Local BPO upbeat on sustained growth

Published by reposted only Date posted on January 29, 2010

The local business process outsourcing (BPO) industry is bullish on sustained growth this year.

The upbeat mood came on the heels of US President Barack Obama’s slashing of incentives for US firms that outsource offshore, in order to keep jobs for Americans.

“And to encourage these [job-creation projects] and other businesses to stay within our borders, it’s time to finally slash the tax breaks for companies that ship our jobs overseas and give those tax breaks to companies that create jobs in the United States of America,” Obama said in his State of the Union address on Wednesday (Thursday in Manila).

The US government had reported that a tenth of the US population was unemployed as of December 2009, and Obama said that about seven million jobs were lost in the last two years.

But government and industry officials here said that the impact on the Philippine BPO sector of a US crackdown on outsourcing might be little, if none.

“Definitely, if such move by the US pushes through, it will have an impact on the growth of our [BPO] industry, because the US is our biggest market,” Monchito Ibrahim, Commission on Information and Communications Technology (CICT) commissioner, told The Manila Times during a telephone interview on Thursday.

“But how it’s going to impact, and the extent of impact, we don’t know yet,” Ibrahim said. “We may revisit our targets [in light of Obama’s statement].”

But Martin Antonio Crisostomo, Business Processing Association of the Philippines (BPAP) executive director for external relations, told The Times during a separate interview also on Thursday that the industry group sees no need to be alarmed by Obama’s pronouncement.

“We believe that it would not have an effect on the local outsourcing industry,” Crisostomo said.

“Tax perks and incentives offered by the US government cannot outweigh the savings of US businesses when they outsource in the Philippines,” he added. “The cost-effectiveness of outsourcing in general helped [many US businesses] survive last year amid the global financial crisis.”

Crisostomo said that about 80 percent of local BPO companies’ accounts come from the US.

And even amid a possible US squeeze on outsourcing, officials said that the local BPO sector expects further double-digit growth in revenues and employment this year.

Crisostomo also told The Times that the Philippine BPO industry targets to grow about 26 percent this year.

He said that the sector last year hit its 20-percent revenue growth target and total industry revenues in 2009 reached $7.3 billion, about a fifth higher than revenues of $6.061 billion in 2008.

Crisostomo added that total industry employment as of end-2009 stood at 446,000, up by about a tenth from 400,000 people employed full-time in the sector in 2008. He said that they have a similar 26-percent growth projection for employment generation this year.

The Philippine BPO industry holds between 7 percent and 8 percent of the global outsourcing market, he said.

Sought for comment, XMG Global Inc., an information and communications technology (ICT) research and advisory firm, said that “the US’ aging workforce, its ongoing shortage of IT and BPO skilled workers and unavoidable high operating cost will continue to make offshoring a worthy option.”

“With technology advancement and companies’ desire for global competitiveness, offshoring will still stand as a viable business strategy. The continuous effort in enhancing virtualization and the vigorous competition among US companies and strong local players in the offshore countries are indicators of this viability,” XMG added.

Similarly, call centers downplayed effects of a potential crackdown on outsourcing.

“US companies will continue to outsource as long as we deliver quality performance and cost savings,” Jojo Uligan, Contact Center Association of the Philippines executive director, also told The Times.

About 90 percent of the local BPO industry’s voice sector service the United States, Uligan said. –BEN ARNOLD O. DE VERA Reporter, Manila Times

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