Tuesday, 17 February 2009

Philippine call centers are not dying

John Mangun
Business Mirror

LOOKING back to 2005, a column titled “Are the Call Centers Dying?” filled this spot. Back then, I was not as bullish on the outsourcing industry for the Philippines as I am now.

Unfortunately, I was listening to too many “experts,” then saying things like “The economic benefits of outsourcing customer service are grossly overstated”. That was from a senior partner of an Australian consulting firm, Niels Kjellerup. I wonder what his job is now, since he certainly cannot be advising corporations on the benefits of outsourcing. Another, one Alexa Bona said then, “During the next three years, up to 60 percent of companies will encounter customer defections that will either cancel or outweigh any perceived savings”. Those two are probably now working together or are unemployed together.

And here we are three short years later with Oscar Sanez, chief executive officer of the Business Processing Association of the Philippines, saying that outsourcing will create 100,000 more new jobs this year in the Philippines. Revenues for this industry hit $6.5 billion in 2008, with a 2009 expected growth rate of 20 percent. That would put revenues to the Philippines to nearly $8 billion, about one-half of total overseas remittances.

Too often in the Philippines, call centers are mentioned as almost an afterthought to the nation’s economic growth and the potential is also nearly dismissed. There is this false idea that in the event of a significant slowdown in the global economy, the BPO will not help the Philippines much. That is a bad argument.

And I think the estimates are wrong. I think the industry is going to grow at closer to 30 percent this year and that revenues are going to be closer to $9 billion.

Companies that a few years ago would never have even considered outsourcing their customer-service functions are now having to do it for simple corporate survival.

For example, Telecom Corp., New Zealand’s largest telephone company, is going to move 250 call-center jobs to the Philippines over the next 18 months to reduce costs. It will retain 1,600 jobs in New Zealand and place 700 jobs in the Philippines. Eventually, if everything works out in the Philippines, as I am sure it will, its New Zealand staff will be cut to only 550, with the majority of its customer service being done right here. Survival.

What you do not read in the newspapers is the massive and well-hidden shift of operations to the Philippines. One unnamed US company made big publicity a few years ago when it abandoned its customer-service operations overseas and moved those jobs back to the US. Now, without any publicity, it is coming to the Philippines very soon and will initially employ 700 Filipinos.

Another very large Australian company will put up 500 seats in the Philippines. And these stories are being repeated over and over.

Sadly, most of the stories you read about are about a call center losing a major client and being forced to shift agents to another account. Bad news sells newspapers.

Want a fascinating number about the economic impact of the call centers? For every holiday, the call centers spend about P50 million in holiday- pay bonus.

While here in the Philippines, the call-center business does not receive the respect it deserves for its economic impact, our main competitor, India, is scared to death. Reading the daily newspapers there, you learn that they know that they cannot effectively compete with Filipino call-center agents either for quality of service or cost. Frequent editorials call for more government action, whatever that means, to avoid their centers closing. But they will close and they will move jobs to the Philippines.

The direct benefits of our export business are small, but the indirect benefits are important. Each employee of one of those electronic factories creates other jobs and the same is true, if not more true, for the call centers.

Further and more important, a laid-off electronic assembler has limited and specialized skills that cannot easily be put to use in another industry. This is not true for the pool of potential call-center employees. For example, the number of employed Philippine bank tellers is not growing at 25 percent per year. Yet, nearly all currently employed bank tellers, with their customer-service skills, conversational English and educational attainment, could most probably go to work tomorrow at a call center for higher income. The call centers can absorb these new employees while, at the same time, open up more positions in the banking sector for more tellers and cashiers.

While the headlines are shouting about the imagined potential of layoffs of overseas workers, where are the headlines shouting about the planned employment of 100,000 call- center agents?

I know why. Because the same people who write the articles never see the tens of thousands of call-center agents going to work every night all across the country. The journalists are tucked sweetly into their beds, while the agents are working at 2 in the morning helping Americans figure out how to turn on their computers, load ring tones on to their cell phones, and getting some British customer to pay his credit-card bill.

PSE stock-market information and technical-analysis tools were provided by CitisecOnline.com Inc. E-mail comments to mangun@email.com.

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