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Product Market Study on philippines bpo industry (oct 2010)

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Product Market Study on philippines bpo industry (oct 2010) Document Transcript

  • 1. PRODUCT MARKET STUDY MATRADE MANILA (1/2010) BUSINESS PROCESS OUTSOURCING IN THE PHILIPPINES : TRENDS AND OPPORTUNITIES Overview BPO is defined as services (act of utilizing) of a third party by a company to perform its back office operations in the areas of customer relationship management, call centres/telemarketing (customer help desk), payroll maintenance, tele-servicing and product support, finance/accounting/billing, human resources, logistics management, supply chain management, medical transcription, insurance claims processing, legal database maintenance and endless kind of services. One of the more important economic developments has been the impressive growth in the global demand for outsourcing and off shoring in the services sector in the last few years. It has flourished to a frantic level where big companies outsource their back office business processes to countries with generally cheap labor but can provide better service like China, India, Mexico, South Africa and the Philippines. BPO Industry in the Philippines In the Philippines, initially the focus was on call centres and low value added BPO in the 1990s, but started growing in earnest at the start of this decade. The phenomenon growth really started year 2000 with the establishment of call centres in the Philippines. Call centre industry that year contributed 12 percent to the country’s gross national product (GNP). From a mere 2,400 call centre professionals, it grew to 112, 000 in 2005 with revenues exceeding 1 billion USD. Since then the call centre industry has become one of the biggest sources of employment for Filipinos and has provided tremendous export revenues for the Philippine government. These opportunities propelled the industry players to add higher value activities to BPO services such as web design, software development, animation, legal services, medical transcription, and other shared services
  • 2. BPO industry in the Philippines is generally divided into the following sectors: Percentage Distribution and Number of BPO Companies, by sector, 2008 Sector Percentage No. of Companies Contact Centre 31 % 191 Transcription 22% 135 Information technology 19% 119 Back office (KPO) 13% 81 Animation 8% 49 Engineering 7% 43 Total 100% 618 Source: Business Processing Association of the Philippines (BPAP) • Contact centre is consist of inbound and out band voice operation service for sale, customer service and technical support among others while transcription is data transcription (including medical) services. • Back office service is also known as knowledge process outsourcing (KPO) like finance, accounting and human resources administration. In terms of employment generated by BPO, this industry expanded rapidly to nearly 372,000 employees at the end of 2008 from only around 100,000 full‐time employees in 2004,. The largest share of job is in the contact centre sector, which employed around 227,000 people in 2008. BPO’s employment growth of 24 percent between 2007 and 2008, outdone total employment growth in the country which grew only by 1.6 percent. For 2009, based from BPAP, the workforce in the BPO industry increased to 446, 000 or approximately by 19 per cent during the closing of 2009 in comparison to the numbers in the previous years. According to the projections of the Department of Trade and Industry, the workforce is expected to swell to anything between 650,000 and 900,000 at the end of 2010.
  • 3. BPO employment by sector, 2004‐2008 Sector 2004 2005 2006 2007 2008 Contact Centres 64,000 112,000 160,000 198,000 227,000 Back Office 15,000 22,500 36,000 40,156 68,927 Transcription 6,300 8,950 11,675 16,409 20,224 Animation 3,000 4,500 6,500 7,000 8,000 Information Technology 10,000 12,000 16,000 29,188 35,314 Engineering Services 2,000 2,800 4,400 8,000 12,000 Digital Content/Game Dev’t 200 500 1,000 200 500 Total 100,500 163,250 235,575 298,953 371,965 Source: Business Processing Association of the Philippines (BPAP) In terms of revenues, the BPO industry despite the financial crisis has shown resiliency and steady growth. It is estimated that the industry generated around US$6 billion in export revenues in 2008 from around only US$1.5 billion in 2004.Contact centers had the biggest impact, bringing in US$4.1 billion, while back office services generated US$827 million in revenue. For 2009, as released by Business Processing Association of the Philippines (BPAP), this industry procured approximately $7.3 billion in terms of revenue. BPO industry had generated the largest amount of revenues compared to all industries in the Philippines during 2009. It is expected that the revenue for 2011 is 11.6 billion USD.
  • 4. BPO Revenues by sector, 2004‐2008 Sector 2004 2005 2006 2007 2008 Contact Centres 1,024 1,792 2,360 3,600 4,100 Back Office 120 180 288 398 827 Transcription 72 70 109 137 182 Animation 52 74 97 105 120 Information Technology 170 204 272 423 601 Engineering Services 34 48 68 152 228 Digital Content/Game Dev’t 3 7 13 1 3 Total 1,475 2,420 3,257 4,875 6,061 Growth Rate 64.07% 34.59% 49.68% 24.33% Source: Business Processing Association of the Philippines (BPAP) Philippine BPO Performance in the world The Philippines ranks as one of the leading global services locations in terms of financial structures, people and skills availability, and overall business environment. The following are achieved by this industry from different surveys and studies conducted by different international groups • The Philippines ranked 7th place among the top fifty (50) offshore destinations for the year 2007 based from A.T. Kearney Global Services Location Index. Indicators used were financial attractiveness as having the lowest telecom costs and one of the lowest wage cost among the countries in the survey. Other indicators were infrastructure, security, risk, political and investment environment. • Philippine BPO is the third largest outsourcing and off shoring destination in the world according to Everest Group for the year 2008. It posted 15% of the market share in comparison with other BPO country destination. • In aspect of IT industry competitiveness for the year 2008, the Philippines has maintained its 47th position in the world and 8th in Asia.
  • 5. (The six indicators used in raking are overall business environment, IT infrastructure, human capital, legal environment, R&D environment, and support to IT industry development) • For 2009, as per results of the World Competitiveness Yearbook , Philippine BPO compared favourably with other BPO destination in the aspect of office rental cost , IT skills availability, and telecom investment Philippine BPO Competitiveness The Philippines is has proven to be an excellent venue for offshore call center outsourcing services for three important reasons: the country’s low labor costs, presence of reliable technology and availability of college graduates who posses high level of English and IT skills. According to the Philippine Board of Investment (BOI), the Philippines has more than sufficient and encouraging advantage as key BPO destination to keep up with stiffer global competition. These are the following advantages:
  • 6. 1) Technology that supports the industry • Expanding technologies on fiber and copper network, wireless technologies (CDMA, GSM, WAP, GPRS, 3G, wireless broadband), radio and VSAT 2) Support infrastructure • Digital fiber optic backbone network (FOBN) • Nationwide radio microwave terrestrial network • Next generation networks (NGN), characterized by the use of Internet Protocol (IP), Multi-Protocol Label Switching (MPLS) and Wave Division Multiplexing (WDM). 3) Ideal locations • Metro Manila, Metro Cebu and the Next Wave Cities .The next wave cities are Metro Laguna, Metro Cavite, Iloilo, Davao, Bacolod, Angeles/Clark/Mabalacat/ Dau, Baliuag/Marilao/Meycuayan, Cagayan De Oro, Malolos/Calumpit and Lipa • Around 165 ready-to-occupy IT Parks and Buildings all over the country. 4) Human resources -Availability • More than 490,000 college-degree graduates in 2008, 66.6% of which have courses suitable for the IT/BPO or cyber-services sector. • Annual growth rate of tertiary level graduates is estimated at 3.8%. -Quality • 3rd largest English-speaking country in the world • 72% of the population fluent in American English • English language as the basic communication medium used in business, government and schools. • Highly educated, flexible, productive, loyal, dedicated workforce with excellent work ethics and attention to detail • Strong affinity for western culture. 5) Costs advantage • Average annual salary of IT professionals in the Philippines handling various types of IT job functions is the most competitive in Asia.
  • 7. Average annual Salary(in US Dollars)
  • 8. IT Job Function National Capital Region Regional/Provincial Data Encoder/Transcriptionist 3,223 2,976 Call Center Agent/Customer service Representative 4,219 3,384 Team Leader/Technician 4,840 3,936 Analyst/Software Developer 5,812 4,800 MIS/Systems Administrator 5,987 4,956 Manager/Department Head 13,331 11,484