Bernardo M. Villegas
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The Future of BPO/KPO Industry

           One of the few economic sectors in which the Philippines is a global player is the Business Process Outsourcing/Knowledge Processing Outsourcing Industry (BPO/KPO) industry.  According to a recent report of the Everest Group entitled “Global Trends in the Contact Center Market and Opportunities in the Philippines”, our country is the leader in the offshore/nearshore English Contact Center Outsourcing (CCO) market with some 36% share.  Total world spending on contact center services can range from US$300 - 350 billion of which 20% is outsourced.  The Global CCO market is expected to grow at 6-8% in the next 3 to 5 years; while offshore CCO market is expected to grow at a faster rate at 10 to 12%.  In the Philippines, the growth has been close to 20% over the last five years and can continue to grow at least at 15% annually over the next five years.

          The IT-BPO Industry in the Philippines is already ranked Number 1 in voice outsourcing destination.  We surpassed India in this sector because of the superior qualities of the Filipino youth in putting on the American accent (the US is 80% of the global market in customer interaction services) as well as the greater familiarity that Filipinos have of American popular culture, such as in sports, media and entertainment.  It is much easier for a Filipino customer interaction agent to engage in small talk with American clients.  There is no question that this is one of the positive impacts of the period of American colonization on Philippine society.  Because of a young, growing and English-speaking population, the Philippines remains the global leader in Customer Information Services (CIS).  This linguistic advantage combined with quality training in finance and accounting enables the Philippines to lead in the Finance and Accounting (FAO) and Global Inhouse Services (GIS) in the non-voice Business Process Management (BPM) sector with a market size of US $3.6 billion and growing at 22% annually.  The Healthcare Information Management Services will surpass US1 billion in 2015, employing close to 90,000 professionals.  Already a maturing industry, Animation Services are experiencing phenomenal growth among the freelancing community.

          Helping economic growth to be more inclusive, the IT-BPO industry is expanding out of Metro Manila into the regions outside the NCR, thereby creating economic opportunities in the countryside.  The major centers of expansion are the Central Visayas hub (Cebu City, Lapu-lapu City, Mandaue City, Dumaguete, Tagbilaran).  Towards the south of Manila, there is expansion to Santa Rosa, and Bacoor/Imus/Dasmarinas,   In Northern Luzon there are Baguio and Ilocos Norte.  In Central Luzon, Angeles, Clark, Cabanatuan, Olongapo/Subic, Tarlac and Malolos.   In fact, Central Luzon can easily rival Manila as an urban hub in the next twenty years when the Philippine Government finally acquires the political will and good judgment to declare Clark as the major international airport.  Tholons’ 2013 top 100 global outsourcing destinations included Manila, Cebu, Davao, Sta. Rosa City, Bacolod City, Iloilo City and Baguio City.  

          An industry forecast made by a UA&P industrial economist showed that the total industry growth per year in the next five years will be 14 to 20%, bringing the total earnings to more than $40 billion by 2020.  There will be two million full time employees (FTEs) by that year. The transcription segment will be growing faster by 20% per annum.  Voice will still be growing robustly until 2020, but will experience gradual deceleration as the new generation of workers and consumers depend more on the internet and other non-voice sources of information.  Efforts will be made to harness growth potentials of Social, Mobile, Analytics and Cloud (SMAC) technical services.  The Government will introduce measures to improve ease of doing business, especially helping the industry to explore more opportunities offered by the Tier 2 cities. There will be more focus on opportunities in the domestic market for IT/BPM.  The industry leaders will play an important role in getting government agencies to adopt IT/BPM technology.  The Philippines will creatively employ branding strategies to retain leadership positions in customer interaction services.  A larger supply of software engineers will help the country upgrade its services in Information Technology. Greater competition in the telecom industry will lead to more efficient internet services.  The introduction of the K to 12 curriculum will lead to higher-quality manpower both for technical and knowledge workers, especially in the architectural, engineering, financial, health care and financial services. 

          The positive disruptors in the next decade or so are the K-12 academic adjustment; the ASEAN integration; expansion of real estate and construction; improvement of telecom services; expanding middle class; continuing high growth of the Philippine economy at least 6 to 7% annually; the creation of the Department of Information and Communications Technology; and the spread of good governance practices.  Negative disruptors are the other side of ASEAN integration which can threaten some of the non-competitive sectors of the Philippine economy such as the sugar industry; natural calamities; power supply shortages; possible deterioration in university education, especially in engineering and the sciences; emerging China’s BPO industry; security threats to data/info industry; increasing attrition rates in the industry; and the lack of technical innovation and research and development, leading the Philippines to the middle-income trap.  In my opinion, the net effect of these disruptions will still be positive, bringing the Philippines to a higher level of economic well-being.  Poverty will not be completely eliminated but the incidence can be kept down to less than 10% as it is already in Indonesia, Thailand and Malaysia, our ASEAN peers.  For comments, my email address is  bernardo.villegas@uap.asia.