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The Philippines is the world’s business process outsourcing (BPO) capital. It offers several advantages, from cost-effective labor to full government support. However, hiring an offshoring provider in the Philippines requires careful planning to maximize benefits and minimize risks.
This article is a complete guide to outsourcing to the Philippines. Read on to learn more about:
- Its past, present, and future;
- Governing laws and regulations;
- Key reasons to outsource;
- Common outsourcing services in the country;
- Top companies outsourcing to the Philippines; and
- Key steps in getting started with outsourcing.
What Is Philippine Outsourcing?
The advent of globalization led to the widespread adoption of business process outsourcing as a strategy for delegating specific processes to third-party service providers. Of all types, offshore outsourcing is ideal for reducing costs while scaling operations. That is where Philippine outsourcing comes in.
Outsourcing to the Philippines entails hiring an offshore provider based in the nation to handle your business functions instead of accomplishing them in-house. Let us explore why outsourcing to the country has become a viable solution for businesses worldwide.
According to Outsource Accelerator, the Philippines is one of the leading outsourcing destinations. It earned its title as the world’s BPO capital due to its lower labor costs, skilled professionals, supportive government, and healthy business environment. Even before then, the Philippines was known as the world’s call center capital.
Today, the Philippine outsourcing industry has grown by leaps and bounds. Learn more about its history, current state, and future directions in the next section.
The Past, Present, and Future of Philippine Outsourcing
The Philippine outsourcing industry has a long and glorious history of becoming the thriving industry it is today.
This sector started when Accenture first outsourced services back in 1992. Sykes and eTelecare later established the first multinational BPO firm and call center in the Philippines, respectively. Since enacting the Special Economic Zone Act, the government has made all efforts to enable BPO companies to thrive and encourage foreign businesses to outsource to the country.
Today, the Philippines has over 700 BPO firms nationwide. Its information technology and business process management (IT-BPM) industry earned $32.5 billion in revenue and had 1.57 million full-time employees (FTEs) in 2022. The banking, financial services, and insurance (BFSI), healthcare, retail, technology, and telecommunications segments drove a significant income and headcount boost.
Further, the IT and Business Process Association of the Philippines (IBPAP) highlighted the IT-BPM industry’s key milestones. The industry is the biggest job generator in the country, having created 1.44 million direct jobs in 2021. It is also the largest contributor to the local economy, comprising 7.5% of the country’s gross domestic product (GDP).
Fast forward to the future: the Philippine outsourcing industry will continue its market growth and expansion. According to Outsourcing Journal, BPO firms should focus on some key imperatives to unleash the industry’s potential. These initiatives include:
- Accelerating digital transformation,
- Upskilling the digital workforce,
- Easing business operations,
- Strengthening the nation’s position, and
- Fortifying the country’s IT-BPM ecosystem.
BPO firms in the country should keep up with the latest industry developments to remain competitive. The Philippine outsourcing industry can maintain its global position and contribute to its economy through these initiatives.
Laws and Regulations Governing the Philippine Outsourcing Industry
As with any industry, the Philippine outsourcing sector follows a set of laws and regulations. These seek to protect employee rights, safeguard investors’ interests, and promote a healthy business environment. Aside from studying the industry market, you should also understand its laws and regulations for compliance.
Whether you employ front- or back-office outsourcing, consider the following Philippine regulations:
The Special Economic Zone Act of 1995
This law creates special economic zones (SEZs) to attract local and foreign investments. The goal is to provide Filipinos with job opportunities and encourage economic growth. It led to the establishment of the Philippine Economic Zone Authority (PEZA), which oversees SEZ operations and expansions.
The Special Economic Zone Act is one of the reasons the country’s BPO sector has prospered in recent years. BPO firms operating in SEZs capitalize on tax incentives and other benefits. In return, they provide jobs and contribute significantly to the country’s economy.
The DICT Act of 2015
The DICT Act established the Department of Information and Communications Technology (DICT). This agency regulates and oversees information and communication technology (ICT) in the Philippines.
This law seeks to provide universal access to quality, reliable, and secure ICT services, which the BPO sector must guarantee. BPO firms and their clients should stay on top of their ICT resources to ensure authorized access and use without compromising privacy and security.
The Data Privacy Act of 2012
The Data Privacy Act protects data stored and used in the government and private sector’s information and communications systems. It regulates the country’s personal information collection, use, and storage.
BPO companies should implement proper organizational measures to protect personal details from unlawful processing, unauthorized access, or accidental loss. The law also requires BPO companies to appoint a data protection officer and register with the National Privacy Commission.
The Telecommuting Act
The Telecommuting Act recognizes telecommuting as a legitimate work setup for employee protection. It allows workers to work from an alternative workplace using telecommunications technologies. But there should be mutual consent between employers and employees regarding the standard practices for this arrangement.
Amid the pandemic, BPO firms adopted a mandatory work-from-home (WFH) setup. The Philippine government recently granted these companies’ requests to extend the WFH arrangement. The only condition is that they transfer their registrations from PEZA to the Board of Investments (BOI) to continue enjoying tax incentives.
The Foreign Investments Act of 1991
As the name implies, the Foreign Investments Act seeks to attract foreign investors to the Philippines. It also promotes and welcomes investments from foreign individuals, business partners, corporations, and governments.
Regarding Philippine outsourcing, this law welcomes businesses of all sizes by providing incentives and protection. In recent years, it has prioritized the BPO sector since it is the biggest contributor to the local economy.
The Omnibus Investments Code of 1987
The Omnibus Investments Code encourages domestic and foreign investments in various industries such as agriculture, forestry, mining, and tourism. It covers the Investment Priorities Plan, a policy document that guides the country’s priorities for local and foreign investments. For example, BOI prioritizes investments in the BPO industry because it is the country’s biggest economic contributor.
This law incentivizes foreign investors planning to do business in the country. It also assists companies looking to outsource to the country, whether for business registrations or regulatory compliance.
The Department Advisory No. 4, Series of 2010
The Department of Labor and Employment (DOLE) set out guidelines for flexible work arrangements in the country. This advisory significantly applies to the BPO sector, particularly in the wake of the pandemic.
The advisory also covers the exemption from the nightwork prohibition of female BPO employees. This means women can work in the evening, provided their employers ensure safe and healthy working conditions.
The Department Circular No. 1, Series of 2008
DOLE set the policy governing call center employees’ occupational safety and health. BPO companies should implement effective measures to ensure the overall well-being of their workers. They must have full compliance to avoid legal and financial ramifications.
Why Choose the Philippines for Outsourcing
The Philippines is one of the top destinations for outsourcing worldwide. Its strategic location, vast pool of educated and English-speaking workers, and favorable business environment have made it an attractive option for companies looking to outsource their business processes.
So why has the Philippines become an ideal destination for outsourcing? Explore the advantages that companies can gain from outsourcing to the Philippines.
1. The Philippines Offers Cost-effective Labor
The Philippines is a top choice for outsourcing because of its cost-effective labor. Compared to other outsourcing destinations, the average hourly rates of BPO vendors in the Philippines are significantly low. This means that businesses can save substantially on labor costs without sacrificing quality.
Aside from lower labor costs, businesses can save on other operating expenses such as infrastructure, office leases, and utility bills. Ultimately, the cost savings offered by outsourcing to the Philippines make it an attractive option for businesses looking to increase their efficiency and profitability.
2. The Philippines Produces a Diverse Pool of Skilled Talent
The Philippine outsourcing industry has a vast pool of skilled talent available. The country’s education system aims to produce graduates with technical and communication skills. As a result, the nation has a diverse and talented workforce capable of performing various tasks for businesses across different industries.
The Philippine government has recognized the importance of this skilled workforce for the outsourcing industry. It has invested in several initiatives to further develop talent, including modifying curricula, providing internships, and creating talent hubs. The investment enables the country to continue producing a steady supply of skilled workers for the outsourcing industry.
3. The Philippines Is an English-proficient Nation
The country’s high English proficiency is a significant advantage for businesses looking to outsource their operations. With English being the primary business language in the country, Philippine BPO firms can effectively communicate with foreign clients. Filipinos also have neutral accents that are easily understandable for English speakers worldwide.
Additionally, BPO companies provide language training to their employees to ensure they communicate clearly with clients. With lots of English-proficient talent, businesses can access a vast pool of skilled workers in the country to help them achieve their goals.
4. The Philippines Has Cultural Affinity With Western Countries
The Philippines has adopted Western practices and norms as a former American colony. Their amiable past makes it easier for Filipino contractors to understand their Western clients. This cultural similarity extends beyond language; Filipinos are also familiar with Western business practices and cultural nuances.
The strong relationship between the two countries provides an opportunity for the Philippine outsourcing industry. For instance, the United States Agency for International Development (USAID) launched the Strengthening Private Enterprise for the Digital Economy (SPEED) project to create more opportunities for collaboration between American and Filipino businesses.
5. Filipinos Are Known for Their Strong Work Ethics and Desirable Traits
Filipino workers have a strong cultural emphasis on hard work and dedication, which makes them highly sought-after by foreign companies. They are known for their positive work attitudes, reliability, and willingness to go above and beyond to get the job done.
Additionally, Filipinos are known for their adaptability and flexibility. They can work with people from different cultures and backgrounds. They are also highly trainable and quick learners. These qualities make them essential assets in the fast-paced BPO industry.
6. The Philippines Has Favorable Laws and Regulations for Foreign Investments
The country’s laws and regulations for foreign investments have attracted international companies to establish operations there. Earlier, we have mentioned the laws governing the outsourcing industry. To reiterate, here are a few regulations ideal for foreign investments:
- Special Economic Zones Act – offers tax incentives to companies that operate in SEZs
- Foreign Investments Act – permits 100% foreign ownership of companies in the country’s BPO industry
- Omnibus Investments Code – provides incentives to foreign investors to encourage them to invest in the country
7. The Philippine Outsourcing Sector Has Full Government Support
The Philippine outsourcing industry is fortunate to have the government’s support. In addition to the SEZ enactment and PEZA establishment, the Philippine government has established the following initiatives to support the outsourcing sector:
- Creation of DICT. This agency aims to promote the country’s IT-BPM industry by providing an environment conducive to investment and creating more job opportunities for Filipinos.
- IT-BPM Roadmap 2028. This roadmap aims to sustain and grow the country’s outsourcing sector by providing infrastructure support, developing talent, and promoting innovation.
- IBPAP initiatives. The agency collaborates with the government to provide training programs, improve the country’s telecommunications infrastructure, and establish industry standards. The BPO sector is their top priority.
Overall, the government and the private sector work hand in hand to address the challenges of outsourcing and create more opportunities.
8. The Philippine Government Builds a Digital Business Environment
The Philippine government has been actively promoting the development of a digital business environment to attract more foreign investments and boost the country’s economic growth.
For example, it recently launched the National Economic and Development Authority’s (NEDA) digital transformation initiative. This strategy seeks to improve digital infrastructure, enhance the workforce’s digital skills, and create an environment that supports digital innovation and entrepreneurship.
The government’s efforts to build a digital business environment have contributed to the growth of the Philippine outsourcing industry.
Common Outsourcing Services in the Philippines
Outsourcing to the Philippines benefits businesses of all sizes. It caters to different companies across different industries, from e-commerce to healthcare. As one of the top outsourcing destinations in the world, the country offers various services so that clients never lack options.
Need help to figure out what to outsource? Explore the most common outsourcing services offered in the Philippines.
1. Contact Centers: Engaging Customer-agent Interaction
The Philippines is the world’s call center capital. Due to the recent global BPO trend, call centers in the country have transitioned to contact centers. They now use contact center as a service (CCaaS) software to support multiple communication channels. They employ these technologies for customer-facing tasks such as customer service, sales, and technical support.
Below are business functions you can outsource to contact centers in the Philippines.
| Business Function | Task Description |
|---|---|
| Inbound customer service | Receive incoming contact and assist customers by answering questions, processing requests, and resolving issues |
| Outbound sales or telemarketing | Reach out to customers to promote a brand and sell products or services |
| Email and chat support | Assist customers through email correspondence and real-time online chat |
2. IT Services: Tech-focused Solutions
According to Deloitte, IT ranks first among outsourced services, followed by finance, payroll, and customer service. The Philippines follows closely after India and the U.S. for IT outsourcing services.
If you plan to outsource tech solutions and IT services to the Philippines, consider some of the tasks below.
| Business Function | Task Description |
|---|---|
| IT support | Provide technical assistance and support to end users, whether software and hardware installation, troubleshooting, or maintenance. |
| Technical support | Offer technical support by assisting users of tech products, whether computer devices or mobile phones. |
| Help desk support | Act as a single point of contact (SPOC) for end users needing assistance or support |
3. BFSI Processes: Streamlined Financial Solutions
The BFSI industry is one of the leading verticals that employ Philippine outsourcing. As mentioned, this segment is one reason the country’s BPO market is flourishing. Banks, insurers, and other financial institutions outsource transactional and non-transactional functions to service providers, aiming to reduce operating costs and meet the growing needs of digital customers.
Let us look at some BFSI functions to outsource to the Philippines.
| Business Function | Task Description |
|---|---|
| Accounting and financial services | Manage a company’s finances through bookkeeping, tax preparation, and financial analysis and reporting |
| Billing and collections | Contact customers for their billing concerns and collect payments |
| Customer service for banking | Assist customers with their financial products or services for online banking |
4. Healthcare BPO: Patient-centric Services
The healthcare sector is vital to public health and patient treatment. But the COVID-19 pandemic created significant challenges for healthcare providers. To mitigate these challenges, more healthcare providers turned to outsourcing. This option allows them to delegate non-core functions so that they can focus on patient care.
Here are healthcare BPO services offered by offshore providers in the Philippines.
| Business Function | Task Description |
|---|---|
| Data entry | Provide data entry services for patient healthcare information |
| Medical billing and coding | Code medical services rendered using HCPCS, ICD, and CPT codes and generate superbills. |
| Claims processing | Review, adjudicate, and pay healthcare claims to insurance companies |
5. E-commerce BPO: Optimized Online Retail Operations
The e-commerce industry experienced explosive growth, particularly during the COVID-19 pandemic. The Philippines has emerged as a top destination for e-commerce BPO services. Amazon recently partnered with IBPAP for the AWS re/Start program, which seeks to add 1.5 million more jobs to the country’s outsourcing sector.
Discover what e-commerce functions to outsource to an offshore provider in the Philippines.
| Business Function | Task Description |
| E-commerce customer support | Answer product inquiries, resolve technical issues, and offer practical guidance on usage. |
| Order fulfillment | Manage the buying process, from receiving orders to delivering products |
| Inventory management | Plan and control inventory levels to ensure efficient operations and meet customer demand |
6. Website-related Services: Effective Promotion
Digital marketing, advertising, and web development services have become essential in this digital era. Businesses rely heavily on these services to establish their brand and reach their target audience online. Philippine outsourcing is a wise option for companies looking to reduce costs while maintaining high-quality output.
Let us look at some outsourcing services related to marketing and web development in the Philippines.
| Business Function | Task Description |
|---|---|
| Search engine optimization (SEO) | Optimize a website, create relevant content, and build links for online visibility and website traffic. |
| Pay-per-click (PPC) advertising | Post ads on SERPs and pay for successful clicks for online prominence and site traffic. |
| Social media management | Leverage social media platforms such as Facebook and Instagram to promote a brand and its products or services. |
| Graphic design | Create images, whether product photos or infographics |
| Web design | Create and develop business websites using responsive web design, UX design, and more |
7. Administrative Tasks: Organized Back-office Processes
Administrative functions are crucial for businesses to run smoothly. These tasks encompass various areas, including accounting, finance, payroll, and human resources (HR). The Philippines is a prime location for outsourcing administrative tasks. Filipino BPO firms offer front- and back-office outsourcing services to help businesses streamline operations and cut costs.
Below are some admin tasks you can outsource to the Philippines.
| Business Function | Task Description |
|---|---|
| Human resources (HR) | Handle recruitment, onboarding, and performance management. |
| Payroll | Cover employee salary disbursements, benefits management, and tax compliance. |
| Bookkeeping and accounting | Record a company’s financial transactions and analyze, forecast, and report business finances. |
| Legal services | Deal with legal matters, whether business registration, labor protection, or paralegal functions |
| Research and development (R&D) | Search for valuable data and analyze it for business projects and decision-making. |
Top Companies Outsourcing to the Philippines
Outsourcing to the Philippines is a top choice for businesses seeking cost-effective solutions and skilled labor. Big corporations, leading brands, and small and midsize businesses (SMBs) alike have taken advantage of outsourcing and capitalized on the benefits of Philippine outsourcing.
Find out how top companies have outsourced their operations to the Philippines below.
1. Amazon: Optimizing E-commerce Operations
Amazon is one of the largest online retailers in the world, and it has been outsourcing to the Philippines for over a decade. It has delegated front-office tasks (customer service) and back-end functions (data entry services) to Philippine BPO firms. It has accessed the country’s vast talent and cost-efficient labor to improve operations and reduce costs.
As mentioned, Amazon has recently committed to contributing to the IBPAP workforce target through its AWS re/Start program for talent upskilling. This program aims to add 1.5 million more jobs to the country’s outsourcing sector. It seeks to solidify the company’s relationship with the Philippine outsourcing industry for continued business partnerships.
2. Google: Achieving Global Expansion
Who does not know about the top search engine in the world? Google has outsourced various operations to different parts of the world. It has an in-house center in the Philippines. The company also continues to partner with other BPO firms in the country for customer service, IT support, and software development.
Furthermore, Google has partnered with Philippine universities to develop a tech talent pool. The company aims to improve its outsourcing operations in the country through this program. It also seeks to contribute to the country’s economic growth and development in the tech industry.
3. Facebook: Expanding Content Moderation
Facebook is the most popular social media platform, with almost three billion monthly active users worldwide. Over the years, it has acquired about 82 companies such as WhatsApp, Instagram, Oculus VR, and Giphy. It has also been actively outsourcing to countries, including the Philippines, since 2016.
Content moderation is one of the notable roles delegated to the country. To ensure a safe and positive experience for Facebook users, the company partners with Philippine-based BPO companies to help moderate content on the platform. Aside from content moderation, Facebook also outsources customer and IT support to the country.
4. LinkedIn: Ensuring Global Participation
LinkedIn is a social media platform for professionals and businesses to connect and network with other companies. It has outsourced its customer service and support operations to the Philippines for several years.
Philippine outsourcing companies provide LinkedIn with back-end support, such as email and chat support, for users worldwide. They also assist in lead generation and data entry services. The company has benefited from outsourcing to the Philippines and leveraging the country’s English-speaking professionals and cost-effective labor.
5. The Coca-Cola Company: Establishing Bottling Partners
The Coca-Cola Company is one of the largest beverage corporations in the world. While it has its own production facilities, the company has also relied on outsourcing to help distribute its products globally. In fact, it has bottling partners all over the world.
The company has branches that help distribute Coca-Cola products to the Philippines. The company also established offshore centers in the country in 2007 to further streamline its global operations.
6. UnitedHealth Group (UHG): Maximizing Healthcare Delivery
UnitedHealth Group (UHG) is one of the world’s largest healthcare companies. This insurer offers various health insurance products and services, whether medical, dental, or vision coverage. UHG has always been committed to promoting public health through its many philanthropic programs and business partnerships.
UHG delegated some business functions to offshore providers in the Philippines to cut costs and streamline operations. These healthcare functions include policy underwriting, benefits customer service, and claims processing. Its subsidiary, Optum, has established its presence in the country since 2012.
7. Wells Fargo: Improving Financial Services
Wells Fargo is a multinational banking and financial services company in the United States. It is the fourth-largest bank, consistently ranking on the annual Fortune 500 list. This financial institution offers financial products and services such as credit cards, mortgages, and financial investment services.
Wells Fargo has relied on Philippine outsourcing for more than a decade now. The company has delegated tasks to offshore providers, such as customer service and back-office operations. It has also established an in-house center in the country.
How To Get Started With Philippine Outsourcing
At this point, we have learned so much about Philippine outsourcing, including what tasks to outsource and how companies successfully delegate processes. We have also covered the potential benefits of outsourcing to the country.
To start outsourcing to the Philippines, follow our crucial steps below:
- Study the Philippine outsourcing industry. Doing your homework before taking the plunge lets you understand the strengths, opportunities, and challenges of outsourcing to the Philippines. This step helps you know how to approach outsourcing and what to expect. You can reduce your risks and make the most of this strategy.
- Audit your business operations. Auditing your current operations helps you identify business problems and needs. You can determine which processes to outsource and which to keep in-house. Then, you can start looking for offshore providers in the country.
- Search for a BPO service provider. Start by searching online, getting referrals, and attending events. Screen your list of prospects based on experience, expertise, the workforce, technology, resources, and reputation. Remember that the goal is to find a provider best suited for your business type, objectives, needs, and budget.
- Draft a service-level agreement (SLA). After choosing an offshore provider, negotiate the terms and create an SLA. This legally binding contract protects both parties. Include your business goals, key metrics, work scope, processes and procedures, pricing structure, and contract breach.
- Set up and kick off your BPO operation. Now, it is time to establish your BPO operation. Allow your provider to set up the infrastructure, integrate technology, and develop communication channels. Help them provide training, develop standard operating procedures (SOPs), and conduct a pilot run. Finally, you can launch your BPO operation.
The Bottom Line
Outsourcing to another country is a practical way to reduce costs, optimize operations, and scale your business. Approach this solution with proper planning and strategic moves to guarantee success.
Study the Philippine outsourcing history, current market, and future directions. Also, understand the laws and regulations governing the industry. You can also learn from top companies that have long outsourced to the country. From there, you can decide what outsourcing services to hire.
Following our tips and steps, you can find and hire the right offshore provider, overcome common challenges, and maximize the benefits of Philippine outsourcing. Whether you’re looking to save on costs, access specialized skills, or achieve overall success, outsourcing to the Philippines is a business strategy worth considering.
Unity Communications is proof of how Philippine outsourcing works. We offer outsourcing services to businesses of all sizes across different industries, whether customer-facing or back-end operations. But do not take our word for it yet—contact us today to learn more and get started!
