April 10, 2018
Accepting the Inevitability of Outsourcing and its Aftermath
Geopolitics and nationalism created borders and trade rules – only to be taken down by technology that inevitably led to outsourcing and new opportunities.
At the mention of outsourcing, either people either shiver with dread or the excitement rises. In ‘first world’ countries, there is a concern over losing jobs due to offshoring. For the people in the Philippines and other outsourcing destinations, it presents new opportunities.
Outsourcing itself as a concept has been around for ages. From small to big companies, subcontracting has always been a part of most businesses. From products to services, it evolved to include core processes.
As a company expands its operation, it also brings benefits to its third-party providers. In any given locality, it is not only good for the business but also the economy. All is well and good until technology changed everything.
It was only thirty or so years ago when the only way to send an image was through a fax machine. After soaring to the height of its popularity in the 80s and 90s, it is now practically obsolete. To put the technological advancements in context, consider the next soon-to-be-phased-out iPhone model. Its processing power is over a hundred million times faster than the computers NASA used to send Apollo to the moon in the 60s.
In all these years, people learned to adapt to the changes. Colleges and universities, for instance, not only had to change its curriculum but also its educational system. A quick look at the programs shows the sheer number of IT related courses where none existed in the past.
The rapid changes have affected the way people live. As much as it has given opportunities to a new generation of people, it has also made many jobs obsolete. For example, people used to rent films from video rental stores. Those businesses and jobs no longer exist.
Fear is natural for people who have the most to lose. Outsourcing has its inherent benefits for companies. It is also not without its less-than-ideal side.
Is outsourcing to blame for the shift in the workforce, or is it because of the ever-changing future?
Realignment of the Field
Getting up to twice as much compensation or more compared to a local job sounds fantastic. For Filipinos, the desire to earn more is not a mere matter of personal luxury. Being family-oriented, it is also a means to support the parents and siblings. Hence, the motivation to work hard is already ingrained by the social norms and familial duty since birth. Such is the workforce that companies tap into when outsourcing in the Philippines.
1. Level Playing Field
Technology made it possible for people to connect in real-time across oceans. In the process, it reshaped the world we live in into one without borders. Innovations in the infrastructure and the maturity of the BPO industry has become the equalizer. No longer is it limited to large companies. Even small to medium size business can use it to their advantage and stay competitive.
So much has been said about the highly skilled Filipino workforce. As countless companies have discovered, there is also an abundance of people with unlimited potential. In other words, place them in a position to succeed and they will. In doing so, many of them have already brought businesses to new heights. Moreover, there are still many of them waiting for the next company.
2. Level Economic Disparity
Any offshoring operation comes at a price. For the companies, it is a means to cut cost or to be more cost-effective. Depending on circumstances, it is either less or loss of opportunities in their locality. Because of the economic disparity, each loss becomes opportunities for several in the Philippines.
History shows that it is the change and the future that has made jobs obsolete. For example, machines replaced pinsetters in bowling alleys. It is a fact that automation has displaced jobs and people can only adapt and move on.
Offshoring, in a sense, allows the Philippines to improve its economy and catch up with the first world countries. Already, it has been consistent as the second largest growing economy in Asia behind China for the last several years.
Leveling the economic disparity is not only limited to nations. In a local market such as the United States, for example, it has allowed for more affordable products and services. In other words, outsourcing benefited all the American consumers. It means that it has allowed people with smaller income access to what might have been too prohibitive.
Outsourcing Is Inevitable
Restating the benefits of outsourcing is foolish. At this point, the concept of offshoring to the Philippines is no longer alien. About the only thing that a company which has yet to offshore needs to do is to learn the ropes and get started. It is one of the reasons why we have created Outsource Accelerator. Not only do we show the benefits, but we also give guidance on the intricacies of starting a BPO operation as well as show how it can be done in the simplest way possible.
A simplistic way of looking at outsourcing is that for every local hired, companies could employ two or more people in the Philippines who can do the same job just as well. Some companies look at it as a means to cut down on costs while others view it as a means to scale up its operation.
As much as there is a motivation to stay competitive, perhaps a more significant motivator is the potential for a broader market and higher profit. Today, no other business model offers limitless possibilities in the era of technology than outsourcing.
Once a trend, offshoring is now a necessity. Lee Kuan Yew said it best when he stated, “If you deprive yourself of outsourcing and your competitors do not, you are putting yourself out of business.”
Is there any doubt at all that outsourcing is inevitable?
The Aftermath of Outsourcing
The rise of the Philippines as an Asian economic power is not lost on the think tanks and governments around the world. Most especially, many companies seeking to increase their sales is very much aware of the incredible opportunities in the country.
As much as the economy has improved, some sectors lag behind, and one of them is manufacturing. Consider too that many Filipinos fancy imported goods mainly from Western countries. Hence, a logical conclusion is that the market is ideal for foreign brands.
Revenues generated by Overseas Filipino Workers (OFW) and the BPO industry was nearly $50 billion in 2017. While OFW remittances appear to stay consistent in the coming years, the projection for the BPO industry remains insanely bullish. Furthermore, the Duterte administration has unveiled plans to spend up to $167 billion in infrastructure projects around the country in the next few years.
It means that there are more employment opportunities in the Philippines. The availability of better-paying jobs such as from the BPO industry has already led to a substantial increase in middle-income class expenditures. For the foreseeable future, this trend is expected to continue.
As a nation, Filipinos spend more than 70% of income on household necessities with most going to food. With growth rate potentially hitting 8%, the spending on consumer items are expected to increase. There is never a better time than today for foreign brands to expand their businesses in the country.
Outsourcing is inevitable, and so is the loss of opportunities for the people where companies are located. On the other hand, the new opportunities created in the Philippines are not only limited to the Filipinos who gained the most in the BPO sector. There are also new opportunities created in their locality as foreign brands increase their sales in the Philippines and other parts of the world.
Today, not only is outsourcing an integral part of many companies. It is also a remarkable model that realigned the playing field of businesses as well as lessen the economic disparity between nations.