Written by Dion Jay Tality
Offshoring business operations is an increasingly popular strategy for optimizing processes, reducing costs, and expanding global reach.
In particular, the Philippines comes to mind when we talk about offshoring. It is known for its cost-effective workforce, solid government initiatives, and business-friendly environment. Working with an offshoring provider in the Philippines is a sound business decision.
This page is a comprehensive guide for those looking to employ offshore outsourcing in the country. Read on to learn more about:
- Top reasons to choose Philippine offshoring,
- Business operations commonly offshored in the country, and
- Steps, tips, and best practices for maximizing Philippine offshoring.
What Is Offshoring (Offshore Outsourcing)?
Offshoring, or offshore outsourcing, entails contracting business processes, functions, or tasks to third-party service providers in faraway countries. For example, an e-commerce business in the United States delegated its data entry, order fulfillment, and inventory management functions to an offshore company in the Philippines.
Offshore outsourcing is a type of outsourcing based on location. The other types are onshore outsourcing (hiring an external vendor in the same country) and nearshore outsourcing (working with a third-party provider in a nearby country).
Offshoring business operations allows companies to balance scaling functions and reducing expenditures. Businesses in the U.S., the UK, Canada, and Australia usually outsource to the Philippines, India, Poland, Ukraine, Malaysia, and China. The advent of globalization has paved the way for the rise of offshore outsourcing.
Why Choose the Philippines When Offshoring Business Operations?
Offshoring business operations to the Philippines is a top choice due to the country’s outsourcing track record and good reputation. Business process outsourcing (BPO) in the Philippines has grown and expanded, with over 700 BPO firms nationwide.
The Information Technology and Business Process Association of the Philippines (IBPAP) cited the country’s IT and business process management (IT-BPM) industry milestones as follows:
- It is the biggest job generator, creating 1.44 million direct jobs and 3.61 million indirect jobs in 2021.
- It is the largest contributor to the local economy, earning $ 29.5 billion in revenues and contributing 7.5% to the gross domestic product (GDP) in 2021.
- It continuously expands to the provinces, where 30% of the total industry workforce is.
- It consistently fortifies top industries, such as retail trade, real estate development, and telecommunications.
The same IBPAP report also highlighted the Philippines’ advantages in offshore outsourcing, as follows:
- Diverse Talent. The Philippines has a diverse pool of highly skilled talent. Its schools and universities produce graduates in various fields annually, from the hospitality and IT industries to the healthcare and finance sectors. These graduates are ready to venture into the BPO industry.
- Competitive Pricing. The Philippines is known for its cheaper labor and operating costs. Offshoring to the country allows businesses to cut workforce expenses by up to 60% and operating expenditures by 40%-50%. The Philippines also offers high-quality services at reasonable pricing.
- Expanding Infrastructure. The Philippines has heavily invested in infrastructure since the outsourcing industry’s inception. The Special Economic Zone (SEZ) Act paved the way for establishing information communication and technology (ICT) hubs. The preparation for the Digital Cities 2025 program is the most recent development.
- Strong Industry Linkages. The government has actively supported the Philippine outsourcing industry. Government agencies such as IBPAP, PEZA, and DICT have been working together to realize the industry’s growth potential. Even key players in academia and other industries participate in this initiative.
- Remarkable Voice and Non-voice BPO Capabilities. The Philippine IT-BPM industry ranks first in voice-related services, comprising 13% of the global BPO market. The industry further maximizes its capabilities by offering IT solutions and non-voice services. It is also expanding its horizontal BPM services and vertical-focused solutions.
Commonly Offshored Business Operations to the Philippines
The Philippines has become a leading destination for offshoring business operations thanks to its diverse talent, competitive pricing, sophisticated service offerings, and more. Companies worldwide have long leveraged these advantages to optimize operations and reduce expenditures. They outsource front-office (customer-facing) and back-end (admin work) functions.
But what specific tasks can you outsource to the country? Below are commonly offshored business operations in the Philippines.
1. Customer Service: Establishing Contact Centers
Customer service outsourcing in the Philippines tops the list of offshored business operations. An offshore call center means you have your customer service located in an overseas location. Companies of all sizes establish customer service operations across this country to assist their customers. That is why the Philippines became the world’s call center capital at the onset.
Recently, call centers transitioned to contact centers and now offer support for multiple communication channels. Aside from phone services, these contact centers provide email, chat, and social media support for customer service operations.
Offshoring Example: AmEx
American Express (AmEx) is a financial institution in the United States. It offers credit card products, banking services, personal and business loans, insurance, and more. This well-known bank outsources customer service in the Philippines. It established call centers in the country with Filipino BPO agents and bankers assisting their customers.
2. IT Support: Providing Tech Solutions
Deloitte reports that IT is the most frequently outsourced service globally (54%), with finance (44%), payroll (32%), and customer service (22%) following. IT support is also a commonly offshored business operation in the Philippines.
For IT outsourcing, the Philippines ranks second to India and stays ahead of emerging destinations such as Poland and Ukraine. IT-BPO firms in the country perform IT-related functions, such as troubleshooting, hardware installation, software updates, system maintenance, and network management.
Offshoring Example: IBM
International Business Machines Corporation (IBM) is a multinational tech company in the United States. It provides hardware and software products, cloud computing, artificial intelligence (AI), and cybersecurity solutions. This company is known for outsourcing 70% of its workforce. The Philippines is one of the countries where IT support functions are outsourced.
3. Sales or Telemarketing: Winning New Customers
Aside from customer service, sales or telemarketing functions are commonly outsourced to the Philippines. Companies resort to offshoring these business operations to access expert salespeople and technological resources. This move also allows them to save money on labor and operating expenses.
Call center agents in the Philippines place outbound calls for telemarketing purposes. They contact potential and existing customers to sell products or services. Email marketing specialists also perform cold outreach by generating leads and sending promotional emails to prospects.
Offshoring Example: Amazon
Amazon is one of the world’s biggest e-commerce businesses, operating in over 190 countries. This online retailer outsources its front- and back-office operations to the Philippines, including sales or telemarketing. Recently, Amazon has committed to helping reach IBPAP’s labor target (adding 1.5 million more jobs) through its AWS re/Start program.
4. Technical Support: Assisting End Users
Apart from customer service and sales, technical support is another popular offshore business operation in the Philippines. The country has a vast pool of IT graduates and experts capable of offering technical assistance.
Technical support specialists provide end users with three tiers of support. They perform hardware and software troubleshooting, maintenance, and repair tasks. Their critical roles are much coveted in the Philippines.
Offshoring Example: Google
Google is the number-one search engine in the world. This multinational tech giant specializes in internet-related products and services. Google already has an offshore center in the Philippines for its technical support and customer service functions. However, it continues to outsource to other BPO firms in the country.
5. Accounting and Financial (A&F) Services: Streamlining Operations
The Philippines is a popular destination for offshoring business operations such as A&F services. While banks outsource their customer service, collections, and billing operations, other companies delegate their A&F tasks to the country. Startups and small and midsize enterprises (SMEs) also take this route to focus on their core operations.
BPO firms in the country handle tasks such as accounting, bookkeeping, payroll processing, and tax preparation. They employ accountants, bookkeepers, tax specialists, and those with financial backgrounds. They also leverage software automation to streamline operations and improve efficiency.
Offshoring Example: Wells Fargo
Wells Fargo is a multinational banking and financial services company in the U.S. It offers credit cards, mortgage products, and financial investment solutions. While this well-known bank has already established its in-house center in the country, it continues to partner with BPO firms to handle its A&F functions.
How to Maximize Philippine Offshoring to Streamline Business Operations
Offshoring business operations proves beneficial in more ways than one. Specifically, offshore outsourcing and BPO in the Philippines have much to offer, from optimizing processes to reducing expenses. However, you still need to work to realize these benefits and achieve success.
If you want to maximize Philippine offshoring, follow the practical tips below.
1. Study the Philippine Offshoring Industry
Offshoring business operations starts with choosing the Philippines for your outsourcing needs. Make sure to study its outsourcing industry and factor in the following:
- Outsourcing Market. The country’s BPO industry has consistently grown. Its IT-BPM industry had a 10.3% increase in revenue from $29.5 billion in 2021 to $32.5 billion last year. It is projected to grow to $59 billion by 2028, so businesses should consider capitalizing on this industry growth.
- Laws and Regulations. The country’s laws and regulations governing offshoring operations have always been favorable. Since the inception of the outsourcing industry, the SEZ Act has welcomed foreign investments. The Foreign Investments Act and the Omnibus Investments Code are other examples of favorable laws.
- Government Programs and Initiatives. The Philippine government offers various programs and initiatives to support the country’s outsourcing industry. Work with a provider that capitalizes on tax incentives, infrastructure development, and talent upskilling programs. A working relationship with government agencies such as IBPAP, PEZA, and DITC is also desirable.
2. Select the Right Offshore Provider
After studying the Philippine outsourcing industry, it is time to look for an offshore provider. Offshoring business operations to another country is a viable cost reduction and process optimization solution. However, choosing the right provider is the key to offshoring success.
Start by searching online, as the internet is a goldmine of BPO service providers. You can also get referrals from other businesses and professionals already outsourcing to the country. Lastly, reach out to government agencies and outsourcing consultants for recommendations.
With a list of potential offshore providers in the country, you can now evaluate them. When doing so, consider the following factors:
- Credentials and Reputation. Ask for credentials such as business licenses, certifications, and BPO awards. Check online reviews and testimonials to get client feedback and assess your prospect’s reputation. Lastly, review case studies to see how your prospects helped their clients grow and succeed.
- Outsourcing Track Record. Factor in two crucial aspects: experience and expertise. Ask how long the offshore providers have been operating in the industry. Likewise, consider their areas of expertise and see if they cater to your business niche, type, size, and needs.
- Human and Technological Resources. For talent, choose providers with a highly-skilled, English-proficient, customer-centric, and committed workforce. Opt for BPO companies leveraging digital tools and modern technologies such as automation, AI, and cloud computing. Lastly, ensure your chosen provider has state-of-the-art facilities.
- Offshoring Cost and Pricing Model. Strike a balance between affordability and quality. Choose a pricing structure favorable to your outsourcing budget. Remember, the goal of offshoring is to save money long-term.
3. Create a Comprehensive Outsourcing Contract
Once you have selected an offshore provider in the Philippines, developing an outsourcing contract is crucial. This legally binding document defines your relationship with your hired provider and seeks to protect both parties. Ensure you and the provider agree to the terms and conditions before signing the contract. Here are some details to include:
- SMART Goals. Set your operational objectives for outsourcing. Ensure these goals are specific, measurable, achievable, relevant, and time-bound.
- SLA. Create a service-level agreement (SLA) that outlines the deliverables and sets proper expectations. That way, your hired provider knows what to accomplish, and you know what to expect.
- KPIs. Ensure the SLA includes the key performance indicators (KPIs) to track progress. These key metrics usually focus on service efficiency, quality, and customer satisfaction (CSAT)
- Work Scope. Define the provider’s responsibilities and your obligations as a client. Likewise, outline the work’s inclusions, limitations, and exclusions.
- SOPs. Develop your standard operating procedures (SOPs). These are step-by-step processes your offshore teams must strictly follow.
- Pricing Model. Outline the pricing structure, whether fixed price (FP), staffing, or time and materials (T&M) model. Remember, the goal is to save money from offshoring in the long run.
- Specific Clauses. Include specific terms and conditions that can impact the outsourcing engagement.
- Contract Breach. Highlight dispute resolutions, violation penalties, and contract termination. That will make both parties responsible and accountable for their actions.
4. Address and Overcome Offshoring Challenges
Weighing the pros and cons of outsourcing to the Philippines is crucial. Offshoring business operations to another country offers several potential benefits but also comes with some risks and challenges.
As such, identify, address, and overcome the following challenges in offshore outsourcing:
- Time Zone Differences. Your offshore team might be working on the other side of the globe with a 12-hour difference. Hire a provider operating 24/7, with teams actively working during graveyard shifts. That way, they can assist your customers whenever.
- Communication Barriers. You might encounter communication issues due to time zone differences, digital barriers, and language gaps. As such, schedule regular check-ins or meetings, leverage software as a service (SaaS) tools, and offer language training. Remember, effective communication is the key to outsourcing success.
- Cultural Gaps. The Philippines has strong cultural ties with Western countries due to its colonial past, ongoing partnerships, and media exposure. However, you might encounter differences in working styles and business practices. Providing cultural orientation and training is best.
- Privacy and Security Risks. Working with a third-party service provider might risk your business data and customer information, exposing them to physical and cyber attacks. To prevent this from happening, assist the provider in setting up network security, creating privacy policies, and enforcing key protocols.
- Potential Disruptions. When offshoring operations to the Philippines, you might face frequent natural calamities, such as typhoons, floods, and earthquakes. You might also encounter regular holidays, festivals, and other disruptions. What better way to prepare for these than to develop contingency plans?
5. Implement Best Practices for Offshore Operations
It is great if you have selected the right offshore provider and started offshoring your business operations to the Philippines. However, your efforts do not stop there.
If you want to succeed in your offshoring endeavor, implement the best practices below:
- Establish Communication Protocols. As mentioned, effective communication is the key to outsourcing success. Ensure regular communication with your contracted provider through check-ins and meetings with the management team. Leverage communication and collaboration tools to make the interactions seamless.
- Invest in Digital Tools and technologies. Your hired provider must have the resources to keep your operation running. It recommends investing in the latest tools and technologies, such as automation, AI, and cloud. This way, it can optimize your business operations and serve your customers better.
- Provide Regular Training and Support. The offshore workforce is your company’s most valuable asset. Invest in the remote team through talent upskilling and reskilling, even when offshoring. Advise your hired provider to offer regular training programs and production support to its employees.
- Streamline Workflows and Processes. You might have laid out workflows and processes at the onset. But as time passes, you also must make some necessary tweaks to streamline the workflows and improve the operations. For example, leverage automation to reduce manual work, simplify the process, and improve efficiency.
- Monitor and Measure Offshore Performance. You and your hired provider might have created an SLA contract. Most likely, this contract includes KPIs that your BPO partner must hit. Track their performance and offer help to improve the overall operations.
The Bottom Line
Offshoring business operations to the Philippines improves processes, saves money, and achieves global expansion. It lets you use the country’s diverse talent, competitive pricing, expanding infrastructure, strong industry linkages, and voice and non-voice capabilities.
Learn from some top brands to see how they work with offshore providers nationwide. Maximize Philippine offshoring by studying the country’s outsourcing industry, selecting the right provider, overcoming potential challenges, and implementing best practices. All these will lead to your business’s growth and success!
Ready to streamline your business operations through Philippine offshoring? Let’s connect! Unity Communications has a proven track record of outsourcing, whether for front-office or back-end operations. We’ll help your startup, SME, or big company grow and succeed!