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EDITORIAL: Snatching the BPO business from India

By Larry Connors
Mon. February 02, 2009; Posted: 04:23 PM
Feb 02, 2009 (The Manila Times - McClatchy-Tribune Information Services via COMTEX) -- SAY | Quote | Chart | News | PowerRating -- The scandal involving India's business process outsourcing (BPO) industry should be a boon for the Philippines, provided it plays its cards right.

Last month, Satyam Computer Services shocked the world when its chairman admitted that the company had been cooking its books, inflating profits for years. The admission came in the wake of intense scrutiny into India's fourth-biggest outsourcing company after its chairman tried to buy two construction firms he and other Satyam founders owned.

Soon after, the World Bank, a major client, announced another shocker, disclosing it had banned the Indian firm from future projects after discovering the company's employees were hacking into the lender's database.

Satyam was not alone, as the World Bank also banned Wipro Technologies from future projects, after India's third-largest outsourcing firm was found to have improperly offered company stock to the lender's officials ostensibly in exchange for bagging a project with the multilateral financial institution.

A third Indian firm, Megasoft Consultants joined the list of Indian IT contractors that the World Bank banned from future projects. Satyam was barred for eight years, Wipro for four, and Megasoft for four.

Immediately, multinational giants IBM and HP were seen to be poised to take advantage of the Indian IT industry's glitch.

We believe Philippine BPO firms stand a better chance of snatching business away from their Indian counterparts. The big-name multinationals in the IT industry are saddled with high operating costs, with a growing number of them already announcing job cuts this year in light of the global financial crisis.

Like their Indian counterparts, Philippine BPO firms enjoy numerous cost advantages over the IT behemoths. But unlike their Indian counterparts, Philippine companies are not tainted poor corporate governance practices, which are at the heart of the Indian IT industry's current debacle.

Should the Philippine BPO sector manage to take business away from India, then we are looking at a potential $40 billion in additional revenues--enough to catapult us into leadership in so far as the outsourcing space is concerned.

As of last year, the Philippine outsourcing sector was looking at ending 2008 with $6.8 billion in revenues, clearly a paltry sum compared with India's share of the global pie.

Despite the Philippines' smaller share of the world market, its prospects appear good judging from the plaudits it has been earning from around the world. Although the local BPO industry was built around the Philippine affinity to American culture, domestic BPO companies can still latch onto the same advantages--English-speaking workforce, ample telecom capacity, sufficient locations, etc.--when marketing to the predominantly British clientele of the Indian outsourcing sector.

Last week, CB Richard Ellis, a property consultancy firm, said the Philippines currently has an oversupply of built-to-suit office space for the BPO sector. While a red flag for the local property sector, they can turn it around if the outsourcing industry raises the ante and snatch business away from their Indian rivals.

And here is where the Philippine government can help. The Business Process Association of the Philippines (BPAP) since last year has expressed optimism about the industry's prospects despite the global economic slowdown, citing the rising number of foreign companies that would be forced to resort to outsourcing to trim operating costs.

Last month, the BPAP said it is ready to push through with a marketing blitz abroad to generate business, if only the government can help by way of channeling resources to this promotional campaign.

This is nothing new, as other countries--such as the US and Japan--have tapped their governments to assist their domestic industries to gain business abroad. The usual term for such a campaign is a road show--something the Arroyo government is fond of doing anyway.

Unfortunately, the time to snatch business away from India is short, as even now, that country's outsourcing sector--with help from its government, of course--has begun a media campaign to repair the damage wrought by Satyam and Wipro. Agility is key in such campaigns. We hope this is not lost on the Philippine government.

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