Wednesday, 1 July 2009

Philippines an emerging global IT and ITES leader

Cai U. Ordinario
Business Mirror

THE Philippines has joined the ranks of the world’s emerging information-technology (IT) and information technology-enabled services (ITES) players which are slowly catching up with India, the world leader in both industries.

This is the assessment of the World Bank, which, in a report titled “Extending Reach and Increasing Impact” in its publication Information and Communications for Development 2009 listed the Philippines, China and Mexico among the world’s emerging IT and ITES leaders.

IT services include hardware and software maintenance, network administration and system integration, help-desk services, application development and consulting, as well as activities in engineering, such as mechanical design, production and software engineering.

ITES are services that can be delivered remotely using telecommunications networks. These include services for industries like banking, insurance and telecommunications, as well as functions that exist across industries such as human-resources management, finance, administration and marketing accounta.

“Developing countries have been very successful in IT services and ITES. Undoubtedly, India is the global leader in both industries. However, China, Mexico and the Philippines are also emerging as potential players in this space,” the study stated.

The World Bank said the global distribution of offshore IT service markets showed the Philippines already accounted for 1 percent of the market. In IT services India accounted for 54 percent, followed by Canada with 29 percent; Ireland, 8 percent; China and Central and Eastern Europe, tied at 3 percent; and other sources, 2 percent.

In terms of the global distribution of offshore ITES markets, the World Bank study showed the Philippines accounts for the third-biggest market share at 15 percent. India accounted for the biggest share with 37 percent, followed by Canada with 27 percent.

ITES markets that trailed the Philippines were Ireland and Mexico with a market share of 5 percent each, Central and Eastern Europe with 4 percent, China with 2 percent, and other sources, 5 percent.

The same study said the Philippines is now considered the leader in the East-Asia and Pacific region, accounting for as much as 56 percent of all Information and communications technology (ICT) goods exports.

Other economies in the East Asia and Pacific also considered leaders in ICT goods exports are Singapore which accounted for 46 percent; Malaysia with 45 percent; Hong Kong, China, 42 percent; and China, 31 percent.

The World Bank said the expansion of IT services and ITES creates significant economic and social benefits, especially for developing countries like India and the Philippines.

India, the World Bank said, exported more than $40 billion worth of IT services and ITES in 2007. This represented one quarter of the country’s total exports and nearly half of its service exports.

The study cited data from the Business Processing Association of the Philippines (BPAP) that IT services and ITES employed 345,000 people as of mid-2008 and are projected to directly employ close to 1 million people by the end of 2010.

“Employment of this scale means that the sector would account for 27 percent of all new jobs created in the Philippines by 2010” the bank said.

Another important positive impact of the growth of IT services and ITES is on the status of women. The study said that in the Philippines, women account for 65 percent of the total professional and technical workers in IT services and ITES.

In India, women make up 30 percent of the IT services and ITES workforce—a much higher rate of female participation than in the services sector in general—and this share is expected to grow to 45 percent by 2010.

“More than half of call-center employees are women. In both countries, women fill a greater number of high-paying jobs in IT services and ITES than in most other sectors of the economy,” the World Bank said.

One of the advantages of the Philippines, according to the World Bank, is an American-based approach in education. This not only refers to a bilingual education system but in specific areas of study that are crucial in delivering IT services and ITES.

Universities in the Philippines, the bank said, offer courses in finance and accounting modeled after the US’ Generally Accepted Accounting Principles (GAAP). This has made the Philippines a natural choice for US banks and financial institutions seeking to offshore portions of their operations.

“Developing globally benchmarked skills in partnership with leading standards organizations helps not only maintain a certain level of quality, but also align skills with industry requirements,” the bank stressed.

Services growing globally

The services sector is growing globally—it already accounts for 70 percent of employment and 73 percent of gross domestic product (GDP) in developed countries and for 35 percent of employment and 51 percent of GDP in developing countries.

The study said IT services, a component of the services sector, represents a $325-billion annual potential market, according to McKinsey & Co. estimates.

As for ITES, estimates of the size of the market varies. The bank said analysis by McKinsey & Co. suggested that the annual potential market for ITES was $150 billion in 2007.

However, the bank said a Gartner Research in 2008 saw the global market growing from $171 billion in 2008 to $239 billion in 2012. There are more optimistic estimates, the bank said. This included the one from Nasscom-Everest in 2008, which suggested that the global ITES market will be worth $700 billion to $800 billion by 2012.

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