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KNOWLEDGE CENTER

RP’s BPO revenues to exceed $9B in 2010

By Tom S. Noda
Computerworld Philippines
February 8, 2010

There is nowhere else to go but up for the Philippines’ business process outsourcing (BPO) industry which is expected to beat all its record figures, whether in terms of workers, infrastructure, and revenues which is pegged to exceed US$9 billion this year.

President Gloria Macapagal-Arroyo disclosed the prediction at this morning’s official opening of the 10th e-Services Global Sourcing Conference and Exhibition at the SMX Convention Center in Pasay City.

“From scratch, with only 2,000 workers and US$24 million in revenues in year 2000, [the Philippine BPO industry] is now a global powerhouse. From almost half a million workers last year, it is expected to be 600,000 this year. And from more than US$7 billion revenues last year, it is expected to exceed at US$9 billion this year,” Arroyo said during her keynote address.

The president reported that about two-thirds of all foreign delegates present in the e-Services event came from New York City. Several of the foreign delegates include outsourcing executives from Australia and Japan, among others.

Arroyo claimed to have achieved already her administration’s vision for the ICT sector that was set 10 years ago–and that is to spur future economic development and create wealth by developing labor intensive and skills intensive service sectors such as the ICT. “Today, nine years later, we did it,” she exclaimed.

INCENTIVE STRATEGY
With only five months left in her term as president, Arroyo gave an unsolicited advice to her would-be successor on how to improve further or, at least, maintain the development of the multi-billion-dollar ICT-BPO industry.

“The ICT sector should be guided. There should be minimal government interference and more of government encouragement. Example, for call centers, you shouldn’t force the investors to specialize in build up management. Instead, give incentives in the development of ICT parks assist investors in identifying promising provincial sites now known as Cyber Corridor, and to build more transport facilities to these new sites in the provinces,” Arroyo said.

The Cyber Corridor is composed of the country’s so called 10 “next wave cities” being endorsed as the best new ICT destinations, namely: Metro Laguna; Metro Cavite; Metro Pampanga; Iloilo; Davao; Bacolod; Metro Bulacan; Central Bulacan; Cagayan de Oro; and Lipa.

SMART POLICIES
The president shared that a “smart policy” approach was applied for the BPO industry, in which three areas were given focus, namely the development of physical infrastructure, having appropriate legal and business environment framework, and the development of human capital.

In terms of physical infrastructure, the president said broadband services have been rolled out in most cities in the country. She added that the cost of international calls went down from 40 cents a minute to 2 cents with the use of Voice over Internet Protocol (VoIP) and that the number of Internet users has jumped from only three million in year 2000 to more than 24 million today.

“And so that no Taiwan tremor or tsunami can cut off our cyber services from their global clients, we encouraged the major mobile telecomunications companies to invest billions in redundancy connections,” she told her audience.

For having the appropriate legal and business environment framework, Arroyo cited the creation of the Commission on ICT (CICT), headed by Secretary Ray Anthony Roxas-Chua III, with the philosophy that the ICT sector should be guided by the market with minimal government interference but more of government encouragement.

She said that besides call centers, the market is moving towards the higher value segments of the offshoring industry such as the non-voice business processes, software development, engineering design, game development, animation, and knowledge process outsourcing.

“The highest IT value in the world can be found right here in the Philippines, the best knowledge services,” she said. “It is the world leader in terms of financial services and its technology workflow development.”

And as to her smart policy on human capital development, the president revealed that she intensified the implementation of various workforce programs for the Philippines to increase its profit share in the global offshoring and outsourcing services market. Among these was to help college graduates and skilled people in obtaining jobs in the ICT sector as well as educating the young on the use of computers.

“More than 5,000 of our 6,500 public high schools now have computer laboratories and almost 4,000 of them are connected to the Internet. In technical education and skills training, we invested Php46 billion or about US$700 million,” she said. “That is three times as much of the combined budgets of the three previous administrations. More than Php1 billion of this investment goes to BPO scholarships. And with this amount, the larger share goes to the skills training program for near-hires supervised by the Business Processing Association of the Philippines (BPA/P) which is now offering programs to close the voice [services] divide.”

With the local BPO market now pegged at US$7.2 billion, analyst group Everest Research has put the Philippines on the 3rd spot in the total global BPO market breakdown in terms of estimated revenues for 2008. The country was also named by the UK’s National Outsourcing Association as the Best Offshoring Destination of the Year for 2007 and most recently in 2009. Such accolades, according to organizers of e-Services, serve to prop the industry towards attaining its target of 10% global market share for 2010.

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