Why is Philippines taking over India in the BPO industry?
By Larissa Ogusico, Triple i Consulting
Despite of still being the main hub for Business Process Outsourcing (BPO), with revenues of USD 118 billion for 2014 according to the National Association of Software and Service Companies (NASSCOM), India has something to worry about as year-by-year Philippines is taking from India the spotlight with regard to offshore related activities. In 2011, the number of call center agents employed in the Philippines surpassed the number in India regardless of the first one’s much smaller population.
The report Top 100 Outsourcing Destinations, published every year by the research and investment firm Tholons, evaluates and compares the BPO industry in different countries around the world. Tholons empathized in its latest reports the key role played by Philippines as an emergent hub for foreign companies. According to the report, though still very restricted to two major cities – Metro Manila and Cebu, the latter situated in Visayas region – other locations such as Iloilo, Davao and Santa Rosa moved up in the latest ranking released this year.
The recent transfer of operations can be explained by quite a few reasons. Aside from the young and qualified workforce moving to the main urban areas of Philippines – the first requirement to enter a BPO company is to have a higher education – Filipinos can easily adjust and camouflage their own accent to make it sound more similar to American English whilst Indians can hardly change their inherited British accent. Considering the pressure of the Communications Workers of America (CWA) and the support of some politicians to bring back to US outsourcing operations since 2012, the problem of miscommunication seemed to be reduced by transferring voice-based services to the Philippines, the best English speaking country within Asia Pacific. Culturally speaking, Filipinos are also steeped in western references. Not only they grew up assimilating the American lifestyle but also the number of Overseas Filipino Workers (OFW) exceeds 10 million; therefore the cultural shock becomes a minor challenge if compared to Philippines’ competitor.
Looking deeper into this context, we find out that many of the call center operations moving to Philippines are not necessarily closing their doors in Mumbai or Bangalore, but creating offshoots of the companies who wish to diversify operations in the subcontinent. At the same time, India has to deal with its own macro-economic issues. The slowdown of Indian’s economy in the last quarter – the GDP grew 5.3% – is now pressuring the government for a cut in the interest rate in order to increase investments. Philippines is taking those opportunities at the most by offering better conditions for the establishment of BPO companies. For instance, the Filipino government gives tax incentives and privileges for companies registered with the Philippines Economic Zone Authority (PEZA) and the Board of Investments (BOI) aiming to attract those foreign investments.
Larissa Ogusico, Account Executive
Triple i, Unit 616 Tower One Stock Exchange Makati City, Philippines 1226
T: +632 856 9631
published: December 2014