Cesar Tolentino

Industry Analyst and Consultant

WHILE the current Philippine Business Process Outsourcing (BPO) industry is dominated by large players like Accenture, IBM, Aegis PeopleSupport, Convergys, and the like, recent trends have indicated that an increasing number of market niches are being created for SME BPOs. SMEs (small- and medium-sized enterprises) are defined as companies with 500 or less employees.

There were at least 64,600 SMEs in the Philippines as early as 2001, and the number is expected to be much higher by this year. Of these, an estimated 300 or so are in the BPO business based on a survey of BPO directory sites such as Offshore Outsourcing Experts (www.offshorexperts.com). There are currently more than 600 BPOs in the Philippines, covering such business services as voice services (call centers), non-voice services (back-office BPOs such as in Human Resource Management, Accounting and Finance, Purchasing, and Office Administration), software development and IT services, transcription and data migration, animation and game development, and engineering and design.

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Interest in SME BPOs rose in the last two years after a local software development firm, Corebuilt Technologies, won the Outstanding Client Application of the Year Award at the e-Services Global Sourcing Conference 2009. Corebuilt Technologies was, in effect, elevated in the same category of business excellence and product/service quality as bigger BPOs such as Accenture and Sencor. Today, other SME BPOs that are establishing niches where larger players used to dominate include such companies as Proview Global (HR outsourcing), Anino Games (game development), Cutting Edge Productions (animation), AccessCall Solutions (call center), Visaya Knoweldge Process Outsourcing (knowledge process outsourcing), Extramind F&A Outsourcing (accounting and finance outsourcing), and Total Transcription Solutions


From a country-level perspective, SMEs account for 99.6 percent of all business establishments, 70 percent of the workforce, and contribute to 32 percent of the economy. Currently, however, SME BPOs are estimated to account for less than a third of all BPOs, less than 20 percent of the workforce, and contribute to less than 20 percent of total BPO revenues in 2009. It can be seen thus, that there is significant room for growth in the BPO industry for more SMEs to enter the market.

Based on the ecosystem of the country-level business environment, it can be projected that the Philippine BPO market has room for at least a thousand more SME players. But like the case with existing SME BPOs like Corebuilt Technologies, success in market entry into the BPO business will have to be as a niche player and not to offer everything under the sun as is the practice of bigger BPO companies like Accenture.

And the opportunities for market entry are substantial, the market demand for BPO services covers a wide array of offerings from salesforce management (via call center services), to financial statement preparations and bookkeeping services (via accounting and finance outsourcing), and to advertising campaign conceptualization, design and execution (via advertising services outsourcing).

And the business proposition for Philippine SMEs to enter the BPO business is pretty much straightforward. Clients in target countries such as the US, Canada and Western Europe who are seeking BPO services are looking for the same quality they will normally find if they source the service locally but at lower contract prices.

And because of the lower costs of living, prevailing salaries (caused by currency exchange rate differences), and real estate costs, service companies in the Philippines have the opportunity to offer the same or similar quality at significant savings to the foreign client. It is estimated that for a typical service such as salesforce management, a Philippine call center can offer at least 20 percent in savings to a US client compared to if the contract had been given to a US service provider.

These savings are critical to most US companies, even among US SME businesses, as the US economy struggles to recover from the effects of the 2008 financial crisis. In spite of prevailing sentiment among the US population that outsourcing and offshoring to countries such as India and the Philippines will be detrimental to the welfare of the US workforce, US companies will be hard-pressed to maintain their business while significantly reducing their operating costs.

And in that context, outsourcing and offshoring practices (while hopefully retaining as much of their workforce as is financially viable) will be inevitable realities of any business in the coming years. This thus, presents an indisputable opportunity to Philippine SMEs – that an ever growing number of US companies will be looking for a wider array of services from other countries.