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Businesses of all sizes constantly seek ways to reduce costs and increase productivity. Even tech giants partner with information technology (IT) outsourcing companies in the Philippines to achieve this business objective.
The Philippines is a top outsourcing destination due to its competitive costs, skilled workforce, and strong government support. It has become a leading hub for IT outsourcing (ITO), following India and the U.S.
But how can an offshoring provider in the Philippines stand out from its counterparts in other countries? Continue reading to learn more about the pros and cons of outsourcing IT to the Philippines.
An Overview of IT Outsourcing Companies in the Philippines
IT is the biggest segment of the global outsourcing market. According to 54% of Deloitte’s total respondents, it is also the most commonly outsourced business function. The ITO segment could grow from $430.5 billion this year to $587.3 billion by 2027 at a compound annual growth rate (CAGR) of 8.17%.
Let’s take a closer look at the Philippine ITO segment in the next section.
Growing IT-BPM Industry in the Philippines
The Philippines is a leading business process outsourcing (BPO) destination. Outsource Accelerator has long considered this country the world’s BPO capital. The country also follows on the heels of India and the U.S. in ITO.
According to Outsourcing Journal, the country’s IT business process management (IT-BPM) sector makes up 13% of the global market. It ranks first in voice-related services, and the industry seeks to expand its non-voice BPM and IT services further.
The IT and Business Process Association of the Philippines (IBPAP) estimated the IT-BPM sector’s revenue at $29 billion in 2021. In the same period, the industry added another 120,000 full-time employees (FTEs), resulting in a workforce of 1.44 million. This sector survived and thrived amid the pandemic by implementing flexible work arrangements.
IT Companies Outsourcing to the Philippines
With over 700 IT BPO companies, the Philippine ITO industry has grown exponentially. Today, global IT companies and tech giants leverage this industry’s capabilities. Below are examples of businesses that rely on outsourced IT services from the Philippines:
- Google outsources various roles to the Philippines, from IT experts to analytical consultants.
- Facebook hires Filipino software specialists and subcontracts Philippine customer support providers and content moderators.
- IBM delegates IT functions, such as network management and infrastructure maintenance, to IT outsourcing companies in the Philippines.
- Hewlett-Packard works with Philippine offshore outsourcing service providers for customer support and IT services.
The Philippine ITO Industry Growth Potential
The Philippine ITO growth potential is bright and promising. Recently, the country ranked 15th in the Tholons 2023 Global Business Innovation Sustainability Index (TBIS). It was categorized as a “Big Kahuna” nation for building “a vibrant foundation.” The country scored well in these three aspects:
- Super cities (9.45 out of 10)
- Business (8.26 out of 10)
- Diversity, equity, and inclusion (8.15 out of 10)
The Philippine government has always supported the country’s IT-BPM industry. It first implemented the Special Economic Zone Act to establish ecozones and information and communications technology (ICT) hubs.
The Department of Information and Communications Technology (DICT) later launched the Digital Cities 2025 program, which seeks to assist 25 areas outside Metro Manila in becoming full-fledged digital cities by 2025. Many IT-BPM firms are looking forward to hosting their services in these locations.
With these developments, the Philippine ITO industry is well on its way to industry growth and success. It offers a viable solution for companies looking to outsource their IT needs without compromising cost or performance.
Pros and Cons of Hiring an IT Outsourcing Company in the Philippines
Partnering with IT offshoring providers in the Philippines has become popular for businesses worldwide. The country’s thriving IT-BPM industry makes it a top destination for outsourcing. It also shines in front- and back-office outsourcing, but you should weigh its advantages and disadvantages to know whether this business strategy is right for you.
Let us delve into the pros and cons of IT outsourcing to BPO companies in the Philippines below.
| Advantages | Disadvantages | |
|---|---|---|
| IT Outsourcing to BPO Companies in the Philippines |
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Advantages of Partnering With Philippine BPO Companies
Let us look at the potential benefits of IT outsourcing to BPO companies in the Philippines.
- Significant Cost Reduction. The Philippines has a lower cost of living than that of many other countries. Outsourcing IT functions to this nation means you can significantly cut expenses on building infrastructure, office leases, and utilities. That benefit can help you save money on operating costs for the long term.
- Cost-efficient Labor. The country is known for its cheap and competitive workforce. Between the Philippines and the United States, the average hourly rates of BPO vendors are $12 to $14 versus $24 to $28, respectively. Outsourcing IT functions can help you cut labor costs without compromising service quality.
- Appealing Tax Incentives and Perks. The Philippine government offers tax incentives to IT-BPM companies. These perks include income tax holidays and duty-free importation of capital equipment. If you outsource IT projects in one of the ecozones, you can take advantage of these tax benefits to reduce costs further.
- Diverse Pool of IT Talent. The Philippines produces a large number of IT graduates annually. Many have the technical skills, English language proficiency, and soft skills required to join the BPO workforce. You can tap into these IT professionals and experts if you employ technical support outsourcing.
- 24/7 Agent Availability. Many IT-BPM firms in the country operate around the clock. Most BPO agents work at night to serve customers on the other side of the globe, but some also work day shifts. If you want to offer 24/7 IT support, consider outsourcing to the Philippines.
- Core Competency Prioritization. Many companies outsource non-core functions to prioritize their core operations. For example, IT support is not your core business, but it is crucial to your day-to-day operation. An IT outsourcing company in the Philippines helps you focus on generating revenue as it manages your IT needs.
- Increased Productivity. The country has a vast pool of IT professionals and experts. Besides their specialized skills, Filipinos are known for their strong work ethic and hardworking nature. If you outsource your IT functions to the country, you can expect a boost in business productivity.
- Robust Government Support. The Philippine government provides strong support for the IT-BPM sector. It continues to invest in digital cities and talent upskilling programs for the sector. Why? This industry comprises 10% of the country’s gross domestic product (GDP), contributing nearly $30 billion annually to the economy.
- Promising IT-BPM Market Growth. The country’s IT-BPM market shows no signs of stopping or slowing down. Continuous support from and investments from the government and key industry players pave the way for its continued growth and success. So now is the right time to outsource tech solutions and IT services to the Philippines.
Disadvantages of Partnering With Philippine BPO Companies
Let us look at the risks of IT outsourcing to BPO companies in the Philippines.
- Unavoidable Time Zone Differences. Outsourcing to the Philippines means employing a workforce on the other side of the globe. Clients from the U.S. or Europe might experience communication and collaboration problems due to the 12- to 16-hour time difference. The best way to avoid this issue is to look for a Philippine IT-BPO provider that operates 24/7.
- Potential Language Barriers. The Philippines is notable for its high English proficiency, but communication barriers still occur due to accents and technical jargon. Miscommunication leads to errors and misunderstandings. So hone your workforce’s soft skills and leverage a contact center as a service (CCaaS) solution for improved communication across the board.
- Possible Cultural Differences. Cultural differences can cause challenges when outsourcing IT services to the Philippines. For example, public holidays, religious practices, and personal beliefs affect interactions with the team and services to customers. To mend cultural differences, conduct proper training and orientation.
- Outdated Technology and Poor IT Infrastructure. Some IT outsourcing companies in the Philippines must update their technology and upgrade their IT infrastructure. Otherwise, they risk falling behind in terms of efficiency and quality of services. Look for an IT-BPO partner in an ICT hub to ensure it uses the latest technology.
- Alarming Privacy and Security Issues. Cybersecurity threats and data breaches are growing concerns in the outsourcing industry. Thus, setting proper security measures and protocols is crucial. Whether you outsource IT, support, or data entry services, hire an IT-BPO partner prioritizing privacy and security.
- Lack of Coordination. Collaboration can be challenging in IT outsourcing, particularly with an offshore team. The lack of coordination can result in poor service quality output and delays in service delivery. Establish effective communication channels and set clear expectations with your IT-BPO partner to avoid this.
- Lack of Business Control. You might experience difficulty managing your team of contractors and ensuring they align with your business standards when outsourcing. So when hiring an IT outsourcing company in the Philippines, create a service-level agreement (SLA), set key performance indicators (KPIs), and ensure regular communication.
- Possible Business Disruptions. When outsourcing to the Philippines, you might encounter disruptions such as natural disasters, power outages, and public holidays. These factors can affect your IT-BPO partner’s ability to deliver efficient, quality services. Set business continuity plans (BCPs) to mitigate the risks of disruptions.
The Bottom Line
IT outsourcing to BPO companies in the Philippines can be a smart business strategy for companies of all sizes. But before taking the plunge into ITO, consider the pros and cons presented here to make informed decisions.
As long as the Philippines continues to invest in its infrastructure and workforce, it will remain a top offshoring destination. By leveraging its highly skilled IT professionals and cost-effective labor, you can save money, boost productivity, and gain a competitive advantage.
