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BPO sector still upbeat despite global downturn

By Paolo Luis G. Montecillo
Tuesday, October 28, 2008 | MANILA, PHILIPPINES
THE LOCAL BUSINESS process outsourcing (BPO) expects to benefit from a recession in the United States as companies there seek to cut costs by transferring functions overseas.

The Business Processing Association of the Philippines (BPAP), in a briefing, said revenues could surpass targets next year because of this development.

This year’s goal of 35-40% growth in revenues to $7 billion remains on track, officials said, even as a global crisis rages.

"We are part of the solution, not part of the problem," BPAP Chief Executive Officer Oscar R. Sañez said in an interview.

The group’s Roadmap 2010, which it launched late last year, targets annual growth of 40% with revenues hitting $12 billion in 2010 and a workforce of close to a million people, from less than $5 billion in revenues and 300,000 employees last year.

Revenues for 2009 were projected to grow to around $9.6 billion "but we may pass it," Mr. Sañez said.

By 2010, outsourcing is expected to grow to a $130-billion global industry. The BPAP expects to service around 10% of this market by that time, with the Philippines as the world’s second largest outsourcing destination next to India.

"This is an industry that is bringing good news to the Philippines as a destination for [foreign] investments," Mr. Sañez said.

Canadian research firm XMG, Inc. recently slashed its growth outlook for the global outsourcing sector to 24.2% from 34.7% annually until 2010 as a result of the global economic slowdown. The growth projection for the Philippines’ BPO industry was also downsized to 25.6% from 31.2%.

"[However], there is still room for growth on the offshoring and outsourcing industry in the Philippines especially that the demand for English-speaking talents still remains strong and with the technology services sector focusing on improved service delivery quality despite its reduction in spending as a result of the financial crunch," XMG analyst Diana B. Cortes said in an e-mail.

Mr. Sañez, meanwhile, said that while added contracts for high-end research and development services from US companies could slow as a result of the crisis, this would be made up for by firms outsourcing more operational services like accounting and back-office tasks.

"A lot of our operations here are, well, operational ... we cannot stop this," he said, saying that most services outsourced to the Philippines are services companies cannot do without.

The BPAP is also intensifying efforts to market the Philippines to "alternative markets" outside of the US. As much as 90% of BPO clients in the country are based in the States.

In a statement, the group said "BPAP will head a Philippine delegation next month to the National Outsourcing Association summit ... in London" to market the Philippines to Europe, which the group said could be a market the same size as the US.

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