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Alexander Villafania
INQUIRER.net

MANILA, Philippines — Amid a looming economic slowdown in the Philippines for 2009, the business process outsourcing (BPO) industry is expected to remain strong. However, growth will be as big as 2008, an official of the Commission on Information and Communications Technology (CICT) said.

“No doubt the BPO industry will remain solid in 2009 and there will be challenges to be faced. The BPO growth this year will be almost the same as the 2008 growth, which was double digit,” CICT Commissioner for Cyber Services Monchito Ibrahim said in an interview.

The Business Process Association of the Philippines (BPAP), the biggest organization of outsourcing providers in the Philippines, is expecting a “cautious” growth of 35 percent for 2009. By 2010, the organization said the outsourcing industry will earn about $12 billion to $13 billion.

Ibrahim said the CICT has drafted a year-long strategic plan for 2009, which would be presented to members of BPAP next week. The CICT expects to synchronize its plans with the industry player during the meeting.

“We’re also consolidating our 2008 figures to really know how much the industry has earned,” Ibrahim said.

The CICT official acknowledged that the human resource shortage remained the biggest concern of the industry.

Ibrahim said they are hoping that the P300 million contact center training started at the Technical Education and Skills Development Authority (TESDA) will continue and its budget doubled.

Meanwhile, the agency is pushing for the adoption of the IBM Service Science, Management and Engineering program in universities to develop more high-level professionals for the BPO industry.

“We’re pushing very hard. We are also hoping that some of the bills proposed to Congress would be approved,” Ibrahim said.

Ibrahim was referring to the data privacy and cybercrime bills, which hopes to create a more attractive environment for BPO providers.

Alexander Villafania
INQUIRER.net

MANILA, Philippines — Despite a looming economic slowdown across Asia Pacific, International Data Corporation (IDC) said IT services market would remain healthy.

IDC also said the IT services market would grow to US$49.4 billion by 2009, according to the research group in recent report.
IDC’s optimistic forecast is brought primarily by continued demand for managed services and outsourcing.

It also said that cost management is a key focus for organizations in the Asia Pacific region.

The report said the region’s stronger resistance to the global slowdown is being helped by double digit growth of IT services in the developing markets, particularly India and China.

Emerging markets like the Philippines, Thailand and Vietnam are also contributing to the growth, the report said.

IDC released its report entitled “Effects of the Global Economic Slowdown on Asia/Pacific (Excluding Japan) IT Services: Market Analysis and Forecast Study for 2008 to 2012.

The report said that overall growth rate of IT services for 2009 in Asia Pacific (excluding Japan) is at 9.6 percent compared to the earlier forecast of 11.2 percent in 2007. The revised forecast indicates growth of US$2 billion for the IT services market in 2008 and 2009.

Nevertheless, IDC forecasted lower growth of US$6.5 billion for the Asia Pacific IT services market between 2008 and 2012.

IDC Associate Research Director for Asia/Pacific IT Services Research Philip Carter said that the Asia Pacific IT services would hold up to the challenging economic conditions.

Citing a previous IDC economic impact poll, Carter said about 12 percent of 400 organizations surveyed said they would increase spending on managed or outsourced services in 2009.

“The impact on the services market has to be viewed from a number of perspectives — and these are changing constantly — but the point is that opportunities will be created. It does highlight that opportunities will exist in the services space in 2009, and vendors need to be proactive in pursuing them,” Carter said.

Alexander Villafania
INQUIRER.net

MANDALUYONG CITY, Philippines – Philippine-based outsourcing giants are now feeling effects of the US recession with some companies seeing a slowdown in demand for services, particularly on medical transcription and animation, industry executives said.

But some are reporting a surge in demand in contact center services, back office operations, software development and gaming.

Nevertheless, the local outsourcing firms are approaching 2009 with “cautious optimism,” according to Philippine Software Industry Association (PSIA) President Beng Coronel.

Animation Council of the Philippines (ACPI) President Grace Dimaranan said some of their projects, which are mostly animation series, were postponed or on hold amid the US recession.

Similarly, Medical Transcription Industry Association of the Philippines (MTIAPI) President Myla Reyes said some of their services, mostly serving the US market, have slowed down.

The Philippine outsourcing industry is composed of contact center operators, business process outsourcing, animation, game development and transcription.

The Philippine outsourcing industry is expecting a 35 percent overall growth that is worth $12 billion to $13 billion by 2010.

But given the US recession, Business Process Association of the Philippines (BPAP) CEO Oscar Sañez said they might adjust these targets but assured that growth would remain in the double digits.

“We are not distracted by the US recession. Indeed there will be some effects but the recession situation is also an opportunity. With companies trying to streamline their operations outsourcing is a viable and cost effective solution,” Sañez said.

There are, however, concerns on US President-elect Barack Obama’s pronouncement to provide tax cuts for companies who will keep operations in the US.

Still, Philippine outsourcers are not threatened by Obama’s statements, saying there are no details yet as to how these tax cuts will be implemented.

Philippine contact centers, who are servicing mostly US clients, are still optimistic.

Contact Center Association of the Philippines (CCAP) Benedict Hernandez said tax cuts will not deter US companies from outsourcing if the need arises. Some companies would have to look into the viability of keeping operations in the US or having it outsourced to other countries.

“We’re at the forefront of providing the best solutions and we’re not afraid that US policies would affect services here,” Hernandez said.

Another concern of Philippine outsourcers is human resource or the lack of skilled workers ready for hiring. The rate of hiring is still low due to the specific requirements of the outsourcing industries.

The software industry reported that it is in need for 75,000 workers by 2010 but has only 21,000 so far. The transcription industry is in need of 32,000 but it only has 10,000 people hired. Animation, on the other end, is in need of 25,000 people but has 10,000 hired.

The contact center business, the biggest outsourcing industry, has 220,000 employees but is still in need of 350,000 people. The relatively new industry, game development, has about 300 to 500 people but also hopes to grow to 1,000 employees.

MTIAPI’s Reyes said English speaking skills remain a problem among applicants in the outsourcing business. Thus she said that fundamental education should be further developed if human resource demand is to be met.

The PSIA, CCAP and the MTIAPI are now working with the Technical Education and Skills Development Administration (TESDA) and the Commission on Higher Education (CHED) to integrate specific curriculums in colleges and universities.

Meanwhile, the Game Development Association of the Philippines (GDAP) and ACPI has been conducting school tours to promote creative and artistic development among students.

Sañez said that while the US is still the main target of the local outsourcing industry, the potential of providing services in Europe and some Asian countries is enticing some companies to build new clienteles outside the US.

The PSIA is already looking at Japan. GDAP has clients from Australia, Germany and France. MTIAPI is expanding to Canada and New Zealand.

Meanwhile, ACPI has clients in Italy France, the United Kingdom and New Zealand.

Sañez said that the outsourcing industry has to expand its product portfolio and its clientele beyond the US to partly augment the possible effects of the US recession.

“There will be challenges and requirements could be slightly different. This is an industry that is working very hard to achieve its goals,” Sañez said.

Anna Valmero
INQUIRER.net

MANILA, Philippines – Business process outsourcing firm APAC Customer Services Inc. is investing P100 million for a call center branch in Leyte, which will house up to 1,000 employees.

Located at the Leyte Academic Center (LAC) in Palo, the 35, 000-square-feet campus will be APAC’s fourth site in the country, and Leyte’s first call center.

“Leyte is our top choice for our provincial strategy due to its fiber optic backbone, talent pool and government support,” said Doug Almond, APAC vice president for international operations, in a briefing.

Initially, the branch will employ 140 professionals for its first client program slated to begin in January 2009. Hiring for the new facility will start in November.

According to Leyte Governor Carlos Petilla, “The province produces about 6,000 graduates per year from a dozen reputable universities, a talent pipeline that is enough to support large-scale BPO operations.”

Petilla said Leyte has an industry-academe forum which allows businesses to explicitly define their employee qualifications and work with the academe to meet this.

The academe, in turn can revise its curriculum offerings to fit these qualifications and help ensure their graduates get jobs based on their expertise. One segment of this forum is grooming graduates to become qualified BPO professionals.

Three other contract bidders applied to set up a call center at Leyte but Petilla said they chose APAC due to the company’s long-term commitment to tap the local talent pool for its operations, as evidenced by the number of seats it wants to operate in the center.

Based on the agreement between APAC and the Leyte provincial government, the BPO company would lease for three years an area at LAC.

Petilla said the renovated LAC campus is a PEZA zone so the government will not tax APAC for at least six years.

He said the province will benefit from the investment from the jobs it will generate and the increase in disposable income people will spend in the province.

At present, the Leyte government has no plans to increase the target of hiring 1,000 employees for its budding BPO industry.

Petilla said they want to make sure the province can provide enough graduates to meet the existing demand before increasing its targets.

Almond said that depending on how the Leyte campus will perform as support center to its U.S. offices, APAC is open for expansion in the region in which Leyte belongs.

Almond said APAC is bullish on its prospects in the Philippines, especially with its provincial strategy plan.

“We are in an aggressive growth phase in the Philippines. Under the provincial strategy program, we aim to achieve 80 percent of our growth over the next five years in the provinces,” the APAC executive said.

About 95 percent of APAC clients are from the U.S., which is now under a financial crisis.

Almond said this will not hinder APAC to continue growing in the Philippines because the company’s financial accounts only comprise 5 percent of its total portfolio.

APAC handles accounts in markets such as healthcare, business services and logistics, publishing, travel and telecommunications.

Currently employing over 8,000 contact center professionals, the NASDAQ-listed BPO firm already operates three sites in Manila, two in Alabang and one in Quezon City. It also operates nine contact centers in the U.S with over 4,000 employees.

Alexander Villafania
INQUIRER.net

MANILA, Philippines — The Philippines’ business process outsourcing industry remains safe from the effects of the recent financial debacle in the United States, according to executives from private and government agencies.

The Business Process Association of the Philippines (BPAP) said the industry will only suffer a “cooling down” effect as some US companies cancel their outsourcing contracts.

However, this will be offset by an influx of new contracts.

BPAP Chief Executive Officer Oscar Sañez told INQUIRER.net that the slowdown will vary in effect among companies in the Philippines, especially those who have US clients.

He said that the BPO business in the country is in better shape against other industries because of new clients coming in. Some of the industries, particularly the banking and financial sectors, would undergo changes that can affect BPO providers’ clientele.

Sañez added that there is no indication as to when the US financial crisis will abate.

Nevertheless, there are investors also from the US, Europe, India, Singapore and Australia exploring possible investments in the Philippines. Some of these are companies that have not done offshore outsourcing projects.

“The Philippines should continue to benefit from what’s happening around us given our industry’s stronger popularity and proven pedigree of success. This explains why we are continuously strengthening our marketing programs to make the country ‘top-of-mind’ choice for outsourcing,” Sañez said.

In a separate interview, Commission on Information and Communications Technology (CICT) Commissioner Monchito Ibrahim said the Philippines will have an “unfair” share of the global BPO business during this time as global firms move towards outsourcing their operations to the Philippines, instead of other countries.

“It is all the more imperative [for global firms] to streamline their operations. Outsourcing is the right thing to do and the Philippines is in the forefront,” Ibrahim said.

Ibrahim said that if there is one thing that the BPO industry should worry about in the Philippines is getting more manpower to fill in jobs.

BPAP projects that the industry would need about 1 million employees for the industry by 2010.

Ibrahim said the government is encouraging industries to move their operators beyond the cities and to other provinces in the country where there are skilled workers who could fill in their human resource requirements.

Ibrahim said provincial areas are starting to be developed to create good environments for BPO investments.

Mary Ann Ll. Reyes
Philippine Star

The local business process outsourcing (BPO) sector is expected to get a major boost as JP Morgan Chase and Co., poised to become America’s largest bank, is anticipated to agressively offshore more back-office jobs to the Philippines.

“We do not see any significant fallout from the recent collapse of a number of a US banks, or their absorption by larger rivals,” according to Catanduanes Rep. Joseph Santiago, chairman of the House information and communications technology committee.

“When American firms slash costs due to mergers or an economic slowdown, the first to go tend to be high-paying US-based jobs. They hardly bother to reexamine toward scaling down their low-cost outsourcing activities here, at least not on the basis of cost,” he said.

US financial institutions, along with telecommunication, Internet, direct broadcast and cable TV providers, are among the biggest clients of Philippine BPO firms.

One of them is 119-year-old Washington Mutual Inc. (WaMu), the erstwhile largest American thrift and savings closed by the US government, whose banking assets were sold at a fire-sale price to JP Morgan.

WaMu has been a key client of PeopleSupport Inc., which runs three contact centers that employ around 8,000 college-educated, fluent English-speaking Filipinos.

“Among US banks, JP Morgan is the most comfortable with the Philippines. The bank has been here for 47 years. It has become totally acclimatized to our political and economic conditions,” Santiago said.

“Our sense is, now that it has become larger, JP Morgan would be inclined to build up in a big way its contact centers and other back-offices here,” he added.

JP Morgan first outsourced customer support jobs to the Philippines in 2003, by putting up a 900-seat contact center in Makati City. The US bank recently launched a new 1,400-seat contact center in Taguig City.

After acquiring Bear Stearns in March and then WaMu last month, JP Morgan has emerged as the largest US bank in terms of market capitalization, surpassing Bank of America Corp. and Citigroup Inc.

Santiago, meanwhile, said he expects the American International Group Inc. (AIG) to sell its local outsourcing subsidiary, AIG Business Processing Services Inc. (AIG-BPSI).

AIG-BPSI provides back-office operations and contact support services for AIG businesses worldwide.

Information technology-enabled service industries have been a key driver of Philippine economic and employment growth.

Driven mainly by contact center and back-office contractors, the industries are expected to fully engage 920,764 Filipinos and generate up to $12.2 billion in annual revenues by 2010, according to the Business Processing Association of the Philippines.

Ma. Elisa P. Osorio
Philippine Star

The business process outsourcing (BPO) industry is expecting big investments from the banking and finance sector as the BPO sector branches out from the usual call center activities.

“Right now the trend is more investments from the banking and finance. It is a captive sector,” Oscar Sanez, Business Process Association of the Philippines (BPAP) president said in an interview.

“A big part of the industry is made up of call centers. The plan now is to move into more specialized high value operations,” Sanez said.

Today, the BPAP will be presenting the global investment outlook for the outsourcing industry in the emerging markets.

Meanwhile, the industry is on track to meeting its year-end growth target as it employed 345,000 workers during the first half of the year.

“The industry employed 345,000 workers for the first six months of the year and we are hoping that we will meet our yearend target of 420,000,” Sanez said.

The offshoring and outsourcing (O&O) industry earned $5.8 billion during the first half of the year.

“We are on track to meet our full year revenue target of $6.8 billion,” Sanez said.

According to Sanez, O&O revenue for the first six months of the year is up 1.8 percent when compared to the same period the previous year.

Sanez said the slowdown in the world economy had no adverse effects on the industry. “The first half results are encouraging. I think we will meet our target stated in the 2010 roadmap.”

Sanez noted that the Philippines ranked third in the O&O industry. India remained number one, followed by Canada.

The Philippines is a good location for outsourcing because of the time zone.

However, Sanez said the problem of skilled workers may pose as a threat. “We are really doing our best to address this issue.”

Likewise, foreign businessmen have said that the problem of education has had a negative impact on the number of qualified workers available.

In fact, the education problem in the country will have an adverse effect on the investment behavior of businesses, European Chamber of Commerce of the Philippines (ECCP) executive Henry Schumacher said.

“We (businesses) can’t wait (for the government to implement reforms). The jobs will have gone somewhere else,” Schumacher warned.

He said if the private sector will wait for the government to solve the education problem then it will be too late. The country’s ASEAN neighbors, specifically Vietnam , are actively attracting foreign investors and are giving attractive packages for businesses in order to set up shop in their respective countries.

Lawrence Casiraya
INQUIRER.net

MANILA, Philippines — India and China have bigger economies but the Philippines has a higher “educational density” and thus in a better position to move ahead in offshore outsourcing, according to an economics professor from Europe.

Professor Guido Dedene, a faculty member of Belgium’s Catholic University of Leuven and Netherlands’ University of Amsterdam, believes the country’s “unique” characteristics make it a more viable outsourcing destination for either United States or Europe.

Dedene cited a recent McKinsey study that predicts that by 2011, the US and United Kingdom alone will be capable of “consuming” the outsourcing capacities of India, China and the Philippines.

“Majority of companies in Europe, for example, go to either India or China because they simply don’t know much about the Philippines,” Dedene said in an interview with INQUIRER.net.

Dedene is in Manila for next week’s SSME (Service Science Management and Engineering) conference organized by IBM and the Commission on Information and Communications Technology (CICT).

IBM defines SSME as a multi-disciplinary academic and research approach that integrates more established areas like computer science, operations research, engineering, business and management.

In the context of BPO, the goal is to group together stakeholders such as business and government with the research and academic community.

“The Philippines has six times more educated people than India per capita,” Dedene said, citing data from the McKinsey study. “In India, outsourcing is present in a few cities. In the Philippines, the entire country can be tapped for BPO (business process outsourcing).”

Dedene likewise cited the Filipinos’ strong English proficiency and service-oriented nature, often mentioned by BPO investors doing business in the country.

“But beyond a good English accent, a key advantage is the fact that the Philippines is a young nation. If we start educating Filipinos now, it will pay off profitably in the future,” he said.

Maricel E. Burgonio
Manila Times

THE Bangko Sentral ng Pilipinas (BSP) said the outsourcing of bank services created more jobs in the industry.

BSP Governor Amando Tetangco Jr. told reporters that central bank data showed employment in the banking system increased by 12 percent from 2000 to 2007, which was when the BSP implemented Circular 268 allowing lenders to outsource some of their services.

“Because the Philippine banking system is healthier, it is able to sustain overall growth and employ more people,” Tetangco said.

On Friday, members of the League of Independent Bank Organizations held a protest rally in front of the BSP, complaining against the implementation of Circular 268.

Tetangco said outsourcing is a business decision made by individual banks and financial institutions as a means to remain competitive, which is also a trend in other jurisdictions.

Under the circular, banks may outsource credit-card services; the printing of bank loan statements, other non-deposit records, bank forms and promotional materials; credit investigation and collection; processing of export, import and other trading transactions; and other functions such as information technology.

“What the BSP has done is to allow certain services that are not inherent to the business of banking, to be outsourced. I understand that banks provide retraining and retooling opportunities to affected employees. But in cases where certain jobs are lost in the original company, new jobs are created in the outsourcing industry,” Tetangco said.

The Philippines has become a major player in the outsourcing industry not only to service local requirements but more significantly, to respond to demand coming from abroad.

Moody’s Investors Service recently gave the Philippine banking system a stable outlook in light of the structural reforms put in place and the moderate impact of the global credit crunch.

The local industry consisted of 38 universal and commercial banks with 4,237 branches, 82 thrift banks with 1,254 branches, and 727 rural and cooperative banks with 1,406 branches. The industry had P5.133-trillion worth of assets at end-2007.

Darwin G. Amojelar
Manila Times

PROPERTY research firms warned of a looming glut in the business process outsourcing (BPO) office space and condominium segments of the local industry.

In its first-quarter Philippine market overview, Colliers International Research said developable land values in the country’s central business districts (CBDs) will be flat next year owing to the oversupply of BPO office space and residential condominiums.

Colliers said it cut its forecast due to massive potential supply of BPO office space across Metro Manila and of residential condominium units in locations such as Fort Bonifacio where capital appreciation and rents may be subdued.

The consulting firm said rents and prices appear to be reaching their peak.

“Although we have seen more transactions in the past six months, we have revised our forecasts as we think valuations are starting to get steep and capital values for certain sectors could hit a plateau,” it said.

Separately, Joey Radovan, CB Richard Ellis Global Corporate Services head agreed with the Colliers assessment.

“There’s a lot of supply. Definitely it will affect the rentals and capital values of office space,” he said.

For this year, Colliers expects land values to appreciate by 5 percent to an average P304,500 per square meter in the Makati CBD and P136,500 per square meter in the Ortigas CBD.

At end-March, developable land in the CBDs is estimated at an average of P292,500 per square meter, or up by less than a percent in the past three months.

Colliers said residential prices appreciated by less than 2 percent in the first three months to an average of P96,575 per square meter. “Expectations are for prices to further rise by 8 percent for the remainder of 2008 to an average of P104,500 per square meter with an upper limit of nearly P116,000 per square meter,” the research firm said.

In terms of retail space, Colliers said the stock in Metro Manila was steady at 4.6 million square meters in the first quarter of the year and is forecast to increase by 3 percent in the first quarter of next year.

In the same period this year, Manila-wide retail vacancy stood at 14.1 percent, a slight improvement from the 14.7 percent in the last quarter of last year.

“The lack of any major new supply in the next 12 months should further lower retail vacancy to 11.1 percent,” Colliers said.

The research firm said rents in Ayala Center have declined to P1,197 per square meter per month during the first quarter from P1,225 per square meter in the fourth quarter of 2007. Year-on-year rental growth stood at 2.3 percent.

“Our forecast for 2009 is a 4.4-percent escalation to P1,250 per square meter per month,” Colliers said.

In Ortigas, rents went down by 2 percent during the year to P986 per square meter per month. In the next 12 months, Colliers said expectations are for rents to escalate by 4.1 percent to P1,026 per square meter per month.