Written by Dion Jay Tality
Numerous companies can attest that working with Philippine offshoring providers helps save money and scale the business. However, outsourcing tasks to a foreign company can seem scary and intimidating, especially for first-timers. So, how can businesses start outsourcing to the Philippines?
This page tackles everything you need to know about Philippine offshoring. Learn valuable lessons from the real-life examples of outsourcing to the Philippines discussed below.
An Overview: The Philippine Outsourcing Industry
The Philippines is a top outsourcing destination globally. The country earned its title as the world’s business process outsourcing (BPO) capital through its cost-effective labor, skilled talent pool, and solid government support. Therefore, outsourcing to the Philippines is a wise business decision.
The Philippine outsourcing industry has come a long way since its inception in 1992. Accenture Global Center was the first to outsource services in the country. Sykes Enterprises and eTelecare Global Solutions followed suit, establishing the first multinational BPO company and call center. Establishing the Special Economic Zone (SEZ) Act led to the industry’s growth.
Today, the Philippines has over 700 BPO firms operating nationwide. Its information technology and business process management (IT-BPM) industry had a 10.3% increase in revenue from $29.5 billion in 2021 to $32.5 billion in 2022. This sector is the biggest job generator, with 1.57 million full-time employees in 2022. It contributes 7.5% to the local gross domestic product (GDP).
Given its continued expansion, the Philippine outsourcing industry looks promising. However, BPO firms should consider the key imperatives for the industry’s growth potential: digital transformation, talent development, infrastructure expansion, and vertical evolution.
Businesses looking to outsource to the Philippines must align their strategies with the initiatives above and keep up with the latest industry trends. The companies’ success stories below are good examples of outsourcing to the Philippines.
Business Success Stories: Examples of Outsourcing to the Philippines
Business process outsourcing in the Philippines is a strategic business move for companies worldwide. Startups, small and midsize enterprises (SMEs), and big companies work with offshore providers in the country for various reasons. These companies might outsource to the Philippines to cut costs, focus on their core competencies, or scale operations.
Explore some examples of outsourcing to the Philippines below.
1. JPMorgan Chase Bank: Optimizing Banking and Finance
JPMorgan Chase & Co. is a multinational financial institution in the United States. It established its representative bank in the country in 1961, and the company has since expanded its operations. Today, it has in-house offices in Manila and Cebu, further optimizing its operations.
JPMorgan Chase outsources banking and financial services to the Philippines. Offshore providers in the country handle front-office functions such as customer service, billing, and collections. They also tackle back-end operations, such as fraud risk management and credit control, as well as administrative tasks such as human resources (HR) and IT support.
2. Johnson & Johnson: Expanding Business Operations
Johnson & Johnson is a multinational company offering worldwide medical devices, pharmaceuticals, and consumer goods. This company has been operating in the Philippines for over 60 years. It started with a small, two-room office in Manila before it transformed to have multiple branches nationwide.
Offshore outsourcing led to Johnson & Johnson’s global expansion. Diosdado C. Salvador Jr., a Filipino leader, founded the J&J ASEAN Consumer Group of Companies in 1999. Johnson & Johnson Philippines Inc. (JJPI) also established its BPO unit, Global Services (GS), which was later named one of the best companies to work for.
3. Nestlé: Tapping into New Markets
Nestlé, the world’s largest food and beverage company, is a perfect example of a company outsourcing to the Philippines. This company set up its first sales office in Manila in 1911. Nestlé Philippines now has an administrative office in Makati and four factories in three locations designated as the Nestlé Group’s ASEAN Supply Centers.
Nestlé has long established its presence in various countries to expand its product lines and tap into new markets. The Philippines is no exception. Nestlé Philippines is committed to delivering quality products and services to meet ever-changing consumer needs.
4. Procter & Gamble (P&G): Pursuing New Innovations
P&G is known globally for its products catering to consumers from all walks of life. However, the company needed to focus on innovation amidst its rapid growth, so it decided to outsource.
P&G outsourced its IT app development, IT support, and data center operations to HP. It also outsourced its payroll, expatriate, and travel services to IBM and its floor and building management to JLL. Some of the offshore providers handling these functions are in the Philippines. As a result, outsourcing increased P&G’s innovation productivity by 60%.
5. Skype: Accessing Expertise and Technology
Businesses and individuals use Skype, a well-known online communication tool. It recognized the need for expertise and technology in certain aspects of the business, proving that offshore outsourcing gives access to digital tools and experts.
Skype is a major proponent of offshore outsourcing as a strategy. After all, it outsourced its app development to three experts from Estonia. It has also continually outsourced its IT functions and other back-end operations to the Philippines.
6. The Coca-cola Company: Establishing Bottling Partners
The Coca-Cola Company is a multinational beverage corporation operating globally. It is a perfect example of companies outsourcing to the Philippines. It has been offshoring its manufacturing services and selling products to the country since 1927. However, the Philippines only acquired full ownership of its local operation in February 2007.
Coca-Cola Beverages Philippines, Inc. is one of the company’s bottling partners. This subsidiary has 19 manufacturing plants and approximately 50 sales offices and distribution centers. Establishing bottling partners has been a vital strategy for The Coca-Cola Company to ensure its products get distributed and patronized worldwide.
7. Toyota: Achieving Global Expansion
Toyota is a global automobile company headquartered in Japan. It is currently the 10th largest company in the world by revenue. This company has outsourcing and offshoring operations in the Philippines under Toyota Motor Philippines Corporation (TMPC).
Established in 1988, TMPC has its head office and manufacturing plant in Laguna’s Toyota Special Economic Zone (TSEZ). This subsidiary has 89 dealer offices and over 1,925 team members nationwide. Toyota best exemplifies how offshore outsourcing leads to global expansion.
8. Unilever: Reducing Operating and Labor Costs
Unilever started as a European company for consumer goods and later expanded operations to 100 countries. With several branches worldwide, the company employs different enterprise resource planning (ERP) systems. It had to put only one ERP system in place, and that is when it decided to outsource to a third party.
Fun fact: Did you know that the outsourcing move has allowed Unilever to save €700 million on operational activities annually? Tapping into experts and their resources enabled the company to cut operating and labor expenses. Further, Unilever is an example of outsourcing to the Philippines with its established presence in the country.
9. AT&T: Capturing a Bigger Share of the Local Market
AT&T is a multinational telecommunications company in the United States. They faced workforce challenges due to the country’s labor market. Many employees consider call center jobs only stepping stones in their careers, so they eventually leave. As such, AT&T found it challenging to sustain its workforce and maintain its infrastructure.
To address this, AT&T outsourced its call center operations to multiple vendors globally. The company hired Unity Communications to handle its Alliance Channel (for business-to-business or B2B clients only). We helped them establish a robust call center for this particular operation, which resulted in a 4% increase in its Arizona market share, allowing it to secure 15% of the local market.
10. Wireless Watchdogs: Creating Custom SLA
Wireless Watchdogs is a wireless management company that sought outsourcing services to improve its daily operations. The company faced attrition, overtime, HR, and support staff challenges. As its business grew, it needed help to improve call center staff productivity and focus on its core business processes.
Enter Unity Communications. We developed a custom service-level agreement (SLA) with measurable key performance indicators (KPIs). Our call center team underwent proper training and strictly complied with the KPIs in production. Not only did we meet the SLA, but we also exceeded their growth targets and increased work quality.
Lessons Learned: Addressing Challenges of Philippine Outsourcing
Weighing the pros and cons of outsourcing to the Philippines is crucial. While the businesses that have adopted this strategy have reaped numerous benefits from offshore outsourcing, they have also faced challenges and learned lessons.
The many examples of companies outsourcing to the Philippines teach us the following lessons for a successful outsourcing engagement:
Lesson 1. Developing an SLA Sets Proper Expectations
Philippine outsourcing means working with an offshore provider in a distant country. You might ask if your hired provider can deliver the services you need.
- Challenges. The problem starts when your offshore provider does not fully understand the project’s scope. They might fail to accomplish the deliverables and meet your expectations. A half-baked contract also causes disagreements and legal ramifications.
- Solutions. Creating an SLA is best to avoid the problem above. This legally binding contract outlines the outsourcing relationship and protects both parties. With this in place, your hired provider knows their duties and responsibilities.
Lesson 2. Addressing Language and Culture Barriers Improves BPO Interactions
Offshore outsourcing entails two businesses from different countries working together. You might encounter linguistic and cultural gaps when outsourcing to the Philippines.
- Challenges. Due to these differences, you might find it hard to communicate and collaborate with your offshore teams. They might also struggle to assist your customers for the same reason. Such difficulties defeat the purpose of hiring their services in the first place.
- Solutions. Outsourcing to the Philippines is advantageous since the country has high English proficiency and cultural compatibility with Western nations. Conduct language training and culture orientation to bridge the gaps to guarantee effective communication.
Lesson 3. Building Solid Relationships Ensures Successful Outsourcing
Banks and tech giants are examples of companies outsourcing to the Philippines. These companies must establish solid relationships with offshore providers to ensure they receive technical expertise.
- Challenges. Lacking trust in your hired provider or becoming overly dependent on them can lead to a bad partnership, a recipe for business chaos and failure. You do not want that to happen!
- Solutions. What better way to avoid the problem above than to hire an outsourcing partner best suited for your business? After sealing the contract, regularly communicate and collaborate with your hired provider to build a solid relationship.
Lesson 4. Monitoring and Measuring Performance Helps Improve Operations
Offshore outsourcing means entrusting your business functions to a foreign provider. The biggest question for Philippine outsourcing is: can your offshore provider deliver what it promised?
- Challenges. The problem is when the provider does not have quality controls in place. Not tracking and gauging outsourcing performance leads to slow progress or failure.
- Solutions. Setting key performance indicators (KPIs) is best for measuring efficiency, quality, and customer satisfaction (CSAT). Establish a quality assurance (QA) team to monitor and audit agents. This team is responsible for ensuring service quality and business compliance.
Lesson 5. Hiring the Right Provider Is Key to Outsourcing Success
The Philippines has more than 700 BPO firms operating nationwide. This means that you have numerous options for offshore providers. But are these providers the best fit for your business?
- Challenges. Hiring the wrong outsourcing provider can cause problems down the line. Chances are, your hired provider does not specialize in your niche or lacks experience handling your business size. Remember, a bad BPO partnership leads to outsourcing failure.
- Solutions. Let us take the examples of outsourcing to the Philippines above. Most of these companies partner with the right BPO firms in the country. This is the reason they have a successful outsourcing engagement.
Lesson 6. Setting Contingency Plans Prevent Business Disruptions
Offshore outsourcing means preparing for possible disruptions in the country of operation. The Philippines, for example, encounters frequent natural calamities such as typhoons, floods, and even earthquakes. It also has several public holidays, not to mention festivals and political events.
- Challenges. Your hired BPO partner might not be prepared for the abovementioned events. They might disrupt your business operations, affecting your productivity and CSAT scores.
- Solutions. First, study the Philippine outsourcing landscape to understand the possible disruptions that might occur. Then, establish contingency plans in place to ensure continuous business operations. Lastly, ensure a core in-house team is trained to handle all your functions.
Real Benefits: How Philippine Outsourcing Can Help
Philippine outsourcing is known for three primary benefits: talent, cost, and quality. Hiring an offshore provider in the country allows you to access a skilled workforce, reduce operating expenses, and improve business performance. The real-life examples of outsourcing to the Philippines prove its many potential benefits.
Explore in detail how Philippine outsourcing can help businesses of all sizes.
1. Significant Cost Savings
Generally, offshore outsourcing is best for cost reduction. Many companies outsource to other countries to cut labor and operating expenses. Take advantage of the cost-saving benefits of this strategy by outsourcing to one of the top destinations, the Philippines.
For one, the cost of living in the country is significantly lower than in many Western countries. You can save on office leases, infrastructure, and utilities. Philippine outsourcing can reduce labor costs by 60% and operating expenses by 40%–50%.
2. Undivided Focus on Core Operations
Offshore outsourcing is ideal for prioritizing core operations. Some businesses, especially startups and SMEs, delegate non-core functions to third-party offshore providers to save money.
Philippine outsourcing lets you concentrate on your core competencies. You can entrust routine, repetitive tasks to a reputable provider in your country. That way, you can free up time and resources to focus on increasing your bottom line and growing your business.
3. Diverse and Skilled Talent Pool
The Philippines has a diverse pool of highly skilled talent. The country produces graduates in various fields, from hospitality and IT to accounting and finance. The government also heavily invests in talent development to ensure enough supply for the BPO workforce.
U.S. banks and tech giants are perfect examples of companies outsourcing to the Philippines. For instance, Wells Fargo and Google work with Philippine offshore providers to access professionals with finance and IT backgrounds, respectively.
4. High English Proficiency
The advent of globalization paved the way for offshore outsourcing. As a result, English became the international language used for business. Philippine outsourcing thus excels with its high English competency.
In the recent English Proficiency Index (EPI), the Philippines ranked 22nd worldwide and second in East and Southeast Asia. This is because English is widely used in education and business in the country. Communicating and collaborating with Philippine offshore teams is easier and smoother because of their proficiency.
5. Strong Western Cultural Compatibility
One potential drawback of offshore outsourcing is cultural differences. Some businesses find it hard to interact with their clients due to different cultural norms, working styles, and business practices. Mostly, this problem does not apply to Philippine offshore providers.
The Philippines has a shared culture with Western countries, especially the United States. Why? The country has a colonial past and ongoing partnerships with the U.S. to this day. Such cultural compatibility makes it easy for Philippine offshore teams to work with their clients.
6. Good Work Ethics and Desirable Traits
Nothing beats teams with solid work ethics and positive attitudes in business. This idea applies to offshore outsourcing, where two companies work together toward common business goals. That is where Philippine outsourcing has a competitive advantage.
For one, Filipino workers are known for their good work ethics. They are very committed and dedicated to their jobs to support their families. They also possess remarkable attributes, such as hospitality, patience, and respect, which are ideal for customer service outsourcing in the Philippines.
7. Solid Government Support
The Philippine government recognizes the importance of the outsourcing industry. It has been actively supporting the industry’s growth since 1992. Why not? The country’s IT-BPM sector is the country’s biggest job generator and GDP contributor.
The SEZ Act is an example of government support that companies can benefit from when outsourcing to the Philippines. It aims to establish ecozones and information and communication technology (ICT) hubs in the country to attract foreign investors.
The government also recently launched the IT-BPM Roadmap 2028 by providing initiatives for regulatory support, talent upskilling, infrastructure expansion, and additional investments.
8. Supportive Laws and Regulations
The Philippine government has enacted laws and regulations that support the outsourcing industry. The SEZ Act contributed to the industry’s market growth and expansion. This law continues to provide tax incentives and other benefits to businesses outsourcing and investing in ecozones and ICT hubs.
Aside from the SEZ Act, the Foreign Investments Act and Omnibus Investments Code are examples of favorable laws that provide indirect benefits when outsourcing to the Philippines. These laws attract foreign investors. The former aims for 100% foreign ownership of companies in the BPO industry, while the latter seeks to incentivize foreign investments.
9. Business-friendly Environment
The Philippines has an ideal business environment, making it easier for businesses to outsource and operate. The country has an expanding infrastructure, not to mention world-class facilities, modern technologies, and functional equipment. The cost of doing business in the Philippines is also relatively low compared to other outsourcing destinations.
The Philippines secured the 15th spot in the 2023 Tholons Global Business Innovation Sustainability Index. Categorized as a “Big Kahuna” nation, the country is one of the “new leaders having built a vibrant foundation.” It scored high in these three business facets: super cities, business, diversity, equity, and inclusion (DEI).
10. Stellar BPO Track Record
The Philippines has a proven track record in the outsourcing industry. The country was initially known as the world’s call center capital. It has since become the world’s BPO capital. Thanks to its cost-effective labor, highly skilled talent, and strong government support, the Philippines has established itself as a top outsourcing hub.
Colliers cited the fact that the country could capture a bigger share of the global outsourcing market. Outsourcing Journal reported that IT-BPM voice-related services already accounted for 13% of the worldwide BPO market share. It is safe to say that Philippine outsourcing has almost reached the pinnacle of its success.
Outsourcing Destinations: Why Choose the Philippines over Others
Top brands and SMEs have long been working with offshore providers in the country. These companies are real-life examples of outsourcing to the Philippines. But why did they choose the country in the first place?
The IT and Business Process Association of the Philippines (IBPAP) answers this by highlighting the Philippines’ strengths in voice BPM services and digital capabilities.
Outsourcing Journal cites that the country ranks first in voice-related services, comprising 13% of the global BPO market share. However, the government seeks to expand its scope by offering non-voice and IT services.
Further, IBPAP highlights the Philippines’ advantages as a BPO hub:
- Diverse Talent. The country has a diverse pool of skilled workforce. They specialize in various fields, have high English language competency, and possess positive work attitudes.
- Competitive Pricing. The country has a lower cost of living. Outsourcing allows businesses to reduce labor and operating expenditures.
- Infrastructure Expansion. The Philippine government’s SEZ Act focuses on establishing ecozones and ICT hubs. The most recent development is the preparation for the Digital Cities 2025 program.
- Strong Linkages. The country’s IT-BPM industry has collaborated with the government, academia, and other industries.
- Voice and Non-voice Capabilities. The country’s IT-BPM industry seeks to go beyond voice-related services and expand its non-voice capabilities. On top of these is offering IT-based solutions.
These advantages give you enough reasons to choose the Philippines as an outsourcing destination. However, the country ranks next to India for IT outsourcing, and many players, such as Ukraine and Poland, are emerging. Even countries in Latin America, such as Mexico and Brazil, have a competitive advantage in the outsourcing arena.
So to make informed decisions, compare the Philippines with other outsourcing destinations below.
|Outsourcing Destinations and Recognitions||Primary Advantages||Outsourcing Services|
(Top BPO hub for customer-facing operations)
(Top IT outsourcing destination)
(Delivery destination of the year)
(One of the leading IT outsourcing countries)
(Rising BPO market in Asia)
(Top outsourcing destination in Latin America)
(Leading BPO hub in Latin America)
(Top software outsourcing destination)
Best Practices: What to Implement for Philippine Outsourcing
At this point, you have learned why BPO in the Philippines should be your top choice among other outsourcing destinations. You also understood the outsourcing advantages this country has to offer. The real-life examples of outsourcing to the Philippines confirm all these remarkable benefits.
However, you must still invest significant time and effort to make the strategy work. Keep in mind that offshore outsourcing requires proper planning and strategic execution. Implement best practices to maximize Philippine outsourcing and minimize your risks.
Follow our crucial steps below:
- Keep up with the Philippine Outsourcing Market. Stay up-to-date with industry trends and developments to make informed outsourcing decisions and stay ahead of the competition. Some current BPO trends include digital transformation, omnichannel solutions, flexible work arrangements, and digital talent upskilling.
- Work with the Philippine Government and Other Key Players. Consult and collaborate with IBPAP, the Philippine Economic Zone Authority (PEZA), and the Department of Information and Communication Technologies (DICT) to know their current initiatives. Align your offshore strategies with their programs and initiatives. They can help you navigate in the right direction.
- Capitalize on Favorable Laws and Regulations for Foreign Investments. The first step is understanding the SEZ Act, Foreign Investments Act, and Omnibus Investments Code. Then, take advantage of the government’s policies and programs, such as the IT-BPM Roadmap 2028.
- Take Advantage of Talent Upskilling and Infrastructure Expansion. The government’s talent development program aims to ensure a consistent supply of BPO talent. Likewise, they are preparing to launch the Next Digital Cities 2025 program. Capitalize on both initiatives!
- Hire the Right Offshore Provider. According to the latest Philippine Statistics Authority (PSA) report, the country has 851 registered BPO companies. Still, the formula to outsourcing success is partnering with a reliable provider best suited for your business type, size, niche, and needs.
- Develop a Comprehensive Outsourcing Contract. Negotiate the terms and conditions with your hired provider to create an SLA contract. This legally binding paper serves as a guide for the outsourcing engagement while protecting both parties. It discusses in detail the work scope, including the inclusions, limitations, and exclusions.
- Set KPIs as Part of Your SLA Contract. These key metrics should include service efficiency (AHT), quality (QA score), and customer satisfaction (CSAT score). Your offshore provider must meet specific and measurable targets for quality and compliance purposes.
- Monitor, Measure, and Improve Your Outsourcing Operation. Learn from real-life examples of outsourcing to the Philippines. Most companies have QA teams to track and measure efficiency, quality, and customer satisfaction. They ensure their BPO providers strictly follow the SLAs and hit the KPIs.
- Celebrate Your Outsourcing Progress and Success. Recognize your provider’s hard work and accolades if you want to establish a successful and sustainable BPO partnership. An amiable relationship ensures both parties will continue to do their best!
The Bottom Line
The Philippine BPO market has a proven track record of outsourcing. Thanks to its talent, cost-saving benefits, and government support, the country earned its title as the world’s BPO capital. This means that outsourcing to this nation is a smart business strategy.
Consider real-life examples of outsourcing to the Philippines. Learn from some of the top brands and SMEs that have worked with BPO partners in the country. Not only do they convey a message of success, but they also teach us crucial outsourcing lessons. Implement the best practices recommended above to maximize Philippine outsourcing and reap the many benefits of it.
Are you ready to outsource to the Philippines? Reach out to us, and let’s connect! Unity Communications offers various outsourcing services, from e-commerce customer service to healthcare insurance verification. See how we can help your business grow and succeed!