September 25, 2018
Butch Valenzuela – My Outsourcing Journey
September 25, 2018
In this episode, Butch Valenzuela, President and CEO of Visaya KPO, shares his exciting journey in the BPO industry.
Butch is a Filipino entrepreneur who had worked for 30 years with a Fortune 200 company called ITT Industries as IT Director, Financial Comptroller, and Director for Strategic Planning.
- While in the US, Butch didn’t have the slightest idea of what a call center meant. But when he came back to the Philippines, he saw the potential of the call center industry and thought that he could apply his strong US learnings in the industry.
- He saw the value the Philippines can provide to the global market, not only for the fluency in English but also for the cultural alignment as historically there is that American or foreign influence in the Filipino culture.
- In his opinion, advancement in robotics or artificial intelligence is impressive but it will take time for small companies to catch up because companies have to pay for the technology. The high cost involved may not really be effective particularly for the SMEs.
- One major client of the call centers in the Philippines are the healthcare companies in the US. Butch foresees that the demand for medical encoders will increase as baby boomers are aging. The country’s call centers can competitively meet this demand as a number of healthcare professionals and nurses are working in call centers.
- There are many factors that can affect the call center industry. This could be government regulations of both the client country and the service provider country. This could be tax regulations. This could be AI or robotics. But people in the call center industry can still be relevant and irreplaceable if they scale up into higher value-add type work.
- The three competitive advantage for a BPO industry to be relevant to the global market: language skills, cultural alignment, and specialized education.
- People in the call center must continue to scale up through continuous education and training to prepare them for higher value-add work and move up the ladder.
- AI and robotics deployment may add to efficiency but maybe costly especially for small revenue companies.
Hi, and welcome to another episode of the Outsource Accelerator Podcast. My name is Derek Gallimore, and this is Episode No. 190. So today I am talking to Butch Valenzuela of Visaya KPO. Butch is a proud Filipino who has been 30 years, 30 formative of his early career in the US. He then returned back to the Philippines and saw good opportunity in the BPO sector which he has pursued and never looked back on. So, there’s a lot of interest in learning a lot of interest and insight from Butch into the big end of town of outsourcing. I really enjoyed this and I’m sure you will too.
If you want any of the show notes or any information that we discussed here just go to outsourceaccelerator.com/190. Enjoy!
Hi and welcome back everybody today I’m joined by Butch Valenzuela of Visaya KPO. Hi Butch, how are you?
Butch: Good afternoon Derek, how are you?
Derek: Absolutely fantastic! And thank you so much for joining me for this podcast. Of course, you are in this podcast to discuss your KPO and we can even discuss, differentiate between a BPO and a KPO. But also, just to explore your background first. You’re a Filipino and returned to the Philippines after 30 years in the US which isn’t that unusual. You got a lot of people going round and returning [inaudible 00:00:20] and professional development, no doubt. You come back in 2006 and started Visaya KPO in 2007, so really excited to hear that journey. I supposed initially, you can introduce yourself far better than me so, give us a bit of background
Butch: Sure. My name is Butch Valenzuela. I left the Philippines actually when I was about 24 and went to UCLA for a couple of years. My background really been in IT. I was an MIS director for a Fortune 200 company called ITT Industries. That was my last job, work for ITT for about 16 years. For the first 10 years, I was an IT Director and then I moved up to become a Financial Comptroller, so I do know a little bit of both side of the house, the IT side of the house as well as the financial side of the house. When I left ITT, I was actually doing a lot of M&A work. I actually became the director of strategic planning and e-business for the group of ITT called Jabsco. And we were about $276,000,000 company at that time or group of companies. And I basically did a lot of traveling, doing targeting companies for acquisition. For those that do not know ITT own the Sheraton hotels, Avis Rent a Car and about 400 different companies throughout the world.
Derek: Wow. I did not know that Butch, that’s a magnet? What’s the capitalization of ITT then? How big are they?
Butch: Well, ITT was actually at that time, about an $8 billion company in revenue. So, they were into several things until it, the CEO by the name of Harold Geenen came in and said, “You know, this is kind of crazy, that we are so diverse, and I would like to actually, go back to our core, which was actually fluid handling systems.”
Derek: Right. Wow. I was going to say that because there’s a lot of cross industry stuff that’s going on there.
Butch: Right. So, I came in through an acquisition of a company called the Flow Jet Corporation out of California. Flow jet, is actually very interestingly enough, was owned by a Filipino. But we don’t, you probably might not have heard of the company. But we do touch people’s’ lives every day. We made the pump that pushes the cert[?] for coke and Pepsi.
Derek: Right. Ahh…
Butch: So, the company became very successful, and consequently got acquired by ITT industries.
Derek: Wow, isn’t that amazing? Humble beginning, is it? And obviously the pump has some kind of specific IP then does it? Because you would imagine kind of the pump with the cert[?] doesn’t need to be that specialized necessarily.
Butch: They are actually a fairly specialized pumps. There’s only two companies in the world that make it in a big way. I mean there’s more but there’s really two primary vendors for Coke and Pepsi and that’s Flow Jet Corporation or at least before it was called Flow Jet Corporation. I think that’s change to ITT Flow Jet and another company called Sure Well[?].
Derek: Wow. Incredible. So, you had sort of significant corporate experience in there. You went into the merger and acquisition department. Did you do, and by you know, as a question also working within the financial aspect of the company, did the company have any involvement with outsourcing that actual company? And did you develop any perspectives on outsourcing, specifically Philippine outsourcing within ITT? Or were they completely sort of oblivious to it?
Butch: No. It was completely oblivious to it. ITT did not really outsource. I guess in some way, we, ITT, the law is the largest pump company in the world. So, in theory move that subcontractors to make different types of products that we might, that ITT has, but nevertheless, not that type of outsourcing that we do here in the Philippines. We do a lot of voice and back office type work. When I was working for ITT, I had no idea what a call center actually meant. But when I decided to quit ITT and come back to the Philippines, I just saw how the call center industry or in the contact center industry was growing and I decided, that is probably something that I could do. It’s very similar to manufacturing. In the end you could say, all the manufacturing concepts, like TQM, lean six sigma and apply it in the contact center industry.
Derek: This is all about efficiency of processes, isn’t it? And affect for your production line, I suppose without the physical aspects of it?
Butch: Absolutely. In manufacturing you have a physical product. In the contact center industry, you have people as your product. So, it’s really the how good your people can deliver.
Derek: Right. So, you have had a very stellar corporate career in the US. You obviously had very strong associations with the Philippines, but you are coming back into the Philippine society and looking around and as a sort of strong corporate background, how did the potential of outsourcing hits you? Where did you see the real potential, the value add of the sector?
Butch: I just thought that it was an industry that was growing, and I could see the need for it Stateside. I could also see the value that the Philippines could actually provide the global market. When you think about it, I guess one of the primary core competence of the Philippines is really not only the English component of it, but also the culture component of it. So, if we are a country that has been ruled, and I really don’t like the word, but it has been ruled by Spain and the United States for quite some time. And we have adapted the American culture in everything that we do comes to television, when it comes to Hershey’s Kisses.
Derek: Yeah. Pizza and basketball.
Butch: Basketball and everything else. So, it’s a very easy transition basically from the cultural perspective. The other thing that I also noticed is that, in the United States, in my house, for example, our appliances were General Electric. So, whenever he calls for service it would typically be India that would pick up. In that experience I was thinking, you know what, we can do better than this, so it ended up that we have. Because today from a voice component, we’ve exceeded both from a revenue and an FDA[?] perspective in voice, we’ve exceeded India in 2010.
Derek: Right. And it makes sense. Absolutely. It’s got a better affinity because of the cultural alignment and the natural sort of English really is suited for that isn’t it? And so, you have a very strong foundation in actually the call center and when you started in 2007, the whole industry was a lot more call center oriented. Now it’s expanded to far more many roles. But in terms of the call center, I suppose foundations, do you think, you know, even you as a consumer in the US, do you think there’s still a bit of a hangover when people, the average consumer thinks of call centers, thinks they’re going to put, be put through to someone in India or the Philippines and you know, there’s a sign of frustration. Now I know that that’s not fair. I know that the industry is incredibly effective of what it does and, and well trained and highly optimized and efficient. Is it because of a hangover from 20 years ago when the whole thing started there wasn’t as good at training? Or do you think that those problems still persist with the aspect of basically outsourcing customer service to a high delivery standard?
Butch: I think people are actually in the US. The average consumer has gotten used to it and that when they actually pick up the phone, chances are that they could be answered either in the Philippines or India or some other part of the world. There was a point in time when there was a lot of pushback I guess, or a lot of comments that you hear about it, but over the years, I’ve noticed is that people are pretty much getting used to it and as part of the norm. But the interesting part, and I’m sure you will be asking me about Artificial Intelligence and robotics would be working. I actually encountered a call when I was in the US last March and I have to call for personal business and I was talking to this lady on the phone for almost two minutes until I realized it wasn’t a lady. It was absolutely AI. It’s very seamless.
Derek: Was that a big corporation that you were phoning?
Butch: It was a big company. Yes.
Derek: Yes. That was impressive, wasn’t it?
Butch: It was impressive. But I guess I will also say this as well. When it comes to AI and, there have been a lot of talk about what it is going to do to this industry in the Philippines. My position on it is that technology is here to stay and the growth of technology here over a year has actually been fairly impressive to say the least. But at the end, I really feel that it will, it will still take sometimes to catch up. When you think about it, when you thought about or we are a smaller player relative to the Convergyses and the Teleperformances of the world. So, our clients are really more the small to medium sized companies. You’re talking about perhaps maybe a 10 to 500, million dollar revenue a year company. You’d say, “well, that’s a hell lot of money”. And that would be true from a Philippines setting perspective, but from a US perspective, that’s still pretty minimal. So…
Derek: And you’re saying they don’t have the scale of these sort of massive processes and they need more flexibility and agility. Is that why AI can’t necessarily have an impact on those?
Butch: That probably would be one, one answer to that question, but the other question quite honestly is cost. We are not at a point yet where deploying AI for every process that you do is at a point wherein you could go to a radio shop that is no longer around, and just buy it. It’s not there yet.
Derek: No, no. And I think it’s at the early adaptive stage at the moment, isn’t it? And so, it’s expensive. It’s not necessarily working that well, but you’re going to get the big boys playing around with it because they have potential gains in efficiency. But then eventually it will, I imagined trickle down more into the kind of SME space and using that as I suppose analogy or a segue way. Because there’s a lot of talk in terms of outsourcing now being a sunset industry, there’s a lot of concern. But what are your thoughts about the migration from the Apps, the user base of outsourcing no longer necessarily being the big corporates but moving down the ladder into the SME space and even into the sort of a micro enterprise space?
Butch: Well, I guess you that could take it and break it out into pieces when you really think about it. You know, when it comes to the Philippines per se, we really need to also look at how do we train our people to move up the ladder into the more higher value add type work. We, as an organization, we do a lot of US healthcare work with our HIPAA client organization. We are actually audited by a US firm or for HIPAA compliance. You know, when you think about US healthcare today, there is a lot of processes, to be honest, that are not automated at the moment. We might have a lot of deployment and especially during the Obama years wherein, they had at first incentivized physicians to actually go into the more automated stuff and incentivize them with, you know, to pay for the technology of it. But the reality is the widespread deployment of it, it’s there, but it’s really not very efficient at the moment.
Derek: And you’re talking about obviously, you know, there’s the big, big clients, the big end of town and then you’re saying that as a smaller BPO, you’re focusing on the 10 to 500 million dollar range. There’s still the huge swathes of companies that are probably one million up to 20 million dollars. In fact, the vast, vast majority of companies in terms of numbers. What do you see in the US specifically, the general awareness of outsourcing, the general awareness of the potential of outsourcing for those companies to access outsourcing services, whether it is customer service or operational support, building a website. Is it sort of a growing awareness in the U. S? Is there resistance in the US? How do you see that market seeing outsourcing?
Butch: I think more and more the, the SMEs, the people that are in my space are already in that range, you know up to half a billion dollars. They are today still, I think the cost component certainly is one thing, but you know the other thing is really, you look at medical coding for example, and you look at Medicare as an example for it. And you know, today there are about 76 million baby boomers in the United States. So, to think about how many times would an elderly person go to see a doctor or go to a hospital. That’s slates to be chart, right?
So, if you think about it, the volume is just enormous and quite honestly, there’s still a shorter fall I guess in the number of medical coders, certified medical coders that need to do the work in the United States. So, India has been a very big player in this for a very long time that the Philippines is actually, you know only today it seems that the Philippines has been a laggard in but today trying to catch up and hopefully, you know we do have a couple of advantages. One is obviously the cultural and the English component, but the other part is the abundance of nurses and medical people in the healthcare field that we have here in the Philippines.
Derek: Yeah, absolutely. There’s huge alignment now.
Butch: Let’s be honest with ourselves, a lot of people that got nursing, not because they want to work in a hospital here in the Philippines, but they want to go abroad. That would be, for some people that might be a very controversial statement, but at the end, let’s think it through, really most people, it’s all about being able to have a considerably better type of employment for your family.
Derek: Absolutely. And so, you see, you see, and so you are heavily invested in medical aspects. Also, the call center aspects of the kind of bigger end of town. Do you still see there’s life and growth in that end of town? You’ve said that there is huge amount, you’ve said that there’s a huge kind of a baby boom and kind of dependency on these things. Why would you think that there’s general concern in the industry then that this could be sunsetting and there’s declining growth?
Butch: Well, there, there are just too many, I guess, things that actually affect the industry. Obviously, you have the leaders of both countries that actually could affect the industry. You could have government regulations that could affect the industry. You could you know, tax regulations that could affect the industry. There are also the you know, the rhetoric that could really affect the industry quite honestly, on both sides of the pond. You know, there has been a lot of rhetoric that has been put forth that doesn’t really help in the sense that it causes uncertainty and a ripple effect into this business.
Derek: And it doesn’t take a lot to kind of spook a big investment really, does it? Just takes one or two factors and then these big investment decisions are probably shelved for another year or they look to safer climate.
Butch: Absolutely, and I used to work for a Fortune 200 company as a financial controller, and I absolutely understand how those things work you know from a large corporate.
Derek: Just kind of risk mitigation, is it?
Butch: Absolutely, yes.
Derek: Yeah, it’s crazy. Okay. Fantastic. So, it’s incredible insight and, really valuable to know about the bigger end of town and I want to get you back so that we can kind of deep dive into Visaya KPO and exactly what that is and more about their services and if anyone wants to get in touch with you in the meantime, how can they do that?
Butch: They could actually reach me through our website. There is a, we had a fairly robust group, I guess you may call it that, waiting for people to contact us on our website or they could also contact me on LinkedIn as well as my email address. My email address is actually on my LinkedIn account.
Derek: Fantastic. Okay. Thank you Butch. And of course, we’ll put all of that in the show notes.
That was Butch Valenzuela of Visaya KPO. Thank you Butch for your time there. If you want to get in touch with Butch or know any more about what he had mentioned and of course, all of his contact details, just go to our show notes which is @outsourceaccelerator.com/190.
And if you want to ask us anything as always just drop us an email to email@example.com See you next time.