AT Kearney misses the mark
Like many other observers who watch the IT-BPO industry, I laughed aloud spontaneously when I scanned consulting firm AT Kearney’s Global Services Location Index 2010. Released earlier this month, the 2010 Index ranks the Philippines number nine—down two places from last year—after India, China, Malaysia, Egypt, Indonesia, Mexico, Thailand, and Vietnam.
In that order.
The annual Index purports to rank countries by their aptitude to attract outsourcing activity in three categories: financial attractiveness; people skills and availability; and, business environment. Although the Philippines ranks among the highest—tied with Indonesia at 3.2—in financial attractiveness, it falls short according to the AT Kearney consultants in the second category, people skills and availability.
Within the people skills category are four criteria: IT-BPO experience and skills; labor force availability; educational skills; and language skills. The Philippines ranks a notch below Vietnam—1.2 versus 1.3—in the people skills and availability category. India, China, Malaysia, Egypt, Indonesia, Mexico, and Thailand are all viewed by AT Kearney as having somewhat to significantly better people skills and availability than the Philippines.
Several other studies—including the IBM Global Location Trends Report and the IT-BPO Road Map 2011-2015 developed by Everest Group and Outsource2Philippines (O2P)—rank the Philippines much higher in the attractiveness of its people skills. (Disclosure: I am the CEO of O2P. The Road Map was commissioned by the Business Processing Association of the Philippines (BPAP) and funded by the Commission on Information & Communications Technology (CICT).)
IBM reports that, “the Philippines has taken over the lead in the global ranking from India (for jobs created in business support and shared services in 2009), having challenged the top position for several years.” Everest and O2P forecast late last year that the Philippines would take the lead in BPO from India in 2010, with more workers directly engaged in the industry. In December 2010, Everest said that the Philippines would reach $5.7 billion in IT-BPO revenues for the year compared to India’s $5.5 billion.
In terms of supply, among recognized offshore outsourcing centers the Philippines is number three in annual tertiary graduates after India and China. It is also number three in the number of finance and accounting and business degrees—and is only slightly behind China—graduated annually. The Philippines is the number three producer of IT and technical talent. It has almost as many certified public accountants as India.
Everest ranks the Philippines number two after India in cumulative talent competitiveness (scalability, experience, quality of English, and size of graduate pool). India and the Philippines are at par on Everest’s risk index for English BPO. The IT-BPO Road Map also shows that while the Philippines is the new leader in voice-based IT-BPO, it has become an important center for knowledge-based services in a wide range of sectors for both BPO services providers and shared services facilities. More than one third of total industry employment is engaged in delivering complex services.
India and China understand the overall attractiveness of the Philippines to outsourcers. The Philippines ranks number three for investment from these countries after the United States and the United Kingdom. Every major India BPO services provider operates a facility in the Philippines, some more than one. With an estimated 530,000 people employed in the industry at the end of 2010, the Philippines far outranks all the Southeast Asian countries ranked above it by AT Kearney in employment terms.
All the top 10 countries in the Index are roughly at par in terms of business environment, except for Malaysia which is ranked somewhat higher than all other leading BPO centers. According to industry sources, AT Kearney is struggling to justify the overall ranking and especially the people skills and availability results. While each country on the list provides distinctive people advantages, it is painfully difficult to explain how Indonesia and Thailand, for example, offer outsourcers a better Western-oriented skillset than the Philippines.
That doesn’t mean that the Philippines isn’t realistically at risk of losing its number one rank in the view of other analysts. Although the Philippines has an adequate supply of annual graduates to grow the industry at a robust rate, to achieve its potential it must expand its available labor pool from about 90,000 annually to more than 130,000 by next year. That’s a 30% jump, and by 2016 the industry will need more than 180,000 new workers annually.
China also is expected to emerge as a significant competitor in complex, non-voice BPO services. English is rigorously taught at all levels in China, and many complex services don’t require the spoken English skills that call centers require. Demand for complex services is expected to grow faster than demand for voice-based customer services process services. While there is likely to be plenty of business for many players, no country can take industry leadership for granted.
As for the present, AT Kearney has obviously convinced itself that its ranking reasonably represents reality. Fortunately for the Philippines, services providers and their clients largely disagree.
(Michael Alan Hamlin is the managing director of TeamAsia and a Manila-based author. His latest book is High Visibility: Transforming Your Personal and Professional Brand. Write him at firstname.lastname@example.org and follow him on Twitter, Facebook and LinkedIn.). Copyright © 2011 Michael Alan Hamlin. All Rights Reserved.)