Written by Dion Jay Tality
Are you looking to scale your business while saving on costs? Offshore outsourcing is the answer. But what country should you consider for offshore outsourcing?
Enter the Philippines, a leading hub for outsourcing.
According to Outsourcing Journal, the country’s information technology and business process management (IT-BPM) market now comprises 13% of the worldwide market share. So hiring an offshoring provider in the Philippines is a wise business decision.
This page explores the Philippine outsourcing industry. Read on to discover what makes this country a leading outsourcing destination.
Philippines: The Top Outsourcing Hub
Business process outsourcing (BPO) is when a company delegates specific tasks to specialized third-party service providers. Offshore outsourcing, the practice of outsourcing to an overseas BPO vendor, is the most feasible way to streamline processes while cutting operating expenses.
The Philippines has long been a top hub for outsourcing, popular for its title as the world’s BPO capital. The country is notable for its cost-effective services; BPO firms employ skilled workers at relatively low labor costs.
The Philippines made it to Tholons’s top-ten list of digital nations in 2020. But it slipped from the fifth to the 18th spot in 2021 due to a workforce decline during the pandemic. With full support from the government and key stakeholders, expect the BPO industry to gain momentum and bounce back.
The country’s outsourcing history speaks for itself. Let us look at its evolution in the next section.
The History of the Philippine Outsourcing Industry
The Philippine BPO sector has come a long way in offering front- and back-office outsourcing. What started as a single Accenture contract has grown into a vast network of over 700 BPO firms across the country. The nation has indeed become a leading hub for outsourcing globally.
In the table below, let us look at how the Philippine outsourcing industry has evolved into what it is today.
|Year||Outsourcing Development in the Philippines|
|1992||Established by Frank Holtz, Accenture started outsourcing services (along with software development) to the country.|
|1995||The government enacted the Special Economic Zone Act to create ecozones for attracting local and foreign investments.|
|1997||Sykes set up the first multinational BPO company offering inbound call center support in the country.|
|1999||eTelecare Global Solutions established the first call center in the country.|
|2000||The BPO sector comprised 0.075% of the country’s gross domestic product (GDP).|
|2005||The BPO industry comprised about 3% of the global BPO market while accounting for nearly 2.5% of the country’s GDP.|
|2010||The nation became the world’s BPO capital, with 525,000 agents employed in call centers.|
|2011||The country’s BPO sector generated $11 billion in revenue and employed approximately 638,000 Filipinos.|
|2016||The country’s BPO industry hit a 17% annual growth rate, opening 1.3 million employment opportunities.|
|2018||The country placed second on the Tholons Top 50 Digital Nations list, with Manila ranking second on the Top 100 Super Cities list.|
|2022||The country’s IT-BPM market made up 13% of the global market share.|
The Current Philippine BPO Market
Along with the United States, the Philippines is second only to India in terms of outsourcing services. It could grab a bigger slice of the global BPO market share. Accounting for 13% of the global market share, the country’s IT-BPM market was projected to reach $29 billion in 2022.
According to the IT and Business Process Association of the Philippines (IBPAP), the Philippine BPO sector recorded $29.1 billion in revenue during the first half of 2022. The industry currently employs nearly 1.45 million full-time employees (FTEs).
Such growth is due to the growing demand from global customers and the high confidence in contact centers with work-from-home (WFH) setups. Even the evolution of verticals, such as banking, financial services, and insurance (BFSI), IT and telecom, healthcare, and e-commerce segments, has led to this enormous growth.
Future BPO Trends in the Philippines
As a leading hub for outsourcing, the Philippine BPO sector will continuously grow and expand. But companies looking to invest in the country should keep up with changes and developments in the industry.
Meanwhile, IT-BPM firms will focus on process optimization, digital transformation, and employee upskilling, according to the Outsourcing Journal.
Explore some of the future BPO trends in the Philippines.
- Digital transformation. BPO firms in the country have adopted new technologies and undergone rapid digital transformation, further accelerated by the pandemic. They seek to improve customer service and data entry services by investing in automation, artificial intelligence (AI), and cloud computing.
- Talent upskilling. IBPAP launched the Philippine IT-BPM Roadmap 2028, which includes talent upskilling as a key strategic imperative. It aims to provide a continuous supply of skilled BPO agents through curriculum modifications, internships and work immersions, and the creation of talent hubs.
- Flexible work arrangements. Aside from employee upskilling, the IT-BPM Roadmap 2028 initiative also covers hybrid work arrangements. Recently, the government approved IT-BPM companies’ request to continue operating remotely without losing tax incentives. Expect flexible work arrangements to redefine the future business landscape.
- Vertical evolution. The top verticals employing IT-BPM services are the BFSI, IT and telecom, healthcare, and manufacturing segments. Since these industries have constantly evolving regulations, capital, and process optimization, BPO firms should stay updated with their developments.
What Makes the Philippines a Leading Outsourcing Destination?
The Philippines became a leading hub for outsourcing due to its cost efficiency, skilled labor, English proficiency, cultural compatibility, and government support. So whether you need customer service, sales, or technical support outsourcing, make the Philippines your top choice.
Let us delve into why the Philippines has become a leading outsourcing destination.
1. Outsourcing to the Philippines Guarantees Cost Efficiency
Deloitte identified cost reduction as the top reason for outsourcing. Outsource Accelerator justifies this by citing that outsourcing cuts overhead expenses by up to 70%. In particular, offshore outsourcing provides better cost savings while significantly improving efficiency.
As a top offshoring destination, the Philippines offers affordable, high-quality labor. The country’s average hourly rate is only $12 to $14 compared to the $24 to $28 in the U.S.
Despite its affordable labor, you can count on the Filipino diverse and skilled workforce. Filipino workers possess technical know-how, soft skills, and desirable traits. Third-party teams can help you streamline processes, increase efficiency, and improve performance.
2. The Country Has a Pool of Highly Diverse and Skilled Talent
As a leading hub for outsourcing, the Philippines can supply your business with professionals and experts. For example, you want to build a customer service team using contact center as a service (CCaaS) technology. A reputable Philippine BPO company can provide you with a robust team of customer service representatives.
The BPO sector is the country’s biggest provider of employment opportunities, with 1.44 million direct jobs and 3.61 million indirect jobs in 2021. The government also invests in people through employee upskilling programs, ensuring a consistent supply of skilled workers for the BPO sector.
3. The Philippines Is an English-proficient Nation
Most Filipinos can understand and speak the language. Why? English is also the official language of the Philippines. It is also a medium of instruction in education, from the elementary to tertiary levels.
The 2020 English Proficiency Index (EPI) reveals that the Philippines ranked 22nd out of 111 countries and second in East and Southeast Asia. High English proficiency makes it easy for Filipinos to work with other nationalities. Thus, this key advantage helps the country establish itself as a top hub for outsourcing.
4. The Country Has a High Cultural Affinity With Western Nations
The Philippines has strong cultural compatibility with Western countries, especially the United States. This affinity makes it easy for Filipinos to work effectively with different Westerners. Such connections have led to stronger relationships and more business partnerships.
For instance, the United States is looking to expand its BPO and tech investments in the Philippines. Initially, such investments have resulted in the creation of about 1.5 million jobs over the past year. Recently, the United States Agency for International Development (USAID) launched Strengthening Private Enterprise for the Digital Economy (SPEED), which seeks to advance the country’s digital ecosystem for economic growth.
5. The Philippine BPO Sector Has Full Government Support
The Philippine government has actively supported the country’s BPO industry. It has implemented various policies and programs for this sector, such as tax incentives, infrastructure development, and education. That is why the IT-BPM market now comprises 8% to 10% of the country’s gross domestic product (GDP).
Such support started with the implementation of the Special Economic Zone Act to attract local and foreign investors for job opportunities and economic growth. Notable recent initiatives include the IT-BPM Roadmap 2028 and The Digital Cities 2025, a program for developing economic zones. If you plan to outsource tech solutions or customer support services, consider the Philippines.
The Bottom Line
The Philippines is one of the world’s leading hubs for outsourcing. With over 700 BPO companies in the country, you have the option to outsource front-office and back-end functions. With its highly skilled and cost-effective labor, you can improve your business operations and reduce costs.
The country’s growing outsourcing market speaks volumes about its future direction. Additionally, key agencies continue to create policies and implement programs for BPO growth and expansion.
Hiring a reputable BPO partner in the Philippines is a good decision. But make sure to study the country’s BPO market and keep up with its latest trends. This can help you make informed decisions and significant investments, helping you achieve business success in the long run.