Philippine IT-BPO in the Year of the Dragon

Michael Alan Hamlin

Posted on March 22, 2012

The Philippine IT-BPO industry may be on a roll—expanding 24% last year to more than $11 billion in revenue and 640,000 full-time employees (FTEs)—but industry leaders aren’t breaking out the cigars and brandy or sitting back to enjoy their success. Instead, a recent survey revealed seven areas IT-BPO executives believe must be urgently addressed to ensure that the industry continues to benefit from growing demand internationally for outsourced services.

Conducted by the Business Processing Association of the Philippines (BPAP) and Outsource2Philippines (O2P), the survey was conducted in February and March. It was distributed to 621 primary and second representatives of BPAP and the Philippine Software Industry Association (PSIA), and 161 executives responded providing a 26% response rate. The confidence level was 95%  plus or minus 3%.

(Disclosure: O2P is a subsidiary firm of TeamAsia, where I am managing director. BPAP and O2P engaged TeamAsia to develop and administer the survey.)

Although IT-BPO executives remain vigilant, they are also optimistic. More than 90% of respondents said their companies will expand their workforces this year. This includes firms of all sizes. Many firms have already attained substantial scale, but among 36 respondents working in firms with 1,000 FTEs or more, all but four said their companies would grow 6% or more this year. And 75% of all respondents said their companies will grow between 6% and 50%.

Compared to last year, significantly more firms also said they will grow between 11% and 50% in 2012. This differential was especially notable among firms that said they would grow between 16% and 25%. In a similar survey last year, slightly more than 11% of respondents said their companies will grow in this range. This year, close to 25% of respondents said their companies will grow between 16% and 25%.

That’s probably why this year’s survey revealed significantly higher perception of the tight labor market as a risk factor compared with previous years. Last March, 43% of respondents said the tight labor market was their number-one concern when it comes to risk to the industry and its continued expansion. This year that number jumped 20 points to 63% of respondents.

Similarly, the chief business development concern is availability of people with the right skills for knowledge process outsourcing. Non-voice, complex outsourcing services are the fastest-growing segment of the Philippine IT-BPO industry. This is a positive development, as it shows growing acceptance of the Philippines as a provider of high-value services. Thirty-four percent of respondents said skill sets to support KPO is their number one development issue, up from 26% last year.

When it comes to general skills, English competence remains the top concern, up eight points to 25% this year from 17% last year. This year’s survey also introduced a new skill area, values and work ethic, and it resonated with respondents. Twenty-four percent said it was their number one priority, making it essentially as important as the ability to speak English. Executives seem to be concerned with emotional maturity of their employees.

As the industry grows KPO capability and expands service delivery, IT-BPO executives believe a deep academic-industry partnership is key to ensuring talent supply, and that a more flexible regulatory environment can contribute to fostering such a partnership. The IT-BPO Road Map 2011-2016 calls for liberalization of foreign investment in education and training to ensure institutions are available with the domain expertise necessary to prepare students for careers in IT-BPO. The industry is already working closely with the Department of Education and the Commission on Higher Education.

Concern over perception and brand visibility of the industry also increased substantially this year, up from 28% in 2011 to 46% in 2012. This result reflects increased concern with availability of qualified labor, and signifies the importance of creating positive perception of the industry and the opportunities it provides among students and the people who influence them, especially parents.

This year’s survey showed some easing of concern over investment incentives. While it remains a priority concern, respondents appear to feel that government policy makers understand the industry and will do whatever necessary to sustain investment.

Given these seven overriding issues, respondents believe that BPAP’s principal roles this year as the umbrella association for the IT-BPO industry are to ensure talent supply, lead industry development especially in the area of quality assurance, and marketing and branding the industry both in the Philippines to potential employees (students and career shifters) and internationally to companies seeking to outsource business services.

For the IT-BPO industry, times are good. But they can always be better. With global industry demand forecast to reach close to $1 trillion this decade according to some analysts, the Philippines must address the issues identified by respondents to get its share.

(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 and follow him on TwitterFacebook and LinkedIn. Copyright © 2012 Michael Alan Hamlin. All Rights Reserved.)

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