Business process outsourcing or what is popularly known as BPO is one of the biggest contributors to the Philippine economy. In fact, it is considered one of the two legs of the Philippine economy, the other one being OFW remittances. The Philippine BPO industry contributes almost $30 billion to the Philippine economy each year. In addition, it is estimated that the country holds 10-15% of the global BPO market.
Known as the “Call Center Capital of The World”, the Philippines employs more than 1.4 million people generating $29.1 billion dollars as of 2022. Over the years, outsourcing in the Philippines has grown by leaps and bounds. Even with the emergence of new markets, the Philippines has remained a go-to destination for short-term and long-term projects. This growth of the industry can be attributed to several factors. In this article, we look at the reasons why the Philippines has become one of the top outsourcing destinations.
Reasons The Philippines Has Emerged As An Outsourcing Destination
- Cultural Compatibility
- English Proficiency
- Cheaper Labor Costs
- Highly Skilled Workforce
- Legal Exemptions and Government Support
- No Timezone Difference
- Industry Track Record
- Economic Growth
Reasons The Philippines Has Emerged As An Outsourcing Destination
With many businesses now realizing the importance of outsourcing, the Philippines has been on the radar of foreign investors seeking to outsource some aspects of their businesses. Since Frank Holtz established Accenture in the country in 1992, the Philippines has hosted several other BPOs in different parts of the country. Here are the reasons why the Philippines is one of the top outsourcing destinations in the world.
1. Cultural Compatibility
As a former colony of Spain and the United States, Western influence has been embedded in its traits and values. Much of this influence can be seen in the social, political, and educational systems in the Philippines. Over the years, Filipinos have adopted Western cultural traditions and lifestyles allowing them to easily integrate and communicate with their foreign counterparts.
Filipinos are known for their warmth, hospitality, and generosity. They are sociable, friendly, motivated, hardworking, and customer-focused. These traits are one of the reasons the Philippines is an attractive destination for businesses looking to outsource. Their ability to adapt has given them an edge over other nationalities in terms of providing excellent BPO service.
Western influence is deeply ingrained in Filipino culture. For this reason, it has become easier for business owners and managers of Western countries to get along with their Filipino partners and offshore employees. Western culture is deeply entrenched in people’s everyday lives and Filipinos remain highly adaptable to foreign cultures.
2. English Proficiency
English proficiency is another strong suit of Filipino BPO workers. According to the 2021 English Proficiency Index (EPI) of Education First, the Philippines ranks 59th out of 112 countries in English proficiency. In terms of English competency, Filipinos are ranked 18th out of 122 nations and second in Asia next to Singapore. Because of its high ranking, the Philippines is one of the prime destinations for outsourcing.
English is one of the official languages in the Philippines and it is taught in educational institutions. In addition, most OFWs return home with foreign language skills beyond English. It is also the primary language for local commerce. Almost all Filipinos know how to communicate in English. Regardless of their educational attainment, Filipinos know at least how to speak basic English.
The implementation of English education in the Philippines also attracts students from non-English speaking countries like Iran, Libya, Russia, Japan, China, and South Korea to study in the country for undergraduate and postgraduate degrees in top Philippine universities which further bolsters the country’s English proficiency.
3. Cheaper Labor Costs
Outsourcing in the Philippines provides businesses with access to cheaper labor costs. This does not mean that quality will suffer but rather efficiency for less cost. On average, BPOs in the country charge US$8 – US$16 an hour for their services, which is lower compared to the hourly rates in countries like the US, Latin America, Eastern Europe, or Australia. The cost is dependent on several factors such as skill level, project size and duration, and other costs like training and technologies.
Hiring an offshore staff in the Philippines ranges between $500 – $600 depending on the type of staff you will hire, saving you around 70 – 80% in salary costs. In return, you will work with highly skilled professionals. Even the basic wage in the Philippines is relatively lower compared to its Asian counterparts. The daily wage of Filipino BPO workers is equivalent to only the hourly salary of employees in Western countries.
However, do not fall into the trap of choosing a provider offering relatively low cost. Do research the provider before choosing. It can be understandable to bite to such offers especially if you are cash-strapped or working on a budget. But as a business owner, you want to make sure that you are making a worthwhile investment. You should still look for quality even with affordable rates.
4. Highly Skilled And Flexible Workforce
While the outsourcing costs are more affordable, businesses can look forward to working with a highly skilled workforce. Every year, the Philippines produces a large number of university graduates who are eager to work in the BPO industry. The median age of the Filipino workforce is 23 years old, the majority of whom have just finished college level education.
The BPO industry boasts of a workforce with a literacy rate of 99.27% as of 2021. It is expected that the country will continue to benefit from these workers in the coming years. Most of these graduates are equipped with advanced skills such as software programming, mobile app design, and animation, to name just a few.
Aside from being highly skilled, Filipino BPO workers are also flexible. Outsourcing in the Philippines allows you to scale quickly and efficiently. You can expand or shrink your team or take in seasonal employees as well depending on your business needs.
5. Legal Exemptions and Government Support
As one leg of the Philippine economy, the government recognizes the contribution of the industry to economic growth. For this reason, they established fair regulations and incentives to ensure market stability. The Philippines has a very established labor law which is generally pro-labor. Incentives like tax holidays and exemptions have been put in place to encourage foreign investments in the country.
Republic Act 11165 or the Telecommuting Act allows BPO employees to work out flexible working arrangements with their employers. Under the law, BPO employees are entitled to paid leaves, regular holidays, and special non-working days. RA 11165 also provides that BPO employees should receive salaries that include overtime, night shift differential, and other monetary benefits.
In addition, the government established the Information Technology and Business Process Association of the Philippines (IBPAP) in 2004 to support the growth of BPOs. Through the IBPAP, the BPO industry has seen rapid growth through various initiatives such as the development of Focused Economic Zones and benefits for foreign investors.
6. No Timezone Difference
When outsourcing in the Philippines, you do not have to worry about not being able to serve the customers who reached out to you after office hours. Filipino BPO workers can work 24/7 ensuring that you won’t lose a customer. The outsourced staff receives additional benefits for working the graveyard shift. For this reason, time zone differences will never be an issue for most outsourcing companies in the country.
BPO companies in the Philippines are geared towards providing 24/7 coverage. If you are in the United States, for example, there will still be around 60% of BPO workers who will work the night shift to ensure that the 12-hour difference is covered. In some cases, outsourcing firms will also implement rotating shifts and weekend work to serve the customers of their clients with a time zone difference from the Philippines.
The BPO workforce is usually assigned to customer service and sales functions where 24/7 support is most essential. While your onshore employees are sleeping, your offshore employees from halfway across the globe are getting things done. This ensures speedy delivery of service and resolution of issues.
7. Industry Track Record
Since its beginning in 1992, the BPO industry in the Philippines has made huge strides. It has achieved a ten-fold increase in its total revenue. From operations in Metro Manila, BPO companies have expanded their operations to cities like Davao, Bacolod, Cebu, and others. When businesses struggled at the height of COVID-19, the BPO industry not only survived but also thrived.
According to the IBPAP, about 30% of BPOs have expanded operations to provinces. From just offering call center services, BPOs have now branched out to non-voice outsourcing solutions such as IT services, software development, finance and accounting, healthcare and knowledge process outsourcing. This steady growth has catapulted the Philippines to become the “Call Center Capital of the World.”
In addition, the BPO industry contributes at least 7% of the country’s GDP. The sector employs over 1.4 million full-time employees. As of the first half of 2022, the BPO industry has generated a revenue of $29.1 billion. The future looks bright for the country’s BPO sector and it is projected that the industry will continue to expand and thrive.
8. Economic Growth
Another important contributor to the attractiveness of outsourcing in the Philippines is the growing economy. Over the years, the Philippines has seen robust economic growth. According to the World Bank, the Philippine economy has been steadily growing from 5.6 percent in 2021 to 7.6 percent in 2022. It is on track to becoming an upper middle-income country. This is buoyed by government initiatives in human and physical capital investments to boost growth over the medium and long term.
Moreover, the country has gained stronger purchasing power which foreign investors can take advantage of. Foreign investors stand to benefit from a business environment that is conducive to growth and stability. Meanwhile, the Asian Development Bank projects that the Philippines economy will grow by 6% in 2023 to 6.2% by 2024. Despite challenges by climate change and emerging technologies, the ADB expects the country to sustain its growth in the coming years.
The country has also seen an improvement in its unemployment rate. From 6.4% in January 2022, it has improved to 4.8% in January 2023. An additional 4.1 million jobs have also been added over the years. The country’s account deficit is also projected to narrow thanks to strong service exports. Stronger domestic demand will also continue to drive imports of both consumer and capital goods.
Business process outsourcing in the Philippines has always been an attractive option for foreign businesses. These are just some of the top reasons why outsourcing in the country is a worthwhile investment.
Benefits of Outsourcing with airisX
By outsourcing to a leader like airisX, you will be able to scale up quickly by getting the right resources, processes and technological infrastructure. No matter what your scaling requirements are, airisX will give you the best optimised solution and you will be able to focus on delighting your customers. Your back office operations will be simplified, giving your users a high-quality experience. Contact us at contact@airisx.com and get a customized solution for your outsourcing needs.