CEBU

Struggling firms may outsource biz in PH

OPPORTU-NITY. The massive unemployment in the US due to the coronavirus pandemic may force companies to offshore some of their operations to countries, like the Philippines, as these companies cut operational costs. (SunStar file)

CEBU’s business process management (BPM) industry may benefit from the global economic recession as it’s likely to compel companies in the west to offshore more jobs at home.

Due to the economic fallout caused by the coronavirus crisis, companies from abroad may look at outsourcing to cut costs, property consultancy firm Santos Knight Frank said in a May 2020 research on the Cebu office market.

Similar to what happened after the 2008 global financial crisis, the Philippines may come out to be a top viable investment option for BPM companies.

“The pandemic has caused huge economic damage to other countries as well,” Santos Knight said. “Similarly, some major cities have also implemented their own versions of the enhanced community quarantine (ECQ) to curb the spread pf Covid-19. With such damage, these companies may look to cut costs by outsourcing some of their businesses here.”

The US is one of the major markets of Cebu’s BPM industry. The world’s largest economy has reported massive unemployment claims in recent weeks as the economic crisis widens. That may force some US companies to offshore their operations.

“As the metropolis already offers affordable office spaces and a high-quality of talent pool proven by the sizeable BPM workforce residing here, Cebu has already proven that it has the necessary manpower and infrastructure to cater to such businesses,” Santos Knight said.

According to the Information Technology and Business Process Association of the Philippines (IBPAP), the sector’s revenues grew by 7.1 percent to US$26.3 billion in 2019. This is faster than its goal of 5.2 percent.

Employment in the IT-BPM sector rose 5.8 percent to 1.3 million employees in 2019. IBPAP noted that the expansion is attributable to more jobs generated in areas outside Metro Manila, including Bacolod, Cebu, Davao, Iloilo, Laguna and Pampanga, which covered more than 70 percent of full-time employee growth.

Delays

On prospects on the office market, the realtor expects delays in the upcoming supply of spaces in Cebu.

From the original estimate of 260,000 square meters in new office space supply, only 96,000 sqm is seen viable to be operational within the year, it said.

Cebu’s office towers may also have temporary surges in vacancy levels as most companies implement work-from-home (WFH) schemes.

“Even when the vaccine for Covid-19 is developed, physical distancing will continue to be practiced and become the new norm. As such, some companies may opt to continue implementing partial WFH scheme to limit the number of employees in their offices while others may find the WFH scheme to be effective in their business,” the company report said.

In fact, there are firms that may even continue to fully implement WFH schemes and have their offices filled only by a skeletal workforce.

These arrangements may cause tenants to be more efficient in their office space use, prompting them to cut their space needs.

Companies that found the WFH system ineffective would need additional office spaces to adhere to physical distancing measures.

This is where, Santos Knight said, flexible and serviced offices can take advantage as they come with private rooms and enough space allocation.

As vacancy surges, office landlords are urged to provide rent relief measures to their tenants to keep them rather than look for new ones later on. At a time when companies are finding it hard to gain revenues compared to the previous years, rent relief measures help lessen the financial pressure of tenants, thus prolonging their capacity to operate amid the ECQ.


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