WHILE Manila and Cebu have proven their credibility as established global outsourcing destinations, these two cities shouldn’t remain complacent, a principal of global consulting firm Tholons warned.
Vikrant Khanna cautioned the participants of the ICTBPM Conference 2014 last Tuesday of tougher competition from around the globe.
“Locations in the Philippines are sitting comfortably. It had the right kind of access to investors, but you should bear in mind the competition outside, not only in talent and market access. Investors are not in search of cheap talent but right talent,” he said.
Citing results of a study conducted by IT body Nasscom, Khanna revealed that access to talent and access to market underscore the role of locations in the global regional delivery. And while talent availability remains critical, business and environment conditions, such as fiscal incentives and business infrastructure, are gaining importance when finalizing decisions.
Moreover, Khanna revealed that while other emerging countries have ventured into the BPM industry, he warned there will be greater requirements.
UK and Europe, put together, will outpace the US market share, which could mean there will be greater requirements, cultural differences, business to be done, and language differences, said Khanna.
“What is happening now is that as the choices of location increase, clients will be more demanding as they build their location plan. What else can you do?”
Khanna suggested the Philippine BPM industry diversify its services portfolio and identify new areas with the right talent to fit into, given that competitors from other countries have started defining niche services and offer value propositions to new buyers.
He noted there is now an upswing of nearshore outsourcing.
“Locations in the Philippines need to find their spot,” he said, adding that tier two and three cities in the country should evolve to provide a diverse portfolio of services.
“Searching for the right talent is also a global battle,” added Khanna. He said the Philippines will have to compete against other emerging locations in terms of graduates produced. The Central American cluster, for instance, has access to 700,000 graduates per year.
Manila has risen to the second spot in Tholons’ list of top cities for outsourcing, dislodging Mumbai down to third. Other cities in the Philippines, including Davao City, Santa Rosa in Laguna and Bacolod City, all rose up the ranks, while Cebu City maintained its position at eight, according to the latest Tholons report.
Tholons ranks cities based on six parameters - scale and quality of talent; cost; business catalyst (economic profile of city); infrastructure; risks (political and social risk, risk of natural disasters); and quality of life.
According to Khanna, the changes in the global market require the Philippines to invest in people development to protect its own industry while building business to other emerging countries. He also suggests that stakeholders identify new growth opportunities beyond what is offered in the current marketplace.
He likewise encouraged industry players to expand entrepreneurship in emerging technologies to build “glocal” champions. He said introducing technology as a business should be a top priority. Startups, in particular, are catalysts for growth.
Khanna noted that the “app economy” is a new industry that is outpacing the growth of the ITBPM. This economy is expected to generate $160 billion by 2016.
While location decisions have become granular, cities also need to step up.
u00a0“The primary role of the industry is to bring in investors to the country. Cities, on the other hand, should step up and promote aggressively,” he said.