Friday, October 17, 2008 Challenges facing the BPO industry By Adrian Boyett Agbon Academe Committee Sun.Star Economic Forum
THE Business Process Outsourcing (BPO) industry, now hailed as one of the biggest industries in the world according to McKinsey & Co., will generate revenues of up to US$180 billion by 2010.
The Philippines and Cebu, in particular, has become host to this information technology (IT) related sectors of the BPO.
These are the contact centers, medical transcription, animation, shared and financial accounting services and the software development services.
Computer World and Inter Unity Group Inc. conducted a survey in 2003 on corporate IT managers in the United States.
Respondents were asked to select the most important reasons why their organizations outsource to non-US locations. Cost reduction and control (44 percent) were the major reasons for their companies’ decision to outsource. This is followed by freeing up internal resources that accounted for 20 percent.
IT managers also cited the need to gain access to world-class capabilities and increase in potential revenue (coming in third at 13 percent). The need to reduce their services, increase process efficiencies and follow company philosophy of outsourcing non-core activities were cited by 11 percent of respondents who decided to outsource.
The Philippines was ranked fourth overall by AT Kearney as a favorite destination of outsourced services due largely to language skills (English with American accent), Western cultural literacy and exposure to global business. The country’s bandwidth is also high compared to our Asian neighbors.
With several years of experience with standard BPO projects, the industry earns about $US1 billion annually.
Thailand, on the other hand, was considered the biggest jumper in the AT Kearney offshore index, thanks to improvements
in education, infrastructure and overall business environment. The Thais have been considered a major low-cost challenger to the Filipinos. However, Thailand’s weak English language capability is a drawback. Both countries were also considered in International Intellectual Property Alliance (IIPA) priority watch list.
What are the major challenges facing the BPO industry in Philippines?
One would be the need to improve the business and political environments, which were cited in the Global Outsourcing Guide 2006 as high-risk factors.
Local government units (LGUs) should also be involved in promotion of possible locations and development of telecoms and IT infrastructure in their localities. LGUs must also enhance the quality of the work force (e.g., mandating English as the medium of instruction in local educational institutions, supporting the introduction of IT courses in public schools, etc.) and ensure the safety of BPO professionals—especially those working during the night shift.
LGU involvement is more direct and will hopefully yield better and immediate impact.
Higher educational institutions should be engaged in partnership programs that aim to provide critical skills to prospective BPO professionals.
It is also imperative to look at our science and math curricula-necessary components to develop high-level technical and critical skills if we want to move up to the BPO value chain, next to India.
