Sunday, 15 March 2009

Philippine upbeat call centers, other BPOs shrug off meltdown

By Paul M. Icamina, Special Reports Editor
Manila Times
http://www.manilatimes.net/national/2009/march/15/yehey/top_stories/20090315top1.html

AMID worldwide gloom and doom, local call centers are upbeat this year and for the following years when they expect to corner 10 percent of the $130-billion global market by 2010.

They and the whole business process outsourcing (BPO) industry has defied gravity as a major source of foreign exchange even as incomes from product exports and remittances from Filipinos working abroad are rolling downhill.

The BPO industry has an impressive record rarely seen hereabouts: the remarkable +30-percent average annual export revenue growth in the last two years.

The Commission on Information and Communication Technology sees a 20-percent to 25-percent industry growth this time, down from the 35 percent last year.

That is still an impressive figure of 90,000 new jobs, but modest compared to 372,000 slots last year when revenues peaked to $6 billion (P291 billion in today’s pesos).

The BPO industry has ballooned beyond call centers, although voice calls still dominate most work stations. More BPO jobs are now in animation, graphics, publishing, game and software development, legal aid, finance and accounting, architectural and engineering designs, business research analysis, medical transcription—the list goes on.

The high-brow tasks ease concerns that call centers are luring the country’s best and brightest away. “We want to tell concerned parents that their graduates are not just telephone operators,” says Gigi Virata, executive director for information and research of the industry group Business Processing Association/Philippines (BPA/P).

“The investors keep coming,” says BPA/P’s Executive Director for Industry Affairs Jonathan de Lu-zuriaga. “We meet at least one prospective locator a week more often than not.”

“Companies abroad have only two choices these days—outsource or surrender and close shop,” he says, pointing out the financial meltdown has made the Philippines even more attractive because it allows foreign companies to tighten their belts without sacrificing their service.

Read: It is much cheaper for foreign companies to outsource Filipino labor than hire workers at home.

The Philippines ties with India as the lowest labor-cost provider, roughly12 percent of the cost of equivalent jobs in the United States.

Huge, talented labor pool

The Philippine labor pool is huge and talented: Half a million new college graduates a year, half of them with degrees in business, engineering or IT.

Then there are the tax holidays and other economic incentives. And low rentals, one-fourth the cost in Mumbai and lower than in Hanoi and Shanghai.

What wraps up the deals are familiar sights of McDonald’s, Kentucky Fried Chicken, Starbucks and Krispy Kreme along most busy call center areas. With a diet like that, how can investors go wrong?

Last year, more than 10 foreign companies set up shop here.

More than 600 companies are currently in the BPO industry, half of them in support industries like telcos, training and recruitment houses, real estate companies, software and hardware vendors and system integrators.

By the end of 2008, the BPO industry employed over 370,000. The target for 2010 is to have 800,000 full-time employees.

In the next three to four years, projections are such that one out of 10 jobs created will be in the BPO industry.

“The Philippines became attractive to major players because of our English-speaking capability, our affinity to the US, and similarities in terms of jurisprudence and general acceptable accounting practices,” says de Luzuriaga.

The global economic crisis has forced companies abroad to turn to low-cost sources such as the Philippines. The latest BPA/P survey released last week shows an industry forecast of a 10-percent to 15-percent growth in employment this year. This is lower than the government’s 20-percent to 25-percent forecast.

Business confidence is at an all time high: 95 percent of BPO executives and human resource managers surveyed expect to increase their workforce in 2009.

Double-digit growth

Half of them expect their workforce to increase by over 15 percent. Those employing from 1,000 to 15,000 employees expect an average increase from a low of 6 percent to a high of 10 percent. Mid-sized companies of 5,000 to 10,000 employees expect an even higher spike of up to 15 percent this year.

Asked if these are electronic sweatshops, Virata remarks: “it must be the most comfortable of sweat shops,” pointing to amenities such as in-house spas, gyms and even media lounges for the lucky ones.

The smokers, of course, aren’t allowed and they congregate on the building steps, outdoor cafes, sidewalks and street corners. Buildings with a lot of young people smoking outside 24/7 are sure to be call centers.

They are lighted even at night and attract fast-food chains that cater to the young, single, hip and moneyed crowd. The day and night activity virtually eliminates the crime risks in what used to be dark streets.

At night, all floor spaces are alight and connected to clients where it is day. Call centers demand very high connectivity that requires sophisticated infrastructures. The connectivity has spilled over to the masses, bringing down to about half the cost of household broadband connection to the Internet.

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