Written by Rene Mallari
When one thinks of “call centers,” the first country that comes to mind is the Philippines. Throughout its long history, the country has become synonymous with this term. Companies worldwide hire offshoring providers in the Philippines to outsource customer service operations for higher productivity and performance.
This article discusses the Philippine call center outsourcing industry. It explains its history, outlook, services, advantages, potential risks, and current issues.
Read until the end to learn how to properly outsource processes to the Philippines.
History of the Philippine Call Center Outsourcing Industry
The perception of the Philippine call center outsourcing industry as a passing trend in its early days proved incorrect thirty years later. The sector survived and thrived despite multiple setbacks. It grew into a multibillion-dollar venture in less than two decades.
The following are the major events that influenced the Philippine call center outsourcing industry’s growth and status:
- 1992. Frank Holz, an American executive at a multinational consultancy firm, started the first contact center. This began the country’s customer service and support outsourcing business.
- 1995. President Fidel Ramos signed into law the Special Economic Zone Act. It encourages foreign and local investments by offering tax breaks and fewer business requirements in economic zones across the country.
- 1997 to 1999. Large-sized foreign companies established outsourcing companies in the Philippines. They served various industries, such as consumer electronics, banking, and telecommunications.
- 2000 to 2004. Department of Trade and Industry Secretary Mar Roxas spearheaded the “Make IT Philippines” program, promoting information technology (IT) enabled services to the U.S. This attracted many American companies to invest in the nation’s IT-Business Process Management (BPM) segment.
- 2000 to 2009. U.S.-based call center companies continued coming in droves to invest.
- 2010. IBM’s Global Location Trends recognized the Philippines as the “call center capital of the world,” eclipsing outsourcing juggernaut India.
- 2011 to 2022. During this period, the call center and outsourcing industry contributed billions of dollars in revenue to the economy and created millions of jobs. The business process outsourcing (BPO) industry became one of the country’s top income ($29 billion in 2022) and employment (1.5 million full-time employees in 2022) generators.
The Future of the Philippine Call Center Outsourcing Industry
The BPO industry comprises different outsourcing services (e.g., voice and non-voice). The call center service constitutes a huge part of this sector. By 2028, the industry could generate over $60 billion in revenue. The IT and Business Process Association of the Philippines (IBPAP) expects the industry to produce at least a million more jobs.
IBPAP president and CEO Jack Madrid stated that amid the COVID-19 pandemic and the economic downturn, the Philippine outsourcing industry managed to churn out additional employment. More than 250,000 jobs opened to the local workforce from 2020 to 2022.
During the two years, the Philippine government permitted BPO companies to adopt remote work arrangements while keeping tax incentives. Many outsourcing companies capitalized on this government measure, which enabled the BPO industry to operate fully despite the global health crisis.
Outsourcing firms also learned that Filipino workers preferred working remotely. Today, service providers can still enjoy tax perks under a work-from-home (WFH) setup by transferring their registration from the Philippine Economic Zone Authority (PEZA) to the Board of Investments (BOI).
Madrid further disclosed the IT-BPM Industry Roadmap 2028, which detailed the strategies IBPAP, in partnership with the government, will execute to help the BPO sector’s expansion. The list includes strengthening the country’s digital infrastructure, closing the talent supply and demand gap, and streamlining business procedures.
Services in the Philippine Call Center Outsourcing Industry
The Philippine call center outsourcing industry consists of BPO providers offering different services to businesses of all types and sizes. These service providers employ skilled, experienced, and passionate professionals to help clients with their call center needs.
Below are some call center services the industry offers:
- Inbound support. BPO companies handle incoming customer phone calls. This function includes issue resolution, claims processing, upselling and cross-selling, product information requests, interactive voice response (IVR), and virtual receptionists.
- Outbound support. Third-party agents call existing and prospective clients and end users. Customer satisfaction surveys, market intelligence, lead generation, appointment setting, customer acquisition, and database development are examples of outbound call center services.
- Multichannel contact center services. BPO agents provide customer service via social media, phone calls, email, live chat, and chatbots. These services integrate multiple channels into a single platform to let agents connect with customers, regardless of how they contact the company.
- Technical support. Call center agents answer basic questions and concerns about tech products and services such as mobile phones and software. They must have good technical knowledge and communication skills to perform this process. Remote IT, pre-sales, post-sales, and help desk support are examples of technical support.
- The contact center as a service (CCaaS). This customer experience solution uses cloud technology to provide contact center services. Companies pay only for the call center services they need (e.g., outbound, inbound, and help desk support) to reduce operating costs and achieve scalable operations.
- Virtual assistants. BPO companies provide remote contractors to help with the client company’s daily office tasks (e.g., organizing files and answering emails). Contractors work as executive and administrative assistants.
Advantages of Philippine Call Center Outsourcing
Check out the benefits of the country’s call center outsourcing industry below.
Continued Economic Stability for High Business Confidence
The Philippine economy experienced substantial growth over the past few years. It has exhibited an over 6% rise in gross domestic product (GDP) since 2010. Sustained GDP growth signifies a robust economy with high local consumption (or consumer spending) and high production (private capital and government expenditures).
A consistently active economy translates to bigger personal savings, more business opportunities, solid investor confidence, and a brighter general outlook. Call center outsourcing services, including CCaaS and similar processes, profit from such a positive environment.
Friendly Regulations and Initiatives To Spur Outsourced Activities
The national government fully supports the BPO industry. Tax revenue, technological improvement, employment generation, and consumer income are vital elements in which the outsourcing sector plays a significant role.
Two government agencies promote establishing and simplifying call center operations. One is the Philippine Economic Zone Authority (PEZA), which oversees the special economic zones. The other is the Board of Investments (BOI), which helps investors successfully outsource data entry services and other back-end tasks.
On the workforce front, the government offers different accessible programs that train individuals for the BPO industry. These initiatives develop and improve trainees’ skills in English, computer systems, and customer service.
Low Legal and Management Risks To Avoid High Financial Costs
Companies that outsource tech solutions and call center processes to a Philippine BPO provider can assume minimal legal and managerial duties. Establishing one’s own offshoring business means dealing with numerous tax laws, labor policies, and compliance regulations. With outsourcing, a service provider manages all these tedious tasks.
Additionally, the chosen BPO partner oversees all the recruitment processes. It also directly addresses job- and staff-related concerns. Delegating call center activities and back-end functions to a third-party vendor decreases the client company’s risk of considerable financial costs and legal drawbacks.
Valuable Work Traits for Better Teamwork, Higher Morale, and Better Performance
Filipino call center agents are known to provide the best customer service in the world. They have distinctive working characteristics that give them an edge over their counterparts. Among them is their inclination toward welcoming and serving visitors, foreigners, and strangers. Showing warm hospitality to others is part of Filipino culture.
Filipino workers are also diligent and creative. They work hard to support their families and view their jobs with passion and accountability. With resourcefulness ingrained in them, Filipino call center agents always look for ways to address task-related problems with patience.
High English Fluency for Better Customer Communication
English is a common language among Filipinos. It is the nation’s second official language and is taught in most schools, from grade school to college.
The Philippines is a consistent top performer in international surveys of English-proficient countries. It trails behind Singapore, the Asia-Pacific region’s most proficient non-English-speaking country.
Call center representatives excel at delivering excellent customer service to English-speaking consumers and speaking with a neutral accent. They can better engage with American, Canadian, Australian, and British callers. Filipino agents can answer questions, address issues, and process transactions faster as customers can understand them more clearly.
Cost-effective Workers for Better Return on Investment (ROI)
The Philippine call center outsourcing industry offers a world-class workforce at a fraction of the cost. Filipino professionals’ technical capabilities, soft skills, and education levels are comparable to their equivalents in more progressive countries such as Malaysia, Singapore, and Mexico. What gives them an edge is that their wages are more affordable.
Lower salary costs reduce operating expenses, allowing Philippine third-party vendors to provide competitive service rates. They can bill clients with reasonable charges for guaranteed high-quality and excellent customer service.
Consistently providing excellent customer service enhances consumer loyalty to a company’s product or service. This translates to higher sales and lower acquisition costs.
High Affinity to Western Culture for Improved Customer Relations
Outsourced call center agents who share cultural similarities with customers are a plus for highly effective back-office outsourcing operations. Filipinos and Americans have similar religious beliefs, lifestyles, and government systems. Both nationalities celebrate Christmas, observe Holy Week, and watch Hollywood movies.
Call center representatives can build rapport more quickly and smoothly when they share customers’ expectations and interests. Interaction is easier, which is why Filipino customer service agents are in demand for outsourcing.
Sufficient Inflow of Young and Trainable Talent To Support Operations
Educational institutions in the Philippines produce tens of thousands of fresh graduates a year.
Most graduates belong to the millennial and Generation Z groups. They are adaptable, passionate, and motivated. These groups of young talent, numbering in the millions, are open to work anytime. They are also well-versed in the latest technologies, including computer systems and mobile phones—skills useful in customer service roles.
The number of young workers joining the labor force continues to grow. As such, the Philippine call center outsourcing industry is unlikely to suffer a workforce shortage in the next few years. A stable supply of competent talent means no drastic wage hikes will occur.
Flexible Workforce for Uninterrupted Outsourcing Processes
Filipino professionals are willing to work regardless of time differences or schedules, whether in technical support outsourcing, customer service, or other back-end functions. They can report for work at night, on weekends, or on holidays. Serving end users or clients anytime is not a major issue for most Filipino workers.
Adapting to a different time zone to provide continuous customer service is common among BPO workers. Call center agents are used to varying shifts and weekend schedules. Time discrepancies are minor concerns in the Philippine call center outsourcing industry.
Progressive Internet Infrastructure for Glitch-free Communication
The Philippine internet infrastructure has advanced over the past decade. Recently, major internet service providers (ISPs) offered subscribers faster and more dependable connectivity using fiber-optic and satellite technologies. Competition among ISPs has boosted download and upload speeds on fixed broadband and mobile platforms.
The government supports the development of the digital platform by easing bureaucratic processes. It approves, and issues building and installation permits faster. This allows telecommunications providers to put up and upgrade more towers and cell sites to improve connectivity.
Disadvantages of Philippine Call Center Outsourcing
In general, outsourcing bears potential risks. Here are the three common disadvantages:
1. Losing Some Management Control
Delegating call center processes to a BPO provider means letting go of some internal control.
For the most part, the service provider uses its tried-and-tested customer support and call center procedures and policies to align and streamline workflow and operations. A client must trust the provider to meet its requirements and achieve its goals.
Applying in-house standards to an offshore call center team is challenging. Allowing the BPO partner to manage various tasks, including getting the team members to cooperate and teaching them new skills, is recommended to get the most out of outsourcing.
2. Incurring Unforeseen and Hidden Expenses
Companies must be aware of unexpected costs that can disrupt their budgets when outsourcing. A service provider might charge a client more than the agreed fee. Not all of them disclose their full-service rates.
Unforeseen expenses are typically tough to track and anticipate. Third-party vendors might bill clients for the following services or situations:
- Pre-termination or cancellation of the agreement
- Employee shortages
- Printing and distribution of various reports and documents
- Staff management and coordination
- Extra-legal services
- Staff layoff and human resources incidents
- Knowledge and work transfer
- Work disruptions
Clarifying payment conditions and requesting complete service costs at the onset is recommended to enable companies to better manage their budget and business relationship with their BPO partners.
3. Increasing Cybersecurity Concerns
Outsourcing call center services require sharing sensitive and confidential customer and company data with the service partner. These include passwords, credit card accounts, insurance details, usernames, and home addresses. Unsecured or unauthenticated critical files might result in data breaches and financial losses.
Companies must verify the BPO provider’s data security protocols from the start. They must set up a confidentiality agreement with the partner and provide a formal assurance of high data protection. There must be strict security and authorization measures when accessing and using information.
Issues Facing the Philippine Call Center Outsourcing Industry
Check out the challenges that the Philippine call center outsourcing industry faces.
- Health issues. Call centers have a few work-related health conditions. Agents experience back and shoulder pains due to prolonged stationary positions, throat problems due to up to 100 calls per shift, and temporary hearing loss resulting from extended high-noise exposure.
- Technological issues. Advanced technology is changing the call center outsourcing landscape. Artificial intelligence (AI), chatbots, automation, and real-time data analytics can handle specific tasks meant for call center agents. The industry must find ways to address this issue and not fully rely on its high English proficiency advantage.
- High attrition issues. IBPAP states the country’s IT-BPM industry, in which the call center is the largest subsector, has a turnover rate of 30% to 40%. Employees stay for four to six months and then resign to look for other opportunities. This indicates how demanding and stressful a customer support role can be.
- Political issues. Political challenges influence the outsourcing industry. For instance, former U.S. President Donald Trump pushed for his “America First” agenda to bring back outsourced jobs to the home country. Another one was the delay of the corporate income tax reform bill, stalling investments in the BPO sector.
- Supply chain issues. The BPO industry must set contingency plans if a workforce shortage happens due to increased competition for the right talent. It also needs qualified personnel to resolve the growing demand for specialized skills such as analytics, automation, and cybersecurity.
- Work setup issues. Many Filipino professionals have opted to work remotely or partially on-site since COVID-19. However, BPO companies are gradually returning to full on-premises work.
Best Practices for Outsourcing Call Center Operations to the Philippines
Consider these procedures when outsourcing call center operations to the Philippines.
1. Define Call Center Outsourcing Objectives and Requirements
Before teaming up with a service provider, a company should develop an outsourcing plan, specifying its reasons and goals for outsourcing. Some examples of goals are:
- To obtain the relevant technologies to raise output and efficiency
- To fortify brand retention and customer loyalty for ongoing sales
- To enhance income for market expansion
- To focus on the core business to improve its competitive edge
- To reduce ongoing expenses for a strong balance sheet
- To be adaptable to deal with unforeseen problems
2. Scrutinize Different Potential BPO Partners
The Philippine call center outsourcing industry comprises numerous service providers. Companies should study the following when prospecting a BPO partner:
- Conduct thorough research. Acquire essential and timely data and information on all the BPO candidates. Studying independent and reliable online sources is recommended.
- Check security protocols. The potential BPO partner must use the latest technologies to protect crucial client, end user, and company information.
- Choose a specialized team. Hire a BPO provider that delivers an outsourced customer service team fully dedicated to the company’s processes. Avoid shared services, if possible.
- Dig deep into their expertise. Research a candidate’s outsourcing background and roster of previous and current clients. Prioritize third-party vendors with subject-matter experts.
3. Gather a Full List of Service Rates
Request that prospects provide complete service fees for outsourced call center processes, including hidden or extra charges. Some providers might bill clients for additional services excluded from the contract. Carefully analyze their pricing packages.
Service providers offer various service rates. Evaluate, compare, and balance the pros and cons of each pricing model. Calculate the total costs. From this point, shorten the list of candidates by choosing the ones that will optimize costs and revenues.
4. Send a Request for Proposal (RFP) to the Short-listed Prospects
Generate and submit an RFP to the selected candidates. It requests price quotes from the prospects and encourages them to join in the bidding. The objective is to get the most acceptable pricing and the best possible service.
Assess the proposals received from interested service providers. Pick the best offer and conclude the negotiation with a service-level agreement (SLA). An SLA describes the services the BPO partner must provide and the key performance indicators (KPIs) or metrics they must meet.
5. Monitor Outsourced Call Center Operations
Assigned tasks must match the overall business goals when outsourcing call center processes to the Philippines. Monitor the third-party team’s productivity and performance with two standard measurements:
- Qualitative analysis measures the call center team’s knowledge of services, products, and business operations. Soft skills, such as collaboration, interpersonal, and problem-solving, are part of this measurement.
- Quantitative analysis gauges the team’s performance using KPIs. Examples are first response time, net promoter score, customer satisfaction score, and average resolution time.
6. Sustain a Firm Relationship With the BPO Partner
Partnering with a local call center company can last long if the service provider delivers on its promises. Maintaining a solid business relationship with the service provider is vital for outsourcing success. The BPO partner can help companies prosper during good times and survive challenging periods.
The Bottom Line
The Philippine call center outsourcing industry provides many services. Companies worldwide continue outsourcing their back-end processes to the country due to the proven benefits.
While call center outsourcing offers various perks, it poses some possible risks. Investing in customer service support involves capitalizing on the advantages and reducing the disadvantages to achieve positive results.
Contacting a service provider with an established local presence is ideal. Unity Communications is an example. The company offers different outsourcing services, such as customer support and technical assistance, to help companies succeed.