After posting record growth, IT-BPO execs turn their attention to the cost of doing business in the Philippines

Michael Alan Hamlin

Posted on April 26, 2012

The Mindanao Power Summit last month brought the cost of power back to the headlines and to the forefront of political debate. For decades, Mindanao has enjoyed highly subsidized rates for electricity. The result was not just cheap energy. Maintenance of hydroelectric and other generating facilities was neglected, and planning and development of new generating capacity was ignored. Neither made financial sense, from a disastrously myopic perspective.

Mindanao isn’t the only place business and consumers worry about energy and other costs. Even in the burgeoning IT-BPO industry, the cost of doing business in the Philippines is of increasing concern to services providers and global in-house centers (GICs) as competition for IT-BPO investment soars. That’s why the Business Processing Association of the Philippines (BPAP) and Outsource2Philippines (O2P) are focusing on the cost of doing business in their next industry briefing.

The briefing is certainly not expected to be as raucous as the Mindanao Power Summit, and its purpose is to generate realistic alternatives for lowering costs. Entitled, “Driving Cost Efficiency, Maximizing Profitability: The Cost of Doing Business in the Philippines,” the briefing will take place June 21, 2012 from 7:00 am to 11:00 am at Makati Shangri-La. (Disclosure: I am the chief executive of O2P.)

According to organizers, with the Philippines a major global player in IT-BPO and GIC services, it is important to assess the cost of doing business to sustain national competitiveness. The briefing’s agenda focuses on third-party services costs, the business environment provided local governments, and the economic forecast for the Philippines. It will feature presentations and discussions led by expert analysts, high-level company executives, and ranking representatives of the government.

The briefing is organized around three presentations. The first is Getting down to business: A closer look at cost and competitiveness. BPAP says the IT-BPO industry ended 2011 with US$11 billion in revenues, achieved a 24% increase over 2010, and employed 638,000, or 22% more employees. Robust growth is expected to continue in both voice and non-voice sectors. But while revenues are growing, costs are as well. How do Philippine IT-BPO firms and GICs view the cost of doing business in the Philippines? How does the Philippine IT-BPO industry compare with competing global centers in terms of the cost of doing business?

The Philippine Economic Forecast is the focus of the second presentation because strong economic performance is a critical attribute in attracting investment. What are the real growth prospects for the Philippines and how can it maintain its competitive edge in attracting IT-BPO investment? Labor arbitrage isn’t the Philippines’ strong suit. Generating value is critical. But so is controlling spiraling costs of doing business.

We’re not alone. According to KPMG’s Competitive Alternatives 2012 study, the labor cost advantages of high-growth markets such as Brazil, China, and India are eroding because of the high rates of wage inflation, with innovation shifting from low-cost process efficiency to higher value product innovation. Can the Philippine IT-BPO industry innovate to succeed? Can government move effectively to do its part to keep costs in check?

The third presentation, Driving Cost Efficiency, Maximizing Profitability, asks how IT-BPO and GIC industry players are managing costs globally and enhancing overall competitiveness.  Are organizations more focused on controlling costs than innovating to sustain margins? How good are they at it? Has the IT-BPO industry adopted a mind-set for continual innovation, embracing productivity- and efficiency-enhancing process and service innovation? What are they? Can super-hyped, new technologies such as “the cloud” provide breakthroughs that both lower costs and increase flexibility?

The briefing also features two panels. The first panel—consisting of representatives of third-party services providers—will examine operating costs for telecommunications, network infrastructure, new technologies, energy, procurement, and human resources. Panelists will discuss how regular enhancements in technology services and systems provide the means for continual, incremental increases in efficiency. And more importantly, the reality that incremental increases in efficiency don’t provide competitive advantage; rather, comparative parity.

The second panel—composed of industry and government representatives including local government units, Department of Trade and Industry, Philippine Economic Zone Authority, and leading IT-BPOs—will provide industry and government perspective on costs and how they can be reduced. Consider: with IT-BPO among the top 10 government priorities, what are local or city governments doing to ensure that current and new investors enjoy business cost advantage?

How are business districts positioning and distinguishing themselves within the Philippines and among other competing global IT-BPO and GIC services centers? Are they prepared to introduce new, innovative incentives to sustain employment generation and expansion of the income tax base? BPAP is working with the Information Communications and Technology Office to rank cities’ competitiveness across the Philippines. How will this impact local officials and their development programs?

Interested? Then click here to register and participate in the briefing.

(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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