Outsourcing in the Philippines
Why the Philippines?The Philippine outsourcing sector is regarded as one of the fastest growing industries in the world. International investment consultancy firm McKinsey & Co. predicts that the demand for outsourcing services will reach $180 billion in 2010. There are number of compelling reasons why companies are now looking to the Philippines, rather than traditional outsourcing destinations such as India, for their offshore outsourcing needs.
Compatible CulturesWhether your outsourcing project involves customer service, sales, or even application development, effective communication and mutual understanding between your outsourced staff and your customers or local employees will be critical factors in your success. In addition to superior language skills, your outsourced staff must possess natural sensitivity to your local culture. This is an area where the Philippines really outshines other outsourcing destinations.
English pervades every aspect of Philippine society, from television and movies to education and government. Philippine children grow up watching Western T.V. shows, listening to Western music and following Western pop culture. Instruction in most schools is carried out in English. The dominant religion in the country is Roman Catholic, which further strengthens ties and affinity for the West. The result is that not only do Filipinos speak English with a pleasing, neutral accent, but they also possess a deep and natural understanding of Western Culture.
The combination of these attributes with Filipinos’ warm and accommodating nature makes it easy to create an offshore Philippine team that mirrors the culture and values of your on-shore operation and enables them to function as a seamless and transparent component of your overall business.
Low CostsObviously the engine that propels the outsourcing industry in any developing country is its lower cost of doing business. The Phillippines excels in this area, especially with regard to labor costs. The minium daily wage in the Philippines is approximately $8 per day and the starting salary for college graduates from good schools begins at around $300 per month.
Salaries in the southern part of the country tend to be slightly lower than in Manila but Manila offers the largest pool of skilled workers, as well as the best English speakers.
Other products and services that benefit from low labor costs, such as office rental, professional services, office supplies, food and lodging are also extremely reasonable in the Philippines. Taxes and health care costs are also much cheaper than in developed countries. Cost savings are not as great for products that must be sourced from abroad, such as computers; and for telecommunication services such as internet access.
Overall, however, a company can expect to save over 50% on staffing costs by outsourcing in the Philippines.
Highly-Educated, Highly-Skilled StaffApproximately 3 million new graduates of the Philippines’ world-class higher education system enter the job market each year.
In addition, Manila boasts a robust professional certification and continuing education system, providing developers and other skilled workers with additional qualifications such as Microsoft and Cisco certifications, as well as sales and customer service training. It is possible to find staff with virtually any specialization in the Philippines.
In addition, many of the world’s leading high-tech companies such as IBM, Dell, Samsung, and Texas Instruments have made large investments in their operations in the Philippines, so many job candidates have extensive experience at multinational corporations producing work to the highest international standards.
Until the emergence of the BPO industry in the Philippines, the local economy could not support the millions of skilled and highly talented local workers who enter the workforce each year, forcing the new workers to join millions of other Filipinos currently working abroad in menial jobs that make no use of their skills and keep them far away from family and friends. The result is a pent-up demand for skilled positions that creates a positive environment for BPO’s looking to hire skilled workers. This is in stark contrast with other offshoring centers such as India where finding and keeping employees is a serious challenge.
Economic Growth and StabilityThe Economist’s most recent country briefing on The Philippines described a number of positive developments in the Phillipines that signal continued economic growth and stability for the country:
The president, Gloria Macapagal Arroyo, has seen off serious challenges to her hold on power. The fact that parties loyal to her retained control of the House of Representatives (the lower house of Congress) following the mid-term election in May 2007 means that she is likely to remain in office until the end of her term in June 2010.
Fiscal stabilization will continue, with government revenue being boosted by the extension of value-added tax (VAT) and other measures to increase the tax take. The improvement in the public finances is expected to lead to a decline in the ratio of government debt to GDP, which is forecast to fall from 55.8% in 2007 to 47.9% by 2012. The improving state of the government's finances should lead to greater economic stability.
Economic growth will average 5.7% a year in 2008-12. Private consumption will be the primary driver of the economy during the forecast period.
The current account will remain in surplus over the forecast period, buoyed by the sustained rise in inflows of remittances from Filipino workers overseas. These inflows, together with progress on the fiscal front, will support the value of the peso.
GDP per head (at market exchange rates) in the Philippines remains relatively low, at an estimated US$1,600 in 2007. It is expected to rise to over US$2,300 by 2012, moderately increasing market opportunities, but still leaving the country's average income level below that of many of its neighbors.
The government continues to actively support the BPO industry through a variety of tax incentives and continued consistent improvement in telecommunications infrastructure will put downward pressure on internet and other costs.
These trends will further enhance the Philippines’ position and the premier up-and-coming outsourcing center.