (BoP) is still manageable even while in deficit. External payments were at a $136-million deficit in 2017’s first five months, reversing the $216 million surplus posted in last year.

“Robust remittances from OFWs and ample receipts from the BPO sector continue to fuel economic growth,” said Espenilla.

Balance of payments is used to track transactions between the Philippines and the rest of the world within a period. A deficit shows that funds that left the economy offset funds that came in.

Philippine BPO Receipts

The Philippine Statistics Authority (PSA) reported a $2.753 billion balance of trade deficit in May that is over five times bigger than 2016’s $2.24 billion. BSP deputy governor Diwa C. Guinigundo said May’s $59-million BoP deficit was due to payments made by the government to settle external debt and the central bank’s countermeasures against foreign exchange volatility.

Espenilla explained that rapidly growing imports are not unusual for a growing economy like the Philippines. Strong macroeconomic fundamentals and remittance inflows continue to support the country’s external position.

Remittances reached $9.036 billion from January to April 2017, 4.2 percent higher than that $8.67 billion recorded during the same period last year. Meanwhile, business process outsourcing (BPO) receipts reached $5.5 billion in the first quarter of this year, up 9.9 percent from the $5 billion posted in Q1 2016.

The central bank expects the country’s BoP position to settle at a $500-million deficit in 2017, equivalent to 0.2 percent of the gross domestic product (GDP). Last year, the BoP was at $420-million deficit or 0.1 percent of the GDP.

Philippine BPOs Moving Up the Value Chain

Tayag added that the BPO industry is moving up the value chain by offering higher-value services that are less likely to be affected by automation. He urged the outsourcing service providers to develop skills required in data analytics, mobile and cloud services and become familiar with new terms like agile and liquid workforce.

According to Contact Center Association of the Philippines (CCAP) operations director Jay Santisteban, call center agents are being trained for jobs that require critical thinking skills and complex decision making. He said Filipinos are in a “very good spot” because of their adaptability and capacity to learn.

Policy Impacts on Philippine Outsourcing Sector

In addition to AI, the industry is also watching the impact of U.S. President Donald Trump’s policies. “Well we have seen or heard feedback related to this but at the end of the day we have not seen actual statistics that will say we have slowed down,” Tayag explained. “We have articulated this in our roadmap 2022. We want to bring this industry to 1.8 million people in 6 years, making us one of the biggest job suppliers in the country together with other multiplier effect in real estate, transportation, and food.”

DICT developed the NCSP to protect Internet users, the country’s critical information infrastructure (CII), private and public networks, and businesses of all sizes. NSCP will shape government policies and guidelines on cybersecurity and provide implementation plans for stakeholders.

Cyber Resiliency Programs

The NSCP’s main goals are to ensure continuous operation of public and military information infrastructures, implement cyber resiliency programs, coordinate with law enforcement agencies, and educate society about cybersecurity.

In addition, the NSCP maps threats in the cyber landscape, identifies key issues, proposes strategic solutions, and promotes societal awareness.

Taking on Cyber Security Issues

The NSCP 2022 booklet emphasized the need for collaboration to address challenges and achieve the goals of the plan. Individuals, businesses and the public sector must work together, as the government cannot take on cybersecurity issues and threats alone.

The recently established DICT commits to implementing the plan in full force. The agency signed a Memorandum of Understanding (MOU) with the International Council of Electronics Commerce Consultants (EC Council) to jumpstart the plan.

Among other responsibilities, DICT is in charge of securing critical information and communications technology (ICT) infrastructure for the private and public sectors, managing agencies that regulate the ICT sector, and boosting the growth of ICT.

Competitive Advantage of Philippine BPO Sectors

During tours in New York, Texas, Florida and California, DTI undersecretary of Industry Promotion Nora Terrado and HIMAP president Christina Coronel told participants that the HIM and BPO sectors have matured in terms of capabilities and competitive advantage. The speakers highlighted the Philippines’ strengths such as the large number of nursing graduates and a talent pool that speaks good American English.

They added that Filipino health professionals are considered a natural fit for the HIM segment, which pays salaries that are significantly higher than those for non-IT employees. In addition, the high level of education and competitive labor rates continue to attract investors.

Outsourced Healthcare Information Management Services

Healthcare information management providers have expanded their offerings to include complex voice/non-voice services and multilingual support for clients in Asia and the Middle East. Among the services offered are clinical management, benefits claims testing, case management, regulatory management, medical writing, medical and clinical trial monitoring, quality, and compliance.

In 2016, the Philippine healthcare BPO Segment generated $2.4 billion in revenues and employed 118,245 people. This represents a 54 percent increase in revenue and 36 percent increase in employment since 2011. The HIM sector expects to reach US$5 billion in revenues by 2020.

The Softcon.ph event focused on growing IT service areas like banking, healthcare and manufacturing, where industry experts shared success stories. PSIA data shows that there are about 123,000 software developers in the country and about 1.5 million IT consultants.

PSIA president Jonathan De Luzuriaga said they are looking to increase global market share from the current 12 percent to 15 percent. PSIA official for Japan Tae Abe-Abion explained that many under-tapped markets present a great opportunity to further raise this share, saying that Japan, which is the world’s third largest IT market, is just four hours away from the Philippines.

"There is a global gap in terms of IT services delivery. People have been scrambling to find delivery centers and these businesses that mostly went to North America and Europe before, are now getting their requirements from us," said Luzuriaga.

He added that support from the public and private sectors will boost the transition and ensure that the Philippine software industry continues to be globally competitive in all areas, from infrastructure to the talent pool.

The telecoms industry can support higher demands of the software industry and external communities, according to Eastern Communications, the event’s official internet provider.

Colliers said IT companies are considered the main source of office space take-ups in the U.S., a phenomenon that is changing workspace strategies in various industries. Among the companies leading office space activity are Amazon, the online retail giant, and Facebook. Amazon occupies 11 million square feet of office space in Seattle, WA, while Facebook has expanded its office space by 275,000 square feet. In the Philippines, BPO companies are absorbing much of the office space supply as the foreign IT firms they serve continue to develop technology products and hire additional customer service teams offshore.

Google and Uber have taken up 18,000 square meters and 5,500 square meters of office space in the country, respectively. Colliers said it will not be surprising to see more tech firms follow in their footsteps. Office space needs in the tech industry are also evolving. One strategy that has been adopted by serviced office spaces and BPO firms is the “workplace of choice,” with options ranging from private spaces to spaces for collaboration and interaction.

Continuous education is required to upgrade skills and build capabilities in an industry that considers people its biggest asset and challenge, according to Contact Center Association of the Philippines (CCAP) president Benedict Hernandez. The BPO sector has expanded from its traditional data entry, directory assistance and call center service offerings to middle and higher value services such as analytics and infrastructure technology. 

Rommel Reginio of SPI Global Holdings, Inc. explained that voice segment of BPO was very generic back in the late 1990s when outsourcing was new, but voice services have expanded to include email, chat, social media, multi-channel and omni-channel support. The BPO workforce has also evolved and become more focused on improving customer loyalty and retention and increasing revenues through data analytics and infrastructure technology-embedded work. 

The new IT-BPM Roadmap 2022 by Frost & Sullivan is expected to focus on the human resource issue. To be released in October this year, the roadmap predicts that low-skilled voice tasks will shrink by 28 percent, while mid-skilled tasks will grow by 7 percent. Meanwhile, high-skilled tasks have the highest growth rate (48 percent), representing big opportunities in complex services.

The new roadmap considers the fact that only 16.6 percent ($166 billion) of the $1-trillion sourceable work in the world have been outsourced, with outsourcing service providers in the Philippines accounting for $22 billion of the global outsourcing pie. The Philippine BPO industry targets $25 billion in revenues and 1.3 million jobs this year.

Compared to larger companies that require board approval and deliberations, Araneta said that SMEs and new businesses are more open to outsourcing. He added that businesses may do well in their industries, but may lack the right infrastructure and efficient finance and accounting, data management and storage processes.

In these cases, SMEs tend to engage the services of outsourcing companies that have the technical capabilities and infrastructure. Through outsourcing, small businesses also benefit from the third party firm’s technical knowledge, leading to better work efficiency and reduction in the number of full-time employees (FTEs) involved in a project. Besides profit, Araneta explained that businesses value business stability. He said they should focus on what they are good at and outsource other processes to external firms.

The Information Technology and Business Process Association of the Philippines (IBPAP) expects the business process outsourcing (BPO) sector to generate $25 billion in revenues and 1.3 million jobs by the end of 2016. IBPAP said the continued growth of the BPO industry is due to the expansion of services from voice to non-voice.

Knowledge process outsourcing (KPO) and health information management (HIM) are among the segments showing robust growth, along with IT and engineering, animation and game development, marketing, and legal process outsourcing.

The Philippine economy is considered to be “fairly resilient,” supported by strong domestic consumption that is driven by a robust business process outsourcing (BPO) industry, remittances from Filipinos working abroad, election spending and a growing middle class. Matthews named consumption as the major driver of economic growth, saying that investments are “just going half speed.” 

He added that government spending will boost the gross domestic product (GDP) forecast even further. The government has allocated 5 percent of the GDP (about P760 billion of the P3 trillion national budget this year) for infrastructure. Matthews stressed that whoever wins the elections “will turn out okay,” and investors will simply wait for uncertainty to subside.

Last year, domestic demand and private investments supported a GDP growth of 5.8 percent. The figure missed the official 7 to 8 percent target and was lower than the 6.1 percent posted in 2014. The government is optimistic this year, expecting the economy to expand by 6.8 to 7.8 percent despite China’s slowing growth, dropping global oil prices and other economic uncertainties. Meanwhile, the International Monetary Fund and Asian Development Bank expect the Philippine economy to grow 6.2 percent and 6 percent, respectively, due to a challenging external environment.

In particular, the pharmaceutical and biotech sub-segments show a high demand for clinical research and drug discovery services. Healthcare providers are working with KPO vendors to update legacy revenue cycle management (RCM) processes and secure intellectual property protection for clinical databases. Meanwhile, the banking, financial services and insurance (BFSI) capital markets segment faces increased demand for more complex products, increasing middle office outsourcing activity.

Emerging markets like Asia and Latin America are among the top providers of KPO services due to the availability of skilled talent, lower labor costs and favorable business environments in these locations.

Philippines Outsourcing is known globally for its voice services, but there is increased pressure to diversify offerings and move towards higher-value and knowledge-intensive services. The Information Technology and Business Process Association of the Philippines (IBPAP) reported in 2014 that KPO already accounted for 40 percent of the country’s BPO industry.

Many BPO companies have branched out into non-voice services, which range from finance and accounting to animation to healthcare revenue cycle management. Revenue management firm ServiceSource started hiring Filipino knowledge workers in December 2015 to provide revenue-as-a-service solutions to global technology companies, including Microsoft, Dell, and GE Healthcare.

As the country’s BPO industry offers more knowledge-based services, analysts and organizations are pushing for increased government support and improvement of ICT (information and communications technology) infrastructure, among others.

The general insurance segment of the global BFSI market captured most of outsourcing deals in terms of volume, with 55 to 60 percent market share in 2015, while the health and life insurance segment captured 35 to 40 percent. The “others” segment accounted for 5 to 10 percent of the market. 

North America, led by the United States, was one of the biggest consumers of outsourced services in 2015. Demand was driven by economic uncertainty and regulatory pressures faced by banks and financial institutions. New regulations like the HIPAA, Consumer Protection Reform, Credit Rating Agency Reform, the Dodd-Frank Act and the Volcker Rule are forcing many companies to outsource services to improve compliance while reducing costs.

The second largest market for outsourced BFSI services in 2015 was the EMEA (Europe, Middle East and Africa) region, with the United Kingdom leading the group. EMEA is also an important capital market and insurance business process outsourcing (BPO) location. The Technavio report revealed that buyers who outsourced insurance and capital market services to this region reduced turnaround times and improved service quality. Companies in EMEA are outsourcing BFSI services due to regulatory uncertainties and increased pressure to improve operational efficiency. 

Meanwhile, the Asia Pacific (APAC) region remained the most cost-effective application outsourcing service delivery destination. Clients mostly outsource call center, credit card processing, data processing and disaster recovery services to this region. Mature BPO markets like India, China and the Philippines continue to be attractive locations for buyers.

Mercado said the industry can “easily” reach $3 billion in 2016, which represents only a 14 percent increase, as it is already posting that growth rate. While official numbers for 2015 are yet to be released, Mercado pegs overall BPO revenues at $22 billion, putting the industry on track to hit its $25 billion revenue target this year.

The IT-BPO industry generated $18.9 billion in revenues in 2014 and employed over 1 million Filipinos. With 15 to 18 percent annual growth rate, the industry expects to reach $21.5 billion in total revenues by the end of 2015 and equal cash remittances by 2017. Remittances from Filipinos working abroad reached $25.8 billion in 2015.

Voice services continue make up the bulk of BPO revenues. The voice segment accounted for 65 percent of overall earnings in 2014, according to the Contact Center Association of the Philippines. However, the non-voice segment is rapidly growing as many companies expand their offerings to include complex and higher value functions.

The healthcare information management (HIM) sub-segment currently employs 87,000 Filipinos who provide healthcare support to international clients. Demand for software and game developers is also rising. The 2015 IT-BPM survey conducted by IBPAP showed that digitization is a big concern among BPO firms, and automation is a top growth driver particularly in the healthcare segment.

The IT-BPM survey showed that most companies expect to see 10 to 25 percent growth, while firms with over 1,000 employees expect 15 to 25 percent growth. The U.S. remains the top customer, accounting for a 60 to 75 percent share of BPO services in the country. The U.K, Europe and New Zealand make up from 5 to 15 percent. Meanwhile, Asia-Pacific is the fastest growing region (15 to 25 percent growth rate) due to strong demand for government in-house support services.

DOLE secretary Rosalinda Baldoz explained that call centers alone are looking to add about 225,0000 new jobs, while the healthcare outsourcing segment is expecting to hire 100,000 new workers this year. The country’s healthcare outsourcing segment is the fastest growing in terms of employment. Currently, it employs about 87,000 people and generates $3 billion in annual revenues. 

The adoption of the International Code for Disease Standards in the United States this year will further boost expansion of healthcare BPO and increase the demand for medical coders. Besides healthcare, the finance and accounting, software development and legal outsourcing segments of the industry also show positive growth.

Baldoz said the country’s young and educated workforce is one of the biggest attractions for investors and multinationals looking to establish operations here. 
DOLE, working with private agencies and the International Labor Organization has developed human resource development (HRD) roadmaps for the IT-BPO sector and 22 other industries. The IT-BPO roadmap highlights the industry’s strengths, such as cost competitiveness and government support.

The industry is currently on track to hit its $22 billion revenue target for 2015. The Information Technology and Business Process Association of the Philippines (IBPAP) will release the 2015 results this month.

AmEx recently inaugurated its first contact center in Metro Manila to provide credit and fraud services to U.S.-based clients. Although the new facility has been fully operational with 400 employees who are already taking calls, the company plans to continue investments to attract and develop great talent.

AmEx expects to triple its workforce within 12 to 18 months. Raymond Joabar, executive vice president of the American Express World Service and Global Credit Administration (GCA), told the press that AmEx was attracted to the booming BPO industry in the Philippines as well as the language proficiency of Filipino workers and the local culture.

A shared services center of international law firm Baker & McKenzie (B&M), has also invested in a new 1,000-seat hub to support business expansion and celebrate its 15th year anniversary in the country. Global professional services firms also continue to expand.

The BPO industry is a major pillar of the Philippine economy. This year, the sector aims to generate $25 billion in revenues and employ 1.3 million workers. According to property consultancy firm CBRE, China’s slowdown gives BPO boom 10 more years to run.

Colliers executive director for office services Jie Espinosa said 70 percent of demand for office space in 2015 came from the BPO and KPO (knowledge process outsourcing) sectors. The company has helped BPO companies find spaces for new facilities, expansion and relocation, leasing almost 140,000 square meters of office space in 2015.

Colliers reports that overall demand for office space in Metro Manila was over 633,000 square meters in 2015, a 36-percent increase from 2014. Supply is expected to reach 881,000 square meters this year, which should be enough to cover a rise in demand. The Fort Bonifacio area creates much of the supply in office space (395,000 square meters), accounting for 45 percent of Metro Manila’s total supply. Most of the developments will be completed later in 2016.

Meanwhile, property advisory firm Jones Lang LaSalle (JLL) said the Philippines could be the next global investment and information technology hub if foreign restrictions on real estate ownership are removed. JLL India chief operating officer Ramesh Nair said there’s a big opportunity to build business parks close to the city center and attract BPO locators looking for more affordable office spaces.

It all depends on good connectivity. Nair recommends building a high-speed railway or highway to connect these new hubs to Metro Manila. In emerging countries like India and the Philippines that lack adequate funds for infrastructure, Nair proposed a public-private partnerships (PPP) model for real estate and infra projects.

The explosion of data generated by businesses around the world is driving the growth of outsourced data analytics. The report found that most enterprises lack in-house analytics capabilities or a skilled workforce to run analytics initiatives, so they are sending work to third party specialists. 

The major consumers of outsourced analytic services are the banking, financial services and insurance (BFSI) sector, accounting for about 33 percent of market revenue in 2014, followed by the healthcare industry. Better availability of transactional data, the focus on data-driven decision making and increased data generation in the retail, telecoms and entertainment sectors are also fueling increased analytics outsourcing activity. 

The study reported that data analytics is shifting from descriptive to predictive and prescriptive analytics, with predictive analytics increasingly being used by organizations for forecasting, statistical analysis and modeling. While descriptive analytics accounted for 79 percent of the overall market revenue in 2014, prescriptive analytics is expected to grow the fastest (37.7 percent CAGR) from 2015 to 2020. 

Much of the demand for outsourced analytics comes from North America and Western Europe. Asia-Pacific is the leading provider of data analytics outsourcing services, with India, China and Philippines as the main analytics outsourcing destinations. India and the Philippines, in particular, are known for their mature business process outsourcing (BPO) environments and consistent attractiveness ratings due to a large population of highly skilled workers, lower labor costs and efficient technology infrastructure.

Villegas said the service sector’s strengths lie in low labor costs, high tertiary education levels, adaptable workforce, English fluency, and cultural compatibility with the United States and other countries in the West.

Compared to countries like China and Singapore, the country’s population also has a low median age (23.1 years) with young, talented people swelling the labor force. The Philippines is more than capable of supplying high-quality talent in the fields of healthcare, accounting, education, architecture and BPO to ASEAN members like Singapore, Malaysia and Thailand, which are struggling with skills shortages.

Villegas said the services sector is a powerful tool for the country to achieve inclusive growth. However, he stressed that the agriculture industry needs looking after.

“We are in greatest danger in the field of agri-business because that has been our biggest mistake … we have neglected agricultural development. So there is no way we can compete … with Thailand and Malaysia in that sector,” said Villegas.

He said the country must remain flexible and competitive in terms of luring foreign direct investments, proposing an aggressive infrastructure program as a solution. Large investments in physical infra projects like airports, trains, highways and ports are needed to catch up with other ASEAN members. Villegas believes that infrastructure improvements will boost the manufacturing and service sectors, which in turn will attract investors.

Everest said the global healthcare industry will increase IT outsourcing spending to enable innovation and reduce operational expenses amid shrinking profit margins, tighter regulations and increasing customer demands. Everest Group practice director Abhishek Singh said the highest IT outsourcing activity from 2014 to 2020 will come from the healthcare provider segment compared to the life sciences and healthcare payer segments. 

Healthcare providers will step up their IT capabilities to make up for the historical lag in technology adoption and prepare for regulations like patient-centric care, new reimbursement models, digitization of the value chain and payer-provider convergence. The report said that providers are using technology to improve patient engagement and population health management.

A Black Book survey published in November 2015 echoed similar findings, showing that 81 percent of respondents will prioritize IT outsourcing in 2016. Nearly 70 percent of chief information officers (CIOs) supported outsourcing for mobile solutions, big data, predictive analytics and claims management.

Meanwhile, Everest reports that healthcare IT outsourcing vendors that wish to succeed in this market must build capabilities in key services, develop and acquire in-demand skills and align their goals with changing vendor engagement models.

“The Philippines has continued to be a solid performer and although analysts are predicting a slight slowdown in growth, they see plenty to be positive about, especially in an office market, likely to be the beneficiary of a thriving BPO sector,” said the magazine.

Cushman and Wakefield managing director for Asia Pacific Sigrid Zialcita added that the country’s BPO sector continues to be a main driver of economic growth. A stable political environment, large pool of young and educated talent, and improving economic management make the country attractive to BPO locators and investors. Zialcita expects the BPO sector to continue expanding in the next five years to support high occupancies and long-term, moderate rental growth of more than 5 percent.

Jones Lang Lasalle managing director for Singapore and Southeast Asia Chris Fossick was similarly optimistic, saying that Vietnam and the Philippines are two countries that investors are most confident about because of potential opportunities. Fossick agreed that the BPO sector is still the biggest driver of the Philippine property sector. However, the decision to invest ultimately depends on the ability of the economy to grow in 2016 and opportunities that arise from this growth. 

The country’s BPO industry currently employs about one million full-time workers, accounting for 2.3 percent of the overall employment in the Philippines. The industry expects to generate $25 billion in revenues and employ 1.3 million direct workers in 2016.

“The logistics sector in Asia looks very exciting in terms of expansion into new locations for development, and the adoption of innovative business models by various players in the market,” according to Colliers’ global outlook for 2016.

Colliers’ chief executive officer for Asia Pacific David Hand stressed that the technology sector, e-commerce businesses in particular, will be one of the most active in Asia due to sustained business growth. However, Hand added that lack of supply of land is making it difficult to build new warehouses for logistics investors and occupiers. 

Hand predicts that new transportation infrastructure like port expansions and road links will also create more inland spots for logistics activity and accelerate development of logistics real estate. 

China’s ‘One Belt, One Road’ project that aims to connect Asian countries to Europe is set to move from the blueprint stage to actual construction in 2016, further brightening logistics prospects in the Philippines and the rest of Asia.

Property advisory firm CBRE said in a separate report that e-commerce and third party logistics (3PL) activity were the main drivers of leasing demand for logistics in Asia in the third quarter of 2015. Demand for logistics space in Asia Pacific also remained strong in Q3 despite the prevailing gloom in most markets.

Colliers expects to see more foreign capital entering the region in 2016 due to cross-country mergers and acquisitions. As for the lack of land problem, Colliers proposed partnerships among occupiers, operators and investors as a solution.

The study said the country’s economy grows at over 5 percent annually, with private sector investment spending expected to remain elevated in 2016. Merrill Lynch analysts added that government spending should continue to speed up next year as indicated by the government’s 2016 budget with 15 percent nominal spending growth.

The Philippine economy grew by an average of 6.3 percent in the last five years of President Noynoy Aquino’s term, compared to the 4.8 percent growth rate during former president Gloria Macapagal-Arroyo’s nine-year tenure. The Merrill Lynch research note is quick to add, however, that fiscal and monetary policy reform that boosted the economy to record levels began seven to eight years before.

Analysts credited the Aquino administration for improved revenue collection and spending reform that should continue in 2016 and the coming years, saying that a GDP growth rate of more than 5 percent is “likely achievable.”

The study predicts a 5.5 percent GDP growth for 2016, but cautioned that weaker global growth could challenge the outsourcing trend or the income/employment of overseas Filipino workers (OFWs). If this happens, GDP growth might drop below 5 percent.

“We are more cautious of growth in agriculture and exports but believe that buoyant private consumption and resurgent government spending should be enough to drive growth,” said the study. Merrill Lynch still expects a modest fiscal deficit, current account surplus and monetary policy changes to make GDP growth resilient in the near term.

IHS upgraded its outlook on the country’s credit rating from stable to positive due to a combination of improved financial fundamentals, governance standards and investor confidence.

“Apart from the clearly strengthened macro-financials over the last few years, the more recent upgrade to the Philippines’ outlook to positive in the third quarter rested on improved governance standards and reforms enhancing competitiveness under the Aquino administration,” said the IHS report.

The firm added that the Philippines is the only sovereign in Asia to have improved credit prospects in the future. The country’s current credit rating of BBB- (minimum investment grade) has a chance of being raised in the next few years.

IHS reported that better fiscal management, a strong economy and current account surpluses helped boost the country’s liquidity and improve its debt manageability. The current account has been in surplus status since 2003. This year, the current account surplus hit $4.7 billion in the first six months, driven mainly by remittances from overseas Filipino workers, growing revenues from the BPO industry, tourism earnings and lower energy import bills.

The country’s debt manageability, as measured by government debt as a percentage of gross domestic product (GDP), is also improving. From 68.1 percent in 2003, general government debt dropped to 36.2 percent at the end of June 2015.

The figure is not surprising in light of the sustained growth of outsourcing in the Philippines, which has already reached $18.4 billion in revenues. This is expected to increase by 15-17 percent this year. The IT and Business Process Association of the Philippines (IBPAP) said the Philippines outsourcing sector is on track to hit $25 billion in annual revenues and employ 1.3 million Filipinos by 2016.

Meanwhile, the number one job with the highest number of openings in the Metro last year was for cashiers and ticket clerks, with a quarterly average of 11,239. This makes up 13 percent of all available jobs. Open positions were predictably highest during the fourth quarter and holiday season. 

Other hot job openings in the top 10 were for sales personnel and product demonstrators (no. 2), accountants and bookkeeping clerks (no. 3), other business professionals or technical and admin staff (no. 4), lawyers (no. 5), technical and commercial sales representatives (no. 6), receptionists and information clerks (no. 7), other office clerks (no. 9), and protective service workers (no. 10).

Delfin explained that established and mature hubs for outsourcing in the Philippines like Manila, Bacolod, Clark in Pampanga and Cebu City are excluded from the list as they are already “centers of excellence.” DOST-ICTO and the Information Technology and Business Process Association of the Philippines (IBPAP) will select the next wave cities based on factors like infrastructure, talent pool, accessibility, connectivity, cost of doing business, and business environment (including security issues and vulnerability to natural disasters).

Last year, the cities labeled “next wave” included Baguio, Davao, Dumaguete, Metro Bulacan, Metro Cavite, Metro Laguna, Metro Naga, Metro Rizal, Lipa and Iloilo. Six of these cities made it to the Tholons’ top 100, while three cities moved up the ranking in 2015: Bacolod rose to 86 from 93, Baguio climbed to 95 from 99, and Iloilo rose to 91 from 95. 

By the end of 2015, IBPAP and DOST-ICTO hope to announce the new list of 10 next wave cities. Delfin said that the government will promote these cities abroad. DOST-ICTO will also leverage rural impact sourcing to generate job opportunities for locals, with the focus on tapping online platforms like oDesk and Upwork. The agency has already requested a P40 million budget for rural impact sourcing, but it is still pending at the Department of Budget and Management.

One of the main factors is the lower cost of doing business in the Philippines. Bustos said the country’s labor cost is only 25 percent of China’s labor cost, and it is cheaper to operate a business here than in Singapore or Hong Kong due to lower living expenses and office space/residential rent.

Another factor is location. Bustos said that the country is close to Japan, China and Singapore, and it is a gateway to the Pacific from the Unites States. “We’re roughly 12 hours from New York, seven hours from London and an hour from Tokyo. If you’re trying to keep your transaction flow the whole day, then we’re a good alternate to other financial centers,” said Bustos. He added that the reason outsourcing in the Philippines flourishes and BPOs end up in the Philippines is because of the country’s great connectivity to the world.

Filipinos are also used to working with different nationalities, proven by many successful workers who were assigned abroad to lead office branches. The population is relatively young, well-educated, highly trainable and speaks English with excellent proficiency. The country’s public and private institutions also use English documents, preventing the need for interpreters.

The Director-General added that the country, along with India, has become one of the world’s top outsourcing destinations, with Metro Manila and Cebu City making the top 10 list of most attractive cities for outsourced services.

The Philippines’ membership in the World Trade Organization has played a role in its economic success, Azevedo told the participants in the Asia Pacific Economic Cooperation (APEC) Ministers Responsible for Trade (MRT) meeting. The WTO chief also mentioned the country’s part in 2013′ Bali Agreement, saying the Philippines has shown “tremendous leadership” throughout the process, and its support was vital in driving forward the partnership. 

The Bali meeting led to the creation of the Trade Facilitation Agreement that is important economically to the Philippines and the rest of the world. The agreement could contribute up to $1 trillion in revenues per year to the global economy and create 21 million jobs worldwide.

“By making the movement of goods across borders faster, easier and cheaper, it is estimated that this Agreement will reduce trade costs at the border by up to 15% for developing countries,” said Azevedo. “Here in the Philippines, an enhanced global trading system would offer very significant and increased opportunities for growth and development.”

The members of the APEC are set to draw the terms of reference (TOR) for the Free Trade Area of the Asia-Pacific (FTAAP) in 2015. Trade Secretary Gregory Domingo said the APEC trade ministers will discuss efforts to achieve economic integration in the region, multilateral trading system support and greater participation of micro, small and medium enterprises in regional and global markets.

During the Cebu ICT-BPM Conference held earlier this month, Information Technology and Business Process Association of the Philippines (IBPAP) chief executive officer Jomari Mercado said that the Philippines outsourcing industry is strengthening its partnership with the academe to sustain the country’s talent pool. IBPAP has implemented the Service Management Program (SMP) in colleges and universities across the country. The program aims to train students for entry-level positions in the IT-BPM sector. 

The Technical Education and Skills Development Authority (TESDA) also showed its support to Outsourcing Philippines by allotting P2.2 billion in 2016 to expand the coverage of their Training for Work Scholarship Program (TWSP) for ICT-BPM. This figure is a P200 million increase from 2015’s budget. The educational programs are expected to boost the growth of the Philippines outsourcing sector by 15 percent, according to Mercado.

A traditional call center stronghold, the Philippines continues to attract global companies wanting to establish offshore captive centers and outsourced call centers due to the country’s large talent pool of English-speaking workers, lower costs, and cultural compatibility with the West. Everest Group partner H. Karthik said companies that have a heavy presence in India are also diversifying to other locations to lower risk.

Everest Group explained that the offshore captive center model is again in vogue this year, and alternative locations are benefiting. 

“The [global in-house] model has been thriving, and divestiture activity continues to decline…At an overall level we expect the model to continue to grow,” said Karthik. 

The new captive center model has matured, however, with the primary drivers being process improvement and value generation instead of cost savings. Karthik added that established captive centers are focusing on expanding their services, undertaking more complex work, and growing revenues. 

Generating 25 percent of the $150 billion global services market in 2014, captive centers are ideal for complex “knowledge” work, mission-critical tasks and activities involving intellectual property and sensitive data. The biggest users of captive centers are Fortune 500 firms in the technology and manufacturing, distribution and retail (MDR) sectors.

Senate President pro-tempore and bill sponsor Ralph Recto said that once signed into law, DICT will be the primary agency to spearhead the government’s ICT agenda. It is expected to promote investment in the ICT sector and create partnerships to foster growth and competitiveness. DICT will also provide free internet services in schools and public areas and consolidate the government’s ICT networks and resources into a single database to facilitate information requests.

Senate President Franklin Drilon explained that DICT was part of key economic reform legislation to help the country ease into the Association of Southeast Asian Nations (ASEAN) economic integration and face major development challenges.

The measure will merge the National Computer Center (NCC), the Commission on Information and Communications Technology (CICT) and other agencies under the Department of Science and Technology (DOST) and the Department of Transportation and Communications (DOTC) into one ICT governing body.

The IMF advised the Philippine government to increase investment and spending over the medium term, particularly on infrastructure and human capital. While the IMF lauded the central bank’s (Bangko Sentral ng Pilipinas) preemptive policies that led to better liquidity and credit growth and reduction in financial stability risks, it urged continued efforts to improve revenue spending, measures to offset policy changes that may erode revenues, and a comprehensive tax reform. The IMF added that these initiatives are critical to meet the country’s large spending needs.

Meanwhile, headline inflation is expected to hit the lower end of the central bank’s 2 to 4 percent target range due to lower prices of commodities such as food. The country’s current account, which measures the net transfer of real resources between the Philippine and international economies, is expected to remain in surplus due to strong revenues from outsourcing in the Philippines, lower oil prices, and strong remittances. The current account reached $12.6 billion in 2014.

However, the IMF cautioned that internal and external risks to growth remain, such as disruptive changes in asset prices due to contradictory monetary policies in developed economies. External demand could also weaken if deflation and lower growth occur in advanced and emerging markets.

According to JLL, one of the reasons for the city’s competitiveness is its population size and economic scale. Metro Manila is one of the five most populous cities in the world, and its gross domestic product (GDP) has been positive for the past few years. JLL researchers predict that Manila will rise to 25th place by 2020 and 18th place by 2030, a feat for a country that was ranked 28th in 2010 and was not even on the list in 2000.

Another key driver is outsourcing in the Philippines that has placed Metro Manila as the world’s second most attractive outsourcing destination behind Bangalore, India. 

“It’s a key tipping point. Increasing across the globe, cities that are successful have to be specialists in specific industries and Manila has that in the BPO industry. Manila is in the sweet spot of growth and momentum reaping the benefits of macroeconomic reforms, improving economic fundamentals, investment grade ratings, and global specialization,” said JLL Global Research Group Regional Director Jeremy Kelly.

Kelly said that globalization, urbanization and technology are changing the commercial real estate landscape, giving cities like Metro Manila opportunities to take center stage. The group of elite cities called the “global 30″ has competitive advantage due to economic scale and global connectivity. Besides JLL, consulting firm AT Kearney also ranked Manila second behind Jakarta, Indonesia in its 2014 Emerging City Attractiveness Index.

The income of outsourcing companies in the Philippines has already reached $18.4 billion, with earnings expected to increase by 15 to 17 percent in 2015. The IT and Business Process Association of the Philippines (IBPAP) estimates that outsourcing in the Philippines will earn $25 billion annually and employ about 1.3 million Filipinos by 2016.

BSP Deputy Governor Diwa C. Guinigundo said remittances from overseas workers are expected to grow at a slow but steady clip of 6 percent at most in 2015, while revenues from outsourcing companies in the Philippines are expected to grow by at least 16 percent this year.

Foreign remittances contributed the most to the country’s dollar income in 2014, reaching a record $24 billion and accounting for almost 10 percent of the gross domestic output. The remittances also helped stabilize the peso amidst market volatility.

Even with the strong performance of outsourcing in the Philippines, the central bank expects remittances to remain a major contributor to economic growth. In March 2015, cash remittances from overseas workers rose to $2.1 billion, an 11.3 percent year-on-year increase. Cash remittances hit $5.8 billion for the first three months of 2015, which is 5.5 percent higher than the figure posted in the same period last year.

Guinigundo added that overseas Filipino worker (OFWs) are still in high demand. “If other countries had substitutes for Filipino labor, we can get worried. But there aren’t any,” said Guinigundo.

“The competitiveness of the Philippines in this industry has been particularly helped by the large pool of university-educated workers as well as the strong English-language skills of the workforce,” said IHS chief economist for Asia-Pacific Rajiv Biswas.

From 2008 to 2014, export revenues from the Philippine BPO sector more than doubled to $18 billion, and the number of offshore outsourcing workers has already breached one million. Biswas added that the rapid growth of the Philippine BPO sector is driving country-wide economic development as cities outside Metro Manila become IT-BPO centers.

The projected GDP increase is set to make the country one of the largest consumer markets in Southeast Asia. It would also attract more foreign investment in the services and manufacturing sectors.

“The rapid growth of the IT-BPO industry is also creating positive transmission effects for the rest of the economy, including for the commercial property sector, with rapid growth in demand for commercial floor space, underpinning the development of existing and new office parks in urban centers,” Biswas said.

The steady inflow of remittances from Filipinos abroad, which hit a record-high $26.9 billion in 2014, also helps boost economic prospects. Biswas estimated that 35 percent of the annual remittances are accounted for by residential property purchases, further supporting the growth of residential construction. 

The Philippine government expects the economy to grow by 7-8 percent in 2015 and 2016.

ESCAP expects economic growth to slow down to 6.4 percent in 2016. “With the rebound in government spending and lower inflation, thanks to the drop in global oil prices, higher growth of 6.5% and 6.4% is projected for 2015 and 2016 respectively,” the agency said in its Economic and Social Survey of Asia and the Pacific 2015 report.

The new forecasts still fall far below the 7 to 8 percent target set by the government for 2015 and 2016, although the new figures are better than average estimates for Southeast Asia within the same period. The Philippines continues to lead many of its peers in the Association of Southeast Asian Nations (ASEAN) in terms of economic growth. The UN agency predicts that the entire region will grow only by 4.9 percent this year and 5.1 percent next year.

ESCAP expects the government to ramp up infrastructure spending before the May 2016 elections. It added that increased spending and strong performance by Philippines BPO (business process outsourcing) will continue to drive growth. The Philippine BPO sector is expected to generate $25 billion in revenues in 2016, making up 10 percent of the economy.

However, ESCAP cautioned that the slow recovery of the country’s trading partners and potential slowdown in remittances from overseas Filipino workers pose threats to growth. The agency advised increased public spending and regulatory reforms to encourage investments.

According to Tholons, Manila, Philippines BPO (business process outsourcing) has dethroned Mumbai as the call center capital of the world in terms of revenues and headcount. Multinational firms like HSBC, IBM, DELL and JPMorgan Chase have captive centers all over the country, and many other MNCs are continuing to establish new sites or expand operations. 

One of the reasons is cheaper office rent. Global property firm Colliers said prime office space in the central business districts go for two-thirds of the cost of office space in Mumbai, Bangkok, Taipei and Seoul. Other attractions are low attrition, modest wage inflation, and a relatively large talent pool of English-speaking workers with neutral accents. The country’s cultural compatibility with the West also lures North American locators to set up BPO centers here.

Today, the country’s information technology and business process outsourcing (IT-BPO) sector employs more than one million workers, and industry revenues are expected to reach $25 billion by 2016. IT-BPO currently represents about 6 percent of the country’s gross domestic product (GDP), which is expected to increase in the next few years.

Besides the strong performance of Philippines BPO, the steady inflow of remittances from Filipinos working abroad and increased consumer spending have helped the Philippines become one of the fastest-growing economies in Southeast Asia in recent years. The International Monetary Fund (IMF) projects a GDP increase of 6.7 percent in 2015, up from 6.1 percent in 2014.

JLL Philippines head of research, consulting and valuation Claro Cordero Jr. said the Makati central business district (CBD) is among the prime destinations in terms of quantity and price of office space. Metro Cebu closely follows Metro Manila in terms of office development projects.

Many foreign banks and multinational companies (MNCs) are also expanding their operations in the Philippines and adding to the demand, prompting the creation of new urban areas. Wong+Bernstein Business senior adviser Enrique M. Soriano III expects the trend to continue up to the third quarter of this year, then taper off slightly in the fourth quarter. Soriano said that over half a million square meters of office space will be added in Q4, which will ease the shortage.

The strong performance of outsourcing companies in the Philippines and steady economic growth are behind the trend. 

“The office demand and supply market will always mirror the state of our economy… we have seen the emergence of small businesses expanding their operations via compact and modular-sized office spaces in CBDs, e.g. Mindanao- and Cebu-based businesses expanding in BGC,” said Soriano.

Once again, the growth of the Philippine economy is predicted to outpace all major Southeast Asian markets this year and the next. Sustained economic growth will set off improvements in the country’s poverty levels, which the World Bank expects to drop from 15.4 percent in 2012 to 10.9 percent by 2017. Currently, the World Bank considers people who earn less than $1.25 a day “poor.”

Economic growth is also expected to reach 6.5 percent in 2015 and 2016, faster than the 6.1 percent growth reported in 2014. The World Bank slightly lowered the forecast for 2015 in line with the outlook for the region. The Asian economy is expected to grow by 6.7 percent this year, slower than last year’s 6.9 percent.

“Philippine growth is still one of the fastest among the major economies in the East Asia region, trailing only China,” said a World Bank representative. “Strong remittances, falling oil prices, and upbeat consumer and business sentiments indicate stronger growth in 2015.”

The global lender advised the Philippine government to implement its planned spending program to support growth. However, long-term poverty eradication will require structural and policy reforms that will protect property rights and raise health, education and infrastructure investments. The bank also urged the government to improve competition by breaking up monopolies and create more jobs through simplified regulations.

More than 50 percent of visitors to online shopping service Lazada come from mobile platforms, and banks are claiming their share of the m-commerce market with mobile banking applications. Consumers are also rapidly using transport sector mobile apps like Uber and Easy Taxi, according to research firm IDC.

Lazada CEO and co-founder Inanc Balci reported that while mobile phone penetration in the Philippines remains one of the lowest in Asia, it is nonetheless growing faster than other countries. Smartphone penetration is expected to reach 50 percent in 2015.

“We see two issues driving this; one is telco companies are investing more and making internet available in more places in the Philippines but at the same time smartphone prices are going down, partly because local brands are bringing better and cheaper smartphones into the market,” added Balci.

Despite a drop of 2 percentage points from last year, the overwhelming majority (86 percent) of Philippines business leaders are optimistic about the economic climate in the next 12 months. The percentage of business leaders expecting an increase in exports and business profitability also rose from 20 percent to 27 percent and from 22 percent to 38 percent, respectively.

The Grant Thornton Internal Business Report (IBR), a quarterly survey of more than 2,600 business leaders worldwide, showed that more than half (56 percent) of Philippines business leaders expect employment to increase. This figure is up from 14 percent in 2014. 

The Grant Thornton report revealed that business confidence in the ASEAN region rose from 23 percent to 40 percent in just three months. After the Philippines, Indonesia (68 percent) and Thailand (36 percent) improved their rankings among ASEAN members. Worldwide, Ireland (92 percent) showed the most promise, followed closely by India (89 percent). Meanwhile, business confidence hit a two-year low in Japan (-17 percent) and an all-time low in Argentina (-38 percent) and Brazil (-18 percent).

The Philippines posted a 6.1 percent economic growth in 2014, much lower than the 7.2-percent posted in 2013. This growth was the second fastest in Asia for that period, but it still fell short of the upper limit of the government’s 6.5 to 7.5-percent target for 2013.

According to ICAEW’s report, the conservative estimate for 2015 was due to persistent infrastructure problems and blackouts that may threaten the country’s strong growth rate. However, ICAEW said that strong public funding should allow the country to implement infrastructure improvement projects.

Under the Aquino government’s public-partnership program implemented in 2010, nine infrastructure projects worth P135 billion have already been awarded. In December 2014, the country’s Public-Private Partnership (PPP) center reported that another set of projects worth P625 billion was being prepared to improve infrastructure and economic growth.

During the Asia BPO Summit, Reyes said that all the sectors are growing, even contact center services, which grew between 15 to 17 percent last year. Despite challenges IT-BPO Philippines is on track to reach $25 billion in revenue and 1.3 million in employment by 2016. Reyes added that the industry was optimistic in terms of sustained growth due to diversified services offered by IT-BPO vendors and the sector’s overall performance.

While contact center services still accounted for the biggest revenue share, healthcare information management was the faster-growing segment in 2014. Reyes expects the demand for healthcare information management to grow due to the implementation of the International Classification of Diseases 10 (ICD 10) system in the United States. 

ICD-10 necessitates a major transformation of the U.S. medical coding system, presenting opportunities for Philippine vendors to offer key services. Reyes stressed that the country’s healthcare information management will “really shoot up” if companies take advantage of the opportunity.

Significant Year

2014 was a significant year for Philippines outsourcing, not only because of double-digit revenues but also because of the more than 1 million jobs generated for Filipinos. IT-BPO Philippines employed about 1.03 million people at the end of 2014, of which 630,000 workers were in the contact center segment. 

U.S. firms make up 77 percent of services outsourced to the country, while 23 percent are shared by companies in the Asia-Pacific region. Reyes said the Philippines continues to be a top destination for IT-BPO companies because of its educated labor force, excellent infrastructure, government support, cost competitiveness, and proven track record. 

IBPAP’s goal for 2015 is to hit $21.3 billion in revenue and 1.18 million in terms of job creation. This year, IBPAP will create a new road map and set new targets for the IT-BPO sector from 2016 to 2022.

“We do a lot of artwork for them, some programming and tech support services. We sell a lot of art, background work, object design and detail work like face-rendering and constructs. (The government) is supporting it because it is one of the fastest growing industries and it has a lot of potential.”

Dinsay said they also have Filipino contacts in Microsoft and other companies, based in the U.S. and Canada, who support game development in the Philippines. It was the first time the Philippine sent delegates from the private sector, government and academe to the three-day expo.

Game development and software development is a young and fast-growing industry in Asia. Key players in the region include Indonesia, South Korea, Singapore, Malaysia, Taiwan, and the Philippines.

BPO Philippines revenues hit $7.1 billion in the third quarter of 2014, 11.8 percent higher than revenues posted in Q4 2013. The latest figures from the World Trade Organization and the United Nations Conference on Trade and Development placed the $7.1 billion revenue from Q4 2014 higher than the $4.7 billion posted in the first quarter and the $6.1 billion posted in the second quarter of 2014.

Meanwhile, total service exports that include non-commercial services are not expected to meet the government target of $24.4 to 24.81 billion in revenues. While Department of Trade and Industry Export Marketing Bureau director Senen M. Perlada acknowledged the contribution of the Philippines outsourcing sector to overall growth, he said that total service exports growth rate in 2014 is projected at around 5-6 percent or about $400 million less than the lower limit of the target level.

Perlada is optimistic about service exports in 2015 due to a robust exchange rate, a surge in the number of road shows, and continued interest in services.

Major property developer Megaworld said they have almost 200 tenants in their portfolio, pushing the company to create supply. Colliers estimated that about 1.85 million square meters of office space will be added in 2015 through 2017 in Makati, Ortigas, Bonifacio Global City, and Quezon City business districts. 

Real estate consultancy firm CBRE Philippines told Reuters that over 50 percent of the office space supply for 2015 had already been leased by February. CBRE also reported that the strong demand for new office space has increased Metro Manila’s average lease rate by 8 percent to $18 per square meter at the end of 2014. Data from 2013 showed a 4 percent increase by comparison. The vacancy rates in prime business areas in the Metro also dropped to 4.5-5 percent from 2010 to 2014 from a 9 percent drop in 2009.

Global firms, “established (like HSBC and Accenture) and new”, remain attracted to outsource to the Philippines because of low operating costs and a workforce that speaks English with high proficiency.

Avoca Group senior consultant Denise Calaprice-Whitty said that many companies are opting for lean outsourcing in 2015 to reduce costs. Calaprice-Whitty added that most companies that use the models are successful. However, the report showed that sponsors do not simply outsource to any provider without first establishing a positive working relationship with the CRO.

“The sponsor companies involved in this research did not typically move into full-service lean outsourcing without having had years of positive experience with a given CRO in a more “traditional” outsourcing model prior to the transition,” said the report.

Companies that formed successful “lean” outsourcing partnerships also considered decisions such as what core competencies to keep in house, type of trials to be outsourced, best practices and tools, functional vs. full-service agreements, and number and type of CROs, among others.

Besides product development, protocol development is another area shifting towards the lean model, as CROs were thought to assume greater ownership and have the expertise to perform the function efficiently.

Companies are also focusing on sophisticated cloud infrastructure and consolidated shared service delivery models. Sealock stressed that organizations should prioritize outsourcing campaigns that serve overall business goals instead of disparate functions. 

CIO magazine similarly predicted that offshore outsourcing service agreements will focus on outcomes. CIO analysts expect providers and clients to adopt outcome-based contracts to protect against expensive, upfront costs.

Information Services Group (ISG) principal consultant Scott Feuless told CIO that “the number of service providers each company uses will grow dramatically, driven by growing popularity of cloud in general and Software-as-a-Service (SaaS) in particular.”

Pace Harmon expects other key trends to emerge in 2015, including cloud-based solutions that tie incentives to performance, sophisticated cloud strategies optimized for analysis and testing, and consolidation of back-office services. Clients are moving away from individual shared services and turning to bundled services to standardize processes and achieve economies of scale.

Membership Benefits

IBPAP helps BPO companies flourish with programs in areas like education, training, security, privacy, public policy, offshore marketing, and others. Besides serving as an advocacy and information channel for the BPO industry, IBPAP helps potential investors establish operations in the Philippines with networking events, human resources programs, business development plans and knowledge support.

By partnering with IBPAP, Sourcefit can share best practices and take advantage of opportunities to be more competitive, while staying committed to providing top quality and close, personal service for their global clients. Sourcefit’s membership in IBPAP also promotes a steady flow of highly skilled and motivated talent;new ideas for service innovation; expanded corporate branding and marketing; and information sharing with other members.

About the Company

U.S.-managed Sourcefit is a business process outsourcing company based in Manila, Philippines. It provides custom offshore staffing solutions to small, medium, and large businesses all over the world. Founded in November 2006 as a mobile application development firm, the company expanded its reach in 2007 to include process consulting and outsourced content moderation services.

In 2008, Sourcefit expanded beyond telecommunications to offer services to the IT, Direct Marketing, Banking, Hospitality, Retail, Telecom and Advertising industries. The company was founded and is led by American entrepreneur Andy Schachtel, who has more than 20 years of experience in outsourcing both on the client side and as a provider.

The report cites the Philippines’ strong performance, with its rising foreign direct investments, remittances from Filipinos working abroad, a booming Philippine outsourcing sector, and record-high real estate activities.

The country hit a 6.9 percent GDP in the fourth quarter of 2014 and recorded an overall 6.1 percent GDP growth for the entire year, placing it ahead of its many Asian neighbors. Growth forecast for 2015 is set at 6.5 percent and 7.3 percent in 2016.

Meanwhile, China’s dazzling economic growth is slowing down due to challenges like high public debt, regional economic imbalances, and low domestic consumption. China’s GDP for 2014 was 7.3 percent, called “disappointing” by analysts. GDP forecast for 2015 is 6.9 percent and 6.7 percent for 2016. 

“China is balancing on the steep and narrow path between growth and reform. This could begin a new seven-year cycle during which GDP growth might likely fall into a range of 6 to 7%,” said the Citibank study. Citibank’s report said that India will also outperform China in the coming years.

JLL head for research, consulting and valuation Claro Cordero added that the new township projects will further drive the Philippine BPO industry boom by providing real estate options and office space to companies looking to expand or establish operations in areas close to labor hubs.

Majority of the real estate developments are located in urban areas like Uptown Bonifacio Global City, Vertis North, McKinley West, ARCA South, South Park District, La Fuerza, and Woodside City. The rest are in Laguna, Pampanga, Cebu, and Davao. Besides Bonifacio Global City in Taguig, Ortigas and Makati, Quezon City remains a top BPO destination for the outsourcing industry in the Philippines due to its large labor pool and good facilities.

Ledonio said the locations provide high-quality but affordable talent and cost efficient rental options, adding that many big and new developers are interested in areas outside Metro Manila to attract companies in the Philippine BPO industry. JLL reported that 75 percent of IT-BPO jobs are in the National Capital Region, while 6 percent are mostly in Central Visayas. 

Growth in Retail and Convenience Stores

The Philippine outsourcing industry boom has been accompanied by the rising number of convenience stores like 7-Eleven, which was expected to open 401 new stores in 2014. JLL said the growth of the convenience store market is in correlation with the round-the-clock type of operations that characterize the business process outsourcing sector. Besides 7-Eleven, Mini Stop and Family Mart, Indonesia’s Alfamart and Japan’s Lawson are also expected to open new stores nationwide.

Meanwhile, expectations for the retail industry also remain hopeful. JLL head for tenant representation Lizanne Tan said Metro Manila currently has 7.6 million of the total 14.2 million square meters of retail space in the Philippines, while 6.6 million are outside the capital. Retail space growth will continue to increase in the provinces until 2015.

Biswas added that gradual economic reforms and a significantly improved fiscal deficit have driven the transition as he affirmed the booming offshore outsourcing industry in the Philippines. In only five years, from 2008 to 2013, revenues from outsourcing companies in the Philippines have more than doubled to reach $13.3 billion. The boom is positively affecting not just outsourcing companies in the Philippines but also the rest of the economy, with construction of urban office parks and increased demand for commercial real estate floor space. Meanwhile, remittances from Filipinos working abroad remain a key driver, and are estimated to have reached $26 billion in 2014. 

Overall, Biswas said the country’s fiscal position has been improving due to “lower fiscal deficits and reduced government debt levels as a share of GDP.” Outlook for the near-team remains positive, while growth for medium-term forecast is supported by strong consumption growth.

Although the country’s economic growth of 6.1 percent for 2014 was much lower than 2013’s 7.2 percent growth, it was enough to make the Philippines the second fastest growing economy in Asia, just behind China. Balisacan expects the economy to grow about 7 to 8 percent in 2015. 

With a projected growth of about 4.5 to 5.0 percent every year from 2016 to 2030, Biswas expects the Philippine gross domestic product (GDP) to rise from the current $280 billion to $680 billion by 2024 and $1.2 trillion by 2030. The analytics firm forecasts the total GDP per person will increase from $2,800 in 2014 to about 5,800 by 2024. The tremendous economic improvements and expanding middle class over time will turn the Philippines into one of ASEAN’s largest consumer markets, said Biswas.

However, existing challenges are expected to continue. While the level of corruption has improved during President Aquino’s term, Biswas said there is still work to be done to improve transparency and governance. 

JLL’s Global Top 30 report confirmed the dominant position of Manila, Philippines as a top BPO location or business process outsourcing destination in the world. “Rapid urbanization is pushing Manila into becoming one of the largest cities in the world,” said JLL Philippines head David T. Leechiu. Leechiu added that the results meant more people needing more real estate, specifically real estate backed by infrastructure and a credible, thought-provoking, enforceable and sustainable master plan.

The Top 30 list, which started in 2012, is the result of a survey of more than 650 global urban centers. JLL considered weighted variables such as gross domestic product (GDP), population, commercial real estate stock, corporate presence, real estate investment, and air connectivity in determining which cities made the top 30. 

In 2014, JLL named 300 cities that are the “bedrock” of global commercial and real estate activity, accounting for more than half of total commercial real estate investment among the urban centers, and included Manila for the first time. As a whole, Manila showed good numbers for office rental, population, GDP, and GDP growth.

JLL operations director Trixie Syling-Arriola said Manila is no. 17 in office rental growth among the Global 300 and no. 9 among the Top 30, an impressive showing for a first timer. Cebu City is also included in the Global 300.

Manila displaced Madrid in the top 30 urban centers in the world list, indicating the movement of real estate activity towards the Asia-Pacific region. Since 2012, Tokyo, New York, Paris and London have been leading the list and accounting for almost a fifth of the total commercial real estate investments and office stock in the Global 300.

Tholons managing director Ankita Vashistha said the top 10 ranking was marked with “significant movements” in 2015. Bangalore, India remained the world’s top outsourcing location, followed by Manila, Philippines. Other outsourcing locations in the Philippines such as Cebu City, Davao City, and Santa Rosa in Laguna also retained the no. 8, no. 69, and no. 82 spots, respectively, bringing the overall total of Philippine cities in the list to eight.

Meanwhile, some cities dropped out from the top 10. Dublin City in Ireland fell two spots to number 12, with the 10th and 11th spot filled by Shanghai, China and San José, Costa Rica. Vashistha said the continued growth of the Chinese and Latin American markets have the potential to push these two cities further into the top 10, despite “systemic problems” in each region.

“The rise of Shanghai to the 10th rank and San Jose on its heels at 11th will be an interesting play in the following years, as both Latin American and China markets grow abound simultaneously,” Vashistha further said of the Top 100 outsourcing destinations 2015 list.

In addition to Latin America, the Asia Pacific market is showing “very positive” regional development with an upward trend in the rankings, particularly for Tier 2 locations, said Vashistha. However, she added that sociopolitical issues in Europe, Africa and the Middle East continue to prevent further IT-BPM growth in those regions.

The services sector, led by Philippine business process outsourcing (BPO), grew by 6 percent in Q4 last year, the same growth for 2014’s total year average. The industry currently employs 1.052 million Filipinos, and voice and non-voice outsourced services in the Philippines are expected to increase employment to 1.3 million and hit $25 billion in revenues by 2016. 

However, economists say there is more work to be done to make the growth driven by the boom in Philippine business process outsourcing, telecoms, and real estate inclusive. They criticized the growth that threw the spotlight on the disparity between private and government spending. 

NEDA Deputy Director General Emmanuel Esguerra also said there are still remaining potentials that can be developed. He added that the country is in a unique strategic position that could help small and medium-sized businesses reach global value chains (GVC). The Philippines has the highest GVC participation in electrical and optical equipment among APEC countries, according to Esguerra.

Trade Secretary Gregory Domingo identified a type of small and medium enterprise that could benefit from better promotion. “Some of them [SMEs] produce very good quality products. They are mainly in food processing. They are also in handicrafts. They are also in furniture and also in the production of smaller items. And these are the ones that really need the most help,” he said.

The Philippines leads the world’s largest economic gathering in almost two decades in the APEC Senior Official’s meeting at Pampanga’s Clark Freeport Zone from January 31 to February 7. The gathering focuses on the integration of SMEs to global value chains.

IDC Philippines country head Jubert Daniel Alberto said increased spending is a “healthy sign” for the country. Organizations and businesses in the Philippines will also ramp on innovation efforts with newer technologies, starting with integrating 3-D printing, and minimum level of Internet of Things into their business processes, and supporting these with better security and interfaces.

Alberto added that challenges like natural disasters will be “short-term only,” and growing demand from small and medium-sized enterprises (SMEs) will continue to support the Philippine ICT industry. IDC said the local telecoms sector is also set to grow by 4.7 percent this year. Affordable and ubiquitous smartphones are one of the key growth drivers, with operators upgrading telecoms coverage and networks.

An IDC market analyst advised companies to expand partnerships to include applications, analytics, connectivity, security and platforms and not be limited by devices and sensors. IDC cautioned that while activity will increase due to opportunities in the sector, companies will have to study the challenges on the road to turning it into a long-term business model.

However, the organization remains cautious about the general job outlook due to slower economic growth in 2014. The government continues to struggle with job creation following a 6 percent job growth in October this year, according to Ecop president Edgardo Lacson.

While the economy added about 1.05 million jobs up to October, the country’s unemployment rate remains the highest in Southeast Asia. Lacson said that investments in manufacturing, agribusiness and tourism are important to sustain gains in job creation. 

Ecop expects more jobs in 2015 because of government and private infrastructure projects. Lacson also expects the 2016 elections to boost spending and employment. He believed the mining industry should be revived because it created the most jobs in rural areas.

Trade secretary Gregory Domingo cited the increasing flow of foreign direct investments to the Philippines for the past four years, adding that the country beat Malaysia in terms of growth. Foreign direct investments were $1 billion in 2010, $2 billion in 2011, $3.2 billion in 2012, 3.8 billion in 2013, and $4.8 billion in 2014. 

Gross domestic product (GDP) growth rate from January to September last year reached 5.8 percent and the government is targeting 7 to 8 percent growth for 2015. This is higher than the International Monetary Fund’s (IMF) forecast of 6.3 percent growth for the country in 2014.

In addition to the FDI figures, Domingo mentioned Moody’s recent credit rating upgrading for the Philippines which is expected to further increase investments.

“There are many good things going in the Philippines, I am very optimistic about our economic growth in the next few decades,” Domingo said. 

Trade undersecretary Adrian Cristobal, Jr. is similarly optimistic, saying that the manufacturing sector and exporters can benefit from the strong peso. DTI also expects infrastructure development projects to move faster.

Many businesses are also hopeful about the economy, and 2014 exports have been stellar especially for higher value products. Balisacan expects the gross domestic product (GDP) for Q4 to improve on Q3’s paltry 5.3 percent growth.

He added that typhoon Ruby’s impact on the economy of about 0.02 to 0.03 percent of the GDP was “very negligible,” and the agriculture sector’s share of the GDP was only around 11 percent. Balisacan mentioned strong macroeconomic fundamentals and optimistic Q4 outlook by the Bangko Sentral ng Pilipinas as some “bright prospects” to look forward to before 2014 ends.

Earlier, Balisacan said the government hopes to reach at least 6 to 7 percent GDP growth in 2014. To hit the 6 percent full year growth target, the economy must grow at least 6.6 percent from October to December. Meanwhile, a higher 8.6 percent Q4 growth is required to reach the lower end of the 6.5 to 7.5 percent official GDP goal of the government.

The NEDA director general pointed out that the Philippine economy will withstand Japan’s recession and Russia’s currency meltdown because of it diversified foreign exchange earnings. Russia’s currency plunged to an all-time low on Monday due to the effect of economic sanctions from the West and falling oil prices. Japan’s third-quarter gross domestic product (GDP) also dropped by 1.6% after plummeting to 7.3% in the past three months as consumers reigned in spending because of the higher national sales tax.

The Philippine BPO industry is a diverse source of foreign exchange due to a wide range of services that have expanded beyond call centers and customer support. Today, BPO providers in the country offer everything from IT infrastructure to accounting to healthcare services. The manufacturing sector is also boosting economic growth and helping the Philippines weather less than ideal conditions in major foreign economies.

Balisacan called the Philippines “well-placed,” citing many sources of foreign exchange like tourism and manufacturing. He said the weak Japanese economy could even be favorable as Japanese companies relocate their operations to the country.

“When there was a hiccup in Japan 10 years ago, it hit our electronics and semiconductor industry significantly as these are 70% of our exports. This is no longer the case,” said Balisacan. “Many Japanese companies are visiting our country for outsourcing.”

ING GSO began by offering lending, payment processing, reconciliation, and static data management services to its clients in eight Asian countries, including the Philippines. In the following months, ING included processing services from Amsterdam and trade finance services processing from Singapore.

ING commercial banking in Asia chief executive Mark Newman said ING GSO is crucial in providing high quality and efficient services to ING clients across time zones.

The ING exec added that ING Bank has been in the country for almost a quarter of a century now. The decision to choose the Philippines as a key location for their shared services and processing hub is another vote of confidence. 

“We are positive that the country’s business-friendly policies, infrastructure and the pool of Filipino professionals will make ING GSO a significant contributor to the bank’s operational excellence,” Newman said.

The OECD said that the Philippines is another economy driven by domestic demand, supported by political stability and remittances from overseas. Growth in the country is seen to be favorable in the medium term. The keys to sustained growth, according to the OECD, are the success of measures to reduce unemployment, create jobs, and improve infrastructure.

In the report titled “Economic Outlook for Southeast Asia, China and India 2015: Strengthening Institutional Capacity”, the OECD is optimistic about growth prospects over the next five years. The region’s gross domestic product (GDP) growth is expected to hit 6.5 percent on average annually from 2015 to 2019, slightly lower than its 6.9 percent 2014 to 2018 growth forecast.

The OECD said slowdown in China will affect growth in the region, but the 10 ASEAN countries can still look forward to a “robust” growth momentum. The Philippines is expected to emerge ahead of other ASEAN-5 countries Indonesia, Malaysia, Vietnam, and Thailand, with an average GDP growth forecast of 6.2% annually from 2015 to 2019. This is up from the OECD’s 5.8 percent projection for 2014 to 2018.

On the back of stellar growth in the past two years and the second quarter of this year, the Philippine government expects the economy to grow 6.5-to 7.5 percent in 2014, 7-8 percent in 2015, and 7.5-8.5 percent in 2016. The actual 2014 year to date GDP growth for the country was far below expectations, however, hitting an average of only 5.8 percent.

Romulo named 45 large BPO firms as the Philippines’ leading employers, adding that the companies greatly reduce unemployment among recent graduates and young professionals. Romulo expects the outsourcing and back office providers to lead the creation of over 248,000 jobs in the BPO industry in 2015 and 2016.

In 2013, the combined revenues of BPO companies hit $5.9 billion. The Philippine BPO industry is expected to generate up to $27 billion in annual revenues and employ more than 1.3 million Filipinos by 2016, according to the IT and Business Processing Association of the Philippines or IBPAP. The IT-BPO sector employs about 1.052 million Filipinos as of 2014.

Filipinos make up 60 percent of condominium sales activities, while 40 percent belongs to foreign buyers that are particularly interested in the luxury, high-end, affordable and mid-market residential investments. 

The country also remains attractive for investors because of efforts by the local government to improve infrastructure and political stability. CBRE cited low interest rates and mild inflation as real estate growth drivers. In the third quarter of 2014, Philippine real estate activities increased to 8.9 percent, faster than the country’s gross domestic product (GDP) growth.

The upcoming ASEAN economic integration is further expected to lure more businesses to the country, especially companies who want to extend their market reach. CBRE Philippines chairman and president Rick Santos said that the continuous transformation of cities into business landscapes will further solidify the position of the country as an investment destination in the years to come.

“As long as this performance continues, and even improves, we can only see nothing but great developments in real estate especially with the ASEAN integration coming up,” Santos added.

Despite the “next wave cities” program geared to expand outsourcing beyond the capital, only a few pioneer BPO firms have established centers in locations outside Metro Manila. Mercado cites well-planned development in the central business districts (CBDs) as the major draw for foreign investors. He added that the “normal reaction” of North American businesses is to choose Manila.

IBPAP recently identified Bacolod, Davao, Iloilo, Cebu City, and Sta. Rosa in Laguna as “next wave cities” because of the talent pool, infrastructure, business continuity, and cost competitiveness in these areas. BPO expansions in these cities are expected to create job opportunities for the locals. There are about 20 BPO firms in Cebu that employs 200,000 people, and Bacolod’s BPO sector employs about 20,000 workers.

Manila is ranked number 2 in the latest Tholons’ Top 100 Outsourcing Destinations, with six other Philippine cities included in the outsourcing locations list.

Twenty finance ministers and bankers met in February earlier this year and agreed to over 900 initiatives that aim to increase the world’s GDP by 2 percent over targets and potentially generate millions of jobs. However, it remains to be seen as to how the world’s economic powerhouses will reach the economic target.

Every country is expected to present a comprehensive strategy during the forum, but “unlikely to reveal specifics,” said an economics professor at Australia’s Griffith University. The professor does not expect the group to churn out a detailed roadmap for each country, but a commitment to inclusive economic growth that is “accessible to all individuals.”

According to Australian Treasurer Joe Hockey, the group will achieve the economic target by focusing on driving growth in the private sector and increased investment in infrastructure. G20 Studies Centre director Mike Callaghan also said the G20 leaders must focus on extra infrastructure spending, multilateral trading systems and preventing profit shifting and tax avoidance to produce significant results.

European leaders have expressed support for these strategies, with European Council President Van Rompuy and European Commission President Barroso stressing the importance of coordinated growth plans, anti-corruption and tax policies, and finalized financial reform agreements.

According to a study by global consulting firm Frost & Sullivan, the APM market will hit $1.4 billion in 2020, a significant increase from earned revenues of $379.9 million in 2013. The key growth drivers are end users in the finance, banking, online retail and e-commerce, information technology (IT), and healthcare sectors.

Frost & Sullivan Information and Communication Technologies Research analyst Vu Anh Tien said companies who want to meet high customer expectations will invest in user-based, model-driven applications. 

Tien added that some organizations already know the importance of going beyond infrastructure and network management to app management. The tech research analyst further said that an integrated approach toward APM and a convergence between network performance management and APM will be crucial to stay afloat in this rapidly changing market.

Called “Erectus,” the real-time strategy and browser-based game will be free to play by large numbers of people at the same time. Erectus is the story of two warring civilizations, Home Sapiens and Homo Erectus, set about 130,000 years ago. The game targets players 16 years and older.

Maata Games managing partner Paul Ludwig said gameplay and storyline conceptualization, design, and development were already completed in the Netherlands, but coding and programming will be done in Davao by NBSI developers.

Maata Games previously considered outsourcing to Eastern Europe, but decided to partner with a Philippine BPO for game development due to lower cost, but high-quality game developers who are able to work efficiently within a team environment. 

“One thing that I was very sure of is programmers here are really qualified to do the job…I am certain the job here will be done properly,” said Ludwig.

Ludwig added that the company has sent a scrum master to prepare the NBSI staff for game development, and he would be checking on the progress regularly as well. Development began earlier this month and is expected to be completed on March 2015. 

The game will be introduced in English, Dutch, Japanese, and Tagalog. After the game is launched, Ludwig said Maata Games will continue to partner with NBSI in hopes to develop a mobile game application.

The Erectus gameplay involves raising a civilization to form alliances with or attack other players. The game also features a shop where players can buy improvements and upgrades. What sets it apart from similar MMOG games is its focus on storyline and rich historical content.

The IMF’s 2015 growth forecast for the Philippines is much more modest at 6.3 percent because of “tighter global financial conditions triggered, for instance, by greater volatility induced by US monetary policy normalization or a spike in global risk aversion.”

The IMF pegged the country’s 2014 gross domestic product (GDP) growth at 6.5 percent earlier, but cut it down to 6.2 percent in July after a significant slowdown during the first quarter of the year. Manufacturing and export rallied in the next quarter, boosting growth by 6.4 percent but still slower than 2013’s second quarter growth of 7.9 percent.

IMF representative to the Philippines Shanaka Jayanath Peiris said that the 6.2 percent forecast remains because economic changes and exports performance were very similar to expectations. In July, manufactured goods were valued at $5.461 billion, while exports totaled $35.129 billion.

The IMF’s forecast is considerably lower than the Philippine government’s 7-8 percent target, but the country is still ahead of Vietnam (5.6 percent), Indonesia (5.5 percent), Malaysia (5.2 percent) and Thailand (4.6 percent).

The World Bank’s latest growth forecast for the Philippines is 6.4 percent in 2014, 6.7 percent in 2015 and 6.5 percent in 2016, based on the expectation that the government would increase spending and reform fiscal policies.

Similarly, the Asian Development Bank’s (ADB) lowered its growth forecast to 6.2 percent for 2014 due to reduced government spending, inflation and tighter monetary policies. Both financial institutions, however, also expect the Philippines to be the fastest growing economy in Southeast Asia in 2014 and 2015.

The report showed that Manila’s Office Rental Index increased to 6.5 percent quarter-on-quarter. Manila and Singapore (up 3.3 percent quarter-on-quarter) remained the top performers in the region due to strong demand for office space in the central business districts.

CBRE Director of Research Jonathan Hsu said that in the third quarter of 2014, Singapore and Manila saw continued robust growth as a result of limited prime space in central business districts, in particular driven by the success of offshore outsourcing in the Philippines and expectation of rent hikes in Singapore. 

The index by the real estate services advisory firm also showed positive rental growth in the third quarter for Shanghai, Melbourne and Sydney, suggesting steady market improvement. Meanwhile, cities like Mumbai and Seoul saw slow office space demand and decreased rentals in Q3. Beijing rental rates dropped for the first time since 2010-2011, but market fundamentals remained robust as property owners continue to determine the price of rentals.

The overall APAC Office Rental Index for Q3 rose to 0.93 percent quarter-on-quarter, somewhat faster than Q2’s 0.8 percent growth. Annual growth was the fastest since Q1 of 2012, with a 2.9 percent year-on-year growth led by Manila and Singapore.

Vacant office spaces across APAC dropped to 27 bps or 8.4 percent, the lowest point since the second quarter of 2008. Even in areas where there is oversupply of office space, tenants are finding it hard to secure prime spaces that meet their needs because of limited supply.

CBRE forecasts that office leasing will remain stable as 2014 draws to a close and continue on to 2015. The firm expects the APAC Office Rental Index to increase to 4 percent this year, with strong growth for Singapore and Japan.

NelsonHall director of ITO research Dominique Raviart said the third quarter of 2014 was a “landmark quarter” for IT outsourcing, and the first time since Q4 of 2012 that market spending was not negative.

Raviart added that businesses have resumed investing in ITO, signing higher scope contracts, and somewhat boosting discretionary investments in long-term contracts. Meanwhile, ITO bookings or contracts signed dropped 20 percent from the first to third quarters of 2014 due to negative values in North America. 

The commercial sector increased bookings to 90 percent but with low total contract value (TCV) levels. Public sector bookings were down 70 percent, also with low TCV levels. Similarly, ITO bookings in Europe dropped significantly in both the commercial and public sectors, with low TCV levels.

The level of new scope contracts, a key performance indicator (KPI), was at 40 percent or at the higher end of the normal range. Europe was slightly higher than North America on this KPI. 

For 2015, NelsonHall expects IT services spending to increase to 3 percent due to offshoring driving down prices and causing lower spending in general. ITO spending in 2015 is expected to remain flat mainly because of low level ITO contracts.

The largest share of the HCIT market belongs to North America (72 percent), where it is projected to increase to $36 billion by 2018 from $25 billion in 2013. The Asia Pacific region is forecast to reach a CAGR of 8.1 percent, followed by the rest of the world (7.8 percent), North America (7.6 percent) and Europe (7.2 percent).

The report cites healthcare IT outsourcing as an “efficient solution” to the growing demand for quality and affordable healthcare services. HCIT outsourcing is attracting many mid-size businesses as well as established corporations looking to curb healthcare costs and manage back office and IT management cash flow. 

Companies are also outsourcing IT to comply with new regulations (including the ICD-10 coding guidelines) set by the U.S. government, meet the demand for unified IT solutions, address the aging population and keep up with medical tourism. Some firms outsource entire information management systems, while other only outsource certain functions, like billing and customer relationship management systems.

Cuisia urged decision makers and managers to invest in the Philippines, citing the skyrocketing growth of the country’s IT-BPM sector within the last decade. He mentioned the 6.4 percent GDP growth in the second quarter of 2014 and similarly encouraging growth projection for the rest of the year.

The ambassador said that the Philippines is one of the bright spots in the region, the second fastest growing economy among major Asian countries for the period.

Consul General Mario De Leon also spoke at the event, saying that the Philippine IT-BPO sector targets $18 billion in revenues in 2014 and currently employs one million Filipinos, with 2.5 additional jobs created for each direct hire. 

2016 projections of the IT and Business Process Association of the Philippines are optimistic, with a $25 billion revenue target and 1.3 million direct employees. This chunk will account for 7.8 percent of the country’s GDP.

De Leon added that the country is “determined” to boost its market share by offering high value added services like outsourced finance and accounting, animation, gaming, software development, and medical and legal transcription.

According to De Leon, Seven Seven Corporate Group was one of the first American companies to outsource to the Philippines, contributing greatly to the accelerated growth of the IT-BPO sector. 

The study showed that companies want to reduce costs, and payroll outsourcing means not only more savings but scalable and reliable services and applications that can be accessed anytime. Buyers also want a well-run payroll system to retain employees and ensure effective and timely payroll processes. 

Other reasons for outsourcing payroll functions include low cost, reduced work pressure and better quality services. One of the primary drivers of the growth is the accountability of payroll outsourcing providers that take responsibility and able to correct mistakes quickly, reducing the workload of in-house staff and allowing managers to focus on core activities.

The report also states that one of the biggest challenges of the global payroll outsourcing market is employee regulation and policies. Payroll outsourcing vendors analyze organizational data, calculate gross salaries, allowances, reimbursements, benefits and taxes. 

Currently, the IT-BPM industry employs about one million Filipinos. Montejo calls the 1.3 million job projection by 2016 “very achievable,” saying that the $18 billion revenue target at the end of this year makes the 2016’s $25 billion target more realistic.

The “Next Wave Cities” program was developed by the agency’s Information and Communications Technology Office and aims to establish IT-BPM centers in areas outside Metro Manila and Cebu. Under the program, cities like Sta. Rosa, Baguio, Bacolod and Iloilo are being groomed to be one of the top IT-BPM hubs in the world.

The program will implement activities that increase awareness of IT-BPM and outsourced services beyond call centers, including new services like game development, animation, software development, and healthcare.

DOST’s Rural Impact Sourcing program also aims to teach individuals in rural areas to acquire ICT skills and build start-ups. DOST Deputy Executive Director Monchito Ibrahim said that there are currently 300,000 entrepreneurs in the IT-BPM segment.

The report said that companies will continue to invest in outsourcing to modernize systems and streamline claims and remediation processing. Midsized healthcare firms are dominating the market and seeking partnerships with BPO or outsourcing providers to improve response to new regulations while reducing costs. Healthcare organizations are also switching their focus to consumers instead of other businesses.

Everest Group vice president Jimit Arora named two main forces are driving the change in health business models and IT requirements, the uncertainty of new reform policies (like Obamacare or PPACA and the shift to the ICD-10) and greater health consumerization. 

Arora added that healthcare companies are looking to re-evaluate their existing processes, technology, infrastructure, and marketing strategies to better handle direct customer interaction. The global healthcare ITO market targets a 12 percent compound annual growth rate (CAGR) from 2013 to 2020 or $68 billion by 2020.

During the Philippine Game Festival at SMX Convention Center in Pasay City, Aquino said that the government should ensure the world is aware of skilled Filipino game developers that possess the “right mix of art and technology.”

Aquino said the country’s game development industry could contribute significantly to the Philippine economy, and local game developers could compete globally with more support from the government. With increased support, Aquino believes that game development could rival the success of the business process outsourcing sector. 

The Philippines’ game development industry is at the same place today as the BPO industry was “maybe 10 to 15 ago,” said Aquino. According to the Game Developers Association of the Philippines (GDAP), there are currently about 60 studios that employ 3,500 people in the country. Many outsourcing and offshoring companies in the Philippines also have game software or app development among their services.

Aquino added aid that the industry has great potential to generate high-paying jobs for local game developers and artists. To attract investors and promote the industry in other countries, the senator is working with the Board of Investments of the Department of Trade and Industry.

Tholons principal Vikrant Khanna said in a recent presentation that the Philippines could expand its share to $48 billion out of the projected $250 billion BPO global revenue by 2020, provided the CAGR continues with its present growth trajectory. The country’s $48 billion target represents about 20 percent of the global revenue.

In the information technology and business process management (IT-BPM) road map created by the Department of Science and Technology (DOST) and the IT and Business Process Association of the Philippines (IBPAP), the country is expected to employ 1.3 million workers and hit $25 billion in revenue by 2016, which represents 12 percent of the global BPO revenue.

IBPAP president Jose Mari Mercado and Science Secretary Mario G. Montejo are both confident that the 2016 targets could be achieved easily. Consultancy group Tholons mentioned that the Philippines grew its revenue twelvefold and its manpower tenfold from 2004 to 2014, adding that BPO revenues this year could reach $18.4 billion.

Mercado added that is it important to create a new IT-BPM roadmap for 2020 that shows new sector targets. 

During the 2014 International IT-BPM Summit on Monday, DOST secretary Mario Montejo said that the agency is implementing projects to boost the productivity of the BPO sector, mentioning the Next Wave Cities program that will establish and develop IT-BPM hubs in areas outside Metro Manila and Cebu. 

The program also aims to roll out information campaigns on the country’s BPO services that go beyond voice and contact support. The new areas include healthcare outsourcing, software development, game development and animation.

According to DOST-ICTO deputy executive director Monchito Ibrahim, the Rural Impact Sourcing program will create the best environment for IT-BPM companies to flourish by enabling local residents in the Next Wave Cities to become more entrepreneurial and acquire and develop the ICT skills needed for the industry, 

There are about 300,000 people in rural areas that work for BPO companies, and the program will help generate more jobs and let residents work for BPO firms based in urban centers. Montejo cited another program, DOST’s disaster-preparedness program, that will provide accurate and timely weather information and hazard maps to the BPO industry.

Montejo said that the projected $18 billion revenue makes the 2016 target of $25 billion “more realistic.” The number of jobs in the IT-BPM sector reached 1 million in August, which is closer to the 1.3 million target by 2016.

Most of the businesses moved to the Philippines, which attracts investors due to a large, employable workforce that is fluent in English with American accents. Big global BPO providers like Convergys, Accenture, Teletech, Teleperformance, Stream and Sykes all have headquarters in the country that employ thousands of people. 

Assocham projected that up to 70 percent call center and voice services will be lost to foreign competitors, and that India might lose $30 billion in foreign exchange earnings to the Philippines. While India remains the world’s top BPO destination, Tholons’ latest top 100 list placed Manila as the second most attractive BPO location in the world, pushing Mumbai to the number 3 spot. Several Philippine cities also made it to the list, with Cebu City landing at number 8. 

The Philippines has been a call center stronghold since the beginning, with voice services accounting for 62 percent of total revenues in 2013, but the country is now starting to expand beyond its traditional voice and contact center offerings. 

A growing number of BPO companies are providing integrated delivery models, cloud-based services and higher-value added functions like finance, accounting, IT and software development to remain competitive in the marketplace.

From slightly more than a hundred thousand workers, the country’s BPO sector currently employs one million workers. The IT and Business Process Association of the Philippines (IBPAP) expects BPO revenue to hit $25 million by 2016 and the workforce to grow to 1.3 million people.

The president added that his administration will continue to support the BPO industry by implementing a service management program to prepare college students for entry-level BPO positions and funding information technology (IT) courses via the Technical Education and Skills Development Authority (TESDA).

“We will also be there as a constant and steady partner. We will continue to solicit concerns and proposals to make sure that the Philippines stays as a global leader in the IT BPO sector far into the future,” the president added.

Aquino told business leaders that the BPO sector could employ 1.3 million Filipinos by 2016 from 2014’s 1 million. Eight Philippine cities were included in the 2014 Tholons Top 100 Outsourcing Destinations in the world, with Metro Manila at no. 2 and Cebu City at no. 8. The 2014 Global Services Location Index by A.T. Kearney also listed the Philippines as the seventh best IT-BPO destination in the world.

The proposed IT hub will serve as a “back and front” IT center for global clients, according to Asia Pacific Digital chief executive officer Roger Sharp. Sharp said in an interview that the experienced pool of professionals in Manila is small but quickly growing. 

Instead of setting up HQ in India, Sharp said that Asia Pacific Digital favored the Philippines due to the country’s talented and flexible IT-BPO employees who communicate well, exhibit a strong work ethic, and are able to work effectively with international team members.

According to a statement by the Department of Trade and Industry (DTI), gaming companies Ubisoft, Activision, Electronic Arts, 2K and Square Enix-Eidos have also expressed interest during the 2014 External Development Summit (XDS) in Vancouver, Canada.

The DTI sent representatives from the Game Developers Association of the Philippines and the Animation Council of the Philippines to the XDS to meet with 28 gaming companies. The XDS is an exclusive video game industry event attended by professionals and service/IT outsourcing providers.

Out of the $1.5 billion global outsourcing market for game development and animation, the Philippines currently has a $136 million share. The country targets a 10 percent increase of the shares by 2016.

The property and casualty (P&C) insurance segment will double the growth rate of the life and pension (L&P) sector, which accounts for 60 percent of overall spending. The growing number of digital consumers, improved data analytics and the fact that BPO depends on information technology are the main drivers of the increased investment.

Everest Group said that insurance companies need to meet expectations as customers become more comfortable with digital marketing. Insurers are looking to BPO providers to help them navigate digital channels and understand the modern consumer.

The possibility of customers switching to other insurance providers is another factor driving the higher BPO spending. A study by Accenture showed that about 25 percent of 6,000 people in 11 countries would consider companies like Amazon and Google as alternative insurers, 67 percent would consider buying insurance from other than traditional companies, and 43 percent would consider banks. The remaining 23 percent mentioned online providers as alternatives.

BearingPoint business consultancy published a similar study showing that 90 percent of insurers currently have no company-wide data strategy, and are in danger of being sidestepped by more tech savvy data aggregators. Insurance firm Ecclesiastical recently partnered with India’s ITC Infotech to integrate company data and reduce the time and expenses related to pricing the company’s insurance products.

The KPMG report showed that 72 percent of large businesses plan to spend more on outsourcing, and 61 percent plan to increase their use of IT and business processes shared services in the next two years, mostly offshore. 

The report titled “The State of Services & Outsourcing in 2014: Things Will Never be the Same” also said that global firms expect to boost offshoring activities by 20 to 30 percent next year. The main focus of most organizations is integrated and shared global service models along with outsourcing. More than half of the companies (56 percent) are increasing spending on centralized services.

KPMG’s Dave Brown said that today’s outsourcing companies should go beyond supplying workers that provide basic operations. Otherwise, outsourcing may be reduced to a “staff augmentation model” instead of a “strategic partnership” that enhances the client’s skills and capabilities.

As the BPO map continues to evolve, clients have a wider list of locations to choose from. A.T. Kearney’s 2014 Global Services Location Index lists the best 100 places for outsourcing, with Asian countries dominating (Bangalore at no. 1 and Manila at no. 2), followed by Eastern and Central Europe, and Latin America.

Destinations with the highest rental rates are Seoul at $79, Singapore at $110, Tokyo at $120, and Hong Kong at $221. CBRE Philippines director for corporate agency and brokerage John Corpus said that a lot of BPO companies are expanding, including Japanese companies that are looking to set up operations in the Philippines. 

CBRE reports that the 1,340.65 square feet of office space occupied in 2014 was the highest transaction in the last six years. According to CBRE, the drop in aggregate vacancy from 3.30 percent to 2.45 percent in the first quarter of 2014 will be offset by the 400,000 square meters of space coming in within the year.

Organized by the Information Technology and Business Process Association of the Philippines (IBPAP), the summit brings together analysts, domain experts, speakers and officials from the private and public sectors to discuss issues and trends faced by the IT-BPM industry.

IBPAP senior executive director Gigi Virata said that the IIS aims to equip and empower industry stakeholders to step up and take action amid the technological revolution and robust growth happening in the IT-BPO sector.

Virata added that the IT-BPM sector is now one of the country’s strongest growth drivers, with a target revenue of $25 billion by 2016. The IIS will help assess the outsourcing sector’s developments and pinpoint new growth paths’ to sustain the Philippines’ offshoring/outsourcing boom.

Some topics to be covered in the summit are “everything-as-a-service” trend, human resources data analytics, business and social media, and enterprise mobility. Participants will also talk about country brand strategies, the rise of knowledge process outsourcing (KPO), and the impact of the ASEAN Economic Community to the industry.

Virata said that the IIS encourages participation and engagement, and using exchange to respond to the fast-evolving IT-BPM landscape. Local and foreign delegates can directly participate in the discussions and leverage networking opportunities with influential IT-BPM leaders, filed experts, and speakers. 

PSA’s 2014 Labor Force Survey reported that 93.3 percent of the country’s workforce (age 15 and over) is employed, with the number of employed Filipinos rising to 38.5 million in 2014 from 37.4 million in 2013, a 2.8 percent increase.

The labor force participation rate (LFPR) similarly rose from last year’s 63.9 percent to 2014’s 64.4 percent, adding 879,000 employees to the 41.23 million strong labor force. Socioeconomic Planning Secretary Arsenio Balisacan said that the increase in LFPR reflects the workers’ “positive outlook” and “expectations of better employment.”

The underemployment rate also decreased from 2013’s 19.2 percent to 2014’s 18.3 percent. The PSA said that workers who need additional work hours or jobs are considered to be underemployed. The survey showed that three regions had lower employment rates than the national average: National Capital Region at 89.7 percent, Central Luzon at 91.7 percent and CALABARZON at 92 percent.

Balisacan said that the government should maintain a favorable economic climate, with the goal to boost investment and encourage employers to hire more workers. He added that the labor force can be further expanded by construction, reconstruction and infrastructure programs, as well as expansion in the tourism and business process outsourcing (BPO) sectors.

McGilvray is optimistic about 2016, saying that companies looking to expand will have space to choose from due to so much available stock on the market. As the BPO sector shows no signs of slowing down in the next two years, McGilvray said that clients are now looking at establishing their second sites.

CBRE Philippines CEO Rick Santos reported that out of the Philippines’ leasable office area of 700,000 square meters in 2014, over 80 percent has already been filled by BPO companies, with a take-up rate of 600,000 square meters. 

Santos projected that about 500,000 square meters of office space will enter the market by 2015 and 2016, with space to be concentrated in Fort Bonifacio Global City, Ortigas, Makati, Alabang and Quezon City. The Quezon City business district is the most saturated, with the least office space available and a vacancy rate of 0.07 percent.

Vacancy rates in the five business districts are expected to increase from 2.4 percent to at least 5 percent due to the incoming office space. The Philippines will also continue to attract BPO companies, Santos added.

According to Ortigas & Company’s senior VP for real estate, the company recognizes the need for space by the BPO and KPO sector, estimating that about 6 million square feet of office space would be leased this year.

Maersk Global Service Centers (Philippines) Ltd. is the Manila service center of Denmark’s shipping, logistics and energy conglomerate. The Maersk Group operates in global trade, shipping, and oil and gas, with ships and carriers in ports all over the world.

IBPAP (Information Technology and Business Process Association of the Philippines) president and CEO Jose Mari Mercado said that there is enormous room to expand into services like healthcare, back office, and finance and accounting services. 

The main growth driver in the past was companies that keep on coming back to outsource services. Today, the “captives” market (in-house extensions of an organization providing BPO services to a parent unit located in the Philippines) contributes to the progress, targeting $18 billion revenue this year, a 16% increase from $15.5 billion in 2013. The market also expects to employ about 1 million employees in 2014.

Positions like medical coding and clinical support services require strong communication and analytical skills, as well as a willingness to work in shifts, said Romulo. Coders convert medical records and other information into international codes that make it easier for U.S. healthcare providers to manage and access their data. 

Romulo named some companies hiring nursing associates for various jobs: Cognizant Technology Solutions based in Teaneck, NJ, VMCO Corp. based in Makati, and Accenture PLC based in Dublin, Ireland.

According to the IT and Business Processing Association of the Philippines, the healthcare BPO industry is expected to hit about $27 billion in annual revenue and expand its workforce to 1.3 million by 2016. Romulo hopes that the hiring would reduce unemployment among nurses in the country.

KMC MAG Group associate director Gerold Fernando reported to the media that many companies lose “thousands” of employees every month, and that moving the site closer where people live significantly cuts down on attrition. Fernando added that attrition could probably be reduced by a tenth as the cost of living will drop.

The KMC MAG Group exec added that it’s a “win-win situation for the company and for majority of the BPO workers” as it promotes “decongestion” of Metro Manila and helps uplift the economy of Next Wave Cities and increases middle income earners.

The so-called “Next Wave” cities around Manila are located in Clark, Bulacan, Cavite, Laguna, Pampanga, Iloilo, and Cagayan de Oro Bacolod. The cities could be made even more attractive to BPO companies and investors, however, said KMC MAG managing director Michael McCullough.

While educational institutions and labor are available, the sites are still missing a “whole lot” of available office space. McCullough, in an article published in Philippine Daily Inquirer, said:

“If you’ve been driving in the province you don’t see a grade A office space just waiting to be leased. You can’t fly some Americans in and take them to a grassy patch of land and say “this will be your office, I promise it will look like this picture.” They don’t buy it. They have to see something that exists and those are mostly always in Metro Manila, Metro Cebu, and Davao now.”

That does not stop some BPO companies from taking the risk and building sites in the New Wave locations, which McCullough believes will attract the big fish should the pioneers succeed.

The booming BPO industry helps provide well-paying jobs not only for direct hires but also for support positions. According to the industry group, one direct hire also generates about 2.5 additional support jobs. Some companies are setting up sites in tier 2 or New Wave cities beyond Metro Manila to lower attrition rates and give employees a better work-life balance.

The Philippines continues to expand beyond its traditional strength in call centers, offering higher value-added and niche services to compete with outsourcing giant India. The services include finance and accounting services, medical and legal transcription, software design and animation.

The positive news came from Trade Secretary Gregory Domingo during an informal interview with local reporters. He mentioned that during his recent visit to the U.S., a number of American and European firms said that they are eyeing the Philippines for their business expansion ventures. Aside from outsourcing firms, some key investors in the services sector have also shown interest in doing business in the country. 

Before Sec. Domingo’s recent trip to the U.S., Trade Undersecretary Ponciano Manalo, Jr. said, in an interview with Philippine Star, that the Department of Trade and Industry (DTI) has been working to attract several animation and game development companies in the U.S. to expand their operations or get creative talent and services from the Philippines. There is also a focus on gaining more healthcare information management and IT-BPM (Information Technology- Business Process Management) companies that are looking to expand their back office services here. 

Several companies in Europe also expressed interest in the Philippine outsourcing and services industry. According to Trade Undersecretary Adrian Cristobal, Jr., a geothermal company in Iceland, in particular, is keen on exploring more ways to successfully strengthen their current presence in the Philippines. 

According to an official document released by the Bureau of Export Trade Promotion Group under the Trade department, there is also strong demand for footwear, bio-coconut products, jewelry, and automotive parts in seven listed European countries. 

European Countries and Corresponding PH Products and Services

The key European countries that were mentioned in the list were Germany, Netherlands, France, Belgium, Spain, Italy, and Sweden. Each has a particular list of products and services that they continually source from the Philippines, making them priority sectors for promotion. 

In Germany, DTI explained that, “Intellectual Property, BPO and Knowledge Process Outsourcing were considered the mainstays of promotional efforts.” Aside from BPO, there is also a fast growing demand for bio-coconut products and creatively designed house ware, furniture, and fashion items such as shoes and clothing.

In the Netherlands, businesses are interested in importing geotextiles and other sporting and camping products as well as medical devices. There is also a demand for fish and other marine foods. 

The trade report also mentioned the good standing of Philippine automotive parts for export to Belgium, Spain, and Italy, with Italy needing mostly replacement parts like belted rubber tires, ignition-wiring harnesses, and other maintenance parts for motorcycles. Businesses engaged in holiday items and retirement and health services can also see potential growth in the Belgian market. 

For exporters eyeing France, there is a strong demand for fashion accessories and reliable Philippine suppliers of such items. While in Sweden, suppliers of organic food products, canned foods, and industrial work uniforms can expect to have a good market share in this Scandinavian country. 

HMOAP president Josefina V. Lauchangco projects employment of 120,000 workers in the healthcare information management industry by 2006. Lauchangco added that the talent pool of about 250,000 nursing graduates in the country presents many opportunities in global healthcare services, attracting a good number of global companies to invest in the Philippines.

Lauchangco said that the Philippines could be one of the top global leaders in health care BPO with a highly-trained workforce. She cited the need to enable talent by creating programs that would give workers the necessary skills.

The HMOAP exec added that the training programs currently offered are limited to jobs like medical coding, medical transcription and mentioned the need to expand to other services such as data analytics and health care information technology. 

The MNCs include research and development pharmaceutical firms (China), and information technology (IT) and business process outsourcing (BPO) companies (India). However, the research paper titled “Should MNCs Stop Paying Rent Overseas?” reported that the steady economic growth in the two countries was accompanied by high rental rates in the central business districts. More international firms are buying office space in other regions to cut costs. 

According to Cushman & Wakefield, American companies are on trend, switching from leasing to buying space because of corporate taxation policy in the U.S. Profits earned outside the U.S. are not subject to federal taxes, so several companies prefer to re-invest profits earned overseas into international operations. Cushman & Wakefield speculated that a portion of the profits were being re-deployed into real estate properties that offer major returns.

Cushman & Wakefield noted that the Philippines and Vietnam may soon join India and China as the top destination for many multinational companies’ overseas headquarters. 

“If China or India is the present, perhaps the Philippines is the future. The economic trajectory of the Philippines is nascent compared to India, and presents great opportunities for global giants,” it said. 

“Financial institutions such as Citibank and J.P. Morgan occupy large spreads in the Philippines, but they currently follow a rental strategy. However, this strategy may take hold in the Philippines after companies feel more confident about growing in the region.”

MNCs would benefit from investing in China, India and the Philippines “sooner rather than later,” according to Cushman & Wakefield’s managing director of research for Asia-Pacific.

According to the results summary released to the media, A.T. Kearney selected the 51 countries based on factors like state promotion initiatives and remote services activity. Each country was evaluated against several metrics grouped into three weighted measures: financial attractiveness (40%), people skills and availability (30%), and business environment (30%).

The report said that the metrics used to evaluate the attractiveness of each location were gathered from responses to A.T. Kearney surveys, industry questionnaires, client experience, and data obtained from client engagements over the past five years. The weight of each metric was assigned based on its importance to the location decision, with the cost advantage being the primary driver. 

The summary showed that the Philippines’ higher total score was a result of improvement in two key measures, business environment and people skills and availability, reigning in a drop in financial attractiveness. The country’s overall score rose from 5.65 in 2011 to 5.75 in 2014 due to an increase in the skills and availability measure from 1.31 to 1.48, and the business environment measure from 1.16 in to 1.21. The improvements offset a financial attractiveness score that dropped from 3.18 to 3.06.

“The Philippines is an industry powerhouse, rising two places this year and with an export sector second only to India,” the summary read. “Philippine industry is one of the most sophisticated in the world and its qualified labor force is one of the deepest.”

The report cited the country’s numerous operating centers in central Luzon and many tier 2 locations elsewhere, saying that the industry is expanding beyond its call center focus to include higher value-added voice, IT (information technology), and BPO (business process outsourcing) services.

India retains the top spot in the survey, followed by China, Malaysia, Egypt, Indonesia, and Thailand.

Tracking Back Office Service Development

The A.T. Kearney report followed the trends in back office development, from before 2000 to the mid-2010s. The three “waves” started with companies establishing back office units in developing countries, followed by contracting providers to deliver non-core functions in the mid-2000s, and automating high-volume processes in the mid-2010s.

5, 033 Call Center Agents

DOLE’s Region 7 Director Chona M. Mantilla said that BPOs now rank as the top industry in terms of available job vacancies. Among the 70,000 jobs listed by the department, 5,033 positions came from BPOs with call center agents as the top position offered.

Aside from call center agents, there are also numerous vacancies for sales clerks, service crew, and manufacturing/production workers. DOLE also cited receptionists for hotels, I.T. professionals, communication and equipment technicians, and people working with electronics as in-demand positions.

Director Mantilla, however, explained that even if there are a lot of job openings in these sectors, one’s employment would still be based on his or her individual skills, trainability, and educational background.

“There are plenty of jobs right now, but the question is, are they qualified?” asked Mantilla.

Qualifications to Get Into BPO Industry

Meanwhile, well-known job portal www.jobstreet.com.ph has enumerated several qualifications that are important for anyone who wants to try out their luck in the BPO industry. According to the job site’s Prospects and Growth report for BPOs, if one has relevant experience in hospitality and the services sector, he or she may already try to apply to call center positions.

Other specializations that have a chance at landing a job in the outsourcing world include finance, communication and information technology, accounting, and even linguistics or people who can speak a foreign language. The report added that Japanese, Spanish, and French speakers are very much in-demand aside from fluent English speakers.

Joining the survey for the first time, the Philippines had a total index score of 66. It edged the other Asian countries included in the survey and also boosted the overall investor sentiment in the region to 22 from a previous quarter score o 15. Overall sentiment in Asia was equal to the fourth quarter investor sentiment in the United States. Canada’s score was at 32. 

“Having seen strong GDP growth for two consecutive years in 2012 and 2013, the Philippines has emerged at the forefront of Southeast Asia’s developing markets. The upbeat sentiment of Philippine investors at 66 points mirrors consumers’ mounting confidence in this economy, which has been able to withstand natural disasters as well as tolerate global market volatility,” explained president and chief executive officer for Manulife Philippines, Mr. Ryan Charland. 

The MISI is a quarterly tracker of investor sentiment among different asset classes: real estate, equities, mutual funds, unit trusts, fixed income, and cash. The index score used for the survey was determined by subtracting the total percentage of respondents who thought it was a bad time to invest from the percentage of those who said it was a good time. 

According to a press release on the Manulife Philippines website, the MISI surveyed, in total, about 4,000 respondents in Asia and about 1,000 in the U.S. and Canada. The respondents were a mix of middle-class and affluent investors, all aged 25 and above. They were also the decision makers in their households when it came to financial matters and were active investors in different asset classes. 

Commercial and office spaces for BPOs will be on huge demand as more companies engaged in I.T. and offshoring are either expanding their present local operations or looking to relocate to the Philippines. Mactan, Cebu, and Clark make up the list of preferred sites for new commercial and retail developments while Davao and Iloilo are also expected to stay competitive especially as areas for establishing redundant/back-up operations. 

“Cebu, Davao and Iloilo will continue to book solid growth for as long as the local government leadership provides regulatory and marketing support,” said Enrique M. Soriano III, real estate analyst and senior adviser at the Wong+Bernstein Business Advisory. 

Metro Manila Space Not Enough

In a separate report from international property management group, Jones Lang LaSalle (JLL), office space in Metro Manila may likely run out in three to four years if the current yearly demand of 400,000 square meters of new commercial/office space remains unchanged. The firm also attributed the high rental demand to the country’s robust BPO sector. 

“We’re not seeing any bubble in office market because what’s being supplied is rented. Buildings are mostly committed even before they are completed,” explained JLL project leasing head Shiela Lobien in a report published in Inquirer.net.

Not Only Office Buildings

The favorable trend for BPO rental spaces will not only benefit businesses and investors who are directly engaged in the outsourcing and offshoring (O&O) sector. According to CBRE, luxury and high-end hotels and residential condominiums will also take up a significant share of the real estate boom brought about by BPOs. 

“The BPO offices are also driving real estate [development] for retail shops, residential and condominium. All are benefiting from the entire cycle of call centers and BPOs. The key catalyst in real estate now is BPO and call center business. There’s a whole lot of economic development and it has a domino effect from call centers to the other industries and surrounding areas,” said Roberto Pe Benito Jr., a chief financial officer for a one well-established BPO in Manila. 

The decade-long real estate makeover will create a total of 10 townships spanning about 16 million square feet of new offices, corporate centers, and buildings that would be surrounded by retail shops and homes.

The concept is closely patterned to one of Megaworld’s most successful developments known as Eastwood, which hosts some of the biggest BPO companies and operations in Quezon City. Built in 1997, Eastwood now attracts about 100,000 people every day from residents, shoppers, and employees. 

“The Philippines is among the most competitive destinations for BPOs,” explained vice-president, Mr. Jericho Go in an article published in Bloomberg.com. “There are many U.S. and European companies who are seriously considering setting up here,” Go added. 

Real Estate Developments Outside Manila

Commercial and residential spaces are not only in demand in Metro Manila. The $5B worth of investments will also cover developments in Iloilo, Lapu-Lapu city, (which is part of Cebu Island’s Metropolitan area), and Davao. This coincides with the government’s goals of increasing BPO revenues by setting up world-class infrastructures and facilities outside of Manila and into other provinces particularly in the central and southern Philippines. 

Just last quarter, reports from Jones Lang LaSalle (JLL), an international property management group, stated that available office spaces in Metro Manila are likely to run out three to four years from now if the current demand of 400,000 square meters continues.

The PH government, together with national organizations such as the Business Process Association of the Philippines (BPAP) and ICT Davao, has been encouraging and planning programs on how to improve conditions in the provinces to make them at par with what Manila has to offer in terms of office spaces, technology, and facilities. 

Natural disasters and redundancy concerns for BPOs have also shifted the focus of operations outside the capital city and have raised the need to beef up real estate developments in the provinces. 

Moody’s Analytics is a division of Moody’s Corp., provider of economic and consumer credit analysis. 

In a report published in Business Mirror, Moody’s Analytics said that the outsourcing industry in the Philippines played a major role in keeping the economy steady despite the weak projections for global growth. 

The economic research and analysis unit added that the Philippines is expected to reach 7.2-% GDP (Gross Domestic Product) growth year-on-year in the second quarter. The country’s BPO sector is projected to reach 6.8 million in total employment by 2020. This is around 15 % of the total employment in the country. 

“[The] Philippines accounts for 15 percent of the global BPO market. Three years ago, the Philippines became the world’s largest provider of offshore voice services. The rise of BPO has widespread benefits for the economy, including employment opportunities for the university-educated, who have tended to move abroad because of the lack of prospects at home,” Moody’s Analytics said in the same report. 

Moody’s Analytics pointed out that the country “likely recorded another smashing quarter in the three months to June” and that full-year growth for the country’s GDP is expected to hit 6.5 percent in 2013 and 2014, “making the Philippines one of the world’s fastest-growing economies.” 

The strong showing of the manufacturing industry amid domestic demand, strong remittances boosting private consumption, and efforts for economic reforms and restoring investor confidence have also been mentioned as the other contributors to the Philippines’ economic growth.

The economic research and analysis unit added, “[Philippine] President [Noynoy] Aquino is rightly credited with helping turn the Philippines’ economy away from perennial disappointment. Since taking helm in 2012, [Mr.] Aquino has set the economy on the right course via infrastructure development, with a focus on upgrading transport links, an anti-corruption push, a drive to halt tax avoidance and improved government coffers. Continued success will depend on who takes the reins when [Mr.] Aquino steps down in 2016.” 

In an interview published in Manila Standard Today, Labor Secretary Rosalinda Baldoz cited a Bureau of Local Employment (BLE) report that also described the healthcare information sector as one of the fastest growing in the outsourcing industry.

“With the fast-growing and innovative trends and advancements in the healthcare industry, I encourage health professionals, nurses especially, to think out-of-the-box, beyond the traditional clinical jobs, and explore other emerging medical and health-related careers needed by our labor market today,” the Labor Secretary said.

Careers in healthcare information outsourcing include clinical appeals specialists, medical transcriptionists, medical coders and billers, medical secretaries, medical butlers, clinical research associates, medical representatives, and medical assistants.

Baldoz added that employees in the healthcare information industry are typically in knowledge process outsourcing, processing and analyzing information and technical data.

According to the BLE Career Guide, jobs in healthcare information outsourcing have a starting salary of P14,000-P18,000. Clinical appeals specialists in the BPO typically receive P20,000-P40,000 a month. Compensations also depend on type of employment, hours of work, and typing speed.

The labor secretary said that by 2016, the country’s outsourcing sector is projected to bring in around 8% of the Philippines’ total gross domestic product (GDP).

She added that the DOLE continues to support the implementation of the IT-BPM (Information Technology and Business Process Management) Roadmap 2012-2016. Targets of the roadmap include 1.3 million direct and 3.2 million indirect employment opportunities.

The IT- Roadmap 2012-2016 asks the government to implement program and policy interventions such as enabling structural changes, including more autonomy in curriculum design “to roll out talent interventions; expediting initiatives for K-to-12; further improving tertiary education capacity; aligning local ordinances with national laws;” and continuing tax holidays.

Property consultancy Jones Lang LaSalle’s Sheila Lobien, head of project leasing – markets, said in report published in abs-cbnnews.com that BPO firms make up 80 to 90% of pre-commitments and supply take-up of Metro Manila office spaces.

The consultancy recorded 168,000 square meters of office space committed in the first six months of 2013. Of this total figure, 52,000 square meters are for outsourcing firms.

“Right now pre-commitment is growing, which means the confidence is there. The BPO market is driving this demand,” Lobien said in a press briefing held recently.

Some of the most popular Metro Manila locations for BPO firms are Bonifacio Global City, McKinley Hill, and Quezon City. Lobien said in the same report that outsourcing firms find Quezon City an attractive location because of its labor pool.

July’s result was $1.099 billion, the highest in six months. The figure is also higher than the $692 million posted last June. Six months ago, the year opened with a $2.043 billion in BoP surplus. 

Last July’s figures contributed to the year-to-date surplus that’s now at $3.677 billion. Bangko Sentral ng Pilipinas (BSP) projected a $4.4-billion surplus for this year. 

Balance of Payments shows the overall transactions of the country with other countries. There is a surplus when more funds flow into the country than out. This helps cushion the blow of external volatility. 

In a report published in Business World, central bank Deputy Governor Diwa C. Guinigundo said that the BoP surplus can serve as support to the economy.

This year’s theme is “Where the World Meets the Philippines.” 

The three-day expo, organized by the Contact Center Association of the Philippines (CCAP), will gather the top business and industry experts for an in-depth discussion of industry trends and best practices. 

The ICCCE is considered one of the biggest yearly business process outsourcing (BPO) events. It is organized as a venue for discussions about the future of the industry and as a way to network with experts that are invited to become among the panel of speakers. 

In a press conference held recently, CCAP president Benidicto Hernandez said that the association chose Cebu as this year’s venue to showcase what the city can offer, particularly to the global outsourcing market, and to promote BPO and contact center locations outside of Metro Manila.

The CCAP exec added, “It is with great pride that we bring the world’s largest contact center conference to Cebu to open its doors to the world of global outsourcing. Cebu has much to offer by way of its talented and friendly people, modern infrastructure and sound business climate.” 

According to a report published in financialexpress.com, the $13.3-billion Philippine outsourcing sector posted 15.6% growth in 2013; which is significantly bigger than the 8.9% growth posted by India’s $20-billion outsourcing industry.

Industry body Nascomm said in the same report that for the past five years, India has lost about 10 % share of the global BPO market, mostly in voice contract subsector, to other outsourcing destinations. 

The challenge for India, according to industry experts, is in language skills because aside from English, the country does not have a sizable talent pool to support contact services in German, Portuguese, Spanish, French, and Nordic languages.

The Philippines, on the other hand, remains the second largest outsourcing destination and is emerging as a serious competitor that has managed to remain relevant for both non-voice and voice services. 

“In fact, the Philippines’ voice industry overtook India’s last year in terms of revenue and full-time equivalent (FTE). Not only does it support English, but the quality of service is better than that of India,” said Salil Dani, practice director, Global Sourcing at global management consulting company Everest Group. 

The Philippines’ voice services subsector is at $8.5 billion, easily topping India’s voice services industry which is at around $7.5 billion. Other countries such as Latin America’s Brazil, Chile, and Mexico; Asia’s China and Malaysia; Europe’s Ireland and Poland; and North Africa’s Morocco and Egypt are also emerging as attractive voice services destinations.

Dani explained in the financialexpress.com report, “European countries working in multi-lingual processes find Poland a good option for their medium-term operations involving up to 500 employees. However, not much work has moved away from India to Poland as these countries have a small talent pool. Moreover, India and the Philippines have scale, which no European location can provide.” 

Industry analysts said that clients are now choosing offshore delivery locations based on the kind of services. 

In a recent report, S&P said that continued economic growth in the Philippines has helped the country surpass Indonesia’s economic performance. 

S&P Asia Pacific chief economist Paul Gruenwald added, in an interview with Yahoo! Southeast Asia Newsroom’s Rio Rose Ribaya, that the Philippine GDP (Gross Domestic Product) is projected to grow by about 7 % in 2013. After that, growth will be “moderating to 6 percent to 6.5 percent in 2014 and 2015.”

According to S&P, GDP growth for Indonesia is expected to hit 6.1%, for Vietnam, 5.3%, and for Malaysia, 5.3%.

The S&P report also projected 6.9% economic growth for the Philippines in 2013. This growth rate is faster than other economies in ASEAN.

Growth for the ASEAN economies as a whole is expected to remain at around 5.5 % through 2015.

In the same interview, Gruenwald added that the major economies in ASEAN will “continue to outperform. These economies are more domestically focused than the Newly Industrialized Economies. (They) tend to do better when global growth is sluggish.”

During the recent quarterly CEO briefing of the Information Technology and Business Process Association of the Philippines (IT-BPAP), IT-BPAP senior executive director Gillian Joyce Virata told the press that achieving the industry’s $20 billion baseline target can be done by next year, at the earliest, and by 2015, at the latest.

Based on Philippine IT-BPO’s revised 2013-2016 roadmap, the sector’s total revenues is projected to reach $15.8 billion in 2013, higher than last year’s $13.2 billion. To achieve its $25 billion target by 2016 and its goal of generating 1.3 million jobs, an improvement over the current 770,000 jobs, the country’s IT-BPO sector has to post a conservative 17 percent yearly growth in three years.

Virata said that the sector’s growth is currently being fueled by the move of a number of IT-BPOs into high value services. The IT-BPAP exec said that almost 50 percent of the total number of IT-BPO firms in the Philippines earned 80-100 % of their revenues from high value products or services.

In a report published in Manila Bulletin, Virata added, “More BPO firms are really going into the high value products although it is misinterpretation to say that voice is a low value product because there are pure voice products that are high value.”

She pointed out that voice service in the Philippines is a high value product. The customer service representatives or frontline personnel in the country, for example, are knowledgeable and are experts on responding to customers that they are a “goldmine for information and data” for customer relations services.

“So clients can leverage for analysis and data, making this kind of customer service a high value product,” Virata said in the Manila Bulletin report.

PLDT announced that it tapped Cisco to upgrade its core network, to make it more secure, resilient, and future-proof. The telco also worked in partnership with foreign network systems specialist Ciena to upgrade its international network. 

In a press statement, PLDT executive vice president and head of Enterprise, International and Carrier Business Group Ernesto Alberto said that the expansion program will ensure that their core system can “support new generation enterprises that are largely driven by a combination of video, social networking and advanced collaborative applications.” 

Alberto also said that banks and BPO companies would gain the most from the data network service upgrade because these sectors rely on international connectivity. 

“We would like to think that we in the telco industry have played a significant role in ensuring that the attractiveness of the Philippines as a destination is sustainable,” he added. 

PLDT first vice president and head of PLDT ALPHA Enterprise Jovy Hernandez said that the telco’s IP backbone was designed using the most up-to-date “intelligent networking technologies to bring scalable, stable, redundant, and resilient network services.”

The IT-BPO industry is targeting $25 billion in revenues by 2016 according to industry association IBPAP (Information Technology and Business Process Association of the Philippines). In 2012, the sector posted $13.2 billion in revenues. (30) 

According to the two financial service companies, the Philippines will not only remain afloat despite the sentiment-led market turbulence, its credit rating will remain unaffected by the volatility. Both S&P Ratings Services and Fitch Ratings granted the Philippines investment-grade status earlier in 2013. 

S&P credit analyst Agost Benard added, in an interview published in broadsheet the Philippine Star, “Our outlook for the Philippines is stable.” 

Fitch, on the other hand, said that the country is in a good position to remain resilient despite the sell-off caused primarily by concerns that the United States would cut back on and eventually remove its stimulus measures. 

Fitch Ratings head of Asia-Pacific Sovereigns Andrew Colquhoun added that the Philippines has been posting a large current account surplus for about a decade now. The account surplus, which helps raise enough dollars to meet external obligations, stands at $3.4 billion as of March. This current account includes remittances, export revenues, and earnings from BPO firms. 

In March of this year, the Philippines earned its first investment grade rating for credit worthiness -BBB-, with a stable outlook – from Fitch. Two months later, S&P also raised the country’s investment grade rating.

The IBPAP exec added that the sector is on track to hitting the US$25 billion revenue and 1.3 million employment targets by 2016.

The country’s IT and business process management industry provided jobs for 776,794 Filipinos by the end of last year; that was a 21% growth in employment from 2011. 

Export revenues, on the other hand, hit around US$13.2 billion in 2012. This 19% growth is seen as an indication that the country remains within the level of growth to reach the 2016 revenue target. 

“To reach our 2016 targets, we reiterate that it is imperative that we sustain and strengthen the work we are doing with government,” Mercado said during the Cebu ICT and BPO Conference. “We have received impressive support from President Aquino and his teams in the executive branch and we were able to pass key legislation needed by the industry.”

IBPAP also reported that healthcare information management saw an 80% increase in employment and a 66% increase in revenues. The game development sub sector, on the other hand, posted US$50 million revenues in 2012 and added 1,000 more developers. 

The contact center subsector saw a 19% increase in employment (81,000 jobs) and an 18% increase in revenues (US$8.7 billion). For the software development subsector, 2012 was also a good year: 17% revenue growth (US$1.16 billion) and 14% employment growth (57,078 jobs.) 

The corporate services subsector – which includes back-office services and knowledge process outsourcing – earned US$2.5 billion and provided 154,380 job opportunities. Both revenues and jobs increased by 20% in 2012.

In an interview with InterAksyon.com, IBPAP president Jose Mari P. Mercado cited preliminary data which showed that IT-BPO firms in the Philippines reached combined revenues of $13.4 billion in 2012. This is higher than the $13 billion target set for the year and 22 percent more than the 2011 revenue which is at $11 billion. 

By the end of 2012, employment in the IT-BPO sector was at 720,000. 

Mercado added that jobs in the IT-BPO industry are projected to hit one million by the first quarter of 2014 thanks to the increased demand from clients that prefer Philippine IT-BPO firms. 

The healthcare outsourcing industry and the call center sector also reported that their revenues for last year exceeded their respective targets. 

The IBPAP exec also said that the sector is sticking to the targets outlined in Road Map 2016 despite the faster-than-expected growth in the industry. For 2013, the targets are revenues of at least $16 billion and jobs in the sector of at least 920,000. And by 2016: $25-billion in revenues and 1.3 million jobs.

The report, cited in an article published in InterAksyon.com, showed that call centers in the Philippines posted a total of $8.6 billion in 2012, clearly breaching the $8.4 billion target for the year. The 2012 revenue is also an increase of a fifth from the $7.1 billion revenue in 2011.

After considering the 2012 performance of the industry, CCAP adjusted the targets to $9.9 billion in revenues and 577,000 jobs for 2013; $11.4 billion in revenues and 663,000 jobs for 2014; $13.1 billion in revenues and 762,000 jobs for 2015; and $15 billion in revenues and 876,000 jobs for 2016.

The call center sector in the Philippines also posted a 21% increase in employment: up from 416,000 in 2011 to 502,000 in 2012; and breaching the 2012 target of 493,000. 

The FCCP exec, who seeks to promote its members’ interests in the Philippines and foster “closer relationships” with the business community in the country, said in an interview published in Sun Star, “The standard of living in the Philippines is increasing, leading to improved consumption and investment opportunities across the board.”

Rocke pointed out that new investors should realize, in order to fully understand the Philippines’ edge and competence, that the country came out from a “dark economic stage through its people’s optimistic outlook, hard work and perseverance.”

French investment in the Philippines, according to Rocke, is a network of industries with “strong movements in sectors of business process outsourcing, infrastructure, health care, pharmaceuticals, beauty, wellness and food.”

Some of the French brands and companies in the country include L’Oréal and Maybelline, cosmetics; Total, gasoline station; Lacoste, apparel; Thales, supplier of electronic control system to airports; Teleperformance, call center; Schneider Electric, energy management specialist; and Lafarge, construction materials.

Aimed at further boosting the digital outsourcing sector in the Philippines, the training program was supported by the Korean Chamber of Commerce and Industry (KCCI) and the Korea International Cooperation Agency (KOICA), under the Korean government’s International Cooperation Program.

Two game developers, Joyce Macaspac and Joie Sales, and two animators, Cynthia Javier and Nelson Udaundo, participated in the nearly two-month training program held in Gyeonggi-do, Paju, South Korea. They completed specialist courses on software program education and in construction and design; and attended workshops on texturing and lighting, graphics modeling, and game art, which are industry-specific skills; and studied software such as Java, Unity 3D, 3D Max, and other e-learning programs. The four trainees were selected from a list of certified and recommended assessors and trainers of TESDA. 

Game Developers Association of the Philippines (GDAP) president Alvin Juban said in a report published in teamasia.com that these kinds of partnerships can help the Philippine game development and animation sectors to market to future clients. 

Juban added, “We hope to have our game developers and animators penetrate the global market and take a bigger slice of the global market. Immersing them in a successful and technologically-adept country such as Korea has surely given them the skills and training that they needed.”

Animation Council of the Philippines, Inc. (ACPI) president Grace Dimaranan, on the other hand, said that the Philippines’ gaming and animation sectors “carry a large potential for the Philippine information technology and business process management industry. By training our future leaders, they can strive to lead the next generation in building up the Philippines as the next prime destination for animation and gaming-related services.”

According to International research firm MarketsandMarkets, the global market for animation and gaming is projected to rise to US$242.93 billion by 2016 from US$122.20 billion in 2010. India is the current industry leader, taking 40% of the global game development and animation market which is at an estimated US$1.5 billion. Korea is at second place with a 15% share of the market and the Philippines is third with a 10% share.

George Mulligan, Emerson Manila Shared Services general manager, said in a news briefing held recently that Emerson, one of the biggest companies in the United States, “is making a significant investment” in Metro Manila and expects to continue operations for many years. Mulligan was referring to Emerson’s new regional office in Cybergate Plaza, Mandaluyong City. The company recently signed a long-term lease contract – which remains in effect until 2024 – for the Cybergate Plaza headquarters.

The Emerson exec said, as quoted in a report published in Manila Standard Today, that the company will be “making a lot of investments in Manila of about P2 billion over the next several years. We approved spending P2 billion just on facilities, just on long-term leases.”

The investment, according to Mulligan, excludes expenses on the company’s human resource development and training programs. 

A leading U.S.company, Emerson is a maker of several industrial and consumer products under such brands as Copeland Scroll, Rigid, Rosemount, PlantWeb, Liebert, DeltaV, Leroy-Somer, Ovation, InSinkErator, and Fisher. The company currently has 12,000 employees in the Philippines. 3,225 of those employees are in the shared services industry.

An investment grade rating from global debt watcher Finch Ratings is a vote of confidence for global investors to pour in capital in the country. 

In a statement posted on the Fitch Ratings official site, the rating agency said that the “Philippine economy has been resilient, expanding 6.6% in 2012 amid a weak global economic backdrop.” 

According to Fitch, the Philippines’ long-term foreign currency IDR (issuer default rating) rose from BB+ to BBB-. The long-term local currency issuer default rating similarly rose from BBB- to BBB. 

Achieving investment grade is expected to lower the country’s borrowing cost which in turn would help increase savings opportunities for the government. 

Fitch said that the key drivers that pushed the credit rating upgrade include high remittances, persistent surplus in current account, and strong external balance sheets. 

The global rating agency also mentioned the reforms undertaken during the previous and current Philippine administrations which it explained helped lead to “favorable macroeconomic outturns.”

Fitch is the first global ratings agency to give the country an investment grade. The two other ratings agencies currently has the country just a below investment grade. Moody’s gave the Philippines a Ba1 rating while Standard & Poor’s placed the Philippines at BB+.

ICT-Davao president Lizabel Holganza said in an interview published in Sun Star that she expects last year’s upward trend in the BPO sector to continue in 2013, especially after more industry players have eyed Davao in particular to be the host of their next BPO centers. 

Holganza added that she sees more partnerships between the industry and the academe for 2013, emphasizing “a heightened synergy between the academe and industry as evidenced by frequent engagements in 2012.”

The health IT sector is also expected to provide more employment opportunities in 2013, particularly for nursing and healthcare professionals.

ICT-Davao executive vice president Bert Barriga, on the other hand, said that last year, an estimated 16,000 jobs have already been generated by the city’s outsourcing sector. This is already more than half of ICT-Davao’s target of 30,000 employment opportunities for Dabawenyos by 2015. 

Barriga said that Davao City has a considerable talent pool which is why they are doing their best to provide training that will help meet the requirements of outsourcing firms. 

He added that there is a new project called Smarter Countryside which will be attended by about 25 representatives of all ICT councils in the country. The Smarter Countryside project will provide prospective BPO employees with more training on a number of BPO disciplines, both voice and non-voice. 

The new undertaking will work side by side with the Technical Education and Skills Development Authority’s (Tesda) Industry-Based Training for Work Scholarship Program (I-TWSP) for prospective outsourcing firm employees.

This is 55% more than the 2011 figures. The increase, according to the index from The Information Services Group (ISG) – which tracks contracts in commercial outsourcing that are worth $5 million and above – is due to impressive performances by business process outsourcing (BPO) firms and emerging markets as well as the contracts awarded in new segments, which comprised 88 % of the total contracts awarded in 2012.

ISG Asia-Pacific partner and president Sid Pai said in an article published in Business Standard, “Asia-Pacific’s robust 2012 performance contrasted sharply with the wider global picture, in which Europe struggled and the Americas remained flat. In contrast to peaks and troughs recorded in other regions, the number of contract awards here followed a pattern of consistent growth.”

The region, while a relatively smaller market compared to Europe and the U.S., is experiencing a more sustained growth rate and the ISG executive noted that the region’s “salient characteristics” include having two large emerging economies, India and China.

“These are expected to contribute strongly to demand. [The region] also has excellent BPO growth in addition to ITO (information technology outsourcing) growth,” Pai added.

Outsourcing contracts awarded in the region in 2012 increased by 6 % year-on-year. Also according to the index, Asia Pacific is the only region which showed an increase in contract or ACV count last year.

The 2012 ACV figure for the BPO segment – $1.4-billion – is 133 % higher than the previous year’s figure. The increase is driven largely by contracts for industry-specific BPO firms and for contact centers. The index further indicated that the contracts awarded to BPO firms in the Asia-Pacific have doubled since 2007.

According to the editors of the 2013 Index of Economic Freedom, the Philippine government’s efforts to stop corruption have helped push the country’s economic freedom ranking 10 notches higher, landing on the 97th spot among 177 territories and countries.

In the 2013 index, the 19th of its kind since it was established in 1995, the Philippines scored 58.2 points out of 100. 

The editors of the index said in a press statement that this score “is 1.1 points higher than last year, with notable improvements in investment freedom and freedom from corruption outweighing a decline in business freedom.”

The Philippines is also said to have shown improvement in terms of fiscal freedom, freedom from corruption, investment freedom, and government spending.

The Index of Economic Freedom has 10 criteria which include financial freedom, property rights, and freedom in trade. The Philippines’ ranking this year, according to the index editors, “suggested a need for improvement in terms of market liberalization.”

Most of the talent pool in the country’s game development sector handle console game services. About 15 % work on game design consulting, quality assurance (QA), and game community support and the remaining percentage are those that work on social and mobile games. 

Jobs in this sector include iOS, Android, and C++ developers, Java developers, Actionscript developers and PHP and MySQL developers. These are jobs that need talent that are “relatively difficult to find” according to Alvin Juban head of operations of Secret6 and president of the Game Developers Association of the Philippines (GDAP). These jobs, Juban added, require educational background in computer science, science or mathematics, and information technology. 

Those that are interested in a career in the game development sector but have no IT or computer science background can consider employment as a game designer. “A game designer is neither a programmer nor an artist. He or she is someone who knows video games very well, gameplay, and can write very well,” Juban said in an article published in the Philippine Star.

Producers and sound engineers also play important roles in the game development sector according to Juban.

GDAP figures indicate that there are around 3,000 professionals – representing about sixty companies – in the game development sector.

Juban added, “We’ve had the best two years of work. Before, we’ve had gaps between projects. Now what happens is when you end a project, you receive two, which is a good sign.”

This is a step to further improve and increase employment in the Philippines’ information technology (IT) and software development sector which both fall under the broader category of the BPO-IT industry. 

The Skills Standards framework is a career model that helps IT and software companies develop talent and ensure growth.

In an article published in teamasia.com, IPA Vice Chairman Hisaya Tanaka said, “With the introduction of the ITSS, an IT professional’s skill level can be recognized globally. This can enhance business cooperation.” Tanaka added that countries that implement ITSS, such as Vietnam, Myanmar, Malaysia, and Thailand, can “mutually benefit from the partnership.”

The agreement signed by the Philippine Software Industry Association and the IT Promotion Agency of Japan aims to reach more businesses and establish what has been described as a “more globally unified career structure” which in turn would help make it easier for IT professionals to secure employment. 

Other benefits of using the ITSS model include opening up more opportunities for employment for Filipinos with software development and IT backgrounds and helping build a qualified pool of talent for IT and software development jobs such as software quality assurance analyst, database administrator, programmers, application support analyst, analytics trainee, web and software developer, compliance officer, network engineer, quality specialist, systems coordinator, analyst programmer, automation and QA tester, software tester, technical support specialist, and IT manager, just to name a few. 

CBRE Philippines president Rick Santos said, in an interview published in Philippine broadsheet Malaya, that the Philippines continues to be “one of the most cost-effective office space construction destinations in Asia.”

He added that prospects are bright for 2013 with the continued growth in the BPO/office, gaming, residential, and leisure sectors.

According to CBRE Global Corporate Services vice chairman Joey Radovan, BPOs are expected to comprise 80-90 % of total office supply for 2013. The estimate is based on the BPO sector’s objectives of hitting $26 billion in revenues by 2016 and expanding its workforce from 1.2 million to 1.4 million by the same year. 

Radovan added that the projected rate would only make up 10 percent of the global revenues and that there is clearly more “capacity for growth.”

One of the factors for the growth in real estate for the BPO sector, according to Radovan, is the continued dominance of the Philippines as one of the leading outsourcing destinations in the world. 

In the same interview with Malaya, Radovan said, “The Philippines is becoming the lifeboat for many US and European companies that need to outsource in order for their businesses to survive and in turn preserve jobs back in the US and Europe. We see a return and rapid expansion of US and European MNCs to the Philippines.”

Cebu, another highly urbanized city in the Philippines, is at no. 8. The ranking is a notch higher than last year’s and 2010’s ranking for the city. Tholons surveys in 2008 and 2009 have mentioned Cebu as an emerging city. 

This year’s top 100 list has five other cities from the Philippines: Davao at 70, Santa Rosa, Laguna at 84, Iloilo City at 93, Bacolod City at 94, and Baguio City at 99. Baguio City enters the survey for the first time this year. 

The Tholons 2013 survey named the Philippines, Malaysia, and Indonesia among “the most promising Southeast Asian destinations in 2012.”

“Among the three, the Philippines has have the most vibrant IT-BPO industry, led by the emerged outsourcing destinations in the country, Manila NCR, which claimed the third top outsourcing destination spot in this year’s list, and deposing India’s Delhi NCR (now 4th),” the Tholons report said.

The same survey said that the Philippines, described as “today’s current global market leader for voice BPO,” has shown that “there’s still more to gain in the services globalization industry.”

The Tholons 2013 survey statements, published in abs-cbnnews.com, also mentioned that “based on the events of 2012, the Philippines continued to garner interest from large, Western providers, not only as an offshore delivery location, but likewise as a potential rich domestic market for IT Services.”

The top 10 cities in the 2013 survey are Bangalore, Mumbai, Manila, Delhi, Chennai, Hyderabad, Pune, Cebu, Dublin, and Krakow.

“We maintain our view that the Philippines will experience solid growth in 2013 and 2014. A sovereign upgrade to investment grade could come earlier than our prediction of 2014 if infrastructure and investment growth outperform expectations,” Standard Chartered research analysts Jeff Ng and David Mann said in an interview published in Malaya. 

Findings of the latest research report from analysts at the banking giant are also described as in contrast with the “more subdued international sentiment over the past year.”

“We noted little fear that the economic growth momentum seen in 2012 would fade in 2013. Some, particularly those with longer memories, did voice healthy skepticism about these high expectations. The construction sector is booming as new businesses develop. There is, however, still much more to be done on the infrastructure development and investment fronts,” Ng and Mann added. 

The Standard Chartered report also mentioned that businesses in the country continue to do well and that 24-hour food and retail establishments have been multiplying “alongside increasingly value-added business-process-outsourcing (BPO) companies.”

The report added that there is also “widespread adoption of technology, such as electronic non-bank overseas workers’ remittance inflows.”

“We need motivated and highly qualified professionals. With support from government and academic and training institutions, we expect to meet that goal of employing 1.3 million,” Business Processing Association of the Philippines (BPAP) president Benedict Hernandez said recently in a press statement published in Philippine broadsheet Malaya. 

Ideal job candidates in the industry should have leadership skills, English-language ability, and strategic thinking. 

BPAP is working with various government agencies to develop a more robust and skilled labor pool.

The industry association currently works with the Commission on Higher Education (CHED) to hold training on job readiness for youth and regular courses for trainers. BPAP has 13 training, HR development and certification programs.

The Philippine information technology and business process outsourcing (IT-BPO) and global in-house center (GIC) sector, which is projected to hit US$25-billion by 2016, is working to find more qualified employees. The country currently has top outsourcing companies offering multi-service delivery in engineering and IT, manufacturing, consulting, financial, healthcare and public services, real estate, customer engagement, support services, facility management, and security.

A new CNBC Asia article “Who Is Asia’s New Darling of Investors?” mentioned that the economic growth in the Philippines, boosted by growth in the services sector, has impressed several economists in the region. 

The country’s 5.9 percent gross domestic product (GDP) growth for Q2, in particular, is one of the highest posted in Asia – next only to China and Indonesia – and bests Malaysia’s 5.4 percent, Vietnam’s 4.4 percent, Thailand’s 4.2 percent, and Singapore’s 2 percent.

Prakriti Sofat, Barclays Regional Economist, called the Philippines “Asia’s rising star” and said that a credit ratings upgrade for the country in the second half of 2012 is expected. 

Fidelity Worldwide Investment’s Medha Samant described the Philippines as the “new market darling” for foreign investors and added that the country has cut down its fiscal deficit, has strong domestic demand, and has high remittances from overseas foreign workers. 

Medha also cited the Philippines’ business process outsourcing industry, which continues to show strong growth. The investment director at Fidelity Worldwide added that the country’s BPO industry “employs almost the same number as bank workers today; there are opportunities in this market that we are quite excited about.”

The CNBC Asia article was published less than a week after the report “A Youthful Populace Helps Make the Philippines an Economic Bright Spot in Asia” came out in The New York Times. 

In a statement published in the Philippine broadsheet Manila Bulletin and posted on Yahoo! News, Finance Secretary Cesar V. Purisima said that the administration of President Noynoy Aquino will work to sustain the level of growth achieved this first quarter by continuing the investments made to build the necessary infrastructure that will support the growth of investments particularly in the business process outsourcing (BPO), tourism, and agriculture sectors. 

The Finance Secretary further said in the press statement that the government “will continue to align policies and rationalize processes to reduce the cost of doing business.”

Purisima added that the country’s “second quarter growth was at a respectable 5.9 percent.” The figure beat market expectations, according to the Finance chief, and placed the country at the upper end of the full year forecast. “This brings our first semester growth to 6.1 percent, well beyond the 4.7 percent average GDP growth of the country in the last decade.” 

According to Purisima the country showed economic growth from January to June even as global growth decelerated amid the economic uncertainties in the United States and in the Eurozone. 

Also in the first quarter of 2012, total construction, boosted by the growth of public construction, grew to 9.2 percent; exports, on the other hand, posted 7.9 % growth; and export of services posted 9.9 % growth. 

The Finance Secretary said, “With the government’s focus on the fundamentals, and the private sector’s optimism, we are confident that we will be able to continue expanding the economy.”

Christian de Guzman, Moody’s Assistant Vice-President, said in the credit rating agency’s report, as quoted by broadsheet Business World, that the “economic resilience in these countries is credit positive because it supports government revenues and mitigates the need for stimulus spending to support growth.” 

He added that the credit rating agency expects the Philippine economy, which posted 6.4 percent growth – the fastest growth rate among ASEAN (Association of Southeast Asian Nations) members – for 2012’s first quarter, to again show healthy growth for the next quarter. 

The Moody’s Investors Service official pointed out that this accelerating growth is actually bucking the trend of lackluster growth in other parts of the region, “particularly in China and Asia’s newly industrialized economies of Hong Kong, Singapore, South Korea and Taiwan.” 

Aside from the Philippines, the other countries that are also posting growth in the region include Thailand, Indonesia, and Malaysia. The Moody’s report added, “As exports have been brought down by softening prices in international markets along with weak demand from the US and Europe, developing Southeast Asia has been supported mainly by domestic economies.”

Foreign direct investments have also remained strong for the resilient economies in the region, according to Moody’s, as “stable inflation and favorable consumer sentiment have sustained private household spending” and “government revenues have remained buoyant, reflecting profitable businesses and healthy labor markets.”

The credit rating agency has already raised its outlook for the Philippines from stable to positive, making it even more likely for the country to achieve a possible upgrade in credit rating in the next 12-18 months. This upgrade would mean an alignment with the credit ratings received from Standard & Poor’s and Fitch Ratings.

Trade Undersecretary Cristino Panlilio said in an interview with the Philippine Star that the roadshow will also explain the general principles of the IPP to the public. 

This year’s IPP, which identifies business activities that enjoy incentives from the government, was approved by President Benigno Aquino III last June. The sectors that were listed as preferred activities in the 2011 IPP remained in the 2012 list. Joining them in the 2012 list are hospital or medical services and iron and steel.

The 2012 IPP list preferred activities also includes knowledge-based services or creative industries, research and development, infrastructure, disaster prevention, mitigation and recovery projects, strategic projects, agribusiness and fishery or agriculture, mass housing, shipbuilding, energy, motor vehicles, and green projects.

According to the Philippine Star report, a published notice indicates that the DTI roadshow kicked off in mid-August in Dipolog City and will continue from the end of August up to the second week of October in Butuan, Naga, Baguio, Bacolod, Tacloban, Davao, Puerto Princesa, Cagayan de Oro, Tagbilaran, and Pasay. 

The report from Research and Markets indicates that the entertainment industry’s growing adoption of animation content is one of the key factors driving the growth of the global animation software market. 

Recent increased demand for 3D and 2D animation content for movies worldwide is also a major factor.

The report also mentions the video gaming industry as another of what it calls “major adopters of animation software.” The growing clamor for games with better visual graphics is driving up the gaming industry’s demand for animation software.

Aside from that, the animation software market across the globe is also experiencing major growth in the outsourcing of animation content. 

Virtual-strategy.com, which posted the article on Research and Markets’ projections for the global animation software industry, quoted an analyst from the engineering team at TechNavio who commented on the Research and Markets report. 

The analyst said, “The outsourcing of animation content is an emerging trend in the market. Organizations in the animation industry are outsourcing their animation content to reduce their production costs. Some developed countries have begun to outsource animation content to countries in the APAC region such as the Philippines, Japan, Korea, and India, thereby tapping the cost advantage. Thus, the outsourcing of animation content helps many animation software vendors increase their market presence across the world.” 

NWCs are areas outside Metro Cebu and the National Capital Region that are seen as promising locations for IT-BPO investment and employment.

A statement from the DOST-ICTO said that the coming road show will cover nine locations “Legaspi City, Palayan City, Tagbilaran, Zamboanga, Malolos, Clark Special Economic Zone, Bacolod, Cavite, and Davao” in four months. It aims to promote job opportunities for graduates and the IT-BPO industry, drive up job applications, and correct misconceptions about working in the IT-BPO sector. 

Alejandro Melchor, DOST-ICTO Deputy Executive Director for Industry Development, said in the article posted on the Philippine Information Agency website that there is a “need to spread the benefits of economic growth” to other areas and regions in the Philippines which at the same time eases the “congestion in NCR and in other high-density IT-BPO locations.”

The road show, according to the DOST, also aims to introduce the “Smarter City/Countryside” concept using ICT for economic and social development and to create partnerships with both the public and the private sector to create training and employment opportunities for students and graduates that are qualified or interested in working in the IT- BPO sector. 

David Caldwell, managing director of Wells Fargo Philippines Solutions Inc., said recently that there are great prospects for the country’s animation industry because of the Philippines’ “sectoral advantage.”

Wells Fargo Philippines Solutions Inc. is among the subsidiaries of Wells Fargo, the fourth biggest bank in the United States.

Caldwell lauded the “sophisticated talent and creative instinct of Filipino animators” that help make the country the preferred outsourcing partner of major international production outfits worldwide.

The Wells Fargo executive added that these international production outfits rely on animators from Philippine outsourcing firms because of English proficiency, lower costs, consistent quality and output speed; as well as higher comprehension ability, particularly regarding storylines and concepts, compared to their Asian counterparts. Caldwell added that the Philippines has “robust infrastructure to support relevant animation activities.”

According to Caldwell, another fast growing non-voice BPO area is the $250-million engineering design sub-sector, which is growing at more than 50% annually.

The Well Fargo exec – who also cited data that shows that the non-voice sub-sector of the Philippines’ BPO industry grew from 15 to 20% in the period 2006-2010 – said that the promising segments of the non-voice sub-sector also include legal transcription, information technology services, knowledge process outsourcing, and back office services.

“We’ll continue to work closely with the government to ensure employee safety, enhance disaster preparedness, and mitigate service disruption,” Business Processing Association of the Philippines president and chief executive Benedict Hernandez said in an interview with Manila Standard Today.

The recent monsoon rains affected a considerable part of Luzon, which is the location of hundreds of IT-BPO firms in the Philippines. BPAP said that their initial survey in the aftermath of the monsoon rains showed that a number of IT-BPO businesses have reportedly given monetary assistance and relief to affected employees through advances of the 13th month pay, outright grants, and interest-free loans. 

Some have also provided – as part of implementing business continuity plans – safe transportation for their employees. 

There are also, according to BPAP, some companies that arranged accommodation for employees who could not go home yet and provided food or food allowance and assistance from support teams. 

Last year’s second quarter growth percentage was 3.6. This year’s second quarter figure is said to be closer to what analysts projected. 

According to the National Statistical Coordination Board (NSCB), this year’s first half showed faster growth at 6.1 percent compared to last year’s 4.2 percent growth for H1.

In an interview published in Philippine broadsheet Business World, NSCB officer-in-charge Lina V. Castro explained that the “resilient service sector remained the driver of growth.”

Arsenio M. Balisacan, Socioeconomic Planning chief, pointed out that the Philippines’ Q2 figure for this year is higher than those posted by Malaysia (5.4 percent), Thailand (4.2 percent), Vietnam (4.4 percent), and Singapore (2.0 percent). 

In the same interview published in Business World, Balisacan added that the Philippine economy “remains cushioned, resilient with sound macroeconomic fundamentals. The government will continue to accelerate spending.” 

Balisacan also said that the Philippine government’s GDP growth target for 2012 is still 5-6 percent and this target won’t be revised. 

The impact of typhoons on the agriculture sector for this third quarter, according to the Socioeconomic Planning chief, would be “modest.”

He added that in response to the floods, the Philippine “government is speeding up investments in construction and rehabilitation. And that should help our economic growth.” 

BPAP figures show that in 2011, the country’s non-voice services – a sub-sector of the business process outsourcing industry – posted 30 percent growth as the entire IT-BPO sector achieved 24 percent growth. 

Growth in non-voice services is due to the strengthening of service delivery in software, financial services, legal services, insurance, logistics, media, engineering, IT, healthcare, and human resources, according to BPAP senior executive director Gillian Virata.

The BPAP official added that the demand for new outsourced services is increasing and there is enormous potential for non-voice and other emerging services. 

Virata explained that the IT-BPO industry has evolved into what she described as an “industry of industries,” which offers a number of opportunities to deliver non-voice services to a wide variety of industry sectors.

Consultancy and research firm Everest Group recently forecast that non-voice will contribute 90 percent of the total 2012 global revenues of outsourced services, which is expected to reach $220-280 billion. 

In 2011, non-voice services produced 33 percent of the $11 billion total revenue of the Philippines’ IT-BPO industry. 

The country, according to the Knight Frank and Citi Private Wealth’s 2012 Wealth Report, will be among the most rapidly growing economies in the world as developing markets in Asia become the major sources of growth across the globe by 2050.

At 7.3%, the Philippines’ growth rate is projected to be faster than Mongolia’s 6.9% growth rate, Indonesia’s 6.8%, Sri Lanka’s 6.6% and Egypt’s 6.4%; all of which made the Citi report’s top ten list. Also among the top ten fastest growing economies is Nigeria which, at an expected growth rate of 8.5% over the same period, is no. 1 on the list.

Citi chief economist Willem Buiter said in the report that the Philippines is going to be among the world’s top “global growth generators” or “future drivers of growth and investment potential.”

The Philippine Star quotes the Citi report as saying that their research shows that “while China and India are likely to grow rapidly over the next 40 years, there are other key countries with promising chances for growth that do not necessarily match the traditional assumptions about where future growth will emanate from.”

“For example, Russia and Brazil, which make up the so-called BRIC nations alongside China and India, do not make Citi’s list of Global Growth Generators or “3G” countries. Instead, Citi includes countries such as Bangladesh, Egypt, Indonesia, Iraq, Mongolia, Nigeria, the Philippines, Sri Lanka and Vietnam on this list,” the Citi report further said. 

The law is seen as a boost to the country’s rapidly expanding information technology and business process outsourcing (IT-BPO) sector. 

Business Processing Association of the Philippines (BPAP) president Benedict Hernandez said in an interview quoted on www.interaksyon.com, “Much of our work involves confidential personal and company information, and client firms of our IT-BPOs want to know that the Philippines provides international standards of protection to safeguard their information.”

The Data Privacy Act, which was aligned with the Information Privacy Framework of the Asia Pacific Economic Cooperation and based on European Parliament standards, was created to protect the confidentiality and integrity of personal data. The law will also pave the way for the creation of the National Privacy Commission which will be under the Department of Transportation and Communications (DOTC).

One of the priority measures of the Aquino administration through the Legislative-Executive Development Advisory Council, Republic Act No. 10173 is expected to boost investor confidence in the IT-BPO industry which is currently on target for a projected $20 billion in revenues and 1.2 million job opportunities through the next four years. 

In a recent interview with Bloomberg, Michael Spencer, Deutsche Bank AG’s chief economist for Asia said that the Philippines is the “strongest-performing economy” in Asia today. 

Spencer also pointed out that this development is despite the fact the Philippines has been historically identified as dependent on U.S. and European economies which continue to face gloomier projections and uncertainties. 

The country’s economy improved by 6.4 % for Q1 or the first quarter of 2012; this, according to economic experts, is an improvement or a recovery from last year’s 3.7 % growth. 

These figures helped propel the Philippines to no. 2 among the fast growing economies in Asia, second only to China which posted 8.1 % growth.

According to BPAP president and CEO Benedict Hernandez, the rejection of the bill confirms that outsourcing is a win-win situation for both American and Philippine businesses. Outsourcing services to the Philippines, Hernandez said, help make US businesses more profitable and competitive.

The anti-outsourcing bill of the Obama administration would have taken out the tax breaks given to businesses that outsource manufacturing jobs and services to other countries. The proposed bill would have also given a 20% tax deduction on costs related to closing down outsourced operations and transferring jobs to America.

Hernandez pointed out that profitable businesses hire more employees both in the US and abroad. He added that several studies have demonstrated that outsourcing has little impact on loss of jobs and can, in fact, even free up company resources and help create more jobs at home.

The BPAP official also mentioned a study of the hiring practices of 2,500 US multinationals conducted by economist Matthew Slaughter from Dartmouth’s Tuck School of Business, which showed that for every job outsourced, two new jobs are created at home. The study also found that US jobs created by foreign multinational subsidiaries almost doubled over a generation, resulting in jobs for 5.4 million employees in the US.

Last year, the IT-BPO sector in the Philippines generated revenues of more than $11 billion and produced jobs for about 640,000 Filipinos. According to industry projections, by 2016, the sector is expected to hit $25 billion in annual revenues and generate jobs for 1.3 million Filipinos.

The government-run agency encouraged local BPO firms to register their company training programs for “near-hires.” After signing up, TESDA will offer accreditation to the trainers and free training for applicants that are almost-hired. 

TESDA aims to improve the skills of trainers by helping develop their teaching skills, techniques, and teaching principles of becoming effective leaders. TESDA will qualify and certify the trainers to make sure that they are competent and capable of developing the skills of the near-hires. 

The state-run skills training school hopes to have trainers earn national technical vocational education and training trainer’s certificates (NTTC) in an effort to improve the level of training of Filipino employees in BPO firms, as well as contribute to the talent pool for BPO companies and help drive greater employment. The NTTC or certification from TESDA is valid for five years.

The target is to have all trainers enrolled in all TESDA vocational courses certified by the state-run school by Sept. 30 of this year. 

According to Trade and Industry Secretary Gregory Domingo, the country received 24 business teams – from countries such as Japan, Russia, and Turkey – in the first six months of 2012. Domingo said that investors expressed interest in business process outsourcing, energy, agriculture, garments, steel, and shipbuilding. 

The $10 billion target for FDI matches the target of P400 billion for 2012 announced earlier this year by the Board of Investments (BOI), which is chaired by Domingo. The BOI goal is in turn backed by the 2012 Investment Priorities Plan (IPP) which has already identified 13 preferred economic activities that are given a package of tax incentives. 

The 13 preferred economic activities for 2012’s IPP include creative industries/ knowledge-based services, agriculture/agribusiness and fisheries, mass housing, shipbuilding, strategic projects, iron and steel, infrastructure and PPP, green projects, research & development, hospital and medical services projects, disaster prevention and recovery projects, energy, and motor vehicles.

The Philippines’ $225 billion economy grew 6.4 percent in Q1. This is the fastest pace for the economy since 2010. The peso, which gained about 5%, is 2012’s best performer against the U.S. dollar among the 11 most-traded currencies in Asia. The Philippine Stock Exchange Index also had a record surge this July.

The country attracted about $6 B in pledged foreign investments in 2011 and has generated commitments from companies that include Gazasia Ltd. and Glencore International Plc for 2012. Domingo added that business teams from Argentina and Mexico are also due to visit the Philippines. 

The target revenue is a billion pesos higher than the previous projection of $25 billion for 2015 and is twice the projected revenue for 2012. If this target is achieved, the BPO industry will continue to become one of the biggest sources of revenue from foreign exchange, next only to remittances from overseas Filipino workers. 

Business Processing Association of the Philippines (BPAP) director Rainerio “Bong” Borja, in an interview published in Philippine Daily Inquirer, acknowledged that the industry’s increased target revenue is “ambitious.” “If we aren’t ambitious, then we won’t grow.” he said.

According to Borja, the BPAP is focusing on talent development to reach the revenue target. He added that the group has more than P1 billion in training funds from the government for developing the skills of potential BPO workers. The Technical Education and Skills Development Authority (TESDA) will help with the training. 

One of the most vital factors driving the growth of the BPO sector in the Philippines, Borja said, is the supply of talented workers that are also capable in other technical areas, aside from being good English speakers. He added that the BPO sector is indeed expanding from call centers to more profitable back office work. 

BPAP president and CEO Benedict Hernandez said that the proposed data privacy law – which is based on European Parliament standards and is in accordance with the Asia Pacific Economic Cooperation (APEC) Information Privacy Framework – will bring the country up to international standards of privacy protection and will increase confidence among investors and clients that outsource to the Philippines. 

Hernandez explained that the IT-BPO sector – which according to BPAP generated $11 billion in revenue last year and generated 640,000 direct employment opportunities – is rapidly developing. Complex services, the BPAP official added, already account for more than 30 % of the IT-BPO industry’s revenues “and these services are growing more rapidly than voice services.” 

“Much of this work involves confidential personal and company information, and client firms of our IT-BPOs want to know that the Philippines provides international standards of protection to safeguard their information,” Hernandez said in an interview published in the Philippine Star. 

This kind of assurance of data protection, Hernandez added, will make the country’s IT-BPO even more competitive, which in turn will help sustain the industry’s growth, particularly in non-voice and value-added services. 

Authored by Sen. Edgardo Angara, the proposed Data Privacy Act aims to protect the confidentiality and integrity of personal data. 

Casambre, who was a guest recently at the Cebu ICT and BPO Conference, said that ICT-BPO added $10.9 billion in revenues to the 2011 gross national product (GNP). It’s the second highest contribution to the GNP; second only to the remittances from overseas Filipino workers. 

The ICTO official said that based on the current growth rate of ICT-BPO, the $50 billion target can be easily achieved and that this kind of revenue can lead to even more job opportunities.

Casambre added that the ICTO, which last year became an attached agency of the Department of Science and Technology, was able to proceed with its planned programs even as the agency faced the challenges of adjusting to the new office. The planned programs include improvements in the ICT policy environment, a Cyber Security Program, development of the ICT and ICT-enabled industries, expansion of the E-government project and Internet for all. 

This is a “landmark”: decade for the ICT industry according to the ICTO official. 

“Last year the country achieved a 15-year high having attracted more than 6 billion dollars in foreign direct investment,” Casambre added. “Rating companies have upgraded the country’s investment status and our stock market is abuzz with activity, bringing our stock index to all time highs.”

A growth rate of 11% — which means jobs for about 50,000 information technology (IT) professionals – was also seen. 

One of the reasons cited for the growth was the increased number of international businesses engaging the services of local firms for their software and IT requirements.

PSIA president Nora Terrado added that companies were able to raise the efficiency and revenue per full-time employee (FTE) because of improved utilization of the present talent pool. The need for technical workforce,on the other hand, was augmented by government and industry players who focused on training fresh graduates and mid-career professionals.

The increased demand for IT services last year, Terrado further explained, helped place these trainees into mainstream IT positions. She cited this along with process optimization and innovation as the other factors that helped contribute to last year’s increased IT outsourcing revenue. 

In addition, a growing number of local companies are moving from service orientation to product development. With this trend in mind, the PSIA created a special interest group on product development (PD/SIG). The group’s aim is to help the software development sector build and commercialize at least 10 software products “all globally recognized” in different categories by 2016. For each of these software products, the projected revenue from offshore customers is at least $1 million. 

Given the globally competitive environment, the convergence of BPO and IT services, the advent of cloud computing, and a number of other developments affecting the industry, Terrado said that product and services innovation as well as capability development are important in sustaining the local sector’s growth trend. 

Local areas of potential growth for this year are independent software testing, application enhancement, remote infrastructure services, and maintenance and support. 

The Philippines’ move from agricultural to services, Jain said, is happening amid the telecommunications revolution in the country. 

To move up to higher value-added activities – for the services and manufacturing industries, in particular – improved infrastructure would help. For one, improved infrastructure can help the country’s business process outsourcing industry develop more services aside from voice-based call centers. Jain added that the financial market in the Philippines needs to develop long-term instruments to help the government as it promotes investments in infrastructure. 

For public-private partnership (PPP) projects, Jain said that loans with longer terms have to be made available. He added that longer tenors can give a bigger boost to infrastructure projects. 

Last month, the ADB announced funding support for the PPP initiative, in hopes of helping sustain the “positive reform momentum.” The project development and monitoring facility (PDMF), which is administered by the ADB, has current funding that is estimated to be capable of supporting at least 12 PPP projects which would be implemented or ready by 2016. This is more than double the government’s five- project
target set for completion by the end of next year. 

BofA Merrill Lynch’s New York-based executive vice chairman for international corporate and investment banking James Quigley, said in a press briefing that currently there is greater transparency and a higher fundamental comfort level in doing business in the Philippines. 

He added that because of the country’s centralized location in Asia, its highly regarded free democracy that works, its historical close ties with the United States of America and its strong demographics the Philippines is considered an attractive place to move manufacturing operations.

Quigley also said that if the Philippines continues doing the right thing, its share of foreign direct investment (FDI) flows will also increase. He added that he feels “very strongly” that as multinational corporations look to move labor-intensive manufacturing operations to emerging markets, the Philippines can become the preferred destination of those foreign direct investments.
Corporate leaders around the world, according to Quigley, were becoming “uniformly comfortable” with the Philippine government’s actions. Investors were also encouraged by the country’s sound local banking system, more equity and fixed capital formation and public fiscal sector surpluses. Manila is also logistically well situated in the region. Demographics point to more potentially beneficial situations and trends: an expanding middle class, increasing need for significant investment in infrastructure and the growing number of world class multinational corporations that are based in Manila. 

The BofA Merrill Lynch official added that there is real growth locally and more people are focusing on demographics, on local policies, political stability and the success of the democracy and local policies. 

DOST Secretary Mario Montejo said in an interview with the Manila Bulletin that the move is a clear signal that technology companies such as IBM really look at the Philippines as a place to go for R & D activities. 

Montejo added that IBM is keen on further tapping the technological expertise of Filipinos, noting that the IT company considers the country as a very conducive place for investing in R & D. 

The R & D centers will be established not just in Metro Manila but also in other areas across the country including Cebu, Tacloban and Davao – a move that is also in support of inclusive growth.

The DOST Secretary added that the country can also benefit from the best practices in Science and Technology that IBM – which he described as a company that provides business solutions using technology, particularly IT – can share through these research and development centers. 

IBM previously worked in partnership with DOST in 2007 with programs like the National Technology Business Incubators Program, Engineering Research & Development for Technology Program and the Philippine Intellectual Property Policy Strategy. 

The MOU will help provide venues and access to online training for teachers and learning modules and study guides for college students interested in subjects related to jobs in the IT-BPO sector. 

The ADB-Philippine government MOU stated that improving national competitiveness, moving into knowledge-based services, and achieving and maintaining rapid economic progress, would require an educated workforce equipped with skills that meet the demands of high-growth industries.

The MOU also stated that the planned ICT-enabled “knowledge hubs” will be placed in selected universities and colleges in the Philippines – at least one hub each for Luzon, Visayas and Mindanao. The learning institutions involved are expected to align their curricula or course offerings according to the needs of the IT-BPO sector. 

The $650,000 technical fund will come from South Korea’s e-Asia and Knowledge Partnership Fund by the ADB – providing $500,000. The Philippine government will be providing “in kind contributions” worth $150,000. 

According to the MOU, at least 3,000 college students and 900 faculty members are expected to benefit from the technical assistance program. The training and education are aimed at helping meet the IT-BPO industry’s growing demand for an educated and skilled workforce. Last year’s figures from the Board of Investments show that the local IT-BPO sector’s total revenues posted 24% growth or about $11 billion, with about 638,000 employees working full-time. 

The PSIA president said that a report by the Everest Group “a business leader advisor on next generation global services” described the Philippines along with India, China, Poland and Brazil as “mature locations” for software services because each of the countries mentioned have more than 50 providers of software services. 

Terrado cited several factors driving the growth of the Philippines’ outsourced software services sector, including major foreign market campaigns and a rapidly growing demand for outsourced software services. The influx of development and research is being driven by new digital platforms like smartphones and other handheld devices that are gaining market traction.

The PSIA president also mentioned a report by research firm Garner, which stated that the Philippines can still remain competitive against countries that offer software services like Vietnam, Argentina, Chile and Ukraine. The main reason is that these countries are facing challenges such as visa restrictions, low salaries, high rates of employee attrition, higher government scrutiny and more. According to Terrado, the Philippines continues to overcome these challenges and could emerge as one of the most viable destinations for outsourced software services. 

Terrado also mentioned some trends in the global in the information technology outsourcing (ITO) sector that might benefit the Philippines’ software services industry, including increasing demand for more value-added services and increased bundling of services with more selections for different outsourcing needs. 

Two new platforms driving the rapid growth of software development and service provisioning “cloud computing and mobile data” are also making it possible for software developers and applications providers to continue to flourish in the world’s outsourced software services industry. 

The software services industry in the Philippines is seeing sustained, double digit growth. Last year, the sector generated US$993 million in total revenue, posted 37 % growth over the previous year, and remained one of the Philippines’ fastest growing outsourcing sectors, with manpower growth of nearly 50,000 full time employees. 

The Philippines is the only country to reach intermediate level and a score of above 7.0 in the 2012 index of 76 countries worldwide. Joining the Philippines “with a score of 7.11” in the top five are Norway, with a score of 6.54; Estonia, 6.45; Serbia, 6.38; and Slovenia, 6.19.

A score above 7.0, said the GlobalEnglish study, is a BEI level that indicates relatively high proficiency. It also indicates the ability to perform relatively complex tasks and take active roles in business discussions. 

GlobalEnglish “a Brisbane, California-based company that works with multinational companies like Procter and Gamble, Cisco, Phzer and HSBC to support business English performance in workplaces around the world” recently released its yearly Business English Index (BEI). The BEI is the only index that evaluates and ranks workforce proficiency in business English across the globe. 

The study, according to a report published in Yahoo! News, said that the results are “particularly interesting because the Philippines, a country with one-tenth of the population of India, recently overtook India as a hub for call centers.” The study added that there are now more than 400,000 Filipinos working in call centers, about 50,000 more than in India. 

The GlobalEnglish report also said that a country’s capability in business English indicates business success and economic growth. “It is not surprising that both the Philippines and Norway” the only two countries in the top five in both 2011 and 2012 “are improving their economies, based on the latest GDP data from the World Bank,” the report added.

With a score of 7.11, the Philippines is classified by GlobalEnglish BEI as intermediate level. The rest of the countries included in the study are at the beginner or basic level. 

Tetangco – who was interviewed after he delivered his speech at a forum hosted by Euromoney, a monthly publication – said that the point he is referring to is what demographers call a “sweet spot.” This is a stage when less than 30% of a population are too young to work and only 15% are too old to contribute. 

This means that now more Filipinos are at an age where they can hold jobs and help drive growth. 

According to Tetangco these are people who have the purchasing power to drive consumption, investment and a faster growing economy.

“If you look at what is happening in the business process outsourcing [BPO] sector, the Philippines has become an important BPO center because of the availability of skilled manpower. And if you look at the age of BPO employees they are quite young but they receive good salaries and therefore they are able to finance consumption,” Tetangco was quoted in an article published in the Business Mirror. 

Tetangco, citing a World Population Prospects document (2010 revised edition) from the United Nations, said that this particular age group is composed of able-bodied Filipinos with an average age of 22.2. He added that by 2015, the Philippines is expected to reach a stage of development where there are more of these working-age Filipinos in the population. By that time, the country should be able to reap the benefits of this demographic the same way neighboring countries Thailand and Malaysia did years earlier. 

Investors who are looking for the potential of an economy in terms of market size will consider this demographic window, Tetangco added.

“If the Philippine economy is growing [by then], underlying that growth would be an increase in employment as well. As you grow, you can generate more employment and therefore you can have more people employed,” he said in the same interview.

According to NEDA Assistant Director General Ruperto Majuca, the estimated 15 percent growth is an average figure for the years 2011 to 2016. He indicated that It could even reach 20 percent if public and private partnerships are strengthened. But if the global market weakens and public and private partnerships are insubstantial, the annual growth might top out at only 9 percent. 

The NEDA added that based on the Business Processing Association of the Philippines (BPAP) 2011 to 2016 Road Map, the association’s projected annual growth of 15 percent would be more likely than a low of only 9% or a high of 20% each year. 

Growth of 15% in the industry, according to the BPAP, would result in 3.15 million indirect and direct job opportunities and taxes reaching $6 billion each year. This is a likely scenario, according to the NEDA, when you consider the global economic environment. Majuca added that the BPAP based its assumptions on a projected doubling of growth from 2010 to 2016 in the global market. This projects a 10-15% growth in the global market despite uncertainties surfacing in Europe and the slow economic recovery in the United States.

Majuca said that these economic developments are resulting in foreign companies flocking to places like the Philippines to save on labor as well as other logistical costs and thus improve their bottom lines. Countries like the Philippines, which have become established as BPO destinations and places where connectivity to the Internet is affordable, are likely to continue to benefit from outsourcing. 

The motivation of firms for conducting offshoring is to save costs, Majuca added.

To take advantage of this growth window, the NEDA strongly recommends improving the talent pool, quickly establishing next wave cities, creating a positive environment for offshoring, and strengthening the information technology (IT) and telecommunication industries. 

That’s one of the reasons for BPAP’s latest campaign – a new career portal called “Work Abroad. Live Here” which aims to make Filipino job seekers as well as fresh graduates and their parents aware of global IT-BPO career opportunities.

Hernandez said that the career portal (http://www.workabroadlivehere.com), which hopes to generate 1.3 million jobs in the next four years, is part of a bigger campaign to provide information to professionals and graduates who are considering a career in the country’s IT-BPO sector, which has more than twenty functional and vertical segments.

According to Hernandez, the career portal is intended for students, fresh graduates, young professionals, and experienced workers who are interested in working for world-renowned businesses that provide their employees professionally and financially rewarding careers. 

“They don’t have to go overseas for great jobs,” Hernandez said. He also mentioned jobs for game developers, animators, IT professionals, financial analysts, software developers, accountants, nurses, doctors and many other professionals.

Citing the fast expanding IT-BPO centers in Davao, Bacolod, Laguna, Iloilo, Batangas, Cavite, Cagayan de Oro, Baguio, Dumaguete and Malolos, which are in need of professionals for jobs in non-voice and voice BPO, Hernandez said that the new portal will include the growing number of IT-BPO job opportunities outside Metro Manila. 

Along with the “Work Abroad. Live Here” campaign, BPAP, its member companies and several government agencies hope to also help increase the labor pool size by undertaking initiatives like near-hire training as well as developing and teaching IT-BPO-geared curricula for both private and public schools. 

Hernandez added that these numbers indicate a good start to the industry’s five-year plan to grow at an average rate of 20 % each year, which is above the projected global annual growth rate of 10 to 15 %. 

Last year, the IT-BPO sector also provided 638,000 job opportunities, an increase of 22% percent from 2010. It is projected that at a 20 percent compound annual growth rate (CAGR), the country’s IT-BPO will become a $25-billion industry within the next four years; cornering 10 percent of the world’s IT-BPO market and contributing about 9 percent of the country’s GDP.

The non-voice business process and knowledge process (KP) services sub sectors, on the other hand, earned more than $2 billion in revenues, employed almost 130,000 and saw 24 percent growth in 2011, according to BPAP senior executive director Gillian Virata.

Virata added that figures show that the country’s IT-BPO industry is steadily moving into high value services. There is a relatively sharp spike in the revenue-to-employee ratio for ITO and also for HIMO, which increased the ratio overall for the entire industry. The trend, according to Virata, is in line with BPAP’s growth plans which are in turn aligned with the government’s plans for the local IT BPO sector. 

Melchor added that the Philippines is currently “one of the lowest cost destinations for IT Outsourcing,” has a workforce with extensive IT work experience, has a considerable range of available IT skills and has “a growing global branding.”

“We have the tools and the talent to be a major player in IT Outsourcing,” Melchor said. “ITO is growing fast and is driven by converging global megatrends such as the growth of the knowledge economy and the global technology revolution.”

The DOST-ICTO is the lead Philippine government agency on Information and Communications Technology (ICT) related matters. The agency’s primary thrusts are in ICT Industry Development, ICT policy development, eGovernment, Cybersecurity and Internet for all.

The Philippines is currently the third largest annual supplier of technical talent for IT in the Asia Pacific – next only to China and India. And based on surveys by US-based Meta Group, the Philippines also consistently ranks near the top when it comes to the availability of knowledge based workers worldwide.

According to DOST Secretary Mario G. Montejo, Filipino workers in the IT sector have a wide range of skills, including knowledge in programming, development of software, proficiency in database platforms, skills in mainframes and expertise in mobile platforms. He added that the country’s ITO industry is one of the top performers in 2011, growing by 37%, creating about 50,000 full time jobs and generating revenues of almost a billion dollars. 

Leechiu, the country head of JLLL, told Business World reporter Franz Jonathan dela Fuente in an interview that the three studios will establish operations in the Philippines and will hire animators. He added that the three foreign companies are still putting up work requirements, but the range is considerable and will probably be around 200 to 300 employees for each company.

The news comes on the heels of a projection made by the Business Processing Association of the Philippines that the country’s IT-BPO (Information Technology – Business Process Outsourcing) industry will increase its revenues by at least 20 percent this 2012; this, after the 22 percent growth in 2011 “amounting to about $11 billion” as the voice, back office and health care subsectors of the industry, as mentioned in earlier reports, continued to grow.

The three animation studios, according to Leechiu, will be establishing operations for business process outsourcing and other animation work and are considering office spaces in Fort Bonifacio, Makati City and Quezon City’s UP-Ayala Land Technohub. He declined to name the three studios in the interview but he said that all three are Western-based companies.

He also said that one of the three is a big company and this studio setting up operations in the Philippines could be good news, particularly for the local BPO sector and the local animation industry. Each animation company will likely spend around $3,000 for each worker they hire, Leechiu added.

The World Bank said that the projected improvement in job prospects in the country is because of increased public spending and continued growth in the BPO sector. 

In the Philippines Quarterly Update, the World Bank said, as quoted in a report in abs-cbnnews.com, that higher spending on infrastructure is expected to generate hundreds of thousands of new jobs in the trade and construction subsectors while continued growth in the BPO sector is expected to create 100,000 new jobs, even as “industry expansion is being slowed down by the diminishing supply of qualified workers.”

Rogier J. E. van den Brink, World Bank Lead Economist, added that while “the global economic environment is not very good, the Philippines has strong fundamentals. That provides an excellent base to now seize the opportunity that the global rebalancing is presenting… Catching the next wave of investments into emerging markets, the Philippines can be the primary destination for it.”

The local BPO sector currently provides employment to around 700,000 Filipinos; some 61 percent of these BPO employees are in the call center subsector. 

Finance and accounting have been identified as among the fastest growing subsectors of the Philippine BPO sector. 

The IMF’s annual review of the country’s economy projected this modest 0.5 % increase for the current year; last year, the economy grew at a rate of 3.7 percent. 

The review added that economic growth rise to about 5 % over the next couple of years; inflation, however, is most likely to remain between 3 to 5 %, which is actually the official target range. 

The international organization added, as mentioned in a report published in the Philippine Daily Inquirer, that the Philippines must implement measures to help make the benefits of economic growth accessible to the poor. 

The IMF recommended that the Philippine government improve collection of taxes to gain more resources for infrastructure and social services, particularly education and health, which are one of the ways to let the benefits of a growing economy trickle down to the rest of the population. 

The government should also make additional investments in the improvement of human capital; this is particularly helpful for members of poor households, who would then be able to gain opportunities for employment and a way out of poverty. 

According to the IMF, the government should also increase social safety nets like conditional cash transfers and should find more ways to make financing available to the poor. 

“We selected the Philippines to be part of Wells Fargo’s international footprint based on the country’s reputation for strong customer service, a large English-speaking population and a cultural affinity to the United States,” Wells Fargo Philippines Solutions managing director David Caldwell said in a report published in Yahoo! News. Wells Fargo Philippines Solutions is the US company’s local subsidiary.

Wells Fargo & Co., the second biggest bank in the US in terms of home mortgage servicing, debit cards and deposits, has $1.3 trillion in assets. 

In the same report, former Sen. Ernesto Herrera welcomed the launch of the Wells Fargo business support center. The labor group leader said that the move further added to the country’s reputation as an “an exceptional global hub for labor-intensive and information technology-enabled outsourcing services.”

Herrera added that Wells Fargo deciding to offshore more jobs comes at a time of worries in the country over the US Congress bill “called the US Call Center and Consumer Protection Act” that discourages outsourcing. The former Senator added that he does not see the US Congress passing the proposed bill which many American companies that benefit from outsourcing oppose. 

The Wells Fargo building in the Philippines will be in the 14-hectare McKinley Hill Cyberpark managed property developer Megaworld Corp. 

“This move highlights the attractiveness of the Philippines as an investment destination and its human resource capabilities,” Megaworld first vice president for business development Jericho Go said in the Yahoo! News report. 

McKinley Hill Cyberpark is an IT park with accreditation from the Philippine Economic Zone Authority; this allows the Cyberpark to offer perks, which include income tax holidays and duty-free importation of equipment for the office. (30)

In an interview with Philippine Daily Inquirer’s Michelle Remo, BSP Governor Amando Tetangco Jr. said that there are opportunities for banks to lend to tourism and BPO sectors. 

“Liquidity is available, and banks can use this to lend to tourism, BPO and other sectors,” the BSP Governor said in a briefing after the government’s economic forum. 

Tetangco said that the banking sector can maximize the benefits of this substantial liquidity by lending more to tourism and BPO enterprises.

The tourism industry, with the country’s many tourist destinations, has considerable room for growth according to government economic managers. The BPO industry, on the other hand, has seen significant growth over the years and is expected to grow even more. 

The BSP Governor said that lending is one of the best ways to support the growth of industries. The BSP, however, cautions banks to maintain low exposure to loan defaults. Tetangco said that while increasing lending to businesses in the tourism and BPO sectors, banks should always practice prudent lending standards which include careful assessment of creditworthiness. (30) 

Labor Secretary Rosalinda Baldoz cited this report as she encouraged Filipino nurses to consider a career in outsourced healthcare services. Careers in the fast growing sector include billers, health care secretaries and medical transcriptionists; mostly non-clinical but medical related job opportunities. 

The BLE website’s “Career Guides,” at http://ble.dole.gov.ph/career.asp, specified Medical Assistants; Medical Secretaries; Medical Butlers; Medical Coders and Billers; Medical Transcriptionists; and Medical Representatives as some of the healthcare outsourcing professions that nursing graduates can consider. 

In an interview published recently in the Philippine Daily Inquirer, the Labor Secretary mentioned the fast-growing and innovative trends and advancements in the healthcare industry and encouraged Filipino nurses looking for employment to consider looking beyond traditional clinical jobs. “I encourage you to go out-of-the-box, beyond traditional clinical jobs, and explore other emerging medical and health-related careers that are needed by our labor market today,” the Secretary said.

Careers in health care, according to Sec. Baldoz, have now expanded into many other disciplines that have opened employment opportunities for nurses and allied medical professionals. The Labor Secretary said that Nursing graduates may also consider applying as clinical research associates that administer and monitor health and safety protocols. Sec. Baldoz added that this job looks for medical knowledge and expertise in the application of clinical regulatory requirements – skills that are also required of nurses. 

Qualified applicants who have outstanding decision making and clinical review skills may want to look into a career as clinical appeals specialists. The job requires reviewing clinical cases, abstracting relevant information from the medical records of patients and preparing responses to written medical appeals of clients and patients.

The Labor Secretary cited the BLE Career Guides as she mentioned that these job opportunities in health care outsourcing have starting salaries from P14,000 to P18,000. BPO sector clinical appeals specialists, on the other hand, command a basic salary of P20,000 to P40,000. The salaries may be even higher if type of employment, hours of work and typing speed are also factored in. 

“The salary in these alternate medical careers is almost double the average monthly salary of P10,000 received by nurses working in local hospitals and private institutions.” Sec. Baldoz told the Inquirer. “Beyond the higher pay, considering these medical-related careers as employment alternatives is a “win-win” solution for our jobseekers in the healthcare industry.”

The Labor Secretary added that these BPO sector careers, along with the constant re training, add to the educational expertise which help increase and broaden competencies as nursing graduates venture into their dream medical career in the future. 

Crisostomo added that last year, the BPO sector hit $10.9 billion in revenues and that the expected 19 percent increase in revenue “almost $ 2 billion” for this year is possible as companies abroad aim to concentrate on their core operations and become more competitive.

“Outsourcing,” Crisostomo said in the same interview, “is a factor that makes businesses more competitive. It (outsourcing) is becoming part of the business model.”
He added that with more businesses requiring new services and complex skills like health services info management, accounting, financial services and software development, the non voice subsector of the BPO industry is expected to expand in 2012.

The voice subsector, on the other hand, will continue to grow as the country, given the proficiency of many Filipinos in English, remains the preferred customer service provider.

Crisostomo added that many analysts project that global revenues of BPO companies will increase to about $25 billion by 2016 and that the global demand for services provided by the world’s BPO sector will see a two-fold increase in the next few years.

Known as a research driven company and described by The Wall Street Journal’s Laurie Burkitt in an article as an “investment research group,” CLSA released its February 20 research titled “The Eagle Flies Again” which said that “the [Philippines’] economic growth has lagged its regional peers. But, without much fanfare, the economy has transformed itself into an emerging services center, laying the foundations for today’s growth.” The report was penned by Mitzi de Dios, an analyst at CLSA. 

The research said that an investment cycle in the private sector is a rare sight in the country, much like the rare and endangered Philippine eagle. But now, in what is being considered a first in 15 years, the Philippines is said to be on the way to another investment cycle. This is said to be the result of the following factors: the Philippines having demographic potential that is long term, as well as a balance sheet that’s robust, lower interest rates, rising business confidence and political stability. 

Stating that “the Philippines soars like an eagle, again,” the report said that the transformation continues for the country, which was once considered one of Asia’s “most promising.” The report added, “The service sector continues to grow with the BPO segment underpinning rising employment and per capita spend. Tourism and gaming are other drivers.” The research pointed out that last year tourist arrivals in the Philippines reached 3.9 million, an all time high. The projection is for a double-digit growth rate for the sector in the succeeding years. 

According to the CLSA report, the BPO sector, which is known globally as the country’s quality service sector, is likely to generate $25 billion in revenues and double employment to 1.2 million in the next few years to 2016. The resulting job opportunities will encourage more Filipinos to remain in the country. The report added that per capita income will increase and that the Philippines’ middle class will continue to grow. 

The CLSA paper reported that it was in the early 90s under President Fidel Ramos when the Philippines saw its last investment cycle. It was Mr. Ramos’ deregulation of the banking and telecom sectors, which, the report stated, helped build the foundations that, over the past ten years or so, led to the development and gradual success of the BPO sector. 

In the last decade, the country saw a population growth of 2.6 percent; for the past twelve years, on the other hand, there was an average growth of 4.54 % percent on the gross domestic product (GDP). The report predicted higher GDP growth starting next year. 

Suggesting that now is the right time for the country to leave behind the stigma of the label “the sick man of Asia” and the disappointments of several false starts and missed opportunities, the research paper also said that there is now a real sense of optimism in the business sector and that the country now has other drivers for growth, aside from the considerable remittances from Filipinos overseas. 

Delivering his speech in Filipino, President Aquino said that P500 million was provided to TESDA under the administration’s economic stimulus program. This is for training 65,000 workers who are set to enter the Business Process Outsourcing (BPO) industry. He added that if the training is successful, additional training budget will surely follow. 

The President said that he is happy with the TESDA program’s results so far. But he expressed that he would like to see more of the individuals who took the training classes to get hired immediately after the training. He also urged TESDA to provide the training graduates with link ups to employment. 

TESDA has been working closely with some of the players in the local BPO sector for the IT-BPO Industry-Based Training Work Scholarship Program (I-TWSP). The agency said that the Business Processing Association of the Philippines (BPAP) has committed to hiring at least 70 % of the training graduates. They will be hired six months after graduation. 

In an interview with Business World’s Johanna D. Poblete, TESDA Director-General Joel J. Villanueva said that of the P500 million training budget that was released, P164,559,500 has been allocated to training potential BPO workers that met quality management standards. The P335,440,500 remaining balance will be used for further training in fields like computer programming and animation. Mr. Villanueva added that more than 70 % of the TESDA training graduates are hired as trainees in BPO companies. 

The ICTO has in fact identified four areas for growth and expansion: healthcare information management outsourcing; animation and outsourcing for creative processes; human resources outsourcing; and finance and accounting. 

Melchor added that medical information outsourcing is the most promising of the four sectors and that the Philippines is the de facto leader this year, not in terms of total number of seats but in terms of being a destination of choice.

The ICTO deputy executive director further said that Filipino medical workers only need a little retooling of skills to become IT-savvy. 

Melchor also pointed to the “steady growth of the aging baby boomers in the United States and the recently signed landmark healthcare law “Patient Protection and Affordable Care Act” under the Obama administration” as further indications of a bright year for the outsourced healthcare business. The ICTO deputy executive director added that the $530 billion dollars that will be used to implement the new US act can mean a big market for the outsourcing service providers in the Philippines. 

The healthcare outsourcing industry includes high value services like management of revenue cycle, clinical coding, management of pharmaceutical benefits, disease management and, of course, back office medical transcription.

Melchor added that for the outsourcing industry in the Philippines to sustain growth, it should move towards more “high-value chain” services. 

To create a guide for helping sustain growth in the four areas of expansion mentioned earlier, ICTO said it will work closely with the Healthcare Information Management Outsourcing Association of the Philippines and the Business Process Association Philippines (BPAP). (30)

The $300-million multinational submarine fiber optic system is good news for BPO firms, call centers, banks, small and medium enterprises and other companies that rely on the Internet for their business. 

In a press statement, PLDT Network Services Assurance senior vice president George N. Lim said that the ASE system will initially link Japan, Philippines, Hong Kong and Singapore through fiber optic cable that spans 7,200 km.

He added that the system is also expected to create better Internet connection between the Philippines and Malaysia. The succeeding phases will see vastly improved Internet connections with and among Vietnam, Thailand and China. ASE will also link up with other major cable systems in the U.S., Middle East, Europe and more countries in Asia. 
In the press statement from PLDT, Lim added that the project is a future-ready network that can potentially supply more than 15 terabits per second capacity, initially using 40 gigabits per second wavelength technology and, in the future, 100 gigabits per second wavelength capability. 

Cable laying work commenced with a ceremony held recently in Daet, Camarines Norte, the site of the telecomm giant’s cable landing station. PLDT said in the press statement that they expect the project, targeted for completion on Q3 of 2012, to more than double the current capacity of their international bandwidth. 

The marine fiber optic system is a joint project of PLDT, StarHub of Singapore, NTTCom of Japan, NEC Corp. and Fujitsu Ltd. 

“Worldwide, demand is higher than the supply. That’s why we have to encourage developers to go into mobile apps development to take advantage of this growth,” Pastor added. “The Philippines can be on the world map for mobile application development. We want to tell the world if they want mobile apps, they can come to the Philippines.”

The challenge ahead is to be able to increase the number of mobile apps developers locally in order to meet the increasing global demand within the next three to four years, where it is projected that demand for mobile applications will significantly increase.

The demand for mobile apps has grown as smartphone use has increased and people have become aware that they can do more than just calling, texting and checking emails from their mobile phone handsets. Furthermore, “companies are beginning to understand they can have apps made for mobile platforms. More companies are realizing that entertainment, banking, shopping, products and services through mobile apps is a powerful marketing tool and a means to put their products and services literally at the fingertips of their clients,” he added.

At the moment, the Philippines is not yet a popular mobile apps development destination because many companies are not aware that mobile apps development services exist locally. “That is why we have to drive people and companies to join the industry and popularize the service. Demand is so high, but most of them go to other countries to outsource. We hope that soon we will be able to take advantage of this demand,” Pastor added as an ending note to his speech. 

Dr. Ruben Sevilleja, President of Central Luzon State University, said “the forums opened our minds to the opportunities awaiting us to earn for our schools if we partner with the private sector. SUCs could ask the Philippine Economic Zone Authority to declare their lands as economic zones and invite investors.”

Particularly, the business process outsourcing sector is viable, since universities are producing highly competitive graduates in various fields. The attendees see a good opportunity to invite BPO investors to partner with SUCs, which have ample land to build offices as well as quality manpower.. This, at the same time, will provide income to the school and open opportunities to fresh graduates. 

The Commission on Higher Education (CHED), which is amenable to the idea of converting SUC lands to profitable investments, has recently convinced the Philippine Association of State Universities and Colleges (PASUC) to participate and allot funding to these business venture explorations. 

“We are now looking into technology commercialization [by] putting up incubator projects [and] business process outsourcing’ as very viable revenue-making ventures,” Sevilleja further said.

Due to government budget cuts for education in the years 2010 and 2011, the SUCs are exploring ways to turn their land assets into revenue-generating investments. According to government records, the overall budget of SUCs in 2011 is 1.7 percent lower than the past year. For the incoming school year, the congress approved only P21.89 billion out of an identified need of P45 billion for education. 

Additionally, Benny Palma, President of Carlos Hidalgo Memorial State College in Talisay City, said that “our SUCs were hobbled by the huge budget cut last year.” Benny Palma is overall coordinator of the CHED-PASUC education economic zone project. He encouraged SUC presidents to examine the potential revenues of education economic zones and the ways and in which their respective universities can initiate public-private partnerships. “SUC presidents are very desirous to find ways’ to augment their income. This education economic zone project is a very welcome project for them,” said Palma.

This is in relation to recent reports that jobs will be brought back to the Philippines by US companies. In a communication between the Senate Committee, the Federal Communications Commission (FCC) and a coalition of call centers called “jobs4america” there will be 100,000 jobs available in the next two years. Among US companies, AT&T promised to bring back about 5,000 jobs if their bid to buy T-Mobile USA is consummated. 

Sen. Angara further said that, “[the] trying economic times have become the incentive for the US to start reeling in the work they outsourced. For IT-BPO to remain a sunrise industry in the country, we need to expand beyond voice services and deepen our pool of professionals well-versed in financial analytics, legal research, creative content, software development, medical transcription and other knowledge-intensive services.”

Along with these lines, Sen. Angara reported that a Memorandum of Agreement (MoA) between TESDA) and BPAP has been recently signed to mutually support the preparation of 2,200 scholars for the BPO workforce. TESDA Director General Joel Villanueva said that the MoA identified some P-20 million funds to be granted to BPAP to train the scholars. Among the BPAP members that will take part as resource trainers are Contact Center Association of the Philippines (CCAP), Health Information Management Outsourcing Association of the Philippines (HIMOAP), Animation Council of the Philippines, Inc. (ACPI) and the Philippine Software Industry Association (PSIA).

There’s a constant annual increase in the number of foreign companies setting-up business operations in the Philippines. A big percentage of the foreign direct investment (FDI) in the country is from the business process outsourcing (BPO) sector. This can also be attributed to the special incentives given to companies in the BPO sector when they set-up operations or branches in the Philippines.

The Foreign Investments Act of 1991 (RA 7042) governing foreign investments in the Philippines, liberalized economic policies and allowed market growth since its passage. PEZA, for one, grants BPO operations within PEZA zones or building some incentives including, but not limited to, reduced taxes and tax exemptions or reductions for information technology equipment purchases. Investing companies in the BPO sector are entitled to claim this incentive through the Board of Investments. 

In the first two quarters of this year, FDIs have increased by 189%, attributed to the burgeoning confidence of foreign investment companies to the country. Along with the increase in foreign investment, the Philippine government, working hand in hand with various stakeholders, is devoting more resources to improvements in the infrastructures for businesses; revisiting the rules and regulation of RA 7042 to further attract more investors; highlighting the strategic location of the Philippines for businesses development and the continuous effort to upgrade the skills of the Filipino workforce. 

“This requires growing the talent base, improving the relevance of education, imparting the employability skills, attracting more graduates and schools to the sector, and up-skilling and retaining experienced staff,” said Raymond Lacdao, Industry Director of the Business Processing Association of the Philippines (BPAP). He also said that an integrated talent development approach is important to meet the total 2016 requirement. These include facilitating deep academe/industry partnership through more flexible regulatory environment and advocating for structural changes and funding, a concerted action among key players and stakeholders would ensure that the demand for talents will be met, both in terms of quality and quantity.

The main formula to attaining this goal is dependent on the strength drawn from the industry support and the enabling mechanisms from the government. Upgrade our local talents while sustaining the cost competitiveness, regulatory environment, capital readiness and risks acuity was also identified as a key factor for 2016 goal. “Industry players would also encourage greater public and private capital flows to drive-scale and promote entrepreneurship,” Lacdao added.

The targeted export revenue increase will definitely contribute to the increment of Philippine’s global market share.

Being one of the best English speaking countries that offer lower cost of labor, Philippines has been enjoying its position as one of the primary and preferred BPO destinations worldwide. 

The BPO industry is continuously growing. By the year 2016, the Philippines’ share of the global BPO market could deliver $25 billion in annual revenues and could employ up to 1.3 million Filipinos according to Business Processing Association of the Philippines (BPAP), the umbrella organization of BPO companies in the country. 

However, for BPO industry executive Rembert de Villa, in order to sustain the growth of BPO industry a change in game plan from government and private sector stakeholders will be needed. This change means maximizing the talent that Filipinos have.

Rembert de Villa is the head of Transformation Services in EXL, a BPO based in New York. He said that “When companies around the world figure out the value chain of services, the Philippines will have an advantage. We have a lot of professionals in finance, healthcare and legal services and our culture is aligned to the United States”.

Filipinos are very talented and these talents should be maximized. “We are just at the tip of the iceberg; the only job that can’t be outsourced is the CEOs. What we want is to have people that have PhD’s, master’s degrees, law degrees and other professionals working in BPOs,” De Villa says in a recent interview.

De Villa’s company EXL has 1000 employees in the Philippines and none of which works as a customer service agent. He says the company currently focuses on healthcare-related services in the Philippines, with bulk of its workforce made up of nurses. EXL intentionally did not put up call center operations because they want to do more complex things in the Philippines for their offshore clients.

Compared to the traditional belief during the start of outsourcing wherein only non-core services can be outsourced, De Villa says “That line is moving and now, even core services can be outsourced.”

Aside from India, Philippines is the only country that can offer high quality outsourcing services for a lower price. The government however should focus more in improving the educational system of the country in order to stand against the expansive educational system of its rival country, India.

The managing partner (India) of the Everest group, Gaurav Gupta told Business Nightly that the challenge for the Philippines is to add the next 500,000 workers in BPO industry, and the growth must come from non-voice where the country has a good foundation but having some branding or perception constraints. 

The country has a lot of advantages that favors the growth of outsourcing industry locally. Some of these favoring factors that encourage offshore investors are the availability of competent and skilled workers, Filipinos affinity to western culture, vast pool of English speaking workforce, and lower cost of production services.

Jimit Arora, Research Director, Everest Research Institute says “In terms of operating cost per employee for transactional back-office work, the Philippines offers about 75 percent and 70 percent respective savings over tier-II cities in UK and US, which is somewhat lesser savings as compared to India, but sizably more than other off shoring destinations like Monterrey (Mexico) and Prague (Czech Republic). Again, in terms of graduates per annum, at 480,000, Philippines lags behind India’s 30, 000,000, but is much ahead of Egypt, Argentina, South Africa and Mexico”

Despite the countless advantages of the country to be the best option for outsourcing industry, Nikhil believes that the managing talent-related constraints will be critical to ensure operational success in the Philippines. He said that the Philippines needs to address the four key talent-related challenges which are: scalability of entry-level talent; availability of specialized skills; availability and quality of managers; and migration of skilled talent.

Maulik Parekh, President of PLDT BPO firm SPi Technologies said that for the last 10 years more than 80% of BPO revenues and other outsourced services came from United States. “Now we have to look at where else to get the revenue. It’s about time to spread the Philippines’ wings to other locations” he said.

The BPO industry is growing fast and the Philippine BPO sector is looking at Japan, Europe, Australia and New Zealand as lucrative and possible new sources of much-needed investment, revenues and contracts. 

“Because of the growth in the Asia-Pacific region, there’s now a big demand (for BPO services). We’re trying to capitalize on our language capabilities. The biggest demand is for Mandarin, Japanese, Thai, Bahasa and Korean,” said Gillian Joyce Virata, Executive Director for information and research of the Business Processing Association of the Philippines. 

Finding Mandarin speakers is not that difficult since Philippines has a big population of Filipino-Chinese and native Chinese. Korean nationals who are studying English in the country can also be tapped to the BPO industry’s advantage by employing them for jobs that requires Korean language.

Japanese companies and organizations were conducting their own language training mainly to support Filipinos already working in Japan. 

Now BPO players are not only looking at other places and regions to get revenues but also increasingly turning to non-voice services that are earning higher yields than voice.

Growth in offshore business processes indicates that BPO is not a passing fancy, but represents a paradigm shift in how companies operate.

IT-BPO industry generated total revenue of $8.3 billion in 2009 which is 30.6% higher than the 2008 revenue that amounted only to $6.3 billion. Also, the IT-BPO exports amounted to $7.7 billion in 2009 is 45.9% higher than $5.3 billion exports revenue recorded the previous year.

BSP survey coverage for 2009 was extended to 736 IT-BPO from 648 in 2008. The survey result was based on an overall response rate of 60.5 percent. BSP Governor Amando Tetangco Jr. said in statement regarding IT-BPO that “While the [national] economic growth rate recorded in 2009 may be a slowdown from those of previous years; it is still robust compared with that of other industries in the country.”

In a separate survey by Business Processing Association of the Philippines (BPAP) and its partner associations ACPI, GDAP, HIMOAP, and PSIA, along with Contact Center Association of the Philippines (CCAP), it shows that the Philippines’ IT-BPO industry grew 26% in 2010 recording 24% employment growth from end of 2009. 

IT-BPO is seen globally as a sound strategy for additional business efficiency and cost savings, thus it counters the impact of the global economic slowdown. The revenue of IT-BPO industry continues to grow even during the peak of global economic crisis in 2009, that movement somewhat helped the Philippines to stand against the global recession.

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In its latest quarterly report on the Philippines, the World Bank pointed out that growing income of the BPO sector had more than made up for the decline in tourism revenue.

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In fact, the country overtook India in these categories last year, according to IBM’s latest Global Locations Trend Annual Report, released recently in New York.

India now ranks No. 2, the first time it was not in the leading position for these activities, according to the IBM report, launched in October but made available online last month.

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Sen. Miriam Defensor-Santiago thinks so, drawing from a recent visit to India where the industry was supposedly abuzz about the Philippines surging past the South Asian nation in five years.

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The Department of Labor and Employment (DOLE) reported yesterday that the government is set to implement a comprehensive occupational safety and health program for business process outsourcing (BPO) firms in Metro Manila.

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According to the results of a recent industry forum and a related survey, close to 80 percent of BPO companies in the Philippines expect to expand their workforce by 6 percent to as high as 80 percent in the next 12 months.

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“In today’s hyper-competitive business environment, every customer is important for small and medium-sized businesses,” says Sourcefit President Andy Schachtel. “Too often, potential new customers are not discovered and existing customers are not retained because businesses lack the resources to implement a dynamic and integrated marketing and customer relationship program. Now, Customer Fit offers businesses a comprehensive, affordable way to locate, reach and retain customers. Companies will finally be able to take their marketing and support to the next level and break through capital constraints by outsourcing the entire process to a specialist for a price that makes business sense,” he adds.

Customer Fit brings the entire customer acquisition and support process together into one system for one low price. The full Customer Fit packaage provides targeted consumer or business leads; creates all necessary marketing materials; contacts the leads via telephone, e-mail or traditional direct mailing; integrates the leads with any existing CRM system; creates customer support scripts for any product; provides online and telephone customer sales support and/or technical support; and delivers detailed reports and analytics. Customer Fit is comprised of four components and there are several packages that allow customers to choose the services that fit their unique business needs:

Process Analysis and Optimization. The first step in the Customer Fit program is a complete no-obligation analysis of the client’s customer-facing systems, including all CRM functions, teleservices, online programs, support materials and other methods utilized by the client to attract and retain customers. After assessing each aspect of the client’s CRM process, Sourcefit will provide a complete roadmap for rationalizing all procedures to cut costs, increase sales, organize data and allow the client to focus on their core operations.

Integration and Development. Sourcefit will then organize all pertinent data regarding new and potential customers. This includes research and development of new sales channels, as well as processing existing customer data and ensuring that it is available for support and development.

Staffing and Operations. A major component of the Customer Fit program is staffing. Sourcefit specializes in offshore staffing of Customer Support and Sales professionals; delivering experienced, highly motivated staff for a fraction of the cost of local markets. Customer Fit enables companies to leverage new sales channels and offer industry-leading support for a price that fits any budget.

Reporting and Data Provisioning. Customer Fit’s tight integration of each phase of customer interaction ensures that data is collected, utilized, analyzed and reported effectively and efficiently. Finally, small and medium businesses are able to make use of sophisticated data mining and analysis techniques to supercharge their marketing efforts.

Benefits of Customer Fit:

• – Streamlined sales and marketing processes
• – Higher sales productivity
• – Improved sales and technical support
• – Added cross-selling and up-selling
• – Improved service, loyalty, and retention
• – Increased call center productivity
• – Better profiling and targeting
• – Reduced expenses
• – Higher overall profitability
• – Outsourcing enables focus on core activities

 by Andy Schachtel

Labor group Trade Union Congress of the Philippines (TUCP) said many American companies farming out their operations abroad are expected to lobby for the junking of the measure.

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Cery Perle, CEO of Spare Backup, computer security specialist, told CBR IT Services that his company was planning to outsource some of its IT and software development functions in a bid to improve its service.

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The upbeat mood came on the heels of US President Barack Obama’s slashing of incentives for US firms that outsource offshore, in order to keep jobs for Americans.

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In making its predictions for 2010, the group stated that the practice will increase in popularity and become more closely associated with network sharing.

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The Philippines , which won the award for the first time in 2007, bested Egypt, Malaysia, Russia and Sri Lanka for 2009.

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European Chamber of Commerce of the Philippines (ECCP) executive vice president Henry Schumacher said investors may have good reasons to be cautiously optimistic on the country’s prospects next year with most of the six industries seen to perform better next year.

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According to Jonathan de Luzuriaga, executive director for industry affairs for the Business Processing Association of the Philippines, the Indian group was currently conducting a due-diligence study in the country.

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The new facility has been operating since November 2007 but was only recently completed. It has a 2,000 seating capacity, the company said.

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Thomson Reuters executives said the company has been conducting interviews of possible employees for its Philippine and India offices, as well as evaluating locations for their facilities.

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According to the results of a recent survey, the BPO sector sees “good to outstanding” prospects for so-called “non-voice” services.

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This directory, meant to help chart the growth of country’s BPO industry, “will cover every player in the industry today,” BPAP chief executive Oscar Sanez said in a telephone interview.

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BPO leaders were confident because they felt capable of executing their jobs well, said Richard Wellins, senior vice president of Development Dimensions International (DDI), which prepared the “Global Leadership Forecast 2008-2009” report.

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