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Business process outsourcing in the Philippines seems easy, but this business approach involves complex processes. Thus, you need to understand its concepts, factors, and best practices to leverage them properly and experience a positive influence on your business.
Do you want to learn more about the country’s outsourcing sector? You’ve come to the right page.
This article details the key facts you need to know when seeking an offshoring provider in the Philippines.
Exploring the Philippine Outsourcing Industry
Business process outsourcing (BPO) helps companies achieve cost efficiency by delegating non-core functions to service providers. Adopting this strategy gives companies sufficient time and resources to focus on enhancing their primary products and services.
As the need for better flexibility, cost savings, and service quality increases, Grand View Research (GVR) expects the BPO industry to grow constantly. In 2022 alone, the market was valued at $261.9 billion. GVR anticipates the sector to expand at a compound annual growth rate (CAGR) of over 9% from 2023 to 2030.
The research firm predicts the Asia-Pacific region to register the highest CAGR during the forecast period. Lower labor costs, increased demand for skilled workers, and critical digital investments drive regional expansion.
As a trusted business process outsourcing hub, the Philippines accounts for 10% to 15% of the global BPO market. The country’s flexible talent, advanced solutions, and cost-effective services urge companies to entrust their tedious, repetitive tasks to Filipino providers.
Two Primary Types of Outsourced Business Processes
Philippine BPO providers classify their affordable, high-quality services into two:
- Front-office support. Third-party teams take over your customer-facing tasks to let you prioritize your business development initiatives. They manage all services that directly address consumer needs. Moreover, Filipino providers use specialized tools to quickly and effectively handle inquiries.
- Back-office support. Delegating your back-office processes to BPO providers boosts your daily operations. This service offering helps lessen the burden of your day-to-day paperwork. It also helps your in-house staff maintain excellent performance by alleviating burnout and overwork.
Ten Examples of Outsourced Services
Philippine service providers offer numerous service packages to satisfy your specific needs. Below are the tasks commonly outsourced to a Filipino BPO team.
- Customer service assists consumers before, during, and after purchasing products and services. Service providers deliver support via voice and non-voice channels: phone calls, live chat, email, video chat, and social media platforms. They use an omnichannel platform to seamlessly connect with customers without missing crucial data.
- E-commerce support covers all services concerning your online store, from order processing and shipping to returns and exchanges.
- Information technology (IT) support includes everything from technical support to system maintenance and repairs. Many businesses outsource their help desks, desktop support, and software development to the country.
- Finance and accounting services involve bookkeeping, accounts payable and receivable management, and other financial-related paperwork. Filipino contractors help keep your financial transactions on track.
- Data entry and management support pertain to the input and organization of data into computer systems, databases, and spreadsheets. Companies assign these time-consuming tasks to providers to avoid data errors, dupes, and missing files.
- Healthcare support is when you task your non-clinical activities to third-party service providers. This way, you can focus on improving your patient care services. Medical billing, coding, and transcription are some common health services you can outsource.
- Sales and marketing include lead generation, market research, social media management, and advertisement. Outsourcing business processes to the Philippines helps boost customer satisfaction and retention without overspending.
- Cloud services include various cloud-based solutions and processes, such as contact center as a service (CCaaS) and cloud migration support. Procuring these services from Philippine BPO companies helps streamline your transactions over the Internet.
- Human resources (HR) support means contracting a Filipino BPO firm to handle your recruitment, onboarding, training, payroll processing, and employee relations programs.
- Manufacturing outsourcing means letting a third-party provider handle your production-associated tasks. These processes include design, engineering, development, logistics, and supply chain management.
- Knowledge process outsourcing (KPO) means paying a third-party team to perform data-driven tasks. KPO contractors collect and analyze market trends and relevant insights. They use up-to-date data analytics solutions to help improve your strategic planning and decision-making.
- Legal process outsourcing (LPO) enables service providers to manage your legal tasks. Such processes include contract development, research, compliance review, and litigation assistance.
Seven Benefits to Expect from Philippine BPO
Business process outsourcing in the Philippines provides similar advantages for all small, mid-sized, and large companies. As you begin planning your BPO investment, ensure you know what you can gain from hiring a provider in the country.
Such insights help you create a list of measurable BPO goals and match them with your business strategies and targets. Here are the benefits of collaborating with a Filipino service provider:
1. Gain Significant Operating Costs
Many businesses report significant cost savings when outsourcing non-core functions to the Philippines. Wireless Watchdogs, for instance, cut about 65% of its labor costs after entrusting its help desk to Unity Communications, a Philippine-based service provider.
The Philippines is a developing nation in Southeast Asia. Thus, its cost of living and income remain significantly lower than those of countries such as the United States, India, and the United Kingdom.
To give you an idea of the cost difference, imagine that you establish a non-voice customer service unit. You need 25 customer service representatives (CSRs) to handle your online shop’s live chat and social media messaging.
Setting up the team in-house requires you to allocate funds for labor, real estate, and work equipment separately. For instance, if you operate in East-Central Phoenix, Arizona, expect your operating expenses to look like this monthly.
|Cost of In-house Operations(25 CSRs)
|8GB RAM Laptops
The figures above do not include other utility bills, such as internet service, electricity, or water supply. However, your expenses for this non-core function have already reached over $170,000.
Adopting business process outsourcing in the Philippines helps double your cost savings. Filipino providers offer more affordable service packages that are payable monthly or hourly. See the table below for the sample costs of outsourcing non-voice customer service to the Philippines.
|Cost of Outsourced Operations(25 CSRs)
|8GB RAM Laptops
The data shows you do not need to spend on office space because service providers have their own sites. Some providers also let their agents work remotely. You also do not need to buy or provide brand-new work equipment; the BPO company handles all these resources. This strategy saves you over 70% of costs since you just have to focus on labor expenses.
2. Utilize English-proficient and Skilled Workers
An English-proficient and skilled workforce is among the most sought-after benefits of Philippine BPO. Because you serve native English-speaking customers, you require workers capable of engaging them naturally. Their high English proficiency puts Filipino workers in high demand for businesses seeking third-party support.
The Philippines recognizes English as an official language. The country’s educational system includes English language proficiency as one of its core subjects. The national government tasks teaching professionals with helping students of all levels learn English, from its basic grammar rules to its complex linguistic aspects.
As a result, the Philippines garnered an Education First English Proficiency Index (EF EPI) score of 578. This score helped the country clinch the second spot out of 24 Asian countries with high English proficiency.
In addition to Filipinos’ adept English-speaking skills and neutral accents, their educational attainment helps them express their thoughts in concise written words. They also undergo regular career development training from certified organizations such as the Technical Education and Skills Development Authority (TESDA).
Apart from language proficiency and educational excellence, the following qualities influence many companies to hire workers from business process outsourcing providers in the Philippines:
- Flexibility and eagerness
- Ability to quickly adapt to different work rules
- Resilience, positivity, and hospitability
- Competence, resourcefulness, and creativity
- Teamwork and cooperation
3. Capitalize on Cultural Compatibility
Cultural compatibility is another crucial factor influencing businesses’ decisions to outsource to the Philippines. According to the Economist Intelligence Unit’s study, multinational companies perceived “cultural differences” and “intercultural communication” as challenges to their cross-border collaborations.
Businesses that attain cultural alignment with their BPO partners become more flexible to boost market share. Being culturally compatible with your business process outsourcing partner in the Philippines helps avoid complex misunderstandings and conflicts. Also, having a close business relationship ensures high-quality outcomes and increased revenues.
Western culture has strongly impacted the country’s cultural diversity since the 1500s, from education and business to entertainment and technology. Nowadays, Filipinos incorporate most European and American values into their personal and professional activities. Below are some examples of how the archipelago embodies Western traits:
- The Philippine educational system matches the U.S. K-12 curriculum. Filipinos can learn by international education standards to compete in the global working field.
- Philippine-based service providers require employees to know industry news and trends. Such insights help their staff provide consistently excellent performance and output quality. This data assists them in delivering personalized customer-facing services.
- Filipino professionals have a globalized mindset. Social media and advanced technology let them easily access information from different cultures. This opportunity has allowed them to expand their perspectives and enhance their global awareness.
Moreover, the Philippines shares a rich history with neighboring countries, so Filipinos are familiar with different cultures and languages. If you plan to target Asian customers, for example, you can rely on Philippine service providers for unmatched customer support.
4. Maximize Aligned Business Operations
When you outsource business processes to the Philippines, expect your third-party contractors to operate on a similar schedule as your in-house staff. Reliable Filipino providers have a well-structured team capable of adjusting to your daily business hours. So if you collaborate with a Philippine BPO firm, you achieve the following advantages:
- Fast and real-time communication
- Smooth task coordination and distribution
- Regular meetings and training
- Enhanced efficiency and scalability
- Round-the-clock customer service and support
- Fewer project issues and delays
- Improved work performance
You do not need to worry about whether BPO workers from the country produce low-quality output when working late nights. Many Filipino workers grab the opportunity to work mid or night shifts due to various benefits such as the following:
- Ten percent night shift differential for working between 10:00 PM and 6:00 AM
- Opportunity to spend more time with families, friends, and loved ones
- Chance to avoid the stress of rush-hour traffic
- Ability to work in a calmer and more peaceful environment
5. Leverage Modernized Technology
Business process outsourcing in the Philippines optimizes advanced technologies to streamline repetitive front- and back-office functions. The solutions below help third-party providers boost customer experience, employee productivity, and enterprise growth:
- Artificial intelligence (AI) simulates human intelligence to perform repetitive activities such as language processing, decision-making, and problem-solving.
- Machine learning (ML), an AI subset, means training algorithms to identify data patterns and speed up information analysis.
- Robotic process automation (RPA) involves deploying software robots to automate repetitive, rule-based tasks such as data entry services and customer responses.
- Predictive analytics uses statistical algorithms and ML techniques to make sense of historical data and predict upcoming trends.
- Cloud computing enables users to access servers, data, and applications online.
- An omnichannel platform brings seamless customer support across phone, chat, email, and social media channels.
- Speech analytics technology scans and examines recorded conversations between customers and agents. The resulting insights assist companies in identifying changing demands and areas for improving customer interactions.
- Word-processing software allows users to create, edit, and organize digital documents such as reports and memos.
- Remote access controls let authorized personnel securely retrieve and use company resources from remote locations.
- Customer relationship management (CRM) platforms facilitate the management of customer engagements during sales, marketing, and consumer support processes.
- Cybersecurity tools safeguard computer systems, networks, and confidential data from breaches, hacking, and unauthorized access. These solutions feature firewalls, antivirus, encryption, and intrusion detection.
6. Receive Strong Government Assistance
The Philippine government supports the business process outsourcing industry due to its vast economic contributions. The administration implements relevant rules and regulations to benefit and protect BPO providers and foreign clients.
- The Department of Information and Communications Technology (DICT) Act of 2016 established the DICT to hone and promote the country’s ICT sector, including the BPO industry. The law establishes standards to simplify overseas partnerships.
- The Data Privacy Act of 2012 monitors sensitive data collection, use, and disclosure by the public and private sectors. It mandates all organizations, including BPO providers, to get consent from individuals before gathering confidential information, imposing penalties for non-compliance.
- The Special Economic Zone Act sets up special economic zones in the country to seek foreign investments and foster economic development. These areas provide tax incentives and exemptions to companies operating within their boundaries.
- The Telecommuting Act urges employers to offer work-from-home (WFH) arrangements for employees in the private sector. The law promotes work-life balance, helps minimize traffic congestion, and supports improved productivity.
7. Experience Guaranteed Economic Stability
The government’s solid support of business process outsourcing in the Philippines guarantees the industry’s growth and economic stability. The Heritage Foundation’s 2022 Index of Economic Freedom gives the country a score of 59.3. This score shows that the Philippines has become the 89th freest economy globally.
Such figures assure you that you will gain returns when investing in any Philippine BPO service. The data also emphasizes that outsourcing to the country lets you anticipate high-quality outcomes without worrying about wasted funds.
Five Disadvantages of Hiring Philippine Providers
Despite the many benefits the Philippine BPO market offers, you might still encounter some drawbacks. You must identify and understand these disadvantages beforehand to develop a well-structured BPO plan. Here are specific drawbacks you must take note of:
1. Losing Quality Control
Working with service providers from another country requires losing some degree of quality control over your products and services. You cannot track your BPO partner’s every move as you need to focus on your primary functions in your home country.
Service providers from the Philippines specialize and excel in the BPO field; their accolades and client testimonials prove that. However, you must ensure strong and seamless communication with your provider to achieve your desired outcomes.
2. Running into Cybersecurity Risks
Business process outsourcing in the Philippines faces different cybersecurity risks as most transactions occur online. Recent data from IBM shows that cybercriminals have already had access to more than 78,000 known exploits over the last few years. This allows malicious actors to exploit older, unpatched vulnerabilities.
Hackers can easily breach your systems and steal your sensitive data if you do not create a well-defined vulnerability management approach with your BPO partner. These incidents require you to spend more on mitigation and recovery efforts.
3. Facing Transparency Challenges
When entrusting your non-core functions to Filipino service providers, you cannot escape transparency issues. This business practice involves sharing sensitive files and business assets. Although it happens rarely, some BPO companies hesitate and refuse to provide relevant information.
Such gaps weaken the trust between you and your BPO partner, damaging your working relationship. These challenges result in considerable project delays, mitigation expenses, and revenue losses.
4. Dealing with Technology Flaws
Modern technologies are crucial in streamlining your operations; however, they still bring complex problems that impact daily productivity. If you and your Philippine BPO partner do not prioritize system monitoring and maintenance, technical issues arise, such as downtime and lagging. These flaws lead to delayed output, slow responses, and high recovery costs.
5. Encountering Time Zone and Cultural Differences
Although Philippine BPO providers adjust to your business operations, time zones and cultural differences remain challenging. The absence of robust communication and collaboration strategies negatively impacts your project timelines.
While the country has a solid affinity for Western culture, cultural variations affect your decision-making and overall work style. The difference in work interpretation and deployment may lead to misunderstandings and goal misalignments.
Seven Key Steps in Outsourcing Business Functions to the Philippines
After knowing the benefits and drawbacks of front- and back-office outsourcing in the Philippines, you must understand the critical steps in finding the best service provider. You can draft a well-organized action plan when employing Filipino contractors.
Follow this step-by-step guide to begin your BPO journey in the country:
1. Enumerate BPO Challenges and Goals
Start your hunt for a Filipino service vendor by specifying potential BPO challenges and goals. Given the varying service fees providers offer, you must clarify what business areas you want to outsource and which support packages you can afford.
Identify specific problems that you may encounter when working with a Philippine-based provider. Apply the SWOT approach when assessing your company’s strengths, weaknesses, opportunities, and threats. It guides you in listing your practical BPO objectives.
- Note the strengths of working with a provider, such as access to a large talent pool, cost-effective services, and a secure collaborative environment. Assess how these strengths contribute to attaining your outsourcing goals.
- Consider the potential weaknesses of business process outsourcing in the Philippines, such as cultural differences, language barriers, and security risks. Evaluate how they can affect your partnership.
- Determine the opportunities created by Philippine BPO providers, such as expanded market reach, improved scalability, and increased operational efficiency. Analyze how these options bring benefits to your business.
- Specify threats you may encounter when outsourcing to the country, such as economic instability, regulatory changes, and geopolitical factors. Examine how these risks could impact your BPO partnership and in-house operations.
Upon wrapping up your SWOT analysis, clarify and list your actionable outsourcing objectives. These targets determine the metrics for tracking your potential provider’s work progress. Use the SMART framework when outlining your Philippine BPO goals:
- Specific: Focused objectives motivate both parties to accomplish them.
- Measurable: Straightforward metrics guide work performance and output monitoring.
- Achievable: Practical and easily attainable targets help avoid flops in BPO investments.
- Relevant: Essential goals contribute to continued business growth.
- Time-bound: Deadline-driven efforts prevent delayed and low-quality outcomes.
2. Create a Strategic BPO Plan
Based on your SWOT and SMART insights, develop an action plan that ensures smooth business process outsourcing in the Philippines. This BPO plan should cover your regular communication, collaboration, training, budget, and contractor management strategies. It should also include security protocols to quickly address potential risks.
Support your BPO plan by researching potential Filipino providers, relevant government policies, geographic, linguistic, and cultural factors, payment options, and security measures. Consider the latest trends, consumer behavior patterns, and global issues. This way, you can properly align your business techniques with those of your potential BPO partner.
3. Identify Desired Provider Qualifications
As you develop your plan for customer service or technical support outsourcing, outline your ideal qualifications for a Philippine BPO provider. Study its work approaches, service offerings, workforce skills, technologies, and fees.
Seek relevant information from online business directories such as Clutch and Dun & Bradstreet, industry associations such as the IT and Business Process Association of the Philippines (IBPAP), or job search websites such as Glassdoor and LinkedIn. Referrals and reviews from colleagues and the provider’s previous clients also give you valuable insights.
Develop criteria for your desired business process outsourcing provider in the Philippines. Include the following qualities in your criteria:
- Has a good market reputation and credibility
- Employs English-proficient and highly skilled workers
- Uses upgraded and well-maintained technology and infrastructure
- Offers affordable, high-quality services
- Ensures compatible work culture and language
- Offers scalability, flexibility, and innovation
- Values transparency and safe data sharing
- Implements strict security and compliance measures
4. Roll out a Proposal Call
Kick off a bid request campaign after completing your BPO plan and listing criteria for your ideal provider. Make sure you add your specific service requirements, terms, and conditions. The call must include your intended work scope, workforce size, budget allocation, and project timeline. You can create creative posters to attract more potential bidders.
Once you receive reasonable project offers, narrow your selection to one or two bidders. Doing so helps you identify which provider best meets your needs and requirements. Consult with appropriate leaders, legal counselors, and other significant executives to support your decision-making.
5. Perform a Cost Analysis
While evaluating your potential Philippine business process outsourcing provider, conduct a cost analysis. This step ensures cost savings and investment returns when outsourcing tech solutions, customer support processes, and other non-core functions. Follow these methods to achieve a comprehensive BPO cost analysis:
- Enumerate your potential operating expenses when outsourcing to the country.
- Study the prospective provider’s service pricing and payment options.
- List all the costs of establishing the team in-house or adopting onshore outsourcing.
- Compare your in-house, onshore outsourcing, and Philippine BPO expenses.
- Calculate your potential cost savings by getting the difference.
6. Finalize a Service-Level Agreement (SLA)
After completing the first five steps, negotiate an SLA with your selected BPO partner. Confirm the accuracy of the contract terms and conditions. These details should include all your service needs, project requirements, and desired outcomes.
Ensure the provider’s work strategies, business schedules, and service goals match yours. Also, tackle your regular meetings, communication channels, task distribution techniques, and security and compliance measures.
Consult with legal counsel to ensure the fairness and legality of your contract files, work statements, and billing. Do not hesitate to schedule a virtual or in-person meeting with your chosen provider. Once finalized, sign the contract with an official seal and date.
7. Establish a BPO Management Strategy
Draft a management strategy after planning your business process outsourcing project in the Philippines. This approach helps strengthen your working relationship with your service provider, avoiding miscommunications and conflicts.
Furthermore, the technique guides you toward maximizing BPO benefits in the long run. Your management strategy must include these practices:
- Assign contact persons to oversee daily interactions and distribute tasks.
- Centralize communication and collaboration channels.
- Provide company handbooks and product manuals to support third-party training.
- Set up weekly or monthly meetings with your service partner.
- Require regular project accomplishment reports.
- Let your point person monitor your provider’s work performance and output.
- Provide incentives to help increase employee performance by about 44%.
Major Companies That Adopt Business Process Outsourcing in the Philippines
According to IBPAP’s latest statistics, the Philippine BPO market experienced a 10.3% revenue increase in 2022, totaling $32.5 billion. The financial services, telecommunications, healthcare, retail, and technology sectors all impacted growth.
Here are some companies contributing to the sector’s expansion:
- Google takes advantage of an extended workforce. The multinational technology company hires service vendors, temporary workers, and freelancers from the country to achieve cost efficiency and continued success. It outsources various tech services such as IT support, software and app development, and data analytics.
- Facebook has been outsourcing to the Philippines since 2016. The social media giant entrusts its customer service, IT support, and content moderation tasks to third-party Filipino service providers.
- Wells Fargo optimizes a wide pool of dedicated Filipino professionals when outsourcing its operations. The financial services firm specifically hires fraud specialists, customer support agents, payroll officers, financial accountants, and process engineers.
- Nike accommodates its vast global customer base by delegating product manufacturing processes to the country. The company initially outsourced its footwear production. Nowadays, it also entrusts its apparel and other equipment manufacturing to Filipino providers.
- IBM outsources to the Philippines to streamline IT functions such as infrastructure and network management.
- American Express relies on Philippine BPO to handle back-office operations for its sites in over 40 countries. The global financial services company outsources its customer service, IT support, and collection services.
The Bottom Line
Business process outsourcing in the Philippines requires learning many facts and figures to successfully plan and hire a Filipino service provider. Understanding the industry’s basic concepts lets you know what services you can outsource and at what costs. The benefits and disadvantages detailed above also inform you of what to expect before starting your BPO journey in the Philippines.
Furthermore, this handbook gives you practical steps to take throughout the process. But if you still hesitate to try your luck with the country’s BPO market, just read how it helps major companies boost their operations.
Once you are ready to employ your first BPO partner from the Philippines, contact us. Unity Communications has a well-structured team and robust technology to help accelerate and improve your daily operations without overspending.