In episode 185, Outsource Accelerator’s Derek Gallimore welcomes back Dean Pascoe, president and owne Read more [...]
Article Category: Article
What is an outsourcing company? It is a company, which provides external resources that cater to different needs of various businesses.
Why do companies use outsourcing when they can choose to maximize internal resources? When you have a business with projects to finish and deadlines to meet but don’t have the time to do it, then this is the time that you can hire an outsourcing service company. When you don’t have enough resources to go through the process but still need efficient results, then you can find an outsource service provider.
An outsourcing firm contracts work externally. In this setup, specific workloads of your business operations are being done offsite. This ultimately gives you the advantage of having repetitive and systematic work done outside the company’s premises.
When you decide to outsource, it is imperative that you understand what an outsourcing company’s origin is and the different benefits it offers. You can have a better insight on what outsourcing services impact is to your company’s efficiency.
Outsourcing in the Philippines: A Brief History
When you talk about outsourcing and its history in the Philippines, Accenture will always come up. Business Process Outsourcing or BPO in the country started from a single contract from the said company.
Frank Holtz founded Accenture Global Center in 1992. It outsourced work in the country and offered management consulting and professional services all over the world. It now has 50,000 employees in the Philippines alone. Among the businesses that outsource, Accenture remains one of the top BPO companies in the Philippines.
Here is a brief overview of the significant events that led to BPO’s success in the Philippines:
1992- Accenture, founded by Frank Holtz, set up the first contact center. It was located at Robinson’s Cybergate 2 tower in Mandaluyong City.
1995- The Philippine Congress passed the Special Economic Zone Act providing tax incentives to foreign investors.
1997- Sykes set up the first multinational BPO Company in the Philippines which focuses on inbound call center support.
1999- Jim Franke and Derek Holley founded eTelecare.
2000- 0.075 percent of the country’s GDP was recorded to have been generated by the BPO Industry.
2005- The Philippines was reported to comprise up to 3 percent of the Global BPO market.
2010- The country was becoming the world’s BPO capital with 525,000 call center agents and approximately $8.9 billion in revenue
2016- The BPO Industry reached an annual growth rate of 17 percent.
All these events have been significant in establishing why outsourcing in the Philippines has been lucrative, and why the country was also referred to as an ideal outsourcing destination for offshoring companies.
Offshoring does not only mean the hiring of an external workforce but also having the operation in another country, hence, the term offshore.
To truly appreciate its existence, you need to understand why outsourcing is good for your business. Here are the three most common reasons why businesses outsource:
1. Cutting Costs
Reducing costs is the most appealing reason why companies outsource. Operational costs that are usually cut down include labor costs and overhead expenses. To put it in a more straightforward perspective, when you outsource work, you don’t have to provide a workspace for your employees anymore. This includes electricity, furniture, and equipment. These are can already be indicated as part of their qualifications, or the outsourcing firms take care of it for you.
2. Decentralizing Command
Always checking your employee’s progress is time-consuming. You have to give out instructions and see to it that they are carried out correctly. This is why companies offshore: to delegate supervisory and managerial responsibilities.
3. Centralizing Focus
Business owners are now embracing reality. A company that outsources avoids being consumed with repetitive tasks that can be easily handled by an outsource service company.
Then and Now: Is the Philippines Ready for Innovation?
Ever since Accenture launched its first contact center in the Philippines, the number of big companies that outsource in the country has been steadily rising. Accenture put the Philippines on the map of modern industrialization through outsourcing.
Accenture was the first company that recognized the country as an excellent source of talents and professionals. Its trust in the companies helped in establishing why companies outsource in the Philippines.
It has taken a risk by offshoring, and now, the Philippines is known to be the “BPO Capital of the world.” Due to its fast growth and development, the BPO Industry in the Philippines is still one of the top outsourcing destinations in the world.
The BPO sector has been generating, as of 2015, $22 billion in revenue. It might even surpass the revenues generated by the Overseas Contract Workers’, which have been the most income-generating Filipino workers for decades.
The Philippines is now maintaining its position among if not the top choice of companies that outsource.
The continuous expansion of training facilities for English proficiency can help the Philippines preserve its high ranking in the English Proficiency Index. Ensuring its current status is essential since It is one of its most respected and sought-after qualifications.
The country guarantees to continuously construct infrastructures conducive and ideal for outsourcing is essential. It’s also imperative to preserve the government’s support for all outsourcing opportunities.
Outsourcing agencies in the country may also create new laws, rules and regulations, government courses, and training that will ensure the quality of BPO candidates. All this can contribute to the country’s knowledge on how does a BPO work.
Being aware of what outsourcing companies do helps in establishing expertise on what the clients’ demands are and how the Philippines can meet them. It will give the outsource service providers an insight into what an outsourcing company is looking for.
By genuinely appreciating the positive influence outsourcing jobs’ positive influence on the Philippines’ economy, effective strategies can be implemented.
What Made Outsourcing Skill Sets in the Philippines Different?
India and Singapore are also top destinations where companies outsource. In India, the labor cost is low. In Singapore, the talent pool of qualified professionals is big. Why would a company outsource to the Philippines then? Simply because in the Philippines, you can have best of both worlds and more.
The Philippines doesn’t only have a low labor cost and a big talent pool; it also has a high rating in English proficiency. Filipino professionals graduate from schools that adhere to western standards when it comes to English.
This is also a distinguishable difference from other Asian countries that cater to offshoring companies. Offshoring companies acknowledge this is an undeniable asset when companies outsource.
What do outsourcing companies look for in a skills set? They are always on the hunt for a unique combination of talent and work ethics.
Here are reasons why the Philippines’ outsourcing skill sets are different:
Standard Filipino education requires an introduction to the English language. Since pre-nursery up to the college level, it has been the medium of instruction for most subjects. Even the simplest blue-collar workers know the basics of the language.
No strong accents
Filipinos’ most valuable asset as an offshore destination is that majority of those working in outsourcing companies like call centers do not have a strong accent. Other offshore destinations may have low labor costs, but the employees have strong accents that make communication much harder.
Quick thinking and finding clever ways to overcome difficulties are often associated with a Filipino employee. This is a very valuable skill that contributes to the growth of a working community. You don’t need to constantly supervise and address issues yourself because they can already be resolved.
A Filipino working culture demands mindfulness of your co-workers’ well-being. This makes the working environment more amiable. It also means that by working together, work demands can be met more efficiently.
Analysis of the BPO industry’s Uprising in the Philippines
There are a lot of countries that have outsourcing companies, but the Philippines really stands out. Its most appealing feature is the Filipinos’ proficiency when it comes to the English language. It makes communication easier.
The Philippines is one of the most proficient non-native English speaking countries in the world. Just last 2017, according to the Education First’s English Proficiency Index, the Philippines is among the top 15 most proficient non-native English speakers. The index included 72 countries overall.
In Asia, the Philippines has been ranked third out of twenty Asian countries. Singapore and Malaysia being first and second, respectively. This bodes well for the Philippines as it means that it can keep up with the outsourcing’s continuing growth.
The government also plays an active role in encouraging BPO development in the country. The Department of Trade and Industry (DTI) is encouraging BPO activities through tax incentive packages provided by the Board of Investments (BOI) and the Philippine Economic Zone Authority (PEZA).
Furthermore, The Department of Information and Communications Technology has been very vocal in its support to the BPO sector. Last October 28, 2016, the government officially launched the Philippine IT-BPM Roadmap 2022. It’s specifically created to accelerate the growth of the BPO Industry in the country.
The labor force in the Philippines, however, has become outsourcing’s most enticing aspect. The Philippines covers 10 to 15 percent of the global share in the BPO Industry.
Filipinos are also naturally hardworking, patient, resourceful, and flexible. The people’s general good-naturedness effectively creates an ideal working environment for a business to be successful.
The Filipino work ethic is centered on group mentality, as opposed to the Western’s individualism. This makes the Filipinos more adaptable and cohesive in working with and as a group. It sets a more efficient professional setting to reach the desired organizational goal.
One of the significant turning points in the success of BPO industry, during its early years, is Microsoft’s generous donation of free Microsoft Apps Licenses to the PCPS program. As this helped in greatly lessening the government’s capital expenditures, the start of the industry was easier.
To sum up, the success of the Philippine’s BPO industry is mainly a combination of low cost of labor, English proficiency, and government support.
10 Reasons Why You Need to Outsource to the Philippines
Other than the unique skills sets of the Filipinos, there are also a number of reasons why it’s the chosen outsourcing destination for businesses.
So, why do companies offshore in the Philippines? We have already established that there are also other countries that can accommodate your outsourcing needs. So, why outsource in the Philippines?
1. The Philippines Is an English-Speaking Country
Schools In the Philippines use English as a medium of instruction. Teachers and students commonly converse in English during discussions. Books and other educational materials are also presented in English.
The English language is deeply embedded in the Filipino culture. Regardless of educational attainment, Filipinos are, more often than not familiar with basic conversational English.
This makes Filipinos seem natural English speakers. When you listen to them speaking comfortably, rapport is easily established. The good command of the English language makes the process of outsourcing easier.
2. Labor Costs Are Lesser Than in Most Western Countries
Labor costs are one of the most attractive reasons why companies choose to outsource to the Philippines. The basic wage of Filipinos is lesser than their western counterparts. It’s even lesser than other Asian countries, given that the Philippines is able to provide more qualified employees.
Labor costs are also one of the most significant expenses of your business. Cutting it down can help your company retain a chunk of your income. When you outsource to the Philippines, you can save on labor costs without sacrificing the quality of your products and services.
3. You Can Hire Flexible, Skilled, and World-Class Employees
Filipinos, by nature, are very resourceful and creative. The adaptability that they display in various tasks and responsibilities save a lot of time in unnecessary supervision.
Filipinos are hospitable by culture. When you give your demands, Filipinos will make a way to accommodate them. The same goes for work; they will do their best with their work to please you.
4. Filipinos Ensure High-Quality and Excellent Services
Since the Philippines maintains a western standard level of education, talents are world-class. The quality of their work is accepted on a global scale.
This explains why companies outsource manufacturing in the country as well. The country’s industrial talent pool has a comprehensive list of services offered. It ranges from fabricating components to selling the finished products.
The manufacturing industry accounts for nearly 24 percent of the Philippines’ GDP. With this, it’s safe to say that the country is more than qualified to cater to manufacturing companies.
Products of outsourcing manufacturing companies include furniture and fixtures, fabricated metal products, rubber and plastic products, textiles, beverages, leather products, and non-metallic mineral products, to name a few.
The Filipino people have a culture of pleasing others. This comes in handy when you hire them professionally since they naturally strive to accommodate their employer’s needs and wants.
5. Filipinos Can Adjust to Any Time Zone and Working Schedule
Filipinos can quickly adjust to any time zone that you require. You just have to set your expectations with the working schedule that you prefer. Again, the hospitable nature of Filipinos come in as willing to accommodate your requests.
6. You Can Focus on Handling the Core Competencies of Your Business
Outsourcing provides an environment of delegation. You give other people tasks and responsibilities that your business cannot or no longer perform effectively. This can save you the job of having to spend time on other small matters which can already be done by others.
Filipinos are very dedicated, hardworking, resourceful, and need only minimal supervision. When given their tasks, they can ask for help and questions only when it’s necessary.
7. You Can Assure That You Are Paying the Best Salary Rates
When you are the employer, best salary rates mean that you can maximize your profit at minimal cost. In the Philippines, you can hire professionals with a more reasonable daily wage rate.
8. Government Support
The Philippine government is very supportive of outsourcing and offshoring businesses. The country is producing more professional than the available local jobs available.
Since western countries can afford to pay more than the basic pay rate, graduates are eager to seek employment in the BPO industry. Offshoring companies can also hire hundreds and thousands of employees.
9. Ability to Multi-task Efficiently
The daily operations of a business can be overwhelming. When you are simultaneously bombarded with different concerns throughout the day, it may prove to be too much for you.
When foreign companies outsource to the Philippines, the different time zones become an advantage. Things get done while you are asleep. You will not be forced to go overtime to deal with everything all at once, all in one day.
10. Infrastructure Development
Local Government Units (LGU’s) and private property owners acknowledge the demand for BPO infrastructures. Both are converting or building facilities to accommodate outsourcing businesses.
Companies that need outsourcing won’t encounter problems in finding venues for their offshore operations. Most of the structures are built in strategic locations that would not cause any difficulties to offshore employees.
What are the Common Outsourcing Functions that Philippines BPOs Offer?
Considering all the reasons that were mentioned above, here is a list of the various functions that companies commonly outsource:
For Inbound Calls:
Banking and Finance Accounts
Banking and finance companies are companies that outsource IT services in the Philippines. Inquiries and complaints are dealt with immediately without disrupting the company’s daily operations.
Products and Services
Companies that choose to outsource in the Philippines also let the outsourcing companies handle their customer hotlines. Customer Service Representatives (CSRs) usually take orders from customers over the phone.
Order taking can take time and a lot of patience. The whole interaction depends on the rapport between the CSR and the customer.
When you are in the field of technical support, you will ask the questions to identify the problem. You will also need to give instructions to resolve the issues.
Seeing that Filipinos have a good command of the English language, this means lesser chances of miscommunication. Most of the time, the customers want help and advice regarding certain products. This Is why technical support accounts are also one of the most commonly outsourced accounts in the Philippines.
After sales is the communication between the company and the customer after the initial acquisition or purchase of a product or service.
An Administrative Coordinator is someone who will maintain a systematic and harmonious flow of offshore operations. The position will require supervisory and managerial capabilities. It also requires excellent communications skills since the position bridges the gap between the employer and employees.
For Outbound Calls After Sales:
This is when you convert someone to be a prospective client. A person who is already interested in your products and services is a Lead. Lead generation then is the act of making ways to attract someone to become a lead.
Businesses do strategic marketing to invoke excitement that will eventually lead to sales. One of these strategies is to make a sales call. This is when you set a face-to-face meeting with a prospective customer. This get-together is designed to generate sales eventually.
Chat and Email Support
Outsourcing of non-voice support is communicating with the customers via chat or email. Prompt response and acknowledgment of a customer’s query are essential to a quality customer service.
Chat and email support exist for customers who find it hard to communicate with another person or simply prefer not to.
The back office is an integral part of a business’ success. It mainly consists of administrative and financial responsibilities. It makes sure that the company complies with all the requirements and observes proper procedure with its daily operations.
This is often why companies outsource, so other tasks are completed with needless distractions of other financially unrelated concerns.
Top Business Process Outsourcing Companies in the Philippines
So, what do companies outsource? A company will usually outsource business processes. A business process is a set of tasks, which aims to accomplish organizational goals. Examples of businesses processes include finance, healthcare services, and IT services.
For Accounting and Finance
When you are in the Philippines, you are required to take up bookkeeping before you graduate from your senior year in high school.
The country’s ABM education curriculum mandates an introductory course in accounting, business, and management data analysis. Regardless of what your college course may be, you are already equipped with basic accounting.
Here are the top BPO companies that offer financial services:
- JPMorgan Chase Bank N.A.-Philippine Global Service Center
In Manila, JPMorgan Chase Bank first set-up its foreign office in 2005. It is open 24 hours a day and seven days a week.
- Accenture PLC
This is the pioneer BPO in the country. It has more than 300,000 employees operating in more than 120 countries.
- Sitel Philippines
Sitel has nine sites in the country and has 13,000 employees. It has also been recognized several times for its excellent service.
- Capital One
It is a bank holding company that specializes in savings, banking, auto loans, and credit card products. Its headquarters is in McLean, Virginia and has been operating since 1994. It started with credit cards, expanded to auto loans, and offers it also offers banking services up to the present.
For Healthcare Services
- Manulife Global Services
When you live in the Philippines, the Manulife brand is recognizable. It has partnered with commercial banks in promoting its life insurance policies. It is a Canadian-based financial services company. Its products include life insurance, group life insurance, and health insurance. It is currently operating in 22 countries.
- Telephilippines Inc.
It is widely known as Teleperformance. Teleperformance received the Frost and Sullivan Asia Pacific Contact Center Outsourcing Provider of the Year Award for two years, 2012 and 2013, due to its overall contribution to the call center industry. Teleperformance offers different outsourcing services including medical transcriptions and data entry.
- AIG Shared Services Corp. Philippines
AIG is recognized as one of the pioneers of non-life insurers. It offers businesses insurance policies that would cover the health of its employees as a group. It originated in the United States of America and was founded by Cornelius Vander Starr in 1919. AIG currently outsources in the Philippines. Its business insurance products include Aviation, Casualty, Energy, Environmental, and Property.
For IT Services
- Sutherland Global Services, Inc.
This company started its operations in 2000. It has over 13,000 employees and has 9 sites all over the Philippines.
Teletech operated its first offshore call center in the Philippines in 2004. It has become one of the biggest employers in the BPO industry.
- Convergys Corporation
Convergys may be one of the most recognizable BPO brands in the Philippines. It has 18 contact centers in the country and has more than 28,000 employees on its payroll.
Philippines as the top outsourcing destination
There may be different reasons for outsourcing and various reasons to offshore, but why it is relevant in this day and age, comes down to the availability of technology. Because of outsourcing, it is no longer impossible to connect to the other side of the world. In fact, it is much easier and cheaper businesswise.
The list of reasons why outsourcing is good is comparatively longer as opposed to why it isn’t. The risks would naturally include the language barrier, culture, and time zone differences.
These risks are becoming unlikely with Filipino workers. The western influence has always been very present in the country. The Filipino people have adapted western language and culture for the longest time and became among the major reasons why do companies outsource in the Philippines.
The government support in the Philippines is also a deal-breaker. It encourages outsourcing because it has a direct positive effect on the rate of employment in the country. The government also gives leeway and incentives to companies using outsourcing.
The government even offers courses if you want to have a career in the BPO industry. To further encourage outsourcing, the Data Security Act and the revised Special Economic Zone Act RA 10173, were passed. This was created to protect sensitive data from threats. The Special Economic Zone Act or RA 7916 introduces various tax-related benefits for outsourcing companies.
If you are new in outsourcing, it’s best to learn the different factors that will affect your decision to go offshore. You can always make use of the Internet and read on how to outsource work in the Philippines.
You can learn what does an outsourcing company do for businesses, and why should foreign companies outsource in the Philippines amidst the sea of outsourcing countries.
The Philippines takes pride as the top outsourcing destination in the world. It endlessly pursues ways to innovate itself and enhance the lineup of reasons why choosing to outsource in the Philippines is an excellent decision. You have to take advantage of the BPO opportunity in the Philippines. Outsourcing to the Philippines is yet to be the smartest decision you can make for your company.
More from Outsource Accelerator: Read more about what is outsourcing and how it can help your business here