Monday, October 30, 2006 Rising business costs in Manila put off firms By Jessica B. Natad Sun.Star Staff Reporter
CEBU is the next best potential site in the county for offshore offices of information technology (IT) and business process organizations (BPOs), an international research agency said.
This is so, as the increasing costs of operation and competitive pressures on the labor supply in Metro Manila continue to diminish the city’s attractiveness, according to the Offshore Insights Market Report series conducted last year by neoIT, an international research center.
Davao and Clark follow Cebu as emerging attractive outsourcing locations in the Philippines, with the cities of Baguio, Bacolod, Iloilo, Dumaguete and Cagayan de Oro on their heels.
Opportunities
As of 2005, Cebu is host to 14 call centers, while Davao and Clark have three and five call center companies, respectively. Some 80 call centers are operating in Metro Manila.
“(But) the increasing cost of doing business in Metro Manila has opened up opportunities for the less costly regions to attract business. For Metro Manila, sustaining a competitive advantage among other cities of excellence around the world—and among those emerging destinations in the Philippines—requires a shift in focus and policy-making based on long-term vision.”
According to the neoIT paper, Cebu surpassed the other seven cities in two of the four key factors—people, infrastructure, financial and catalyst—considered to have an impact on the competitiveness of a city to attract IT and BPO companies.
While Davao and Cebu are comparable in population size, Cebu ranks higher on the size of labor pool, a sub-factor of the people factor. This is due to the larger number of educational institutions, therefore a larger number of graduates entering the labor pool, in Cebu than in Davao.
Catalyst
With regard to the catalyst factor, which include government support and initiatives, the desire and effort of the Cebu local government to catalyze and create an environment for the industry to flourish, is more tangible as manifested in the creation of five special economic zones than the local governments of Davao and Clark, which has one ecozone each.
The report cited two multinational companies—American International Group (AIG) and SPI Technologies—which have established offshore back-end processing offices in Manila, to have expanded operations in Cebu.
AIG, a US-based insurance and financial services organization, has located its second center in Cebu. Its center in the Philippines provides back-end processes such as data entry, policy administration, claims, disbursement and premium processing and customer service to AIG worldwide.
SPI Technologies, on the other hand, builds a production facility in Cebu to increase its global operations capacity.
This move aims to accommodate up to 1,200 agents who will focus on providing state-of-the-art, medical transcription and information management services to hospitals, multi-specialty clinics, health management organizations, insurance companies and health information in the US.
“Organizations evaluating the Philippines as a sourcing destination now have more than a single city to consider. Metro Manila might be the established hotspot now, but the country is incubating cities like Cebu, Davao and Clark—cities that have the potential to become mature centers of excellence.
Whether their strengths lay in voice-based call centers, financial and accounting business process or animal services, these cities have inherent capabilities that will enable them to service offshore outsourcing needs,” according to the report.
