The Strong Future of Outsourcing
Last updated August 19, 2019
Today in this podcast, Derek discusses a recently released white paper and It is called, “The Strong Future of Outsourcing” and it is discussing from the perspective of the SME market.
- Outsourcing sector has been going about 25 years since the advent of cheap telecommunications, internet, and the evolution of technology according to Derek.
- According to Derek, Philippine BPO sector is expected to slow down from the double-digit growth rate enjoyed during the first phase of its expansion.
- Derek shares that there are concern that the industry is not keeping up with the required evolution for to be able keep up with its previously high growth rates.
- He feels that the Philippine economy or the outsourcing sector has really taken for granted a lot of this growth in the industry.
- Derek talked about the democratization of outsourcing the strong future of outsourcing coming from SME sector.
- He believes that that over the next 20-30 years if not every single business will be outsourcing some of their staffing requirements.
- Derek strongly believe that there is a strong future for outsourcing and that is a win-win for all involve.
- Philippines Outsourcing industry has been an economic savior for the country.
- In just 10 years, the Philippines increase it’s world share of outsourcing service provision. From 4% in 2004 to 12.3% in 2014.
- The Philippines BPO industry raked in over 22 Billion in 2015 and today it is the second largest source employment in the country.
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Derek: Hi and welcome to another episode of the Outsource Accelerator Podcast. So, today it’s just me. Yes, me, today, on this podcast. This is episode 161. So, if you want to go and see any of the show notes, I do mention some pretty gnarly URLs in this podcast. So, if you want any of the URLs, don’t fret. Just go to our show notes which is at outsourceaccelerator.com/161 for this episode.
So, today in this episode I discussed a white paper that we have released. It is called, “The Strong Future of Outsourcing” and surprise, it is discussing the strong future of outsourcing from the perspective of the SME market. So, I am looking at the opportunities of outsourcing for the small business owners, the entrepreneurs out there in the west. I explore this in this episode but of course, it’s really only a taster and you’re best to go and download the white paper. So, again if you want to do that, go to our website and have a look around or go to our show notes which is at outsourceaccelerator.com/161 for the link. Enjoy.
Derek: Hi. So, today I want to discuss with you the future of outsourcing. This is just me today. Welcome to me. I hope you’re not getting too tired of my voice but today I just wanna discuss a white paper that we have on our website. So, this white paper is called ‘The Strong Future of Outsourcing’. Ok, and it’s all about that. Now, there is a concern in the environment in the Philippines about the future of outsourcing. There’s a lot of talk that it is a sunset industry. There is a lot of talk that the A.I. and automation are gonna come here and wipe out tens of thousands of jobs and basically, the future of outsourcing is very bleak. People are suggesting that growth is slowing or plateauing which again is a real concern for the Philippines. So, to put it into context, the Philippines outsourcing industry has really been an economic savior for this country. The sector has been going about 25 years since of course the advent of cheap telecommunications, and internet, and the evolution of technology. Now it had an incredible run. It’s been the absolute economic savior and what it does is it enables Filipinos to take on high skilled white collar jobs and able to join into a career ladder. It enables them to join corporate structures and get trained for better and better roles. This means it is now a 25-year deep executive talent pool over that 25 years, of course, people become people processes and the industry has become far more sophisticated. So, unlike other sectors, the overseas foreign workers that produces a lot of income for the Philippines but it means that they have to move overseas to do it. That means that they are separated from their families. but that also means that there’s an enormous brain drain on the Philippines. Sure, people developed their careers but they’re doing it overseas which doesn’t help the home market. Ok, so outsourcing really has been an absolute boom for the Philippines economy. So, I just want to put this in some sort of context. In just 10 years, the Philippines increased it’s world share of outsourcing service provisions. From 4% in 2004 to 12.3% in 2014. Well, basically 3 times its proportion of the pie. The Philippines BPO industry raked in over 22 Billion in 2015. And today it is the second largest source employment in the country. So, it’s really an absolute winner. There is concern that it is maturing. So, the Philippine BPO sector is expected to slow down from the double-digit growth rate enjoyed during the first phase of its expansion even as the Philippines build its non-voice capabilities which points to a maturing sector. It is critical that its policies stands indicated in the 2017 investment priority plan and industry initiatives embodied in the new IBPAP program maintain it’s momentum. So, there really is concern that the industry is not keeping up with the required evolution for it to be able keep up with its previously high growth rates. Now of course when things have been growing at double digits, it gets harder and harder to maintain that. But I really do feel that the Philippine economy or the outsourcing sector has really taken for granted a lot of this growth in the industry and that they may be resting on their holes. So, we talk about in this white paper about the democratization of outsourcing. And we talk about the strong future of outsourcing coming from SME sector. That is the west small players, the business owners, the entrepreneurs and we look at the numbers that support that. So the outsourcing sector is fast changing in both of its breadth and depth of service provision. It is quickly upskilling in response to an increasing demand for broader services. This is an exciting development for the industry as it allows it to offer increasingly higher value services but it means that the industry has to keep pace with educational requirements to ensure that there is adequate supply of higher skilled roles. However, when it comes to the main bulk of the outsourcing market. It is evident that the vast majority of jobs still remain within the original, most basic functions. When it comes to the global outsourcing market for 2015, IT services account for nearly 60% of the worlds 166 billion dollar total. Another 40% of that came from BPO global sourcing services. So, what they’re showing is that the vast majority of this stuff is still the more traditional IT and BPO services, and BPO services typically refers to call center and voice customer services, things like that. So, within this white paper, we look at the different story that outsourcing has for SMEs. When SMEs get into outsourcing, they have a very different requirement than the big corporates. They need far more agile staff. They need staff that like in a startup, they can do one thing one day, they can do another thing the other day. If they don’t have the direct skills they can learn the skills and they can apply new skills. So it really is a far more agile workforce that is needed. A workforce that can use intuition, use initiative, and can think on their feet. And you know, this hasn’t been at the forefront of the industry up until now. But I really think the Philippines is in a position where it is able to take advantage of these growing agility requirements. So, within the white paper, we look at the size of this SME market. Historically, the outsourcing sector hasn’t regarded the SME and small business sector as anything worth pursuing. You’ve gotta put this in context, if you are looking to outsource 10 staff in the Philippines, that really doesn’t move the needle for a lot of BPOs. Most BPO certainly in the historic sense wouldn’t look at a business partnership for less than a 100, maybe 500 seats. They’re really dealing with huge numbers here. However, it’s all changing and I believe that these numbers really justify that the Philippines looks into outsourcing to SMEs more. So, the numbers that I’m referring to is the study that we did looking at how many SMEs there are in the west. So, some of the headline figures are that there are over 35 million SMEs in the west. So, by SMEs just to clarify that is a small to medium-sized enterprise. That’s 35 million. Those 35 million SMEs employ over 100 million people and that is 60% of the workforce in those catchment areas. Now, on top of that, the combined revenues of those 35 million SMEs is 12 trillion dollars. So, when you look at it like that, this is no small fish and these are the major economies, these are the ten major economies like Canada, the US, the UK, Ireland basically, any western high-cost country that speaks English. Australia-New Zealand. Some of the northern European countries that have a really significant grasp on English. So, the picture we’re trying to paint here is that there is huge market out there for outsourcing.
Now, where do all of this lead to? Currently I believe there are only half a percent of those SMEs currently outsourcing. So how far can this go? I really believe that over the next 20-30 years that almost every business, if not every single business will be outsourcing some of their staffing requirements. Now, why do I think this? I mean that’s a pretty radical number. It might be common to suggest that if half of the percent are outsourcing then there’s strap like that and take it 10 or 20 percent. But no, I really do think that 30 years from now everyone will be outsourcing and that is because with 20 to 30 years of technological advancement behind us. Just imagine how we will be communicating with each other. Everything will be digital, everything will be online, and all of the interfaces will be incredibly enhanced. So, I’m suggesting that with all of the new interfaces it will be email 5.0, slack 7.0, Facebook 6.0. There will be all this advancements with there’s potentially augmented reality, there’s virtual reality. I really think that in 30 years time, the friction that is caused by geographical distance will almost but completely be removed. When that is the case it means that people will start to employ people not based on where they are sitting. So, the geographical relevance will really fall well away and people will base their employment decisions based on the quality of deliverable or of course the CV and of course the cost of that deliverable. So, I have an argument that it will truly become more of a meritocracy, a meritocratist world where people are employed not from where they lived but for the quality and output of their work. Before, it was really a lottery of where you are born. And now I think it will become more of a meritocracy which again is something to celebrate the world over. Because if you are in the US, if you are in Australia, at the moment you are constricted by who you hire for what amount. When you have the opportunity to seek human resources from a pool of 7 to 8 billion people across the world. And you have a smooth technological interfaces to help you do that to find them, and to interact with them, and to work alongside with them. Then that really opens up huge possibilities for you and every business around you and the community that you’re in. So I find it really exciting. So, I don’t led the point but I really believe that there is a strong future for outsourcing. And I believe that is a win-win for all involved. Now, if you want to learn more then go to our website. This is a white paper, it’s within the white paper section of The Source. Now, the URL is massive which I do apologize for. So, I will put this URL in the show notes. I will briefly say it here just in case you managed to be typing at the moment. It’s outsourceaccelerator.com/whitepaper/strong-future-of-outsourcing-white-paper/. I know that’s a long one and I really do apologize for that. But, it’s best if you just go to show notes or just go to our website, or even in google type in “outsource accelerator strong future of outsourcing” and you will get there. You can also download a pdf version, there’s also slideshare slides on it. We deliver this white paper however you need and however it suits you. So, I hope you enjoy. I would love for you to give us feedback on your thoughts.
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Ok, that was the strong future of outsourcing. Give me any feedback on that. This episode 161 so if you want any of the show notes or you want that long link then go outsourceaccelerator.com/161 and of course as always if you have any questions then please just send us an email to [email protected] See you next time.