Japanese investor confident in outlook for PH outsourcing

Why is a Japanese investor confident in Philippine outsourcing?

A Japanese investor is confident in Philippine outsourcing because the country offers a young, English-speaking workforce, strong growth, and the world’s largest BPO market.

• S Division sees long-term value in the country’s BPO sector.
• A young population and English skills drive the outlook.
• The firm wants to partner with local BPOs, not just buy them.

The Philippines runs one of the world’s most successful business process outsourcing (BPO) industries. S Division, a Japanese investment holding company, agrees. So its confidence says a lot about the market.

S Division Holdings Inc. is a Japanese-Filipino investment firm. It focuses mainly on real estate, finance, and BPOs. The Filipino branch opened in 2017. Still, the company began its Philippine work as early as 2013. From the start, it acted as a bridge between Filipino and Japanese investors. It joins a long list of Japanese companies that outsource to the Philippines. The country’s appeal is clear when you look at what draws firms to investing in the Philippines.

Outsource Accelerator has reported that S Division is seeking to invest in Philippine BPO companies. The goal is to add them to its portfolio. So we went behind the scenes for a chat with its Chief Executive Officer, Mr. Aoi Ikeda. We talked about the company, the outsourcing industry, and the outlook ahead.

Here is what we learned.

[OA] Aoi Ikeda, first, tell us about you. How did you come to live in Manila, and how long have you been here?

[AI] I came to the Philippines five years ago from Japan. S Division was started by Mr. Sumi, the chairman, and my brother. My brother moved here to help set up the company. He told me the Philippines was growing fast. So I became interested, moved here, and now serve as the CEO.

[OA] What are your key areas of interest for investments?

[AI] Right now, we focus on BPO and lending in Metro Manila. The Philippines has the largest BPO market share in the world. So we believe it will become a main industry in the future. We have also introduced Japanese investors to hotel-based condominiums.

[OA] Why is S Division interested in investing in the Philippines?

[AI] As many know, Japan faces a low birthrate and an ageing population. In 50 years, the population may fall to 100 million. By then, 1 in 2.5 people will be elderly. So Japanese investors want to invest outside Japan.

The Philippines is an attractive long-term choice. The population is young and speaks English. Moreover, it may grow to 150 million in 50 years.

[OA] Why does the BPO sector interest you?

[AI] We have followed the Philippine BPO industry for years. We always had the vision to run BPO projects ourselves. For a long time, remittances from workers abroad supported the economy. This happened because local jobs were scarce. However, IT-BPO now gives Filipinos many job options.

So we are ready to enter the BPO space. Outsource Accelerator (OA) is the number one BPO platform in the Philippines. S Division also has ties to many Japanese firms. As a result, we believe our work with OA will help more Japanese companies outsource to the Philippines.

[OA] How do market disruptions affect your investment thesis and outlook?

[AI] Big market shifts push us to review our strategy and some targets. Still, we know the BPO industry stays resilient over time. Some providers will not survive, while new players will rise. So we watch for BPOs that come through tough periods in a strong position.

In real estate, on-site tours for Japanese investors are sometimes hard to arrange. Like BPO, this too passes. Meanwhile, we use the time to sharpen our marketing and sales.

[OA] How do you see the investment outlook for the Philippines 10 years from now?

[AI] We believe the BPO industry will remain a great investment destination. Many research reports back this view. To understand why, it helps to see the sector’s weight in Philippine economic growth.

The Philippines also has a high growth rate. So we expect more business chances as the economy develops. In addition, we track the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE). As the corporate tax rate falls, more foreign firms and direct investment should arrive. Programs run by the Board of Investments support this trend.

So I believe the Philippines will become an even larger business hub of Asia.

Seeking outsourcing investment partners now

S Division wants to be a major investor and an active partner. It does not just want to buy a Philippine outsourcing business. Instead, the plan lets the current owner keep partial ownership. Owners also keep operational control and gain structured earn-outs. So the firm seeks BPOs open to an early, exploratory talk.

They want BPOs of 100 to 400 seats across any vertical. Ideally, these sit in central Metro Manila. Still, any interested party is welcome to reach out. They aim to close deals fast. As a result, the BPO can focus on the job in hand and pursue growth. So the final value depends on size, financials, growth prospects, and deal structure. To see which functions draw the most demand, review common roles outsourced to the Philippines.

Today, S Division sits in Bonifacio Global City in Taguig, Metro Manila. In addition, it runs its own showroom of Step Philippine Real Estate Properties, Inc.

Expressions of interest invited

Do you own a BPO or know one that might fit? If so, please reach out through the details below. S Division has asked that interested parties get in touch through Outsource Accelerator.

Send an email with company details to: [email protected]

Frequently asked questions

Who is S Division?

S Division is a Japanese-Filipino investment holding company. It focuses on real estate, finance, and BPOs. So it acts as a bridge for Japanese investors in the Philippines.

Why does S Division invest in Philippine outsourcing?

First, the country has a young, English-speaking workforce and strong growth. It also holds the largest BPO market share in the world. So the long-term outlook looks strong.

What kind of BPO is S Division looking for?

Also, it seeks BPOs of 100 to 400 seats in any vertical. It prefers firms in central Metro Manila. Still, any interested party can reach out.

Does the current owner keep control after the deal?

Yes. As a result, S Division prefers partnership over a full buyout. Owners keep partial ownership and operational control. They also gain structured earn-outs.

How does CREATE affect foreign investment?

So CREATE lowers the corporate tax rate over time. So it makes the country more appealing to foreign firms. As a result, more direct investment may follow.

Key takeaways

• A Japanese investor, S Division, is confident in Philippine outsourcing for the long term.
• A young, English-speaking workforce and strong growth drive that view.
• The firm wants to partner with local BPOs, not just buy them.
• It seeks BPOs of 100 to 400 seats, ideally in Metro Manila.
• Tax reform under CREATE should draw more foreign investment.