Guide to doing outsourcing business in the Philippines
The Philippines has turned out to be one of the most sought out places to start and carry out BPO-based businesses. It has even overtaken India in this aspect over the last few years. In this report from the LA Times, it was reported that India still holds the reigns on IT support, but as far as call centers go, the Philippines is right on top. BPO is also the go-to industry for a large number of college graduates.
The economy is at a perfect sweet spot for both employers and employees as the specialized skills that are needed to sustain the BPO industry are available here. There are 8 known branches of the BPO industry and services, they are call centers, software development, engineering design, knowledge process outsourcing (KPO), back offices, animation, medical transcription, and game development.
Of these, the Philippines seems to have cornered the market with call centers and back-office services like accounting and customer-facing inbound services. The main advantages that are pointed out as to why the jobs in this field are pouring into the country are because, the culture of the Philippines, especially amongst the youngsters, are well suited to interact with the American market, second, the English that is used in the Philippines are closer to American standards.
Countries like India have a base in British English that might not carry over well to the American customer base where most of the business comes from. It is also said that the Filipino call center workers are less likely to shout back at the customer as they are much more customer-centric.
BPO, as an industry, is something that is well compatible with most forms of business that are customer-facing. Almost all industries, regardless of what they produce or sell in the West will need to have service backup, this goes from bars of chocolate to industrial drill bits, all industries in the current system are in need of back-end services and the first place they look is the Philippines.
Pros and cons of outsourcing
So there it is, it is a perfect solution, right? Set up a BPO call center in the Philippines and let the hard-working Filipino staff take care of the back-end. The answer is not so simple, really. There are a few pointers that you need to keep in mind before jumping into it. There are pros and cons, advantages and disadvantages to everything, here are a few of them. Weigh them out carefully before taking the plunge.
Advantages of outsourcing
Cost is the first and obviously most important reason as to why outsourcing is done. Talent is much less expensive abroad and in countries like the Philippines and India when compared to local talent. The cost of setting up a business, the taxes in the new country, the cost of recruitment and the running of the offices, all put together, will be a lot more cost-effective as opposed to simply making use of talent from the home country.
Take for example a team of developers from the Philippines working on a project for an American company. As long as the project is started on time, the team in the US can be sure that the developer team is working while they sleep and then some. The developer team can have two shifts of staff working around the clock that may not be possible on site. With an outsourced team, your company will be working more than 24 hours per day.
Once the off-site team gets into the groove of working with the on-site parent company, they are sure to get all of their work done in a timely manner. The off-site team is managed by a local managerial body that can handle all the pressures of delivering projects, so it is actually a relief in terms of work stress.
Hire and fire
There is no real relationship with the parent company, so that makes it easy to have control over the quality and SLA of the outsourced team. If they don’t satisfy as agreed, they can be just as easily replaced. Expansion and contraction of the size of the teams are also a lot simpler when working with an outsourced partner. Many BPOs have a hire and fire policy that keeps the talent fresh and always at peak performance.
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Disadvantages of outsourcing
Privacy of data
If the project that is worked on is highly sensitive, outsourcing might open doors to leaks and theft of data. While this is a rare occurrence and the state of cybersecurity right now is really strong, there are chances and that cannot be ignored.
Delays in delivering projects
The advantage of having teamwork while you are asleep is also a disadvantage. There are times when you are almost always 12 to 24 hours away. That makes every little change and corrections one day away. As long as everything goes as planned, you are safe. Human error cannot be completely discounted, so, you need to prepare yourself for such eventualities.
Philippines BPO industry
The BPO industry in the Philippines was started by Accenture in the year 1992. Since then it has grown to be one of the most important factors that spearheaded growth and development in the country. The BPO industry is the main driving factor for economic growth in the Philippines, it was able to single-handedly bring the unemployment rate down and actually spur the growth of education in technical fields over the last two decades or so.
By 2010, it was responsible for 27% of all jobs in the country. The largest industry also eventually gave rise to the development of other industries like aviation, hospitality, engineering, and health services. There are over 1 million workers in this sector as of the last census in the Philippines.
The early stages of the BPO industry were greatly supported by the then government and visionary leaders of the industry who were able to see the potential of this sector. A lot of tax breaks and discounts were offered, bringing the already low cost further down. It led to an environment that really welcomed investment in the industry and it grew rapidly.
- The BPO sector contributed just 0.075% of the GDP in the year 2000.
- 2005- Philippines gains 3% of the world’s BPO market. It contributes 2.4% of the GDP.
- 2010- The Philippines becomes call center capital of the world. $8.9 billion in revenue alone. Over the next 5 years, it is expected to grow at a CAGR of 38%.
- 2013- Revenue stands at $15.5 billion, nearly a million people are employed.
- 2016- BPO sector continues to grow at an astronomical rate. Philippines is the go-to country for call centers and BPO-IT. It is expected to generate over 1.3 million more jobs in the coming years and will be growing at a rate of 17% per annum.
- By 2020, the projection is that earning will reach and cross $55 billion. That is more than double the number as it stands now.
Growth of this sort will be sustained by the young population that is coming out of schools and colleges every year. There is going to be jobs for all that need them and the industry will be serviced by investors. It is a win-win for all that are involved.
The Philippines is one of the fastest-growing economic powerhouses in Asia, behind only China and India. All of this growth, according to Bloomberg, can be attributed to two things- the outsourcing Industry and OFW remittances.
The data that has been collected by the Everest group point out to one thing in particular. As the industry grows in the Philippines, one thing is for certain. The country’s services will begin to branch off into specialized services from a more general and broad definition of the term ‘BPO IT’. That means, more and more companies with specific needs and demands will find it easier to find the right workforce.
The workforce will have all the skills needed, especially in terms of training and knowledge which will eventually lead to expertise in the field. That makes it easier for managers to find staff that is fine-tuned for their requirements.
Industry based, specialized markets are expected to grow at a high rate, between 20% and 22%. Generalized back-end services will also grow, but the projections show a 14% to 16% growth. More people will eventually siphon into specializations, and this is what the industry will need. Products are getting lot more funneled down, so services that back up these products will also change likewise.
The largest BPOs in the Philippines
It was the first company to enter the Philippine market and is still the biggest. It is also the biggest BPO Company in the world, covering over 120 countries globally.
It is the second-largest in the country and it has 18 centers around the country and has a staff of over 28,000 workers.
JP Morgan Chase
A late entrant to the Philippines, establishing their offices only in 2005, but have grown to become one of the largest in the country. They have people working 24 x 7 in their famous Philippine Global Services Centre.
Guide to outsourcing business in the Philippines
Setting up a call center in the Philippines is a lot more than simply putting together some capital and finding clients. There is a lot that goes into being able to participate in the country’s largest and fastest-growing industry. As mentioned, there are 8 types of services that you can offer through a BPO, you need to be able to find the one that you have the most experience with, and you then need clients.
There really is no point in putting together a large center with no one to serve. Here are a few pointers that might help with the basic concept of setting up a viable workspace in the Philippines.
The BPO industry, just like any other, has a long list of legal requirements and compliance regulations from the authorities. Getting all of this paperwork sorted is the first step towards actually setting up a call or contact center.
The first set of documents that you will have to get in order are the ones that are related to the business, a sort of license to carry out business. The Securities and Exchange Commission will have to be contacted for this, they will hand out the first set of the necessary documents. It is recommended that you start here before going in for the other paperwork.
The next regulatory body that will have to be approached is the Bureau of Internal Revenue, the taxman. All the fees and other payments that you will make will happen here. Make sure you have all the required documents from the Bureau sorted out before you approach the next government body
The next step is getting the approval of local bodies. Called LGU (Local Government Unit) permits, they are required if you are thinking of doing any business. It is quite an exhaustive list of documents that you need to get in order. The LGU permits contain the:
- Location clearance
- Lease contract
- Business name registration
- Barangay clearance
- Public Liability insurance
There will be a thorough assessment of all the documents and after the evaluation is completed, you will be handed over the license and with it, the permission to set up the BPO. You should know that without all the approvals from the government, it is illegal to start a BPO. The process should be fairly straightforward, and getting through the process should be simple enough as long as all the fees and charges along with the documents are in place when they are needed.
Technical and infrastructural requirements
To set up a BPO, apart from all the paperwork, you will need two important physical assets to get started; the office itself and the equipment. The office will be in the form of a building. With buildings, there are two options- you can lease it out and set up offices in the existing space after getting a lease document cleared with the city Mayor’s office in the form of a Mayor’s Permit Registration.
Many large companies prefer to build their own premises as it better suits their needs and specifications. In such cases, you will need to find the right amount of land, and a number of building and real estate taxes will be applicable. Depending on where you locate your offices, you might be applicable for Economic Zone Incentives for job creation. After the office space is ready, you will need to take care of the equipment.
At a basic level, this includes computers, the Internet lines, phones, data centers, and security for all of them. You will also need utilities like electricity, gas, water, plumbing, and a list of other things that will be needed as part of the office spaces to make it a workspace and not just a bare building. Interior work, branding, and paint make it comfortable and adds character to space.
What to look for in employees
The next step is staffing. You need to tap into the workforce and pick and choose the right people to get the job done. When staffing, think about the kind of client you are servicing, the services you are offering, and how best you can deliver. The right staff is not just your company’s employees, they are what makes your brand stand out, the strength of a BPO lies entirely in the hands of the staff.
So the question remains, freelancers or full-time company rolls? There is a fine balance that has to be achieved as freelancers are less expensive and will work from home, but full-time employees are specialized, have all the knowledge required for the tasks, will be able to handle exceptions well and are dependable.
When you are just starting off, the first two positions that you will have to fill in are the admin/managerial positions- they have to be full-time company staff, and systems administrators. The on-floor staff can be contracted or even part-timers, but some positions need to be stable and available.
Budgeting is actually something that you have to do as the first step. You need to know how much you have against how much you can spend and how much revenue you expect. Always plan for contingencies as well, they might crop up at the wrong time and take you down. Financial planning is something that cannot be overlooked. Many new companies seem to spend too much on setting up and are unable to sustain their expenditure as a result.
Long term goal
Always plan your venture with the end game in mind. Always plan long term; where are you going to be 10 years from now? Are you hoping to be merged into a larger company? Will you become a branch of the parent company or will you be moving from client to client? There are all viable models, but you need to have a vision with which to direct your company forward. Always plan with an upward sloping scaled-up point of view.