Unity Communications 2023 Review: A Look Back at IT-BPM Achievements and the Path Forward to 2024

The previous year has been eventful for business process outsourcing (BPO) in the Philippines, with multiple BPO trends and predictions driving the workforce. Local government officials have also been more active in overseeing the sector’s operations.

Business leaders and politicians closely monitor the BPO industry, being the linchpin of global operations and a significant growth driver of the Philippine economy.

This report explores developments in the Philippine BPO industry and their implications. It also discusses predictions for the sector’s growth in 2024 and relevant news from other outsourcing hubs.

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The Current State of BPO in the Philippines

Outsourcing is here to stay. Despite the potential threat of artificial intelligence (AI), the BPO industry remains strong and will likely continue expanding. BPO and knowledge process outsourcing (KPO) companies provide services integral to keeping businesses functional.

A testament to the value of human-backed BPO services is the emergence of new outsourcing hubs. With BPO offices relocating outside of Metro Manila, the industry is set to overtake overseas remittances as the country’s primary economic driver within the decade.

To support the local industry’s growth, leaders are taking preemptive measures to curb the influence of disruptive elements such as generative AI, chatbots, and cyberattacks. Despite these concerns, the Philippine BPO industry has enjoyed a fruitful 2023 overall.

Keeping up with Previous Growth Forecasts

Although it is still too early to compare previous forecasts with actual results, 2023 was a good year for the Philippine BPO. Even as the year ended, experts and governing bodies remained confident in the industry’s growth.

Here are a few highlights:

• According to the IT and Business Process Association of the Philippines (IBPAP), the BPO industry was expected to earn $35.4 billion in revenue in 2023, up 8.8% from 2022. Though sizeable, this figure is $500 million less than projections at the start of the year.
• IBPAP initially forecasted the industry would reach a total of 1.7 million full-time employees (FTEs). By mid-2023, BPO companies produced an additional 135,841 jobs, representing an 8.7% growth from 2022.
• Both preliminary reports exceeded the global average for year-on-year (YoY) growth at 7.7% in revenue and 7.1% in employment. With five years left on IBPAP’s roadmap, achieving $29.5 billion in revenue and 1.1 million FTE growth by 2028 is possible.

Expansions Outside Metro Manila Remain Strong

Besides hitting industry milestones, BPO companies saw many other positive developments in the Philippines. Among them is continued expansion outside Metro Manila, a primary driving force for job creation last year.

The BPO centers and provincial tech hubs established in 2023 included the following:

• Laoag City, Ilocos Norte
• Tanjay City, Negros Oriental
• Puerto Princesa City, Palawan
• Lipa City, Batangas
• Iloilo City, Iloilo

IBPAP also predicts a southbound BPO expansion, citing the following five provinces as the most favored destinations outside of Metro Manila:

• Cagayan de Oro
• Cebu
• Clark
• Davao
• Iloilo

Upskilling to Meet Changing Demands

As one of the largest providers of outsourcing services, the Philippines must keep abreast of the changes in business demands. Immediate adaptation is vital to surviving an increasingly tech-centric future overrun with generative AI.

The Philippine BPO industry has consistently received praise for its first-class customer service skills and ability to swiftly incorporate technological innovations, such as augmented reality (AR), virtual reality (VR), and AI, into its services.

But owing to the country’s status as a developing country, it struggles to keep pace with competitors in aspects such as employee upskilling. Without updated training, BPO companies will likely grapple with the upsurge of democratized software and automation tools.

The potential for sustained growth remains feasible. Experts and industry leaders have routinely commented on how Philippine BPO companies can maintain relevance going forward.

Here are a few major points:

• Integrating AI, genuine empathy, and human connection helps Filipinos gain a competitive edge in customer service. With the right tools and knowledge, call center workers can boost their productivity with AI and improve customer experience.
• KPO is a subset of BPO wherein Philippine-based providers succeed. Key sectors where specialized skills (e.g., coding) are becoming highly valuable include educational technology (EdTech), healthcare, and e-commerce.
• Seeing the immense value BPO brings, the public and private sectors have made strides in supporting the local industry. Senators filed three relevant bills last year. Social enterprise INSPHERO also offered college degrees for BPO workers.

Addressing Cyber Threats Facing the BPO Industry

Unfortunately, not all changes were positive in 2023. Some experts anticipate certain developments to worsen. Uncertainties about the AI takeover aside, cybersecurity threats have increased, exposing critical weaknesses in the information technology and business process management (IT-BPM) industry.

Here are a few examples illustrating the country’s cybersecurity vulnerabilities:

• According to Palo Alto Networks, the Philippines and Malaysia are the most vulnerable to cyberattacks among the member states of the Association of Southeast Asian Nations (ASEAN). It reported that 29% of the surveyed Philippine firms saw over a 50% increase in malicious attacks, highlighting their vulnerabilities.
• The same Palo Alto Networks report cites malware (66%) as the top cybersecurity threat to Philippine businesses. Other threats include phishing attempts (63%) and password theft (56%). Most companies, however, are confident in their cybersecurity measures.
• Only 202 cybersecurity experts with Certified Information Systems Security Professional (CISSP) certifications were present in the Philippines, according to a 2021 IBM study that received funding from USAID. This figure is a far cry from other major BPO centers.

Local Government Response to AI in IT-BPO

Philippine officials were quick to point out potential issues with generative AI for the local economy. In January 2023, Senator Risa Hontiveros called on government agencies to form action plans to dampen the impact of AI on economic activity and job security. Senator Imee Marcos voiced similar concerns in May, citing a study by Oxford Economics and Cisco.

Before 2023 ended, IBPAP had already set up an AI council. Its primary task is to work with organizations, such as the Analytics and Artificial Intelligence Association of the Philippines (AAP), and industry experts to upskill BPO workers.

By empowering workers to leverage tools, AI becomes an enhancement instead of a replacement for BPO employees. The response of Philippine government officials to generative AI has caught the attention of other burgeoning BPO markets, such as South Africa, which are also wary of the technology’s effect on job prospects.

Key players remain hopeful about the Philippine BPO industry’s resilience due to its decades-long customer service experience. However, the AI dilemma has also exposed skill gaps and talent shortages that must be addressed.

Workers’ Rights and Government Incentives

Apart from calling for action against the rise of automation in the BPO industry, local officials have been proactive in safeguarding workers’ rights in other respects. The country’s dependence on exporting services for economic growth means that threats to jobs are serious.

Below are three Senate bills filed in 2023 to support workers nationwide:

• House Bill No. 8189. This bill is an updated version of the Magna Carta for BPO Workers, filed by Rep. Raoul Manuel to bolster protection for BPO workers. Its core issues include setting a minimum wage for BPO workers and upholding employees’ rights to enter or form unions.
• House Bill No. 8733. Rep. Luis Villafuerte Jr. introduced this bill, known as the BPO Workers’ Welfare Protection Act, which is similar to HB No. 8189. Its main goal is also to create oversight to improve the industry’s employment benefits and work conditions.
• House Bill No. 9342. Rep. Camille Villar submitted this bill to safeguard BPO workers from abusive and exploitative practices. It covers concerns that affect work-life balance, such as workload and discrimination.

Employees are not the only beneficiaries of these actions. The government also supports BPO companies’ efforts to remain competitive in light of recent developments that threaten to upheave established industry practices worldwide.

Proposed changes to the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Law via House Bill No. 8968 (CREATE MORE) incentivize BPO companies whose workforces and revenue rely on hybrid and work-from-home setups. It allows these providers to retain tax incentives regardless of their registering agency.

The Future of the Philippine IT-BPM Industry

The previous year has largely been positive for Philippine IT-BPO, though numerous global concerns make the industry’s 2024 prospects uncertain.

Here are a few key points that might influence companies outsourcing to the Philippines and the future of the local industry in general:

• According to GoodFirm’s 2023 BPO study, nearshoring accounts for 32.1% of outsourcing. This trend is expected to continue given the current growth of nearshore markets (e.g., Mexico and Brazil for the U.S.).
• The same study projects a global BPO market annual revenue of $525.2 billion by 2030, as businesses continue to rely on outsourcing companies to handle critical daily functions.
• Economic uncertainties and fears over job security will continue to shake the industry as BPO providers adjust to AI integrations. The Philippine industry managed to maintain steady growth in 2023, but it now faces fierce competition with its nearshore counterparts.
• Upskilling and additional training are necessary to maintain relevance in the digital era. To prepare workers and the industry moving forward, BPO providers must reconceptualize work.
• Additional investments from abroad are expected to flow in as foreign firms continue to show interest in the Philippines, generating new jobs and more revenue for the country.
• Major Philippine-based land developers Ayala Land Inc. and Aboitiz InfraCapital anticipate renewed demand for office space. They have projects to accommodate booming BPO expansions outside the Metro Manila area.

The following sections explore how the Philippine BPO industry can reduce and mitigate concerns to find success in 2024.

Maneuvering Around Cybersecurity Threats

According to U.S. Embassy Spokesperson Kanishka Gangopadhyay, around 90% of Wall Street’s financial transactions go through BPO providers in the Philippines. This fact highlights the importance of data security in financial BPO. Client companies in the technology, healthcare, and insurance industries also require stringent security for sensitive data.

In December, U.S.-Japanese cybersecurity company Trend Micro announced its partnership with USAID to educate Filipinos on cybersecurity. Online threats are especially concerning for BPO providers processing sensitive or confidential data.

The National Association of Data Protection Officers of the Philippines (NADPOP) estimates that around 180,000 cybersecurity professionals are required to cover critical local needs. Even then, it only accounts for 10% of companies that provide crucial services, including BPO vendors.

Although Philippine-based BPO companies saw a disproportionately low number of cyberattacks compared to the global industry, they remain a serious vulnerability. The country’s lagging tech and cybersecurity protocols might even become a deciding factor for clients eager to protect their data.

Onshore, Nearshore, and Offshore Competitors

The Philippines faces stiff competition from other outsourcing hubs. Although these markets share the same concerns about AI-led job loss, the local industry struggles to compare favorably in factors such as proximity and talent retention.

According to the 2023 Kearney Global Services Location Index, India, China, and Malaysia remain the top providers of tech-enabled workers. Meanwhile, Brazil (fourth), the UK (fifth), and Mexico (10th) have all risen in recent years as top picks for building nearshore operations.

The BPO industries of Colombia, Belize, and Jamaica have also improved immensely over the last year and have boosted their reputation as outsourcing destinations. Despite dropping one rank from 2021, the U.S. remains in the top ten, showing the undeniable value of onshore outsourcing.

Singapore, Hungary, and Morocco are some of the biggest winners, rising to 24th, 18th, and 12th in ranks, respectively. Egypt and South Africa are also noteworthy competitors on the African continent, with burgeoning BPO engines working hard to promote their status globally.

Despite these changes, which include dropping three ranks to 12th place on the Kearney list, the Philippines retained its status as the world’s second-largest BPO outpost. However, its success going forward depends on how quickly it upskills and satisfies its workforce.

Bridging the Skill Gap and Curbing AI Fears

Although opinions differ on the actual threat AI poses to BPO workers, the core of the debate is the accuracy with which generative AI can replicate human interactions, rendering agents obsolete.

Here are critical arguments from both sides on whether AI enhances or replaces humans:

Human workers will struggle to compete with machines in terms of raw productivity. But this does not mean that sufficiently skilled individuals no longer have a place in outsourcing. Another point raised on this issue is that AI can potentially ease workers’ burdens.

By eliminating human intervention at the lowest levels, employers will likely assign complex issues to the remaining workers. In turn, BPO work becomes increasingly more cutthroat and demanding. Companies that come prepared are less likely to face these dilemmas, if at all.

The Bottom Line

Outsourcing is not going anywhere anytime soon. But its evolution in the era of fast-advancing AI technology bothers many people. The Philippines, in particular, has to take these developments seriously due to its heavy reliance on the industry.

Although many strides were made to protect BPO vendors and workers from challenges such as AI and cyber threats, no bills have been passed into law. Industry leaders, government officials, and experts must hasten in formulating feasible solutions to safeguard BPO jobs.

That said, many are also hopeful of the prospect of AI and how it can instead enhance BPO operations and services. Support jobs have much to gain from the invaluable assistance of real-time analysis in dealing with customer concerns, technical or otherwise.