A new dawn?

Michael Alan Hamlin

Posted on November 25, 2009

When asked to identify the greatest obstacles to growth of knowledge process outsourcing (KPO) services, respondents to a new industry survey pointed to human resource constraints. The tight market for qualified knowledge workers (54%), the difficult of retaining knowledge workers (46%), complex training requirements (34%), high wages (30%), and inadequate educational infrastructure threaten future growth.

Despite those hurdles, most respondents (81%) offering KPO services-which include small, medium, and large enterprises delivering a broad range of complex work-agreed that growth prospects are good (37%) or very good (44%). Only six percent of respondents said growth prospects were fair, and none said they were poor. Thirteen percent of respondents said prospects for growth were excellent.

The survey was commissioned by the Business Processing Association of the Philippines (BPA/P) and Outsource2Philippines (O2P) and administered online by TeamAsia (Disclosure: I am an employee of TeamAsia and a director of O2P. BPA/P is a client of TeamAsia.). The survey was conducted after two recent typhoons-locally known as Ondoy and Pepeng-among BPA/P members. The survey had a response rate of 25%, or 160 senior executives.

The results were presented yesterday in a CEO breakfast forum by BPA/P executive director for research, Gillian Virata. Although the survey results overall revealed an upbeat assessment of the industry-which is the Philippines’ most important generator of high-paying jobs-respondents also revealed concerns in the areas of business continuity and general perception of the Philippines internationally.

Entitled “The State of Philippine KPO: A New Dawn?” the forum and the survey that preceded it were intended to assess whether the Philippines is on the cusp of a new, more mature outsourcing era in which highly educated knowledge workers are engaged in complex work in a wide range of value-added work, including legal, creative concepts and content, financial, market research and analytics, and healthcare.

The results suggest that it is. Sixty percent of respondents said their organizations are engaged in the delivery of KPO work, with 66% identifying North America as a principal market, especially among large to extremely large firms (59%). Perhaps surprising to some, Asia was identified by 55% of respondents as a principal KPO services market, particularly for small to large firms (46%). The EU is an important market for 30% of respondents, but 37% of small to large firms said it is a primary market.

Aside from human resource constraints (23%)-which also include a dearth of mid-level managers with solid management experience according to forum panelists-survey respondents identified government corruption (21%), and negative perception (15%) as serious impediments to growth in KPO. The Philippines ranks among the most corrupt countries in Southeast Asia and the world in annual corruption surveys, and anecdotal evidence abounds within the industry of government corruption, particularly at the local government level.

Many international investors walk away from potential investments marred by corrupt practices, in part because developed country governments where they are headquartered levy heavy penalties for engaging in corruption. Others simply won’t allow corruption to distract from their investment objectives when there are so many other countries competing for the same investment and the jobs it creates.

Panelists at the forum-which included Thomson Reuters senior site officer Raoul Teh, Duotal managing director Dondi Mapa, and Integreon global chief information officer Erik Tabuena-commented that Filipino knowledge workers are highly evaluated within the industries they serve. However, negative perception of the Philippines overall limits investor interest in the country.

Despite the high levels of appreciation for knowledge workers here, selling an investment opportunity to a skeptical executive committee reviewing the latest corruption report, to a client decision maker whose security firm has just warned him or her about political instability and terrorism in the Philippines, and to an executive’s family concerned about kidnapping is an uphill task. JP Morgan Chase Bank senior country operations officer and BPA/P director Barry Marshall said, “there are many misperceptions surrounding the Philippines.”

Mr. Marshall and others-including BBDO Guerrero chairman and chief creative officer David Guerrero-said these misperceptions persist because the Philippines does not effectively communicate its attributes to investors. Although many questions have been raised concerning business continuity in the aftermath of recent typhoons, for example, 75% of respondents said their operations were only somewhat (55%) or not at all (20%) impacted by Typhoon Ondoy.

Ninety-five percent had negligible (87%) or minor (8%) damage to facilities and equipment, and half of respondents said operations were normal throughout the severe weather. Ninety-five percent of respondents were operating normally three days after Typhoon Ondoy. The quick return to normal operations “in the face of a 40-year-storm is not only notable, it is absolutely remarkable,” Mr. Marshall said.

“The people of this country get the work done, and it is that same determination and perseverance that will continue to propel this industry to great success,” he said. And it will happen faster if we communicate that reality effectively.

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