Amidst gloom, BPO executives to confer

Michael Alan Hamlin

Posted on April 22, 2009

London-based Fitch Ratings cut its growth forecast for the Philippines over the weekend to just 0.5% for the year, the lowest growth rate since 1998. The announcement follows a revised government forecast of 3.1-4.1% growth, down from 4.6% last year and 7.2% in 2007. James McCormack, head of Asia Pacific Sovereigns for Fitch, expects remittances from overseas Filipino workers, executives, and professionals (OFWs) to contract five percent in 2009 and unemployment to increase to 8.6%. He expects exports representing 40% of GDP to decline a frightening 25%.

Does anyone still believe the Global Financial Crisis won’t affect the Philippines? Even the business process outsourcing industry is feeling the impact according to preliminary results of the latest survey conducted by the Business Processing Association of the Philippines (BPA/P) and Outsource2Philippines (O2P). The survey, administered by TeamAsia, reveals that more than 80% of respondents’ firms have been affected in some way by the crisis. (Disclosure: BPA/P is a client. I am an investor in O2P and am employed by TeamAsia.)

Most of that impact is in demand. However, the preliminary results suggest that the impact of the Global Financial Crisis for many BPOs is positive, rather than negative. All but one respondent that indicated his or her firm had been impacted by the crisis said their companies have taken steps in response. For almost 60% of respondents, responding to the crisis meant introducing new services, suggesting that they intend to capitalize on new opportunities presented by the crisis. More firms are accelerating expansion and recruitment than not as a result.

The complete results of the survey will be announced June 16 in a breakfast briefing for senior BPO executives, “State of the BPO Industry: Mid-Year Report.” The survey was wide-ranging and includes a rapidly expanding range of sectors and value-added services. Valuable insights into attractive investment locations, recruitment issues, and turnover are provided.

The BPO sector seems to be benefiting overall as a result of the Global Financial Crisis as firms seek to improve process efficiencies and results, and the breakfast briefing will provide the opportunity to examine BPO trends in tumultuous times from both analyst and practitioner perspectives. More importantly, it will provide the opportunity to look beyond the crisis. The breakfast briefing features top industry executives in the Philippines as speakers and panelists as well as internationally respected analysts.

The state-of-the-industry survey will be repeated every quarter according to BPA/P executive director for information and research Gillian Virata. The series of surveys are intended to track industry sentiment, and how that sentiment evolves over the year. In addition to the surveys and regular industry briefings, BPA/P is planning a major international summit in October that will look beyond the Philippine BPO industry to assess the future of outsourcing globally.

Dubbed the “International Outsourcing Summit: Global Market Leaders Addressing Global Issues,” BPA/P executive director for industry affairs Jonathan de Luzuriaga says the conference will feature speakers and panelists from country associations and industry leading BPOs the world over. For two days in October, top global industry executives will debate the future of BPO and provide an update on how the Global Financial Crisis is not merely affecting the industry, but reshaping it.

According to Everest Research Institute, the stakes are enormous. In its most recent report, Everest said that BPO globally has an “addressable market opportunity of US$220-280 billion,” and the Philippines is well positioned to capitalize on that potential. “Success in voice-based BPO services has made the Philippines the second-largest, low-cost BPO destination (in the word) after India,” Everest analysts conclude.

The report also suggested that the Philippines is moving up the BPO value chain, providing increasingly value-added services, although “scale and maturity is low.” Most respondents to the BPA/P-O2P survey would beg to disagree on the issue of scale and maturity. When asked to indicate the value-add of the services they provide, 97% of respondents said their companies provide moderate, high, or very high value-added services. Almost 50% said the services they provide are of high value, and over 20% said the services they provide are very high valued-added.

The growing BPO sector is undoubtedly good news to many OFWs who are finding themselves without jobs, and who will eventually have no recourse but to return to the Philippines. But that’s silver lining for both OFWs and the industry. There are jobs waiting for them, here, where their families live. And for the industry, hard-working OFWs with excellent communication skills are re-entering the workforce.

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