Written by Allie Delos Santos
Hiring an offshore service provider can pose several issues if done poorly. Organizations should tread carefully when looking for a solution that meets their needs.
Business process outsourcing (BPO) offers a cost-effective scheme that enables businesses to streamline operations and reduce expenses. Companies can find many offshoring providers in the Philippines. But, as with any major business decision, outsourcing has its drawbacks.
Hence, it is crucial to consider various factors to determine whether offshoring is for you.
If you are considering outsourcing to the Philippines, read on to discover the advantages and disadvantages of this business strategy.
Advantages of Outsourcing to the Philippines
Before outsourcing to the Philippines, you must consider its advantages and disadvantages. Doing so lets you know whether the solution is right for your company.
While some businesses prefer to keep business processes in-house, many admit that the perks of hiring an external service provider outweigh the disadvantages.
Let’s give you a clearer idea. When you outsource to the Philippines, expect the following advantages and disadvantages:
Diverse and Deep Talent Pool
The outsourcing industry in the Philippines has matured, allowing it to offer a vast and diverse talent pool.
Initially, the country produced quality workers in the customer service sector, thus earning the title of “Call Center Capital of the World.” Today, contact center roles dominate the business process outsourcing market. Still, a stream of new talent is slowly and steadily emerging.
Companies across the globe are outsourcing business functions such as graphic design, animation, marketing, software development, and accounting. Additionally, businesses are starting to witness the excellent skills of Filipinos in information technology (IT), which is highly in demand nowadays.
Outsourcing to the Philippines has many advantages and disadvantages, and one of the perks is a scalable workforce.
Since a business cannot have a permanent relationship with a BPO company, monitoring an offshore team’s performance and quality is easier. The client can simply replace team members if they fail to meet the conditions of the service-level agreement (SLA).
Team expansion and contraction are easier when partnering with a service provider. Many third parties follow a hire-and-fire policy that ensures the workforce is fresh and at peak performance.
Flexible and Customizable Solutions
Although you can technically build an offshore team yourself, hiring a third-party service provider is the safest way. The BPO company is a business partner and is flexible in designing effective, custom solutions that work for you. It analyzes your business operations and goals and suggests the best strategy.
In addition, outsourcing lets you scale your team without adding infrastructure costs. It allows you to grow your team depending on the type of work and workload your organization requires at any given time.
Strong English Proficiency
Most Filipinos speak English proficiently. In fact, it is one of the country’s primary languages at work and school. The education system in the country places great importance on English fluency, both in verbal and written format, from primary school to university levels.
The country also ranked 22nd out of 111 nations in the EF English Proficiency Index 2022. It comes second in the Asian region, next to Singapore.
Moreover, Filipinos have a neutral accent. They are easily trainable in the specific English vernaculars businesses need for their organizations.
If you want workers who excel in their jobs and have minimal language barriers, outsourcing to the Philippines is your best bet.
When outsourcing to the Philippines, you must consider the advantages and disadvantages. The most significant upside to hiring a Filipino BPO provider is cost-effective service.
Despite changes in the global economy, the Philippines is still one of the least expensive countries when it comes to back-office outsourcing. Outsourcing to another country means you can save more than half the cost of doing everything independently.
The nation can offer high-quality talent for a fraction of the price due to its low labor costs. The Philippines has a minimum wage of $10 per day, while the minimum wage in the U.S. is about $58 a day—a massive difference that affects the cost of BPO workers.
By partnering with a Filipino service provider, you can access trained and experienced professionals and your vendor’s technology infrastructure at a much lower cost.
Filipinos are some of the hardest-working people and strive to do their best. They are known to work hard and well with others, no matter their ethnicity, race, or gender orientation.
Being family-oriented is part of the Filipino culture, which complements their hard-working nature. They have an innate desire to support their loved ones and provide them with a comfortable life. This becomes their ultimate reason for working hard.
Strong Cultural Adaptability
While outsourcing to the Philippines has advantages and disadvantages, the cultural adaptability of Filipinos is one of their strongest suits.
Filipinos’ strong affinity for Western culture can be traced back to the strong American and Spanish influences in their history. The country had been under the Spanish regime for more than 300 years before the Americans arrived and blended their culture with the Filipinos.
After obtaining their independence during the mid-20th century, many Filipinos decided to work abroad—in the U.S., Australia, New Zealand, the UK, and Saudi Arabia. They then came back with aspects of foreign culture.
With their exposure to a foreign way of life, Filipinos gained a cultural openness unavailable in other outsourcing destinations.
Their affinity for Western culture makes Filipinos some of the best people to work with in the BPO industry, especially for contact centers as a service.
The Philippine government greatly supports the BPO industry; many recognize it as a primary booster of the nation’s economy. Moreover, lawmakers continue to pass laws and regulations that empower outsourcing parties to expand, upgrade, and deliver better service.
The “Ease of Doing Business” law is one of the pieces of legislation passed by the Philippine Congress. This law aims to reduce bureaucratic red tape in operating businesses in the country.
Legislators also amended the Public Services Act. This loosens the foreign ownership restrictions on railways, transportation, and telecommunications.
The nation’s favorable laws make it one of the most progressive and stable outsourcing destinations for data entry services, IT, and customer support.
Robust Data Privacy and Security Laws
Government officials in the Philippines have thoroughly passed strict data privacy regulations to ensure the outsourcing industry grows and thrives.
Since BPO operations often involve sharing private information, the Philippine government passed the Privacy Act in 2012 to guarantee that security protocols meet international standards.
The law created strict regulations to protect valuable data and prevent unauthorized access to confidential information. The law’s implementation led to the Philippines becoming a viable outsourcing destination for healthcare services.
Strong Government Support
As established earlier, the BPO sector is an essential economic pillar in the Philippines. Hence, the government continues recognizing its potential and facilitating its growth with infrastructure and policy development.
Their support showed when they worked with universities to draft BPO-specific curricula. They also established the Technical Education and Skills Development Authority (TESDA), which aided in funding customer service training centers.
The country also has a unique voucher system and standard operating procedures (SOPs) to underpin foreign investments. Lastly, the National Information and Communication Technology Council is available to further support the industry’s growth.
Facilitative Tax Benefits and Exemptions
When considering outsourcing to the Philippines and its advantages and disadvantages, mentioning the country’s tax benefits for BPO companies is worthwhile.
The Philippine government introduced the Special Economic Zone Act, which grants foreign companies tax exemptions and other benefits to support the growing outsourcing industry. Under this law, companies can take advantage of the following:
- Local permit and tax exemption
- Corporate income tax exemption for a maximum of four years
- Permanent residence for foreign investors and their family
- Duty-free import of raw materials, supplies, and equipment
Technologically Competent Workers
Philippine universities produce thousands of highly skilled workers annually, resulting in a diverse and competent talent pool. In 2022, they produced over 1.6 million graduates, many of whom can work in the BPO industry.
Other graduates also have access to high-quality education, ensuring they enter the BPO sector equipped with the right skills to succeed.
Regarding technical competency, the country’s population currently has a median age of 25.7 years old. This demographic is highly familiar with technology and can effectively use it when doing business.
Less Task Management
Choosing a service provider in the Philippines means you have a partner to manage outsourced tech solutions, customer service, data management, and more on your behalf. They oversee tax headaches, recruitment, leave reporting, and employee attendance so that you no longer have to.
You can also allow them to hire a project leader to oversee training and team management for you while still retaining complete control of the staff. This means you only need to check on the staff and analyze reports occasionally, and you are free to concentrate on other aspects of the business.
Fewer Management Issues and Legal Liabilities
Legal liabilities and lawsuits filed by in-house employees are some of the negative aspects of running a business. But you can avoid legal troubles when you outsource to the Philippines.
BPO providers are legally required to make sure client relations remain intact. They also give you access to a robust administrative and HR team to help you with task allocation, tax returns, and training-project delegation. All these ensure you can concentrate on your company.
Prompt Turnaround Time
When outsourcing, you invite field experts to join your team. You gain access to global skills that your big rivals might be leveraging. With a professional managing your project, your in-house and external departments can get to work immediately without stressing about resources, tools, and training.
Take technical support outsourcing for example. Once the off-site team gets into the groove, you can rest assured that work will be done on time.
A local managerial body oversees the off-site team and handles pressures related to project delivery. This serves as a relief for you in terms of work stress.
Disadvantages of Outsourcing to the Philippines
Like any other business decision, outsourcing to the Philippines has advantages and disadvantages. Carefully consider each one to make the right decision for your company.
Here are some drawbacks of BPO to guard against:
Poor Weather Conditions
The Philippines is a tropical country nestled on the west side of the Pacific Ocean. On average, the nation experiences 20 typhoons a year, leading to power outages and work and school interruptions in the affected areas prone to flooding.
Furthermore, resting within the Pacific Ring of Fire means the Philippines encounters volcanic eruptions and earthquakes. The country gets about 100 earthquakes per year on average. But it rarely experiences eruptions despite having 53 active volcanoes.
The upside is that Filipinos are more than capable and happy to work remotely. Some outsourcing vendors give employees the option of working from home. Many BPO companies maintain business continuity when natural disasters inevitably occur by building remote teams.
Too Many Holidays
The Philippines has a total of 18 official non-working religious and government holidays. The U.S. has only 11 official holidays. Since the country’s population is predominantly Christian, the government considers many critical religious events official holidays.
That said, employers can ask workers to report to the office. This matter is often at the client company’s discretion. However, the nation’s labor laws mandate employers to offer additional compensation for days worked during legal holidays.
Reduced Management Control and Poor Quality
One of the biggest concerns you can have when outsourcing to the Philippines is losing complete control of your business functions. This is because you are delegating some of your operations to someone else.
With less control comes potentially poor service quality. You can never be sure whether your BPO partner will deliver the perfect result or meet your expectations. In this case, your reputation might suffer, leading to a loss of sales, clients, and profit.
Thus, before committing, you must find the best possible outsourcing collaborator.
Other disadvantages of offshore outsourcing are cultural differences, language barriers, and mismatched time zones. Although Filipinos are known for their cultural adaptability, some workers cannot learn specific vernaculars or customs for an organization.
These small yet essential factors impact the client company because poor communication leads to poor results.
The Bottom Line
Outsourcing to the Philippines comes with advantages and disadvantages. We have listed them above to guide you in deciding whether outsourcing overseas is right for you. So consider them thoroughly before making a decision.
Remember that pros and cons always exist, regardless of which outsourcing destination or BPO company you choose. As a decision-maker, you must determine whether the benefits outweigh the drawbacks.
Unity Communications helps you access the best local talent at a fraction of the cost of in-house staffing. Contact us to learn more about how we can help.