Philippine BPO Market Sees Gains

MANILA: The economic slowdown in the United States is likely to boost the Philippines' outsourcing industry. The country is aiming for a 10 percent share of the US$130 billion global market.

Round-the-clock construction work of new office buildings is sweeping across the Philippines.

At McKinley Hill, 15 hectares has been set aside for an information technology park, which will house business process outsourcing (BPO) offices costing almost US$260 million.

Investments like these have led international real estate services firms to dub the Philippines as the hottest real estate market in Southeast Asia.

Vice-chairman of CB Richard Ellis Philippines, Joey Radovan, said: "Our neighbours in Asia right now, the property value is actually very high compared to the Philippines. We are probably three to five times cheaper in terms of space."

Outsourcing firms now account for more than 60 percent of the office spaces in the central business district of Makati.

With the current economic slowdown in the United States, more and more companies are now turning to outsourcing to save on costs. That is why the Philippines' outsourcing industry is confident it will earn at least US$7 billion in 2008, a 40 percent increase from last year.

By Channel NewsAsia's Philippine Correspondent Christine Ong (Sourcingmag.com) Full Story

PHILIPPINES--Despite the current gloomy economic outlook, the Philippines may still reach its 2008 growth targets for the local business process outsourcing (BPO) market, according to a research firm.

Canada-based XMG said the prevailing economic slowdown may even favor the Philippines' outsourcing industry as more companies that outsource, now look at cheaper ways to operate.

"Due to recent U.S. economic slowdown and poor global outlook, contract for offshore countries such as the Philippines will grow by an additional 7 percent to 12 percent as top multinational companies cut cost and transfer [processes] to cost-effective sites or outsource some of their needs," said Benedict Ferrer, research manger and senior analyst at XMG.

In an e-mail interview Monday, he said: "For this year, the country is on track to meet its revenue targets.

"In terms of revenue, our conservative contract outlook for the Philippines will be an estimated US$4.8 billion to US$5.1 billion by the end of 2008."

(ZDNet Asia) Full Story

In Europe, 70% of European companies already outsource at least one function of their business, with 20% set to increase their level of outsourcing in the next two years, as they increasingly view it as a means to gaining a competitive edge, according to Ernst & Young's "European Outsourcing Survey 2008."

The survey consisted of interviews with more than 100 business leaders from companies with an annual turnover exceeding 100M euros in France, the UK, Germany, Italy, Spain and Belgium.

In addition, the survey found the biggest reasons for outsourcing were cost savings (49%) and better quality through the hiring of specialists (33%). The functions most commonly outsourced were maintenance (76%), logistics (73%) and computing/telecommunications (68%).

Belgium recorded the highest rate of outsourcing with 81% of the companies using it, while France had the lowest take-up rate at 63%. However, France demonstrated one of the broadest ranges of outsourced functions, with an average of five functions outsourced per company. Although a common business practice in the UK (71%), outsourcing remains restricted to an average of only three functions.

"Competing in the global economy and having to deal with a strong euro, European firms need to be more scalable and profitable, and this is creating a general trend towards the fragmentation of the traditional vertically integrated business," said Thierry Muller, partner at Ernst & Young France and outsourcing advisory leader, in a statement. "The overall outsourcing experience appears to be a positive one." In the US, however, outsourcing is more complex, particularly in the manufacturing sector as soaring fuel and transport costs raise concerns.

The cost of shipping a standard container from Shanghai, China, to the US eastern seaboard, including inland costs, has tripled since 2000 and will triple again if oil prices reach $200 per barrel as some experts predict, according to according to a June report by CIBC World Markets.

The high cost of transporting raw materials, component parts and finished goods may well prompt some US companies to return their overseas manufacturing operations to the US, according to CIBC.

Sentiment in the US already appears to reflect the findings. According to a June survey by the National Association of Manufacturers, nearly half of North American manufacturers consider the US the most desirable country for business expansion in the next three years, and more than half expect to become more globally competitive in the next five years.

Although high fuel prices may impact, slow or even reverse outsourcing in some business sectors, it will not cause a dramatic shift in the globalization of the supply chain, the CIBC report concluded.

(Outsourcing Strategies) Full Story

IT services companies are seeing strong growth in marked contrast with others in the services industry, according to the Confederation of British Industry (CBI).

Robert Morgan, director of supplier support company Hamilton Bailey, said the reason is simply that companies tend to outsource in a difficult economic climate.

He said the outsourcing industry usually benefits from an economic downturn as companies attempt to balance the books by reducing capital expenditure by buying services and transferring these costs into operation expenses.

"This financial re-engineering makes the balance sheet appear healthier and can help boost the value of a company if it is sold off," said Morgan. "This is a way of spreading costs almost invisibly in order to get through a difficult trading period, and the net effect is that the sector looks buoyant."

Sridhar Vedala, managing director of global sourcing at outsourcing consultancy EquaTerra Europe, said companies under pressure to contain costs perceive IT outsourcing as opportunity to bring about cost savings, reduce fixed cost investments and improve overall effectiveness.

"The demand for outsourcing has, in many ways, amplified because of the downturn. Also almost all IT services companies are now leveraging global labor arbitrage through offshoring which enables them to manage the impact of the downturn," Vedala said. (ComputerWeekly.com) Full Story

03.07.2008 13:13:42 The BPO sector has grown by spectacular levels, providing employment to more than 200,000 BPO professionals. It is projected to grow on the average 38 percent until 2010, contributing more than $12 billion in revenue.

(live-PR.com) - Similar to the experience of India, much of the growth in the Philippine BPO sector has been driven by relatively lower labor costs. This has been the salient characteristic of the first phase of global BPO development which took place in the 90’s through the early 2000’s, where clients and providers alike placed emphasis on cost, efficiency and productivity. As clients in the US and Europe searched for ways to bring down cost further, they turned to providers in India, Philippines, and others to provide low labor costs to perform customer care, HR, and accounting BPO services.

As established BPO providers are besieged by new entrants from China, Latin America, and other relatively lower cost countries, new sources of service differentiation become crucial to maintain and get more clients. This is when the second phase of BPO development took place starting in the early 2000, which is characterized by the focus on quality.

Adoption of quality standards is the direction of local BPO players now through the implementation of quality standards and practices such as Six Sigma, Total Quality Management, ISO 9000, and Capability Maturity Model. To survive in the long run, it is a must for BPOs to adopt any or a combination of these quality programs.

But these advantages in cost and quality are fast eroding as BPO services become commoditized and the sector reaches maturity. In fact, the global business process outsourcing sector is likely to see only a modest growth of 2 percent in 2007, after a continuous average growth of 14 percent annually during the last five years, according to Technology Partners International, a sourcing advisory firm.

It is now imperative that BPO providers set the stage for their next phase of evolution and momentum - the third phase of BPO development which focuses on innovation. In fact, a 2005 IDC survey among BPO clients in the US suggested that 35 percent of the respondents look for BPO providers to drive innovation.

Moreover, a 2005 McKinsey Study makes a strong case for innovation by suggesting that the Indian IT-BPO sector can generate over US$ 10-15 billion of additional revenues by 2010—over and above its US$ 60 billion export target—provided it makes innovation its chief growth catalyst.

More on outsourcing at www.outsourcingstrategies.com (live-PR.com) Full Story