2010 bpo monograph (usc)

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2010 bpo monograph (usc)

  1. 1. FOREWORDThe BPO in Cebu:Challenges andOpportunities HIGHE ON R MMISSION ED UCATIO CO N OF 1994 FIC NT DE OF E OF THE PRESI ES TH E P HILI PPI N
  2. 2. FOREWORD The BPO Industry in Cebu: Challenges and Opportunities
  3. 3. FOREWORDThe BPO in Cebu:Challenges andOpportunities Contributors: Fiscalina Amadora-Nolasco Leah C. Auman Francisco M. Largo Elmira Judy T. Aguilar Jiah L. Sayson Reuel C. Yap Brenette L. Abrenica Tyler C. Ong Rey Uzhmar C. Padit Charity A. Tecson Cholen T. Osorio UNIVERSITY OF SAN CARLOS PRESS CEBU CITY, PHILIPPINES 2010
  4. 4. FOREWORDThe BPO in Cebu:Challenges and OpportunitiesCopyright @ 2010 University of San Carlos PressAll rights reserved.No part of this publication may be reproduced or used in any form or by any means whethergraphic, electronic, or mechanical-including photocopying, recording, taping or through otherdigitized information storage and retrieval systems-without written permission of the publisher.Co-Published by CHED Zonal Research Center and University of San Carlos PressArthur Dingman Bldg., USC Main CampusP. del Rosario Street, Cebu City, PhilippinesTelefax: +63 32 2531000 loc. 175www.usc.edu.phThe National Library of the Philippines CIP DataRecommended entry:The BPO in Cebu : challenges and opportunities /contributors, Fiscalina Amadora-Nolasco... [et. al.].-- Cebu City : University of San Carlos Press, 2010. p. ; cm.ISBN 978-971-539-027-9 1. Contracting out--Philippines--Cebu. I. Nolasco,Fiscalina Amadora.HD2365 658.4058 2010 P102010107Cover design: Julianito Joseph L. Masna The BPO Industry in Cebu: Challenges and Opportunities
  5. 5. FOREWORD he Higher Education Act of 1994 or Republic Act No. 7722 mandating the Commission of Higher Education (CHED) to perform functions related to research has come a long way since its inception. The Commission ismandated to promote, direct and support higher education institutions (HEIs) in carryingout their research and instruction functions. It is within this milieu that the NationalHigher Education Research Agenda (NHERA 1999-2008; 2009-2018) was developedand the Zonal Research Centers (ZRCs) throughout the country were established. Bothinitiatives are aimed at enabling higher education institutions in the country to producehigh quality research that will advance knowledge leading to economic development andbetter quality of life.Among the various CHED schemes to support research is the Grant-in-Aid or GIA, forwhich this present study on “The BPO in Cebu: Challenges and Opportunities,” is a casein point. This grant is provided to research proposals approved from private and publicHEIs developed along the two-pronged Batch III USC-CHED Zonal Research Programthrusts: Business and Industry Development Studies and Socioeconomic DevelopmentStudies.Contemporary business and industry is not spared of the effects of globalization. Thephenomenon of business process outsourcing is an impact of globalization. As it is,globalization has made it possible for historically distinct and disconnected nationalmarkets to merge as one huge global marketplace. For those in the know, declining tradeand investment barriers, the development of microprocessors and telecommunications,the use of the internet and the World Wide Web, and major innovations in transportationtechnology have been identified as the main drivers of globalization.This study in regard the Cebu BPO industry (2008 and 2009) is timely as Cebu is rankedas the number one in the Top 50 Emerging Global Outsourcing Cities. This is accordingto Tholons (2009), a leading full-service strategic advisory firm for global outsourcingand investments. According to Professor Fajardo (Sun Star Cebu Yearbook 2010), of theUniversity of San Carlos, Cebu met the most critical input in business processoutsourcing: An English-savvy and computer-literate work force with state-of-the-artcommunication facilities.This CHED Grant-in-Aid research output likewise comes with meaningful relevance as itaddresses the principles guiding research prioritization: Multidisciplinarity, policyorientation, participation, balanced attention given to basic and applied research,dovetailing, and complementation with other R & D initiatives. Moreover, the work is anexpression of the effort towards operationalizing the development of a research culturethrough networking and collaboration, as partner HEIs in the USC-CHED ZRC researchcapability building process.Elizabeth M. Remedio, PhDDirectorUSC-CHED Zonal Research Center The BPO Industry in Cebu: Challenges and Opportunities
  6. 6. ACKNOWLEDGMENT his Monograph was produced under the University of San Carlos-Commission on Higher Education Zonal Research Center Grant-in-Aid Research Project, both for Phase 1 (GIA 2008: Research) and Phase 2 (GIA 2009: Publication).In particular, we thank the USC-CHED-ZRC Director, Dr. Elizabeth M. Remedio, for theencouragement and remarkable support to this timely undertaking; the Director of theUSC Office of Research, Dr. Danilo B. Largo; and the Dean of the College of Arts andSciences, Dr. Ramon S. Del Fierro, for the research opportunity and release time fromteaching.We sincerely acknowledge the involvement of our collaborating partners from otherHigher Education Institutions (HEI) in Cebu, namely, Cebu Doctors University,University of Cebu, Cebu Institute of Technology, and the University of San JoseRecoletos.Additionally, we are grateful to those who have in one way or the other participated inthe capability-building activities, including the conduct of actual fieldwork: AdrianBoyett D. Agbon, Reymar Zarsoza (CDU), Baby Ting (UC), Jofe Marie M. Garvez(CIT), Agnes Sequino (USJR), Aldwin Joseph Empaces, Enriquito Satuita, Deborah LizCampos, Anna Beatrice Quijano, Leo Gerard A. Caral, Carlo Espina, Jiggs Adiong,Donna Bacalso, Katrina Chiong, Lauren V. Ligaton, Reino D. Pasay, Anselmo Otero,Ronnie Mandawe, Ma. Cecilia Caballes, Ana Flouressa Cabanilla, Shazeen B. Cruz,Cielo Maris S. Badilles, Kaye Hazel Lequigan, Lizette Tomabang, Noel Lentija, MaeClaire Jabines, Rowanne Marie Maxilom, and Sunleigh C. Gador.To the technical experts who provided valuable and insightful suggestions, we thankGerard Go (Market Structure), Rene’ E. Alburo (Academe and BPO Linkage), FernandoFajardo (Benefits Package), Aloysius M. L. Cañete (Gender and Reproductive Health),and Barbara Christina J. Pineda (Psychological Correlates of Stress).For her unflagging assistance and for working extremely hard in preparing the financialreports, we thank Chalemae O. Miñoza. We are also grateful to Celeste S. Villaluz-Sanchez for the painstaking efforts and untiring assistance in preparing the documentsneeded for submission to CHED; Julie Ann C. Belaniso and Geillecar C. Bucog for theadministrative and technical assistance; and Julianito Joseph L. Masna for the design andlayout of this monograph.Finally, our profound gratitude goes to Rene’ E. Alburo and Aloysius M. L. Cañete forthe copyediting assistance, and to Father Dionisio M. Miranda, SVD, President of theUniversity of San Carlos, for the helpful inputs to improve this work.
  7. 7. ABOUT THE CONTRIBUTORSBrenette L. Abrenica is a full-time faculty at the Department of Political Science,University of San Carlos. She specializes in public management and local governance.She finished her Master of Arts in Public Administration from the Cebu NormalUniversity, and Master in Political Science degree from the USC. Ms. Abrenica served asfield specialist and data processor of the CHED-ZRC BPO Study. Currently, she isengaged in expanding her grasp of development issues, Cebuano politics, and votertransition studies through new teaching responsibilities and training opportunities.Among others, her extension activities are with the World Bank-KnowledgeDevelopment Center (WB-KDC).Elmira Judy T. Aguilar is Professor of Anthropology in the Department of Sociologyand Anthropology, University of San Carlos. She obtained her Masters in Health SocialScience degree at the De La Salle University. Dr. Aguilar served as Component Leader ofthe CHED-ZRC BPO Study. For several years now, she headed several gender, sexuality,and reproductive health projects.Leah C. Auman is a full-time faculty at the Department of Psychology, University of SanCarlos. She obtained her Master of Arts in Psychology from the University of thePhilippines Diliman, with concentration in developmental psychology. Ms. Auman hastaught courses in research methods, statistics, psychological testing, training anddevelopment, and developmental psychology. Her research interest includescommitment, psychology of religion, and developmental concerns.Francisco M. Largo is Assistant Professor at the Department of Economics, Universityof San Carlos. He obtained his Master of Arts degree in Economics from the Universityof the Philippines School of Economics. His current research interests revolve around therole of institutions in public policy formulation and implementation especially in the fieldof water resources management and the economics of intra-household resourceallocations. Mr. Largo served as Component Leader of the CHED-ZRC BPO Study.Fiscalina Amadora-Nolasco is Professor of Anthropology and Graduate ProgramCoordinator in the Department of Sociology and Anthropology, and currentlyCoordinator of the USC Social Science Research Center. She obtained her Ph.D. inAnthropology under the Bureau of Cultural and Educational Affairs’ AnthropologyProgram Affiliation between USC and the New Mexico State University. She served asProject Leader of the CHED-ZRC BPO Study. Her research interest includes amongother concerns, women and health, HIV/AIDS, child labor, water in urban poorcommunities, and other development-related issues.Tyler C. Ong is a full-time faculty at the Department of Psychology, University of SanCarlos. He is a psychotherapist in private practice. Dr. Ong earned his Master of Sciencedegree in Psychology specializing in Marriage and Family Therapy from the CaliforniaState Polytechnic University at Pomona, and his Doctor of Psychology in ClinicalPsychology from the California Southern University. He teaches courses in clinical andcounseling psychology. His doctoral project was a proposed psychology of religion for
  8. 8. ABOUT THE CONTRIBUTORSgay men. His research interest involves gay men’s issues, psychology of religion, andreligio-magical practices.Cholen T. Osorio is a full-time faculty at the Department of Psychology, University ofSan Carlos. She earned her Master’s degree in Industrial/Organizational Psychology fromthe USC. Her thesis focused on stress and teaching performance. She teaches humanbehavior in organization, human resource management, techniques in counseling, and shehandles internship supervision. Her research interest involves issues related to workperformance and occupational stress. Ms. Osorio’s professional experience includesworking as a training and development officer for two organizations: one in Cebu andanother in the Laguna area. Her eight years of experience as a guidance counselor hasgiven her a wider view of the developmental concerns among the adolescent age group.Rey Uzhmar C. Padit is a full-time faculty at the Department of Economics, Universityof San Carlos. He teaches microeconomics, macroeconomics, and health economics. Hisareas of interest include political economics, institutional economics, economicseducation, and public policy. Mr. Padit served as field interviewer and data processor ofthe CHED-ZRC BPO Study, and is currently active in development-related undertakings.Jiah L. Sayson earned her Master of Arts in Development Studies major in Politics ofAlternative Development at the Institute of Social Studies, Den Haag, The Netherlands in2004. Her training includes urban and regional planning and development (UP-CebuCollege), geographic information systems (USC and Larenstein University), andAmerican political thought/political development (University of Massachusetts). Ms.Sayson is the former Chair of the USC Political Science Department, and she served asComponent Leader of the CHED-ZRC BPO Study.Charity A. Tecson is Professor of English, Speech, and Linguistics in the Department ofLanguages and Literature at the University of San Carlos. She earned her Master of Artsin English Language Teaching and Doctor of Philosophy in Education at the USC. Shehas also pursued short-term courses in Linguistics at the Linguistics Summer Institute ofthe Philippines. Her researches are language and linguistics-related.Reuel C. Yap is a full-time faculty at the Department of Psychology, University of SanCarlos. He obtained his Master of Arts degree in Psychology from the USC. His latestresearch endeavor was as a collaborator for a cross-cultural research on happiness andquality of friendship. He served as one of the technical experts of the CHED-ZRC BPOstudy. Mr. Yap’s research specialization includes attachment styles, forgiveness, positivepsychology, and other topics under social psychology.
  9. 9. TABLE OF CONTENTSFOREWORDACKNOWLEDGMENTABOUT THE CONTRIBUTORSCHAPTER 1 Introduction ......... 11 Fiscalina Amadora-Nolasco The Story The Method Plan for the MonographCHAPTER 2 Market Structure and Labor Market ......... 15 Adjustment Mechanism Francisco M. Largo and Rey Uzhmar C. Padit Introduction Conceptual Framework Methodology Findings Implications Policy RecommendationCHAPTER 3 Academe and BPO Linkage: ......... 27 Matching Workforce Competencies Fiscalina Amadora-Nolasco Introduction Competency Needs of BPO Management The Metro Cebu Sample BPO Workforce Conclusion and RecommendationsCHAPTER 4 Benefits Package and Worker Satisfaction ......... 43 Jiah L. Sayson and Brenette L. Abrenica Introduction Decent Work Agenda Investigating BPO Benefits Packages in Metro Cebu Decent Work Status in the BPO Industry Decent Work Status in the BPO Industry: Per Subsector Perspectives
  10. 10. TABLE OF CONTENTSCHAPTER 5 Identifying and Addressing Gender and Reproductive ......... 62 Health Issues in the Business Process Outsourcing Companies Elmira Judy T. Aguilar Introduction Health Concerns and Experiences of Men and Women Addressing Gender and Reproductive Health Concerns in the Workplace Conclusion and RecommendationsCHAPTER 6 Psychological Correlates of Stress Among BPO Industry ......... 70 Workers Leah C. Auman, Cholen T. Osorio, Reuel C. Yap and Tyler C. Ong Introduction Method Results Implications RecommendationsSpecial Paper USC English and ICT Curricula ......... 88 Charity A. Tecson Introduction USC English Curriculum USC ICT Curriculum Recommendations
  11. 11. CHAPTER 1 Introduction Fiscalina Amadora-Nolasco Department of Sociology and Anthropology The Story he study of the BPO is not restricted to any single discipline. It is an area of concern which is of special interest to many people in contemporary Cebu and can be analyzed in a variety of ways. This monograph is a five-componentstudy that makes use of the social science approach, and interprets findings obtained fromboth quantitative and qualitative interviews. This project is a product of a CHED-ZRC-funded research conducted by social science departments of the University of San Carlosand their collaborating partners from other HEIs, namely: University of Cebu, CebuDoctors University, Cebu Institute of Technology, and the University of San JoseRecoletos.The overarching goal of this undertaking is to foster collaboration between the academeand business sector as well as to support the priority thrusts of the CHED-ZRC,particularly Business Industry studies. It aims to build a body of knowledge of the BPOindustry based on verified observations.The research was first conceptualized by the USC Social Science Research Center in2008 to encourage collaboration in research, demonstrate the importance of workingtogether, and enhance the research competencies of faculty and students. Given theholistic intent of the study, the project had to be a collaborative effort among four socialscience departments (Sociology and Anthropology, Economics, Political Science, andPsychology), the Department of Languages and Literature, and the Social ScienceResearch Center, each with specific objectives and interpretation for a given concern. Aseries of consultative meetings initially funded by the USC Office of Research were thencarried out to plan the research process and mobilize resources for action. Consultationswere also regularly done with the USC-CHED-ZRC to shed light on the relevance of theresearch in contemporary society and the strategies that will need to be employed tofulfill the objectives of the study.In a forum held with the Cebu Educational Development Foundation for InformationTechnology, the agency which has been instrumental in positioning Cebu as a locationfor the development of IT and IT-enabled services, the matter of strengthening the BPOworkforce competencies was raised. The same concern was emphasized in a separateforum initiated by the USC-CHED ZRC. A clear gap was seen between what the industryneeded and what the academe was producing, leading to efforts to fill in the perceivedmismatch including an assessment of the region’s demand and supply of human resourcesin the IT sector. CEDF-IT also collaborated with academic institutions for facultytraining and curricula development. Despite those attempts, however, it was suggested The BPO Industry in Cebu: Challenges and Opportunities
  12. 12. Introduction Amadora-Nolasco l 12that the BPO industry in Cebu still has to face the challenge of improving its workforce tomove up in the value chain.Following these fora and upon the suggestion of the industry’s stakeholders, the studyteam reexamined its original proposal and thereafter incorporated the concerns raised bythe BPOs in the forum. The first proposal (Phase 1: Research) was then submitted inresponse to ZRC’s call for proposals under CHED’s Grants in Aid Research Projects for2008. Upon completion of the research phase, a second proposal (Phase 2: Publication)was submitted for GIA 2009.The objectives of the study include (i) to examine the reported mismatch between theworkforce produced by the academe and BPO’s demand in Metro Cebu in the context ofpredicted market structures for business process outsourcing industries, (ii) to determinethe mental, emotional and psychological well-being of the sample workforce, (iii) toexplore the dynamics of gender, sexuality and reproductive health in the workplace, (iv)to look into the status of decent work in the BPO industry and examine the benefitpackages and workers’ level of satisfaction, and (v) to determine the needs ofBPO management insofar as competencies of workforce are concerned, and assess howthe academe can best address these concerns.These concerns are only a few areas that warrant immediate attention as BPOs continueto expand their operations in Cebu. We hope that other equally significant issues not dealtwith thoroughly in this monograph can be examined by other researchers who may wishto continue the journey of writing about the BPO industry in Cebu, the changes it isundergoing and future directions.The industry has placed Cebu on the global map thereby promoting the Cebuanocapability and culture. It has encouraged Cebuanos to expand their skills in marketingand communication, among others, to ensure that the industry will remain and continue toprovide economic incentives to families and communities particularly in the context ofdifficult economic realities.Recognizing that the industry is not just about opportunity and innovation, there istherefore a need to better understand the challenges faced by both workers andmanagement. The study explores the links between labor market efficiency and thevarious social and psychological factors that impact on work effectiveness and day-to-day living. It intends to demonstrate how the BPO industry has reshaped the lives ofpeople, not just insofar as economic incentives are concerned but also with regard tochanges and adjustments they need to make to accommodate the pace of rapid change.While it is imperative to understand the risks, threats and challenges faced by the BPOindustry in identifying concerns that can be addressed by the academe and traininginstitutions, it is equally important to understand situations faced by its workforce. It isbelieved that while they enjoy better-paying jobs and perhaps better living conditions,they also need to have a supportive environment that promotes their health and well-being, and prevents other factors from affecting work competencies and competitiveness. The BPO Industry in Cebu: Challenges and Opportunities
  13. 13. Introduction Amadora-Nolasco l 13The complexity of the phenomenon highlights the relevance of a multidisciplinaryapproach, which the academic sector is uniquely equipped to contribute to addressingproblems in the real world. This monograph is our way of addressing our corporate socialresponsibility, our academic contribution to the business world, and to the Cebuanocommunity in general, albeit limited. Because this monograph provides exploratoryanalyses, its results would have to be taken as guides for a more thorough investigation. The MethodThe companies involved in the project were pre-identified and determined on the basis ofthe BPO category to which they belong to ensure representation of categories. The studypopulation comprised men and women of varying ages in Metro Cebu who work intechnology-empowered companies that provide outsourcing services to other companieswhether local, national or international.The BPO/IT sub-sector categories which have been identified for inclusion include callcenter, back office, medical transcription, legal transcription, animation, softwaredevelopment, engineering design, digital content, and companies that offer multipleservices.For triangulation and validation of results, the process of gathering informationproceeded along certain quantitative (survey) and qualitative (key informant interview)methods. The survey instrument was crafted with close-ended and open-ended questionsdesigned to draw out participant socio-demographic characteristics, entry qualificationsand skills training, gender and reproductive health, benefits package and enablingpolicies, psychological well-being, occupational stress and coping styles. Interviews werecarried out with a sample of 118 purposively-chosen workers from 15 purposively-selected BPO companies, between May and July 2009. Apart from the involvement ofour partner institutions, our field researchers comprised of graduate and undergraduatestudents and faculty of the departments of Political Science, Psychology, Sociology andAnthropology, and Economics.There are portions in the instrument, particularly on the psychological well-being andbenefits package sections, which are self-administered or filled-up by participantsthemselves owing to the length of multiple-choice items. In this study the PWB scale ofC. Ryff was adopted to measure the psychological well-being of the sample workforce,while the J. Greenberg scale was used for occupational stress.A set of open-ended questions was prepared for the key informant interviews. BPOmanagement and human resources heads in five companies were interviewed to obtain abroader understanding of the BPO industry in Cebu and draw out information aboutneeded competencies and concerns which they think can be addressed by learninginstitutions. Prior to actual fieldwork, courtesy calls were made to various BPOs that fallwithin the inclusion criteria, letters were distributed, and appointments for interviewswere made to those who agreed to participate. The BPO Industry in Cebu: Challenges and Opportunities
  14. 14. Introduction Amadora-Nolasco l 14Company names are not mentioned in this monograph to protect their privacy andmaintain confidentiality of information, and only participants who were willing toparticipate in the study were interviewed. To ensure that the survey instrument and keyinformant interview guides contain relevant concerns that address specific objectives, aseries of long and serious deliberation among key project staff and technical experts werecarried out prior to considering these as final and ready for field implementation. Plan for the MonographThis monograph is organized into six chapters. The present chapter provides a shortbackground to the monograph including a discussion of the methodology used by thedifferent components in the study. Chapter 2 describes the prevailing characteristics ofthe market structure of the BPO industry in Cebu and analyzes the possible adjustmentmechanisms resulting from these structures. This analysis is extended to possibleimplications for public and business policy. Chapter 3 presents the kinds of competenciesrequired or preferred by the BPO companies. It discusses the current profile of the sampleworkforce, their entry qualifications and skills training. Chapter 4 discusses the status ofdecent work in the BPO industry and analyzes the benefit packages offered by companiesand workers’ level of satisfaction. Chapter 5 identifies the gender and reproductive healthconcerns and corresponding health services and other related benefits in the BPOworkplace. Chapter 6 examines the mental, emotional and psychological well-being ofthe sample workforce. It discusses their level of stress and identifies their coping style aswell as social support networks. A special paper on the USC English and IT curricula isincluded in this monograph to show the extent the University of San Carlos has addressedsome of the competency needs identified by BPO companies. The BPO Industry in Cebu: Challenges and Opportunities
  15. 15. CHAPTER 2 Market Structure and Labor Market Adjustment Mechanisms Francisco M. Largo and Rey Uzhmar C. Padit Department of Economics Introduction he markets for Business Process Outsourcing (BPO) have enjoyed considerable growth in the past decade. Galvanized by substantial reductions in the cost of information technology infrastructure, professional services such as payments processing, customer contact, records encoding, and others that werepreviously done inside the firm were now contracted out to external parties eitherproximate in terms of geographical location (“nearshoring) or not (“offshoring”). Theoutsourcing of these information technology enabled services (ITES) is estimated toreach USD 110 to 180 billion globally by the current year. The Philippines is poised tocapture a substantial portion of this market. If government reports are to be taken at facevalue, the Philippines is now a very close second to India, with the total value of BPOtransactions estimated at USD 7 billion as opposed to the latter’s USD 9 billion. Despitethe advent of the global financial crisis of 2008, the sector has continued to showresiliency and is preparing for even further growth (Rodolfo, 2009; Tolentino, 2010).The exuberance surrounding the BPO phenomenon in the Philippines has been dampenedsomewhat by problems identified by the industry especially with respect to theavailability of human resources. As industry insiders point to the availability of humanresources as critical to sustaining its growth 1, these issues present considerable causes forconcern for the industry. Belen (2008) identifies two issues that are relevant to thisstudy: 1.) the lack of people with the required skill sets, and 2.) the high rate of turnoveramong employees. Applicants to the workforce are assumed to be ready for theirassignments in the workplace but only a small fraction is claimed to be so. The firstproblem is of particular concern to the academic sector especially higher educationinstitutions (HEI) as industry insiders are wont to attribute this deficiency to the nature oftraining received at the tertiary level. Proposals for solutions have come thick and fastfrom industry to address these deficiencies but to our knowledge, these have comewithout an analysis of their economic context. Such an analysis is especially pertinent inensuring the efficacy of these solutions at the very least. For example, asking for“education supply to meet industry demand” shows a basic misunderstanding of thenature of the markets involved. It is the household that demands education for itsmembers from HEIs that supply it. These work force participants then supply labor tofirms that demand them. For industry to ensure that its needs are met, firms must ensurethat they recognize these channels and work through them. No mention, for example, hasbeen made of the crucial role that alumni have on the feedback process for curriculum1 See Nolasco, Chp 3, this volume. The BPO Industry in Cebu: Challenges and Opportunities
  16. 16. Market Structure Largo and Padit l 16development. It is also our hypothesis that economic forces largely account for the natureand magnitude of the problem of employee turnover. Accounting for these forces willsimilarly fruitful in determining the appropriate actions to take to mitigate the effects ofthis problem as well.This paper aims to contribute to an emerging literature on BPOs and ITES by developinga rudimentary framework of the economic forces at play especially in the Philippinecontext. The literature on BPOs, as opposed to that concerning manufacturingoutsourcing, is still in its infancy. This is largely due to the recentness of the phenomenonand its very dynamic nature in the short time it has been in place. We develop such aframework by starting at the most basic level possible, the decision on the boundaries ofthe firm. We then proceed to showing that the forces that determine whether or not thefirm outsources operations also determine the nature of the service being outsourced.The nature of these services, the ease of entry and exit of firms selling them, and theability of prices to move in reaction to changes in market conditions determine thebehavior of service sellers. This behavior in turn affects the behavior of BPO firms asbuyers of human resources as inputs to the production processes and the nature ofproduction processes themselves. The following section shows this framework.The subsequent section shows how the predictions developed in this framework performwhen checked against anecdotal evidence from key informant interviews with six firms inthe Cebuano BPO/ITES industry. These interviews were conducted with senior andhuman resources management. The paucity of willing participants is in itself a resultconsistent with our framework as we will show below. We next discuss the implicationsof this framework for the issues previously identified. Finally, we provide somerecommendations for stakeholder action and further research. Conceptual FrameworkThe Nature of Outsourced ServicesAt the most fundamental level, the decision whether to outsource a service or not istypical of a make-or-buy decision that faces the firm in organizing its productionprocesses. The classic reference on this is Coase (1937). Coase revolutionized the view ofthe firm and markets by introducing the concept of transactions costs as the primarydeterminant for this decision. A firm decides to produce something with its boundarieswithin direct administrative control if this control is less costly compared to enforcingcontracts with external market players for the same level of production costs.These costs are independent of the costs of production, i.e., the costs of attracting inputsfrom alternative employments so that while lower production costs might make marketprovision attractive, the costs of finding these low cost participants, engaging them in acontractual arrangement, and monitoring their contractual obligations might be so high asto make in-house provision less costly. The BPO Industry in Cebu: Challenges and Opportunities
  17. 17. Market Structure Largo and Padit l 17Coase, however, failed to describe precisely how these costs of transacting weredetermined both within and outside the firm. Subsequent work in transaction costeconomics and organization theory extended his analysis to provide testablepropositions. 2Williamson (1971, 1979, and 1981) develops Coase’s arguments further by pointing outthat transactions costs of market contracting hinge on two important factors: thecomplexity of transactions and the specific nature of human and physical assets. 3 Themore complex the transactions involved, the more detailed the contracts need to be. Thisis a patently falsifiable proposition as complexity and detail may be measured or scaled.Complex transactions are then done within the firm or done in environments amenable todetailed contracting and enforcement. 4The converse proposition is that outsourced activities tend to be simple and easilyverifiable in nature. Williamson also argues that when assets utilized in the production ofactivities are specific to a relationship, there is a danger of being held-up by the owner ofspecific assets, that is, firms find themselves being subject to opportunism by partners.This opportunism may take the form of sub-standard provision of the activity orextraction of surpluses through higher fees on renegotiation or hidden fees duringoperations. The high cost of ensuring that rent is not extracted leads to activities of thisnature being provided in house. The converse proposition is that when activities areoutsourced, the assets involved tend to be of a homogenous and transferable nature thatare widely applicable to several partners or even industries.The nature of markets that result in professional service outsourcing is then predicted asfollows:Proposition 1. The markets for outsourced professional services will be those involvingrelatively simple services which require standardized inputs and production processes.Outsourced professional services that are more complex will involve more detailedcontrol procedures.The Nature of Sellers of ServicesLooking further at transactions costs further gives us other predictions related to marketstructures. The relatively homogenous nature of products and processes will mean thatsubstantial economies of scale will be available for both in house production and market2 Alchian and Demsetz (1972), for example, pointed to the need for understanding the implications ofmonitoring work effort inside the firm and the role played by proprietors and employee status in thelatter.3 The scientific primer on Oliver Williamson at the Nobel Foundation website (www.nobelprize.org)provides very accessible information on his work.4 Jester and Pedersen (2000) argue that increasingly complex transactions being done in bothmanufacturing and services outsourcing require the arrangement of “total solutions,” a veritable packageof material and services that ensure the satisfaction of client standards. This is based on the premise thatboth client preferences and provider technologies are well defined. The BPO Industry in Cebu: Challenges and Opportunities
  18. 18. Market Structure Largo and Padit l 18transactions. However, when external providers enjoy lower production costs then thiswill incentivize the firm for market provision or outsourcing, when the requisitetransactions costs are lowered.This lower production cost, especially for human resources, is identified as a primarydriver for outsourcing to developing countries. NeoIT (2006) mentions that savings fromactivities involving Indian and Filipino professionals could be 80-85% of wages ofcomparable staff in Western countries. Nicholson et al. (2006) report a lower differentialof 70% for India, the premier outsourcing destination. Combined with the large volumeof transactions, the potential cost savings can be substantial. However, it has only been inrecent years when the cost of transmitting and verifying data has fallen, has theoutsourcing of professional services been actually done.While the homogeneity of output and input would normally be conducive to competitivemarkets, the presence of substantial transactions costs would cause the opposite. Whenactivities are transferred to locations with differing practices, choosing the correct firm tocontract poses information costs on the searching firm. These may include ensuringfamiliarity with standards, awareness of cultural sensitivities, and other similar costs.When these costs are especially acute, a firm may give up altogether and just offshoreoperations and keep them within management control of the firm if only to takeadvantage of lower production costs. At the next level, firms may choose to employ anear-shore provider or a firm incorporated in the same jurisdiction that is known tooperate in offshore locations. Both offshoring and near-shore outsourcing will beprevalent in the early stages of industry development as they are in the Philippines whenhome-grown provider track records are still unproven. This is our second hypothesis:Proposition 2. Firms engaged in professional service provision will either be offshoreunits of mother firms located in developed country jurisdictions or branch plant locationsof third party near-shore outsourcing firms.If this proposition is borne out, the firms that provide services will have some degree ofmarket power. However, with non-asset specificity, entry into the markets for serviceswhether off-shored or outsourced, will be relatively easy. One can then point to sellermarkets that more or less border on monopolistically competitive markets with theattendant implications on their behavior as sellers. The most relevant of these is that firmswill earn normal or near-normal rates of profit.Proposition 3. Professional service firms will earn market rates of return as easy entrydrives profits down to normal levels.As employers of resources, the requirement that assets be non-specific to client needsmeans that skill sets are well-defined for labor resources and that fixed capital costs arenot significant barriers to entry. The fact that off-shoring is an option means that an addeddimension of location choice is added to the firm’s decision if several low productioncost locations are available. As pointed out in NeoIT (2006), one can model this decisionas akin to choosing a portfolio of plant locations that minimize costs subject to somequantity constraint. Operations will be spread across locations possibly as a response both The BPO Industry in Cebu: Challenges and Opportunities
  19. 19. Market Structure Largo and Padit l 19to client demand for redundancy and the above motive. Whatever the case, net returns aremaximized across locations and profits are driven down to normal levels as ease of entryextends to location choice as well.This ease of entry in both service markets and location has implications for labormarkets. As already alluded to, labor supply will have to be devoid of firm specificity.This precludes any learning by doing on the job of any skills or the acquisition ofproprietary information that would render the firm and its client dependent on any oneresource. When a supply of labor can be had at a prevailing price, firm demanders willhave no difficulty finding required amounts of this resource. However, as entrycontinues and labor demand expands in a market with a finite resource pool, firmsquickly find themselves fighting over a fixed but highly mobile resource base in the shortrun. Wage competition will be out of the question if firms only earn normal profits. Theenticement of labor will then take the form of non-wage benefits.Proposition 4. When normal profits prevent firms from paying wages at levels to ensureparticipation (i.e., reservation wages), turnover rates will be high. FindingsThis research is exploratory in nature. In this light, any results gained would have to betaken as guides for a more rigorous investigation. This does not, however, discount thevalue of this effort in providing preliminary insights to the problem at hand. In particular,this research may be regarded as an exercise in deduction. The general assumptions arelaid out from which relevant predictions are made. These predictions are then subject tofalsification through the search for contrary results. The presence of corroborative resultslends itself to the possibility of the assumptions being correct but not conclusively so.Contrary results, however, offer stronger indications that the assumptions are not correct.The propositions were verified using key informant interviews with the seniormanagement and human resource officers of six BPO firms based in Metro Cebu. Thesefirms were the only ones willing to participate in the exercise out of the ten initiallytargeted from a list of identified BPO firms from private and government sources.Additional information about these firms were gleaned from other sources such ascompany websites and third-party online resources. The findings for any exploratorystudy must be considered preliminary and serve to direct future research. These findingsare discussed below.The findings for propositions 1 and 2 are best discussed in relation to one another. Thefirms in the sample provided a variety of services. Table 1 enumerates these firms andtheir broad category of services provided and whether they are Philippine firms ormultinationals / wholly owned subsidiaries of multinationals. The BPO Industry in Cebu: Challenges and Opportunities
  20. 20. Market Structure Largo and Padit l 20Table 1Services Provided and Type of Participant FirmsFirm Service TypeA Call Center Multinational SubsidiaryB Digital Content Multinational SubsidiaryC Graphics Multinational SubsidiaryD Medical Records Review LocalE Online Marketing Multinational SubsidiaryF Software LocalFour of the six firms are subsidiaries of firms based outside the Philippines. Firm A is thesubsidiary of a BPO service provider based in the United States. Its presence in Cebu isfor the provision of customer contact for a key client. It undertakes both sales creationand customer service activities for its client which has a substantial market share. Firm Bis a long-standing player in the market based in the United States engaged in a wide rangeof services from software development, business process services, and content creation.Its Cebu operations deal mainly with textual content processing. Firm C is the localsubsidiary of a major player based in the US in the graphics-related services includingadvertising, animation, and digital graphic content. Firm E is another multiple-servicefirm based in the US with its Cebu operations concentrating on on-line marketing.Firm D is engaged in the review and summarizing of medical records. While it had earlierbeen involved in the transcription of medical notes, it exited from this market due to theincreasing competition. Firm F is a local firm engaged in software development usingindustry standard software and the packaging of software solutions.While almost all of the participant firms are subsidiaries of multinational serviceproviders, a result in support of proposition 2, the converse proposition also has somesupport from the sample in firms D and F. In terms of physical asset specificity onlyFirm C provides a clear-cut case consistent with proposition 1. Firm C is engaged in verysophisticated graphics content provision. Its design facility in Cebu is touted as at parwith any design facility in its market. The fixed investment for such a facility would beunderstandably important. Such asset specificity predicts that this firm would just be anoffshore facility still within the control of a vertical firm hierarchy headquartered in theprimary market being served. This indeed is the case for this firm.The firms interviewed hired labor of varying qualities (i.e. participated in several labormarkets as a demander). Customer contact services such as those provided by Firm Awould be the most standard in form and requiring the least amount of in-house training.When firms require more specialized (specific) labor it would be typical for hiring to beconditional, based on a specific base criteria with subsequent specialization provided in-house. For Firm D, a medical background was key. For Firm B’s highly specializedprojects in legal, medical, and chemical data and content processing, the relevantspecialist degree was required. Firm F professed a preference for exemplary studentswithout work experience indicating that most training would be done in-house. Despitethese, the actual work would be subject to clear definitions of output quality and form and The BPO Industry in Cebu: Challenges and Opportunities
  21. 21. Market Structure Largo and Padit l 21hence a high level of standardization is expected for outsourced services as is consistentwith the first proposition.The exercise of market power is clearest for Firm C as it professes to have a substantialportion of its market (~20 percent market share). This leads to its above-normal rates ofreturn as highly specific assets and high fixed costs play their role as barriers to entry andthe increase of profit rates above normal levels. For the rest of the firms, the model ofmonopolistic completion appears to be corroborated. Firm D reviews medical records forone of the largest sub-national political jurisdictions in the United States. Given itscurrent capacity, it is unlikely that it accounts for a substantial share of the transactionsfor this entity. Firm F recently expanded operations to Manila and the US. In this marketit faces numerous other competitors. All other firms compete in markets that are subjectto easy entry from competitors. It would be reasonable to say that the third proposition iscorroborated. Firms in the sample, with the exception of Firm C, enjoy normal rates ofreturn.The inability to offer at least reservation wage levels appears to plague Firm D the mostas it competes for labor with very high alternative wage levels (nurses working abroad).As predicted, this firm is the most vocal about its turnover rates. On the other hand, FirmF with its willingness to pay even new entrants high wages said that turnover was not aproblem. This will, in general, be true for work that is valued at such levels as to enablemarket participants to apportion a greater share of the gains from market participation tolabor. These will typically be true for the more specialized forms of labor. ImplicationsThe Lack of Qualified Labor ResourcesWhat accounts then for the lamented lack of qualified human resources from HEIs? Anunderstanding of the nature of the education and labor markets makes this clearer. Aspreviously mentioned in the introduction, firms are not usually direct participants ineducation markets. The usual participants are households building up human capital andHEIs facilitating the process. Graduates who finish their programs then supply theirlabor to firm buyers of labor. It is the workers and their employers who bear the brunt ofany deficiencies in training: workers, in terms of delayed advancement or even lay-off,firms, through additional expenditures on training. If the philosophy of higher educationis to emphasize enduring principles, this gap in training in immediately applicable skillsand knowledge will be glaring if the industry concerned is experiencing significantchanges as the BPO/ITES industry is. This is a coordination problem that has no inherentimmediate mechanisms for correction in the markets concerned if this strict dichotomy ismaintained.Are stop gap measures possible? In terms of the analysis presented above, the answer isyes. The BPO Industry in Cebu: Challenges and Opportunities
  22. 22. Market Structure Largo and Padit l 22The general need for inputs that are not specific to any client requirements means thatdemands placed on skill sets for labor resources will be for generally available andclearly defined ones at least at the early stages of BPO/ITES industry development. Thispoints to the feasibility of measures that specifically aim at the deficiencies that are easilyverified and addressed through directed interventions. This ease of definition should alsotake into account the appropriate level of educational careers where this training or theappropriate intervention would be most effective. Firm specific skills might be providedin house, general professional skills at the tertiary level while competencies in analyticalthinking, reading comprehension or language proficiency are built up over the years ofbasic education. Remedial measures aimed at producing immediate results may bepossible given the concreteness of the desired results. The next question is who bears thecost of these measures. Some firms who are earning above normal profits may choose tobear this expense. Workers may opt to defray this expense on their own throughenrollment in specialized training providers (e.g. English for Call Center trainingcenters). Government may also provide bridge training in a similar vein as it is currentlydoing for other industries’ requirements. HEIs may offer non-traditional or vocationinstruction as well in addition to the menu of traditional programs. The point is thatremedial measures are feasible and from several providers.The long-term answer to this coordination problem lies in mitigating the dichotomy ofthe education and labor markets. Firms who want to ensure the availability of qualifiedpersonnel must undertake measures to ensure this availability as a participant in theeducation market. How is this done? Several avenues are possible. Firms may choose toendow HEIs with funds to operative specific initiatives which would otherwise not befinancially or technically feasible. Firms may also choose to participate in the demandside of the education market by funding scholarships specific to the profile of desiredpotential recruits with concomitant employment agreements. Firms may also seekparticipation in the certification processes of professional programs as governmentregulation for professional programs are well in place. Another avenue that is not oftenmentioned in the discourse in this area is the role of alumni feedback on curriculumdevelopment. The alumni of HEIs may be in a better position to dialog with their almamaters on the matter of workplace competencies especially if they occupy leadershippositions in the concerned industries. Concerned alumni would also have an incentive toensure that their degrees remain valuable and untarnished by subsequent entrants to thelabor market. Whatever the case, there must be a mechanism whereby the costs of theseadjustments are shared in proportions amenable to all parties with recognition of thevarious constraints that impinge on the ability of all parties to act.An even longer term structural problem that needs to be addressed is the quality oftraining received in the basic education levels where basic skills such as languageproficiency and analysis are developed over the longer term of the 10-12 years of basiceducation. Skills training at the tertiary level will still not produce the volume ofcompetent graduates required with growing industries if this is not answered. The BPO Industry in Cebu: Challenges and Opportunities
  23. 23. Market Structure Largo and Padit l 23High Rates of Labor TurnoverThe non-specialized nature of outsource services and the labor that serve as inputs in theirproduction provide for significant labor mobility between employments and acrossindustries. High rates of labor turnover are expected for an industry with ongoing entryof firms and fixed resource pools. Wages may not be able to rise due to the presence ofcompetitive pressures on service firm profits. This is particularly true for the currentlevel of development of the industry, dominated as it is by multinationals. Given thatmultinationals engage in location choice in the manner of choosing a portfolio oflocations to minimize costs, wage increases will make one location more unfavorable.This inability of wages to rise is crucial as it means that incentives for the transfer oflabor resources from other industries will not be present.The appropriate long term measure to address any lack in the availability of labor withthe appropriate skill sets is the expansion of labor supply at the same or lower wages.This expansion is again subject to the conduct of short-term and long term measuresmentioned in the above section predominantly on ensuring that the quality of labor meetsindustry standards.Firms subject to downward pressures on their profit levels will also be reluctant toprovide in-house training as the ensuing labor mobility means that the returns to thisinvestment are lost. Firms will then find ways to offload the cost of training to othersectors of society (to the laborers through paid internships, to the educational sectorthrough curriculum changes that closely mirror firm requirements). This will determinein part the avenues that firms take when seeking to breakdown the dichotomy mentionedabove.High levels of turnover also result from the inability of firms to pay reservation wagesgiven that normal profits are just earned. The wages that can be earned in alternativeemployments may be sufficiently high such that long-term employability with BPO/ITESfirms is undesired (e.g. nurses working as medical transcriptionists).Firms may also resort to process innovation and substitute away from relatively costlyinputs (i.e., work at home schemes). If this innovation is not possible, then labor costswill rise to a point where new entry is discouraged. The fact that expansion is stilloccurring at a rapid pace means that these limits have still not been reached. The BPO Industry in Cebu: Challenges and Opportunities
  24. 24. Market Structure Largo and Padit l 24 Summary and RecommendationsThis paper aimed to develop a rudimentary framework for analyzing the market structureof BPO/ITES services with which the problems of lack of qualified labor resources andhigh labor turnover may be analyzed with greater focus and aid in suggesting solutions tothese problems. This framework builds on the assumption that the costs of searching andmaintaining market contracts engenders a market for outsourced services that are easilyverified and utilize inputs that are non-specific to the client firm to guard against theproblem of over dependency on outsourcing firms. These costs also imply that BPO/ITESfirms will tend to be multinationals offshoring their service operations or subsidiaries ofnear-shore outsourcing firms at least in the early stages of industry development as iscurrently the case for the Philippines. This non-specialized nature of the productionprocesses imply that entry is easy and that competition will drive profits to normal levels.Rapid industrial growth and the need to keep wages low will mean that firms will befighting over fixed labor resource pools, hence, the high turnover rate. We find supportfor the predictions of this framework in a very limited sample of six firms thatparticipated in key informant interviews.This framework also implies that stop gap measures to address the bewailed lack ofqualified labor resources are possible given that the competencies required are clearlydefined and non-specialized. Longer term measures to address this gap however willentail closer partnerships between industry, academe, and government. As there are noautomatic incentives for such partnerships, this presents a collective action problem.High labor turnover in this framework is the result of short-term deficiencies of laborresources that may not be addressed with wage increases due to the competitive nature ofthe industry. High rates of turnover will persist pending long-term adjustments in laborsupply. Making this happen at the soonest possible time should be the locus of solutionsfor this problem.Even with such a rudimentary framework, we are able to provide insights to what oftenpuzzles industry insiders. While formalizing this framework and ensuring the testabilityof predictions for rigorous empirical tests should be the next order of business forresearch in this area, substantial data gaps, including a census of all firms in theBPO/ITES industry in Cebu province, would have to be filled even before such an effortis possible. The latter is an effort of the highest priority in our opinion and should be thenext worthwhile undertaking in this field. The BPO Industry in Cebu: Challenges and Opportunities
  25. 25. Market Structure Largo and Padit l 25 ReferencesAlchian, A.; Demsetz, H. (1972). Production, information costs, and economic organization. American Economic Review 62 (December): 777-795.Ang, S.; Straub, D. (1998). Production and Transaction Economies and IS Outsourcing: A Study of the U.S. Banking Industry. MIS Quarterly 22, No. 4,(1998): 535-552.Belen, B. (2008). Fast Forward A Look at the BPOs of Tomorrow. Retrieved at: http://www.sunstar.com.ph/blogs/ecoforum/pdf/bonifacio_belen.pdf. Date retrieved: November 1, 2009.Coase, Ronald. (1937). The Nature of the Firm. Economica 4(16) 386-405.Ellram, L.; Tate, W.; Bilington, C. (2007). Offshore outsourcing of professional services: A transaction cost economics perspective. Journal of Operations Management: 116.Government of the Republic of the Philippines. (2010). RP BPO industry closes in on India – GMA. Retrieved February 10, 2010, from http://www.gov.phJenster, P.; Pedersen, H. S. (2000). Outsourcing–facts and fiction. Strategic Change 9, 147-154.Mankiw, G.; Swagel, P. (2006). The politics and economics of offshore outsourcing. Journal of Monetary Economics 53: 1027-1056.NeoIT. (2006). Offshore and Nearshore ITO and BPO Salary Report. Offshore Insights Market Report Series. June 4(4): 1-23Qu, Z.; Brocklehurst, M. (2003). What will it take for China to become a competitive force in offshore outsourcing? An analysis of the role of transaction costs in supplier selection. Journal of Information Technology 18: 53-67.Rodolfo, C. (2009). The Philippine Business Process Outsourcing (BPO) sector and the Global Financial Crisis: Executive Summary. Retrieved February 1, 2010, from http://pdf.phRodolfo, C. (2005). Sustaining Philippine Advantage in Business Process Outsourcing. Retrieved August 10, 2009, from http://dirp4.pids.gov.phWilliamson, O. E. (1971): Vertical Integration of Production: Market Failure Considerations, American Economic Review, Papers and Proceedings 61, 112 123.Williamson, O. (1979). Transactions Cost Economics: The Governance of Contractual Relations. Journal of Law and Economics 22: 548-577. The BPO Industry in Cebu: Challenges and Opportunities
  26. 26. Market Structure Largo and Padit l 26Williamson, O. (1981). The Economics of Organization: The Transaction Cost Approach. The American Journal of Sociology 87, No. 3: 548-577 The BPO Industry in Cebu: Challenges and Opportunities
  27. 27. CHAPTER 3 Academe and BPO Linkage: Matching Workforce Competencies Fiscalina Amadora-Nolasco Department of Sociology & Anthropology Abstract he biggest challenge of BPOs in their workforce is the inadequacy of skills in oral and written communication. Other challenges include inadequacy of skills in computer/ICT, comprehension and analytical thinking, and management.Lessons learned can be used as benchmark for future reference in order to arrive at asituation that will translate to the level of skill and competence needed to promote asustainable BPO industry. Although this paper reports exploratory analyses and is by nomeans complete, readers will find a window through which the role of the academe infilling-in the competency needs vacuum of BPO management may be assessed.Suggestions have emerged from this exploration and are presented in the discussion.Keywords: business process outsourcing, academe, competencies, Cebu, Philippines IntroductionThe purpose of this study is to explore the kind of competencies required or preferred byBPO companies, assess the gaps between workforce skills and BPO competency needs,and determine the role of the academe in addressing these concerns. By providing usefuldata for both the academic and business sectors, the findings are expected to contributenot only to the enhancement of knowledge of the BPO industry but also to efforts towarddeveloping a framework that integrates concerns of the academe and BPO. It isenvisioned that further studies will validate results obtained from previous works andeventually enable learning institutions and program planners to effectively address theproblems in workforce competencies.The BPO industry involves the contracting of a task to a third-party provider. As theReynolds and Magno study (2006) puts it, “BPO is hiring someone else to do all of yourchores while you concentrate on core business, like manufacturing” (p. 2). The industryhas been proven to be a viable business strategy in the Philippines particularly in Cebuwhere the BPO boom was triggered by a demand for call centers sometime in 2004.TESDA (2007, p. 8) reports that the factors that make Cebu an ideal location for contactcenter firms outside Metro Manila include (i) a pool of customer-oriented and servicedriven call center agents who are proficient in English, (ii) adaptability and familiaritywith the western culture, (iii) delivery of quality services at cost-effective rates, (iv) lowoperating costs, and (v) presence of adequate infrastructure and service support. The BPO Industry in Cebu: Challenges and Opportunities
  28. 28. Academe and BPO Linkage Amadora-Nolasco l 28Information and Communications Technology (ICT) is also one of the four prioritysectors being promoted for development in Region VII, to include Cebu. The manyemployment opportunities therefore that it provides stimulate more BPO activities. Otheroutsourcing services include back office, medical transcription, legal transcription, otherdata transcription, data encoding and processing, web design, software development,animation, engineering design and other services, digital content, financial management,accounting and payroll services.A total of 30 major companies in Cebu that provide IT and IT-Enabled Services(ITS/ITES) was reported by JETRO Philippine IT Industry Update (2007, p. 1), many ofwhich are engaged in call center and software development services. In 2006, there were11 call centers which employed more than 6,000 call center agents. The numberincreased to 20 in 2007 employing 18,000 people. During the Cebu ICT 2007, a two-dayevent hosted by the Cebu Chamber of Commerce, the most pressing issue raised for thesustainability of Philippines ITS/ITES industry was human resource development, thatis, expanding the supply of human resources that the industry needed. Another commonchallenge for many companies in the young and rapidly growing industry was the criticalshortage of middle-management talents. In this two-day event, a CEO pointed out that thelack of managers was an even more pressing issue for the Philippine BPO industry thanthe lack of agents, and needed immediate attention and action.Using survey and focus group discussions as main elicitation techniques, Sequino (2008),in collaboration with the Cebu Educational Development Foundation for InformationTechnology (CEDF-IT), conducted a study that looked into the factors affecting BPOsuppliers’ sustainability, the sales performance levels of BPO companies in Cebu City,and the support provided by government and other institutions to the industry. In thisstudy, Sequino identified inadequacy of skills and competencies of the workforce as oneof the challenges faced by BPO firms. She recommended that apart from curriculumdevelopment and skills enhancement activities to improve the competencies of potentialapplicants, tertiary level faculty needed to undertake BPO immersion programs to betterunderstand the dynamics and intricacies of the industry (p. 26).“Human resources is what the business is all about,” say Reynolds and Magno (2006, p.3). What is therefore needed for the success of the industry include, first and foremost,qualified and competent people. Similarly Saxena and Bharadwaj (2007) note that“human resource is the most crucial resource in the high growth BPO industry.” Theyimply that BPO companies are faced with numerous human resource challenges,particularly the problem of attrition and finding the right people who can keep pace withthe unique patterns of the industry. To combat these challenges, Saxena and Bharadwajput forward the need to develop competency in building innovative process (p. 99).In view of these observations, the need to highlight the role of learning institutions andassess how a partnership between the academe and the BPO industry can be mostbeneficial is imperative, both to the workforce and the industry. Schools and trainingestablishments play a significant task in creating jobs for students and graduates, and inproviding the industry with appropriate human resources. The BPO Industry in Cebu: Challenges and Opportunities
  29. 29. Academe and BPO Linkage Amadora-Nolasco l 29Since the competencies of the BPO workforce in Cebu are inadequate this study assumesthat the academe can help address some of the challenges faced by the industry throughcurriculum enhancement and other capacity-building initiatives for faculty, students andgraduates. It is a fact that the BPO industry plays a significant role in Cebu’s localeconomy but its sustainability depends largely on the competencies and competitivenessof its workforce. The quality of the workforce in turn depends on the quality andeffectiveness of education and training obtained from institutions and the relevance ofcurricular program offerings to BPO needs.Recognizing the economic incentives brought about by the industry to families andcommunities in Cebu and the concerns that need to be addressed to ensure a sustainablebusiness, a partnership between the academe and BPO industry is critical. Such acollaborative effort can help ensure the promotion of a sustainable and fertile businessatmosphere and a stable quality of life for a skilled and competitive workforce.Basic information and insights collected from this study are intended to be used as apreliminary basis for learning institutions to rethink course offerings which could lead todecisions toward improving course contents, quality of instruction and teachingstrategies, and perhaps, developing elective courses primarily designed for students andgraduates who are looking at a future with BPO. Intensifying research endeavors on BPOlife will generate more public awareness and guide learning institutions, BPO companies,and policy makers to arrive at decisions that will lead to achieving a sustainable industry. Competency Needs of BPO ManagementThis section presents what the surveyed BPO management and human resource heads anddirectors have to say about needed workforce competencies, problems faced with theirworkforce, and how the academe can help address some of these competency-relatedproblems. Results can be used by the academe to develop a mechanism to address weakareas.The two sets of key-informant interview participants indicate strong preference forapplicants who are, first and foremost, proficient in English (which includes skills in oraland written communication) and computer/ICT literate. In all interviews withmanagement, they emphasized that workers must have a strong command of the Englishlanguage and must be familiar with technology-based and ICT-related activities in orderfor them to meet the demands of the highly competitive and dynamic BPO industry.While English proficiency is a general education competency, computer literacy on theother hand is a basic technical competency. This may therefore lead one to say that theBPO companies prefer applicants who are competent in both categories.A similar finding was found by TESDA in its study of call centers in 2007. All of the callcenter companies they had surveyed specified that applicants must be proficient inEnglish, and nine out of 10 of them indicated computer literacy as equally important.Other qualifications mentioned in the TESDA study include higher educational The BPO Industry in Cebu: Challenges and Opportunities
  30. 30. Academe and BPO Linkage Amadora-Nolasco l 30attainment, training in call center jobs, positive comprehension and right attitude, andweb-hosting skills (p. 21).Then comes other preferred competencies such as skills in comprehension and analyticalthinking, and interpersonal and management skills. While the former is a generaleducation competency, the latter falls under the social skills category. The BPOscommented that the workforce must possess these skills to ensure that they becomeproductive and are able to sustain their level of energy and enthusiasm in the BPO work.In the absence of these skills, BPO companies in Metro Cebu are most likely to face theproblem of dearth of qualified people.Their responses suggest that the primary objective of these companies is to provideclients with the most efficient customer-oriented services. Hence the hiring process mustalso be efficient so that management will be able to get the right people with the rightskills and attitude. It may be well worth to note at this point that these are almost thesame skills which the study sample in the survey component claims to be needed at thetime they were hired.The most critical competency problem that emerged from this study is the inadequacy ofthe workforce’s skills in English proficiency, both oral and written. For both managementand human resources heads, this is the biggest stumbling block faced by their companies.This observation appears to be consistent with what TESDA reported about theattractiveness of jobs brought about by the call center business boom beingovershadowed by the observed decline in English proficiency among graduates.Likewise, inadequacy of skills in computer/ICT, comprehension and analytical thinking,and management are essential competency problems faced by BPOs. These revelationscan serve as guide for learning and training institutions to devise more effective strategiesto ensure that potential applicants are qualified to work in whatever position they maychoose to apply.Another concern cited by the sample BPOs is weak work ethics, referring in particular tonot having a positive attitude towards work, tardiness and inability to work well withothers. Reportedly, workers tend to slow down on their job or delay work assignmentswhen no supervision is provided, hence the need to constantly remind them about theirwork attitude. In another interview, a human resource head commented that some of theirworkers have the tendency to come late for work, a practice which is detrimental to workefficiency. They pointed out that workers need to demonstrate not only a high degree ofknowledge and skills but a positive attitude and good work ethics.This study may not be able to show whether the sample workforce is looking at a futurewith BPO but the reality is that they are, at the time of the study, working in a BPOcompany. Such could be attributed to the incentives it offers or because of a lack of otheroptions. The assumption is that these workers may not have been cut out for and/ortrained for BPO work hence their personality may not fit into the industry’s type of workenvironment. This is presumed to be the reason why mentions were made bymanagement regarding the workforce “not having the right attitude” or “problems in The BPO Industry in Cebu: Challenges and Opportunities
  31. 31. Academe and BPO Linkage Amadora-Nolasco l 31attitude.” To cite an example, many of the learning institutions in Metro Cebu offercourses in management and marketing, but these are general courses that go into everytype of industry. Thus if an applicant possesses the necessarily skills but is not familiarwith the nature, scope and environment of the BPO industry, he/she is likely toexperience various difficulties which in effect might lead to inefficiency at theworkplace.Suggestions on how best the academe can help address some of the challenges faced byBPO companies were obtained from management and human resource heads of thesurveyed BPOs. These include (i) strengthening students’ skills in English (oral andwritten, to include correct grammar, spelling, sentence construction and punctuation),reading comprehension, analytical thinking, computer skills and other technology-basedand ICT-related competencies; (ii) educating students on the nature, scope andenvironment of BPO work, giving special emphasis on topics that relate to work ethic;(iii) assisting in the training and integration of students and graduates into the industry;and (iv) facilitating in the work placement of interested and qualified individuals comingfrom different disciplines. The Metro Cebu Sample BPO WorkforceThis section presents the data collected through interviews with 118 workers to showwhether they possess qualities and skills preferred by the selected BPO companies. Itdiscusses the workforce profile, perceived entry qualifications, and the in-house skillsenhancement activities they had to go through at the time of employment. Specifically, itdescribes the characteristics of the sample by age, gender, marital status, highest level ofeducation, last school attended, course taken, nature of BPO work and employmentstatus. Subsequent sections focus on examining the responses of participants in terms ofskills training which they think should have been given stronger focus in schools.Recommendations that have emerged from this exploration are presented in thediscussion.ProfileTable 1 provides a profile of the sample by age, gender and marital status. Evident here isthat the BPO workers are mostly in their 20’s. Their ages range from 19 to 43 years old,the mean and median ages of which are 27 and 25, respectively. The proportion offemales is slightly greater than the males, although this study could not say whether theBPO companies surveyed have a strong preference for females. In this study, thedifference can be attributed to the fact that there were more females than males whoagreed to participate and be interviewed.In the TESDA study (2007) of call centers, however, close to 60 percent of their finishingcourse graduates were females, and more than 40 percent of them were eventuallyemployed in call centers. Among the male graduates, only a third of them wereemployed. TESDA implied that “females have more chances of landing a call center jobthan the males” (p. 29). Whether such observation holds true in other BPO categories is The BPO Industry in Cebu: Challenges and Opportunities
  32. 32. Academe and BPO Linkage Amadora-Nolasco l 32something which requires further study. Management’s gender preference is therefore apotential area for future research.On the aspect of marital status, those who are single account for over 70 percent of thesample while a little over a fifth of them are married. Workers who claim to have live-inpartners or have been separated from their partners account for only a slight percentage.Table 1Study Sample by Age, Gender and Marital Status (N=118)Background N PercentageInformationGenderMale 56 47.5Female 62 52.5Marital StatusSingle 87 73.7Married 25 21.2Living-in 4 3.4Separated 2 1.7AgeAge Range 19-43Mean Age 27 years oldMedian Age 25 years oldThe sample workforce is composed mostly of college graduates (Table 2). This illustratesthat the BPO industry in Cebu has become an appreciable employment alternative formany college graduates. But whether the reason for the choice of work is a consequenceof a lack of other employment opportunities or the lure of a higher income is somethingwhich this study has not looked into. This is perhaps one possible area which otherresearchers can explore. While close to a fifth have had some form of college education,a little over 10 percent of them have post-graduate degrees. Only three workers are highschool graduates while one has finished a vocational course.The majority has studied or is studying in the major universities located in Cebu, withUSC accounting for a fifth of these (23 out of 118). Other schools registered only lessthan 10 percent of the sample. These data should not be interpreted as an indicator ofBPO preference for graduates of specific universities. It is also worth noting that asignificant number of BPO workers obtained their education from schools located outsideCebu, an indication that the industry provides employment opportunities not only for theMetro Cebu workforce but to those in neighboring places as well. The BPO Industry in Cebu: Challenges and Opportunities
  33. 33. Academe and BPO Linkage Amadora-Nolasco l 33Table 2Study Sample by Highest Level of Education and School Last Attended (N=118)Highest Level of Education N PercentagePost Graduate 12 10.2College Graduate 79 66.9College Level 22 18.6High School Graduate 3 2.5Vocational 2 1.7School Last AttendedUniversity of San Carlos 23 19.5Cebu Institute of Technology 10 8.5Southwestern University 10 8.5University of San Jose Recoletos 10 8.5University of Cebu 8 6.8UP-Cebu/Visayas 7 5.9Cebu Normal College 4 3.4University of the Visayas 4 3.4Velez College 4 3.4Other Schools in Cebu (merged) 17 14.4Other Schools outside Cebu (merged) 21 17.8We now turn to the distribution of participants according to courses taken at the tertiarylevel (Table 3). A preponderance of workers who have taken or are currently takingcourses in Computer Science and/or Information Technology is evident in the study.Applicants who are in the field of CS and/or IT appear to be at an edge when compared tothose in other courses insofar as finding work at the BPO is concerned. If such becomes atrend, it is likely that enrolment in the CS or IT curriculum will double in the next fewyears particularly if the industry continues to expand operations in Cebu. This will giveall the more reason for learning institutions that offer CS and IT to strengthen theircurricula and ensure that their students and graduates possess the required and preferredskills.Other courses which registered an appreciable percentage of workers include Commerce,Nursing, Engineering and Education. One can also see in Table 3 that students andgraduates who are in the Medical and Allied Programs, Law, Social Science, andArchitecture and Fine Arts are among those who have been given opportunities to workin the BPO under the assumption that they possess the competency requirements of thecompany at the time they were hired. Even those coming from the natural sciences andindividuals who have not had a College education have found work in the industry. The BPO Industry in Cebu: Challenges and Opportunities
  34. 34. Academe and BPO Linkage Amadora-Nolasco l 34Table 3Study Sample by Course Taken (N=118)Course N PercentageCS and IT 24 20.3Commerce 16 13.6Nursing 14 11.9Engineering 14 11.9Education 11 9.3Medical & Applied Programs 9 7.6Law 7 5.9Social Sciences 6 5.1Architecture and Fine Arts 5 4.2Natural Sciences 3 2.5Journalism/Mass Communication 4 3.4High School Graduate 3 2.5Others 2 1.7BPO Work and Employment StatusAs earlier pointed out, there are 30 major BPO companies in Cebu many of which areengaged in call center services. This perhaps explains why the bulk of the samplepopulation, as shown in Table 4, works in a contact center, followed by more than a fifthof them who work in companies that offer multiple services to clients, that is, acombination of two or more of the identified services. It appears that the presence ofBPOs in Cebu that offer multiple services is increasing. If this is the case, this wouldtranslate to wider employment opportunities, higher demand for competent humanresources and tighter competition. Those who are engaged in medical transcriptionaccount for 17 percent of the sample, and there is an equal number of workers who areengaged in back-office and software development. The others are into animation anddigital content-related work.Interestingly, over 70 percent of the workers hold regular employment status (83 of 118),a finding which can be considered a positive development in the BPO world. This factcontradicts anecdotal reports that working in the BPO is temporary and workers aregenerally contractual or do not have security of tenure. Given this finding, it would notcome as a surprise if more and more potential applicants would want to pursue a career inthis industry. The BPO Industry in Cebu: Challenges and Opportunities
  35. 35. Academe and BPO Linkage Amadora-Nolasco l 35Table 4Study Sample by BPO Work and Employment Status (N=118)BPO Work N PercentageCall Center 45 38.1Multiple Services 29 24.6Medical Transcription 20 16.9Back Office 8 6.8Software Development 8 6.8Animation 6 5.1Digital Content 2 1.7Employment StatusContractual 34 28.8Regular 84 71.2BPO Work and Course TakenCS/IT students and graduates are mostly engaged in call center, software developmentand multiple outsourcing services. Whether this is going to be the trend is somethingwhich future research endeavors can confirm. At this point, we could not say, forinstance, that only CS/IT students and graduates have wider opportunities for work in thethree mentioned categories. On the other hand, Nursing students and graduates of otherMedical and Applied programs are involved in medical transcription although it may bewell worth noting that even the three high school-graduate participants have foundemployment in the BPO as medical transcriptionists. This may be an indication that aprerequisite for this line of work is computer literacy rather than knowledge in themedical field. Most of those who are in the field of Commerce or Education also work incall centers while among the Engineering and Law students and graduates, multipleoutsourcing services appear to be the common niche. Other courses which registered afew participants are no longer included in the discussion herein.BPO Work and Last School AttendedIn reference to the distribution of participants by BPO work and last school attended, thedata show that the number of USC participants who work in call center and medicaltranscription companies is higher compared to other institutions. Many of those whocome from CIT and UC also work in call centers while the SWU and USJR students andgraduates are mostly involved in multiple outsourcing services. Other participants arespread over the various BPO categories. This sub-study, however, could not say whetherBPO companies in Cebu have school preferences in hiring. Perhaps a more thoroughstudy on this can be made to enable learning institutions to become aware of the qualityof their students and graduates, and provide them with directions on aspects that need tobe given special emphases in the teaching and learning process. The BPO Industry in Cebu: Challenges and Opportunities
  36. 36. Academe and BPO Linkage Amadora-Nolasco l 36Perceived Entry Skills and QualificationsOne can see in Table 5 the perceived entry skills of the workforce at the time they wererecruited and hired. For clarity, these are divided into four types: (i) general educationcompetencies, (ii) basic technical competencies for BPO work in general, (iii) specificcompetencies for the particular BPO, and (iv) social skills. Among the various types,computer/ICT literacy, which falls under the second type, appears to be the most sought-after skill that facilitates entry into the BPO world. A far-second skill requirementmentioned was English proficiency, a general education competency, although this didnot elicit as many mentions as computer or ICT literacy. The data show that the entryskills as perceived by the workforce match those identified by the BPO companies.Other skills which registered relatively higher frequencies fall under two categories:general education (comprehension, analytical skills, problem solving) and social skills(attitudinal and interpersonal skills, management skills). The workers themselves areaware that more skills-enhancement activities on these aspects need to be undertaken tomake them more effective for BPO work.Table 5Entry Skills and Qualifications Possessed by the Surveyed BPO Workforce (N=118)Entry Skills and Qualifications N PercentageGeneral Education CompetenciesEnglish Proficiency 32 27.1Comprehension and Analytical Skills 22 18.6Problem Solving 13 11.0Communication Skills 8 6.8Reading Comprehension 2 1.7Basic Technical CompetenciesComputer/ICT Literacy 50 42.4Specific CompetenciesWeb Hosting 6 5.1Foreign Language 5 4.2Knowledge in Medical Field 5 4.2Knowledge in Legal Profession 3 2.5Graphics Design 3 2.5Technical Support 3 2.5Production Skills 3 2.5Filing 2 1.7Social SkillsRight Attitude and Interpersonal Skills 18 15.3Management Skills 13 11.0Experience in Other BPO 2 1.7 multiple response The BPO Industry in Cebu: Challenges and Opportunities
  37. 37. Academe and BPO Linkage Amadora-Nolasco l 37To determine whether the entry skills mentioned by the workforce match the nature oftheir work, cross-tabulations were made. The results show that many of those whomentioned computer and ICT literacy found employment in call centers and companiesthat offer multiple services. Clearly, participants who possess proficiency in the Englishlanguage, have good comprehension and analytical skills, and those who claim to possessthe right attitude and interpersonal skills as well as management and problem solvingskills are more likely to be hired in call centers.The BPO In-House Skills Enhancement TrainingThe workers were next asked to identify the skills training activities they had to undergoat the time of their employment at the BPO (Table 6). For this part of the exploration,more mentions were made for computer/ICT training, English proficiency, andmanagement skills. Despite the claim of many workers that they possess suchqualifications as computer/ICT literacy and English proficiency when they were hired bytheir current BPO employer, it appears that the surveyed BPO still saw the need to furtherenhance the skills of their workforce in these aspects. One can therefore say that theworkers’ perceived skills in both computer and English proficiency may not be sufficientto warrant management’s trust and confidence.The frequent mention of computer/ICT literacy, English proficiency, and managementskills as BPO in-house skills enhancement activities is an indication that honing theworkforce’ skills on these aspects is critical to the operations of the sample BPOs. Otherskills-enhancement activities which registered an appreciable number of mentions includeproduct-sales-marketing, right attitude and interpersonal skills, comprehension andanalytical skills, and problem solving.Table 6BPO In-House Skills Enhancement Training (N=118)Entry Skills and Qualifications N PercentageGeneral Education CompetenciesEnglish Proficiency 19 16.1Comprehension and Analytical Skills 12 10.2Problem Solving 9 7.6Basic Technical CompetenciesComputer/ICT Literacy 20 16.9Specific CompetenciesProduct, Sales Training, Marketing 17 14.4Web Hosting 4 3.4Foreign Language 4 3.4Others (1 mention each only) 21 17.8Social SkillsManagement Skills 23 19.5Right Attitude and Interpersonal Skills 13 11.0 multiple response The BPO Industry in Cebu: Challenges and Opportunities

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