The Outsourcing Week in Review: Wednesday, September 25, 2019

Last week saw the Corporate Income Tax and Incentive Rationalization Act (CITIRA) passed in its third and final reading.  The controversial new tax law may restructure the incentives currently enjoyed by PEZA locators. PEZA chief Charito Plaza has argued that the agency will go all out in pushing for an exemption for PEZA-registered businesses to ensure that investors are still encouraged to set up and operate in the zones. In contrast, Albay representative Joey Salceda has argued that BPO locators will not pull out once they understand the realities of CITIRA. Taxes based on gross income earned (GIE) are a source of abuse and should be removed. Service-oriented companies such as BPOs that enjoy high gross margins because of a low-cost-of goods-sold expense are losing out unfairly from the current arrangement.

It is the market opportunities and quality of the English-speaking workforce that really matter to foreign investors, not tax breaks, says Salceda. A case in point might be Australia. Its ambassador, Steven Robinson, has said he expects the Philippines will see more investments from Australia over the coming years due to its booming economy and efficient workforce.

The country’s booming property sector also sees a rosy future. The Philippine BPO industry will experience further growth in the next 10 years, according to Leechiu Property Consultants, despite the threat from artificial intelligence (AI). Moreover, hedging the property sector’s bets are the Philippine offshore gaming operators (POGOs), which are now the country’s top office space demand driver, overtaking the BPO sector for the first time this year. Development in the provinces is also moving fast. Visayan cities close to Cebu, specifically Bacolod and Iloilo, have the potential for expansion, according to real estate company Federal Land.

The week saw more of the big players – both in global and local BPO sectors – pick up industry plaudits for their excellence. Tata Consultancy Services (TCS) has been recognized as a leader in the Everest Group PEAK Matrix for Software Product Engineering (SPE) Services. TCS and Cisco have also teamed up to build a Center of Excellence to further explore the potential of Cisco’s Digital Network Architecture solutions platform. Wipro has been recognized as a leader in Gartner’s Magic Quadrant for Data Center Outsourcing and Hybrid Infrastructure Managed Services. Sitel Philippines said it has strengthened its support of inclusion and diversity in the workplace by sponsoring the recently-held third Philippine Financial Industry Pride’s Pride Summit 2019.

But there are concerns that the country is not investing adequately in the broad range of support structures needed for it to remain out front of the digital wave sweeping over global business. Its investment in innovation is falling behind. Philippine start-ups only attracted US$31.3m worth of start-up investment deals last year, which was just a fraction of the amount for Indonesian start-ups which received US$2.93bn; Thailand’s figure of US$114.6m; and Vietnam’s US$39.9m.

The country’s inadequate internet connectivity is also still a thorn in the side of business. Manny Estrada, Globe’s senior vice president for network strategy, said property developers need to ensure that developments have multiple providers in their plans and not just one. The BPO sector and POGOs need not only stable internet connectivity, but also a back up when one service goes down.

Lack of sufficient funds is also the biggest challenge facing companies that want to re-skill their employees, according to a survey by Infosys Knowledge Institute. The survey noted that while companies acknowledge the need for retraining and up-skilling, many of them continue to undervalue and underfund talent and employee initiatives. This is a huge risk. According to market research, the chatbot market in the Asia Pacific region is expected to grow at a compound annual growth rate of about 31% between 2018 and 2024, faster than for any other region. The Philippines’s massive customer service workforce needs urgent and effective up-skilling if they are to stay ahead of the growing army of hungry chatbots snapping up their jobs.

Wednesday, September 25, 2019

NEWS THIS WEEK

23 September 2019

• TCS Named Leader In Software Product Engineering Services – read article…
• Sitel Promotes Inclusion, Diversity At Pride Summit – read article…
• Federal Land Says Bacolod, Iloilo Ideal For Expansion – read article…

20 September 2019

• Wipro Recognized As Leader In Gartner’s Magic Quadrant – read article…
• Philippines To Get More Australian Investments – read article…
• PEZA Locators Will Not Move Out Once They Understand CITIRA – read article…

19 September 2019

• Property Developers Asked To Prioritize Internet Connectivity – read article…
• Lack Of Funds Prevents Firms From Reskilling Workers – read article…
• GIE Source Of Revenue Loss – Salceda – read article…

18 September 2019

• Property Firm Sees BPO Sector Expanding Despite AI Threat – read article…
• POGOs Overtake BPO Firms As Top Demand Driver For Office Space – read article…
• Philippines Struggles In Start-Up Innovation Race – read article…

17 September 2019

• Salceda Says Philippines Can Attract Investors Without Tax Breaks – read article…
• TCS, Cisco Create Center Of Excellence For Digital Solutions – read article…
• Chatbots Are Important Tool For Customer Support – read article…

Read more Inside Outsourcing Newsletters here:

1. The Outsourcing Week in Review: September 18, 2019
2. The Outsourcing Week in Review: October 2, 2019