Increasing our IT-BPO Market Share in Europe

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Gartner confirms the 2008-09 financial crisis has triggered widespread adaptation of BPO and shared services by European countries and corporations. Presentation for the Shared Services and Outsourcing Exchange in Europe.

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Increasing our IT-BPO Market Share in Europe

  1. 1. The Philippines: The Location of Choice for IT-BPO and Shared Services 6th Shared Services and Outsourcing Exchange BrainWeave Session 10:00 a.m.-11:00 a.m., 17 September 2012 Prague, Czech RepublicAlejandro P. Melchor IIIDeputy Executive Director for ICT Industry DevelopmentDepartment of Science & TechnologyInformation and Communications Technology Office
  2. 2. Outline• Philippine economic scorecard• Policy directions• Philippine Advantage• Government Support
  3. 3. PHILIPPINES AT A GLANCE Land Area: 300.000 km2 Population: 94.2 million 41% working group from ages 20-44 16% working group from ages 45-64 Capital City: Metro Manila Political Structure: Democratic (Presidential System) National Language: Filipino, Official Language: English Religion: 93% Christian Believers of which 83% are Catholic 2011 GDP : US$224.8 BillionSources: 2011 Per Capita Income: $2,223 Bangko Sentral ng Pilippinas National Statistical Coordination Board and 1 National Economic and Development Authority
  4. 4. PHILIPPINE ECONOMIC SCORECARD GNP/GDP Quarterly Growth Highlights (2010-2012) 12 GNP GDP growth of 7.6% in 10 GDP 2010, highest in 31 years 8 7.3 BOP record surplus of 6.9 6.1 6.3 US$10.2B in 2011 6 5.6 6.3 5.1 4.9 4.5 5.1 Inflation at its lowest in 21 4 3.6 years 2.2 4.0 3.5 Stable and low interest 3.2 2 2.4 rate environment 0 Gross international reserves (GIR) peaked at $75.3 million in 2011Sources: Bangko Sentral ng Pilippinas National Statistical Coordination Board and National Economic and Development Authority
  5. 5. PHILIPPINE ECONOMIC SCORECARDConsumption-driven economy + Nearly $80M Gross Int’l Reserves100%80%60%40%20% 0% 2003 2004 2005 2006 2007 2008 2009-20% Pvt. Consumption Govt. Consumption Investments Net Exports = Resistance to external shocks. Positive GDP growth rate for 52 consecutive quarters since 1999 + Prudent fiscal management + Sound economic policy
  6. 6. HSBC, The World in 2050: • “Attention will increasingly turn to the ‘new emergers’ as the world economy undergoes a seismic shift…” • “We highlight the following: The striking rise of the Philippines, which is set to become the world’s 16th largest economy, up 27 places from today.”• “Who will deliver thefastest growth enrouteto 2050?”https://www.research.hsbc.com/midas/Res/RDV?ao=20&key=hCmm8WiQC0&n=317638.PDF
  7. 7. Ruchir Sharma, Morgan Stanley • TIPs, poised to upstage BRICs • Turkey, Indonesia, Philippines • “Aquino is delegating power to competent technocrats…”World Economic Forum:• Philippines leapfrogged 20 places inglobal competitiveness in the 2 years ofthe Aquino Administration.Jim O’Neill, GoldmanSachs:• Philippines one of the“Next 11”—the nextBRICs.
  8. 8. 2012 economic performance lives up to billing #2 in Asia, 1Q 2012 #3 in Asia, 2Q 2012
  9. 9. POLICY DIRECTIONS• A more responsive government and a business-friendly environment• Continued fiscal consolidation• Increased infrastructure spending• Clear agenda for competitiveness• Broad-based expansion led by services• Prioritizes creation of jobs that empower the people• ASEAN masterplan for ICT development http://www.aseansec.org/22073.htm• National development plan for rapid economic growth• Inclusive agenda for national ICT development http://devplan.neda.gov.ph/index.php ilearn.gov.ph/PhilippineDigitalStrategy2011-2016.pdf
  10. 10. President Benigno S. Aquino III supports the IT-BPO Industry “The BPO sector has successfully showcased the skills of Filipinos to the world.”“By the time I step down in 2016, we are looking atrevenues that will have more than doubled to $25 billionand 4.5 million jobs — 1.3 million directly as a result ofthe BPO sector and 3.2 million indirect jobs.”
  11. 11. Philippine IT-BPO Industry:The country’s premier sunrise industry Total Employees (000s) Annual Revenue (US$B) 700 $12.0 643 $11.0 600 $10.0 525 $8.9 500 442 $8.0 $7.1 400 372 $6.1 $6.0 300 $4.9 300 236 $4.0 $3.3 200 163 $2.2 101 $2.0 $1.3 100 0 $0.0 2004 2005 2006 2007 2008 2009 2010 2011 2004 2005 2006 2007 2008 2009 2010 2011Source: Business Processing Association of the Philippines (BPAP)
  12. 12. The Philippine talent value proposition:large pool of young, English-speaking talentNumber of college degree graduates 2010  Abundant labor force of 38 millionMedical and natural sciences, allied 119,378  Over 450,000 college graduates per yearfields  Large pool of accounting and businessBusiness, accounting, and related 117,339 graduatesfields  English proficiencySocial and behavioral sciences, 68,811  Affinity with Western cultureeducation  Customer service orientationEngineering and architecture 50,734  Highly trainableIT-related and mathematics 47,928  Cost effectiveFine arts, masscom, humanities 12,269  High level of commitment and loyaltyTOTAL Tertiary level 481,862 Pop Labor force Unemp rate Literacy World 7,021M 3,264M 9.1% 83.7% India 1,205M 488M 9.8% 61.0% China 1,343M 796M Suitability rates are empirically based on a total of >80 interviews 6.5% 92.2% with HR professionals working in each country Brazil 206M 105M 6.0% 88.6%Source: CHED 2012; CIA World Factbook 2012; Philippines 92M 41M 7.4% 92.6% NSO 2012 12
  13. 13. Philippines has abundant human and natural resources— world’s 5th richest store of natural resources
  14. 14. Philippines is currently among the most-competitive destinations for IT-BPO services MARKET AVERAGESDirect operating cost1 per FTE for English voice work ENGLISH-LANGUAGE VOICE EXAMPLE2010; US$ ’000 per annum per FTE Reflective of market averages. Range 70-72 could vary depending upon  Tier-1 vs. Tier-2 cities  Suppliers vs. captives  Scaled operations vs. mid-size operations 29-32 24-26 19-20 16-17 15-16 14-15 US Tier-2 Mexico City Krakow Kuala Lumpur Cairo Metro Manila Delhi/NCR 1 Ongoing costs only; excludes margins/mark-ups, centralized corporate overheads, initial investment, set-up costs, and travel costs Note: Exchange rates for local currencies with respect to the U.S. dollar have been averaged for 12 months from Oct. 1, 2009 to Sept. 30, 2010 Source: Everest analysis
  15. 15. Likewise, The Philippines is among thelowest cost locations for non-voice BPOworkDirect operating cost1 per FTE for F&A transactional work2010; US$ ’000s a year per FTE MARKET AVERAGES FAO EXAMPLE 1 Ongoing costs only; excludes margins/mark-ups, centralized corporate overheads, initial investment, set-up costs, and travel costs Note: Exchange rates for local currencies with respect to the U.S. dollar have been averaged for 12 months from Oct. 1, 2009, to Sept. 30, 2010 Source: Everest analysis Copyright ©2011: BPAP, CICT, Everest Global, O2P. All rights reserved.
  16. 16. …and for IT Services Direct operating cost1 per FTE for IT Applications Development and Maintenance (ADM) 2010; US$ ‘000s per annum per FTE MARKET AVERAGES ADM EXAMPLE 1 Ongoing costs only; excludes margins/mark-ups, centralized corporate overheads, initial investment, set-up costs, and travel costs Note: Exchange rates for local currencies with respect to the U.S. dollar have been averaged for 12 months from Oct. 1, 2009, to Sept. 30, 2010 Source: Everest analysisCopyright ©2011: BPAP, CICT, Everest Global, O2P. All rights reserved.
  17. 17. RELIABLE AND REDUNDANT CONNECTIVITY TGN-IA Transmission Backbone Networks BALLESTEROS  PLDT Digital Fiber Optic Network AAG LAOAG VIGAN TUGUEGARAO (DFON) CAUAYAN  Globe Telecom Fiber Optic SFLU BAGUIO SOLANO ASE DAGUPAN URDANETA Backbone Network (FOBN) TARLAC CABANATUAN CANERO EAC  TelicPhil (BayanTel) Nationwide SeaMeWe-3 SUBIC SAMPALOC ERMITA AURORA MAKATI Digital Transmission Network BACOOR APCN2 NASUGB U NAGA (NDTN) BATANGAS PAGBILAO MAMBURAO PILI LEGASPI C2C DONSOL MASBATE SORSOGON SAN JOSE CALBAYOG Cable Landing Stations ROXAS TACLOBAN ORMOC SJC ILOILO CADIZ BANATE SAN REMIGIO TALISAY LILOAN  Ballesteros, Cagayan (June 2013) BACOLOD LAHUG TALISAY MAASIN DUERO MARIBOJ  Tanza, Cavite OC DAUIN TAGBILARAN CABADBARAN  Nasugbu, Batangas CDO MANTICAO BUTUAN ILIGAN  Bauang, La Union PAGADIAN COTABATO DAVAO  Daet, Camarines Norte ZAMBOA NGA GEN. SANTOS
  18. 18. World class, IT-BPO designed, infrastructureLowest rental rates in the region; dedicated IT parks right in the center of business districts METRO MANILA Eastwood City Cyberpark Ortigas Center, Mandaluyong City/Pasig City Quezon City Bonifacio Global UP-Ayala Technohub, City, Taguig City Quezon City McKinley Hill Taguig City Makati City Northgate Cyberzone Muntinlupa City
  19. 19. COMPETITIVE INVESTMENT INCENTIVES  4 to 8 years Income Tax Holiday (ITH)  Special 5% tax on Gross Income  Other tax and duties exemptions*  Domestic sales allowance of up to 30% of total sales  Additional deduction on total manpower training cost 1 Exemption from duties and taxes on imported capital equipment, spare parts, supplies, and raw materials 2 Exemption from export taxes, wharfage dues, imposts and fees 3 Exemption from Value Added Tax (VAT) on allowable local purchases such as telecom, power, and water bills 4 Additional deduction of 50% of total manpower training cost under the special 5% gross income tax regimec
  20. 20. GOVERNMENT SUPPORT ICT & BPO Industry Development ProgramsiPPP PROGRAMS GOALS PROJECTS Stepping-Up the ICT: a $50B industry by 1 – Research & Road Value Chain 2016: Mapping • IT-BPO $25-27B • All other ICT: $23-25B 2 – Training & Education i-TalentDev.PH Global leadership in multiple high growth 3 – Organizational segments Development & Next Wave Cities/ Capability BuildingSmarter Countryside Countryside development 4 – Advocacy and through ICT & BPO Marketing i-Creative.PH Increase size & 5 – IT-preneurship & employability of talent pool Technology Business Indicators Develop knowledge 6 – Policy Framework, ICT Marketing & workers with Research st Century Skills Business Environment 21 Investment Incentives
  21. 21. Stepping Up the Value Chain Program We are #1 in call centers and we Voice BPO intend to become market leader in UK & Australia Healthcare Information Management Outsourcing We intend to Finance & Accounting Outsourcing attain worldleadership in 4 more HR Outsourcingfast growing services Creative Process Outsourcing ICT-enabled Creative Industry Development We intend to IT Outsourcing double our market Engineering Servicesshare in 3 other fast Philippine Technological Outsourcing Council growing services Multilingual BPO
  22. 22. Development of World Class Talent Knowledge Workers with 21st Century Skills for the Global Knowledge Industry specific Government Economy curriculum support to training development, and development assessments & of ICT-industry certification workers World Educational reforms for mutual 450,000 college graduates annually Class recognition of qualifications and Talent degrees
  23. 23. Next Wave Cities Program provides access to talent throughout the Philippines
  24. 24. An InvitationDiscoverthePhilippineAdvantage!For more details, visit:www.icto.dost.gov.phwww.dti.gov.phwww.peza.gov.ph http://www.bpap.org/publications/research/investorprimer2012 Department of Science and Technology- Information and Communications Technology Office

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