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Philippine Outsourcing Growth: Real or Just Numbers?

By Chris V.
Outsourcing Insider
July 21, 2009 at 4:29am
Analysts continue to project positive growth for the Philippine Outsourcing industry. Growth being measured in terms of business deals signed alone does not provide an accurate picture of what this sunshine industry truly contributes to the Philippine economy and the Filipinos. Businesses for these service providers continue to pour in as the figures show however, Filipino workforce development seems still behind.

More Outsourcing Deals Closed, More Available Jobs for Filipinos

Mainstream news continues to report the expansion of existing outsourcing providers even setting up operations outside Manila to top cities like Cebu, Laguna and Bacolod. Last month, IPVG Corp (PSE:IP) signed an outsourcing deal with Prudential Corp. Vietnam to provide voice and non-voice services. IPVG will be hiring 400 employees for this project. Convergys Corporation (NYSE:CVG) also plans to hire 1,000 employees for its new contact center. In April, BPO company Affiliated Computer Services Inc. (NYSE:ACS) also announced their plans to add 2,000 more seats in the next six months. Two days ago, Bacolod officials announced the opening of Transcom Asia on September which initially starts with 800 employees and then later on is expected to hire 2,000- 3,000 employees. Thomson Reuters (NYSE:TRI) will also be putting up a legal content business in the country. IBM Philippines (NYSE:IBM) also bagged a 7 year outsourcing contract with Sara Lee Corp (NYSE:SLE) last March. News like these make readers believe that the Philippine outsourcing industry 15% growth rate target and 1.5 million jobs are really achievable.

Low Compensation of Filipino BPO Workers a form of Labor Exploitation

Philippines continues to attract outsourcing deals because it offers one of the lowest compensation costs in the world, Mong Palatino, member of the Philippine Parliament representing the youth sector, challenges this notion saying it is an inappropriate indicator of the country’s improving performance in the global competitive index. He further asserts that the low compensation of Filipino BPO employees is a form of labor exploitation. On the other side of the coin, you have Senator Mar Roxas campaigning for the retention of the current BPO salary rates to retain the country’s rates within market rates.

Despite being a popular outsourcing destination, the Philippines has been surpassed by other Asian countries such as Malaysia and Thailand in terms of “better business environment, financial attractiveness and availabil...”. And with other new rising destinations such as Vietnam and Africa who can definitely offer a much cheaper labor cost, the Philippine BPO sector needs to find more ways to entice foreign investments to come in without bringing down labor cost too low. This kind of scheme can only lead to brain flight. Talented Filipinos instead of becoming involved in the outsourcing industry and bringing about real industry development might opt to shy away from it making the talented workforce even smaller for this industry. Human resource recruiters complain of the decreasing number of qualified applicants.

BPO firms Pays Better than Local Businesses

In comparison with other sectors within the country, BPOs offer higher compensation. A nurse who takes on a transcription job in a BPO receives P22,500 a month while working in a local hospital will only bring P10,000 per month. On the good side as well, the BPOs also provides a good number of jobs for the country’s oversupply of medical graduates. According to Herrera, there are about 400,000 licensed nurses who are currently unemployed. But even with this, some medical workers still choose to get a career.

Making the Paths Clearer

The BPO sector remains a good source of jobs for Filipinos especially for new graduates and employees who want to shift to another industry since the most basic requirement is English proficiency for entry level and no immediate industry specializations are required. It is in this area that the outsourcing industry needs to keep building these fresh talents to persevere more to move up the ladder. Managers should actively show them different career development paths they can take not just simply looking at available posts within the current structure but more particularly exploring new ones, which then leads to new services that can be offered to clients. The government should also play a more proactive role of talent promotion. Instead of lobbying for the stagnant pricing of labor, they should invest more in the improvement of local talents through providing scholarships that do not merely provide basic education but better yet aims for high level training and experience equipping Filipinos with the chance to discover breakthroughs.

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