The Philippines has become even more attractive as a location for back-office services, according to a new survey by international management consultancy group A.T. Kearney. The Philippines climbed to number 7 among 51 countries included in the 2014 Global Services Location Index by A.T. Kearney. This is two spots up from the 2011 Index where the Philippines placed at number 9 out of 50 countries.

According to the results summary released to the media, A.T. Kearney selected the 51 countries based on factors like state promotion initiatives and remote services activity. Each country was evaluated against several metrics grouped into three weighted measures: financial attractiveness (40%), people skills and availability (30%), and business environment (30%).

The report said that the metrics used to evaluate the attractiveness of each location were gathered from responses to A.T. Kearney surveys, industry questionnaires, client experience, and data obtained from client engagements over the past five years. The weight of each metric was assigned based on its importance to the location decision, with the cost advantage being the primary driver. 

The summary showed that the Philippines’ higher total score was a result of improvement in two key measures, business environment and people skills and availability, reigning in a drop in financial attractiveness. The country’s overall score rose from 5.65 in 2011 to 5.75 in 2014 due to an increase in the skills and availability measure from 1.31 to 1.48, and the business environment measure from 1.16 in to 1.21. The improvements offset a financial attractiveness score that dropped from 3.18 to 3.06.

“The Philippines is an industry powerhouse, rising two places this year and with an export sector second only to India,” the summary read. “Philippine industry is one of the most sophisticated in the world and its qualified labor force is one of the deepest.”

The report cited the country’s numerous operating centers in central Luzon and many tier 2 locations elsewhere, saying that the industry is expanding beyond its call center focus to include higher value-added voice, IT (information technology), and BPO (business process outsourcing) services.

India retains the top spot in the survey, followed by China, Malaysia, Egypt, Indonesia, and Thailand.

Tracking Back Office Service Development

The A.T. Kearney report followed the trends in back office development, from before 2000 to the mid-2010s. The three “waves” started with companies establishing back office units in developing countries, followed by contracting providers to deliver non-core functions in the mid-2000s, and automating high-volume processes in the mid-2010s.