Derek Gallimore looks into the challenges of outsourcing in the SME market with guest Bastiaan Mawhin. Bas, a Dutch national, is an outsourcing and offshoring strategist dedicated to helping clients succeed in their outsourcing journey. He has been in the Philippines for ten years working and mastering the intricacies of the outsourcing industry.
- Bas first came to the Philippines, ten years ago initially on a short project with Shell. He then noticed the potential of outsourcing or offshoring, thus helping companies established their presence in the Philippines.
- He discussed the evolution of BPOs and how these outsourcing providers opens the market and opportunities for SMEs, and how small businesses with as few as three to five people reach 20, 30 and more.
- Bas first encounters with SMEs was with MicroSourcing. It is in MicroSourcing that Derek got to know Bas.
- MicroSourcing caters to the needs of the SME market by leasing seats for company staff or small outsource service providers.
- Bas mentioned price competition as one of the challenges within the BPO industry. Unutilized space for lease in BPO companies affects their income thus prompting some to drop leasing prices.
- Bas explains that price dropping and other cost-saving strategies in the BPO industry the customer may suffer as service quality may also drop correspondingly.
- There is a great potential for the talent pool in the Philippines as the outsourcing industry step up with the demands of the global market.
- The services of the outsourcing industry is not only for the big business players but for the SMEs as well.
- Seat leasing in BPOs create opportunities for small companies with as few as five to ten people and grow in number as they find more clients from the global market.
- Outsourcing providers and BPOs must step up with the global demand for high quality talents.
Derek: Hi. And welcome to another episode of the Outsource Accelerator Podcast. My name is Derek Gallimore, and this is episode number 168. So today, I’m talking to Bastiaan Mawhin. He is a Dutch guy that’s been only here about 10 years and has really worked in outsourcing for that entire time and has really deep-dived into the industry and is quite a master of outsourcing. So, it’s really good to talk to Bas. I’ve known Bas for about the last seven, eight years. And together, we’ve both seen the industry really develop in its size, sophistication, and diversity. So, it’s really an interesting conversation. And I’m sure you will enjoy. So, if you want any of the show notes or if you want to get in touch with Bas at all, go to our shownotes, which is at outsourceaccelerator.com/168. Enjoy.
All right. So welcome back, everybody. Today, we have Bas Mawhin. Hi, Bas. How are you?
Bas: I’m very well. Thank you very much.
Derek: Good. And we’ve known each other for a few years now. Since I’ve pretty much came over to Manila, you’ve been part of the furniture over here. And so, I suppose initially doing it, just introduce yourself and how you, a Dutch guy, found yourself here in Manila.
Bas: Absolutely, Derek. Thank you very much. Look. So, I came here over to the Philippines over I’d say 10 years ago initially we’re just on a short project with Shell, which eventually got extended to much longer and more because I really, really noticed the potential in the Philippines, specifically in the outsourcing or so-called offshoring world where the bigger guys, including Shell at the time, started to set up shared service centers and the likes more to service the internal back office processes. And yes, little did we know, in that same period, a lot of other businesses came down here and set it up. And there were so many ways on how to do it and also so many wrong ways on how to do things. And yes, I jumped on board on that journey. And I’d say 10 years after, I’ve helped a lot of companies, advised them into different directions and different ways on how to set themselves up in the Philippines with a partnership here or do it on their own or anything in between. So, it’s been a very exciting, I must say, journey so far. And I’m very excited even more so for what the future will look like for this country.
Derek: Yes. It’s really exciting, isn’t it? I mean, we’ve kind of crossed paths when I started in 2011 with outsourcing. That was in MicroSourcing. And you were actually in MicroSourcing then. And you’ve been within the entire outsourcing industry for the last 10 years. How have you seen the whole thing evolve, because the industry’s only really 20, 25 years old, isn’t it? So how have you seen the industry developed in terms of sophistication, but also in terms of catering to maybe the SME market more?
Bas: Yes, absolutely. I think it’s funny you bring it up because indeed, around that time, the outsourcing market was maturing but also shifting into different directions. So, where you initially started with your IBMs and Accentures, they started to build almost little villages, employing thousands of people in these different sort of businesses hubs here in the Philippines, you started to get an appetite for more of the small medium sized businesses, on how to do that here. And initially, the bigger providers didn’t necessarily have an appetite for those that wanted to start with maybe two people, five people, or even smaller because it was very common that you would service bigger companies with bigger sized operations. And yes, I think what started to happen is that we started to see more of the so-called local service providers, companies that would do a similar service but were operating more on a smaller scale. So, these were businesses either owned by foreigners or a combination between foreign and local or even fully local. And these were companies that could service needs of the SME space of two people or three people or 10 people. And I think that’s definitely an evolution that has taken place in the past sort of 5 to 10 years, and even more so for what I’ve seen is the Australian entrepreneur. That’s definitely a market that I’ve seen over the past year, is that it started to really, really consider the Philippine talent.
Derek: Yes. And I think when I came into the market, as you say, about 10 years ago, it started opening up to the SME market because people were entertaining entrepreneurs with small requirements, like one, two, three, four, five seats whereas previously, people wouldn’t really talk to you unless you wanted 100 seats. Yes.
Derek: How have you seen that change the BPO provisioning? It makes it a lot easier because it opens up the market and the opportunities to SMEs, but you now have a whole host of BPOs where they’re really dealing with really the small end of client market.
Derek: Is it viable? Has it been viable for them?
Bas: I think in the beginning, it’s definitely been viable and mainly because there are these great success stories, especially in the beginning where people just started with three of five and not so much because they didn’t have the potential to be at a 100, but it was just simply too risky. And I think that’s more of the story of those early SME adopters, 5 or 10 years ago where they could have started, and the potential is there to reach 30, 40, 50, or even 100, but the roadmap on getting there is a bit of a shared risk approach where you want to test the waters. You want to see what sort of frameworks you want to build. You don’t necessarily have all the processes in place. You don’t necessarily have all the leaderships and the skills sets internally to drive that, unlike these bigger corporations or these bigger companies. So, I think the smaller start, especially in the early days, was not necessarily because there was not a potential, but it was more about better risk management and making sure that you take calculated, I supposed, mistakes and learn from them quickly to make sure that you start building those layers and that framework that can reach into that 20, 30, or 40 sized businesses. And I think that’s one of the key things that makes it still viable for local service providers to consider taking on board your two or three staff operations if you like.
Derek: Yes. What’s happened to the pricing in that span as well? Because I think MicroSourcing were maybe one of the original that focused on the SME market, and their prices have really gone through the roof recently in terms of the seat leasing price. But then in the other end of town, I see a lot of price competition. A lot of people are underbidding each other. Prices are becoming cheaper and cheaper. And then you also have the stripped-down models where you’re now just paying literally for office. And then the kind of staff leasing is on top. Are you seeing an increased price competition, price war, and kind of reduction of margins within the BPO sector?
Bas: Absolutely. And I think one of the things that we also—it’s definitely in play. And much of that is because we see a lot more challenge around real estate in those prime locations. So, if you are a business and you are a local service provider committing, whether you’re MicroSourcing or Shore Solutions or an Acquire BPO, if you are committing to those prime locations, then, yes, you pay the premium for that. And there’s definitely over the past years, you can see a big difference in those rental cost aspects of it. So, it’s different than how price wars look. There’s businesses that commit to a lot of space. And we’ll know that if you got a lot of space and unutilized real estate under your belt, you’re bleeding a lot. So yes. And people are willing to drop the prices, unfortunately. And just to make sure that they stop the bleeding and make sure that their seats that they fitted out become billable. And yes, it’s happening. Another thing that we see happening is also more diversification. You see people going to different locations and therefore benefitting from more of the real estate cost and the rental efficiencies. In that way, they could offer overall cheaper solutions. Yes, it’s happening. And I think we’re almost at a point where you kind of want to put a bit of a compliance in there or a bit of an association that would monitor these sort of prices because the last thing that this country needs is a lot of local service providers competing against one another simply overpriced, because we’re still talking about people here in the industry with talent and skill. And the last thing that we want is that we’re undercutting everybody or one another.
Derek: Yes. It doesn’t really serve anyone, does it, because the price comes down, but then the clients are getting less results. They’re getting kind of angry with the output. The kind of staff in the Philippines aren’t getting the attention and training they need. And it’s a downward spiral, isn’t it?
Bas: Absolutely. And every time you see the price drop in an industry where we all already are cost-saving a lot of money, yes, it has to come from somewhere. Right? If it’s not your end, then indeed, like you’re saying, it’s your training or it’s your management involvement or it’s not the right stakeholder levels to drive issue resolution. At the end, if you drop prices and you drop prices significantly, what suffers is the customer. And at the end, the customer, they’re contributing to a great piece of the talent pool in the Philippines.
Bas: Yes, very much a pity if that’s really the direction.
Derek: And how have you seen the customer, which is the SME in the West? How have you seen them develop over the last 10 years? I assume maybe 10 years ago, it was more a case of educating people, building awareness, whereas you’re seeing people now, the kind of common business owner, they’re aware of outsourcing, and they’re ready to plug into it. How has that dynamic changed?
Bas: Yes. Look. I think that dynamic has definitely changed on various levels. You can even categorize it in different sort of aspects of things. So, I’d say you got those that have started in the early days, didn’t have a very positive experience, and therefore, they got more educated and probably a little bit more warned about the things that could go wrong. And they’re a bit more hesitant these days. You got those that didn’t really jump on board 10 years ago but now really see the benefits. They come in well-educated through either, friends, networks, or those that have done it before. And then you still have the guys that are out here and just constantly looking for better deals and better ways on how to do things. And every time the contract comes up, they look around and see if they can do better. So I think, in many ways, aside from the pricing discussion that we had earlier, it’s also good for the industry because it kind of forces indirectly, as well as directly, providers in the Philippines to really step up their game, step up the game of the quality of service, the quality of the workplace, the differentiators in the model, and even taking in consideration what their future looks like with automation, artificial intelligence, bots and things like that. Those are things that I see happening a lot and also come across my table a lot these days.
Derek: Yes, I absolutely agree. And differentiators of the market is really— and actually, maybe I can get you back and discuss that with you in another episode. And yes, you’re seeing such a spread now, I mean, in terms of service provision and service options and also the kind of increase in sophistication of what clients can get from an outsourcing provider. It’s really kind of advancing in every respect, isn’t it?
Derek: Fantastic. So, thank you so much, Bas. It’s been great insight. If people want to get in touch with you, how can they do that?
Bas: They can get in touch with me through I’d say LinkedIn, Bastiaan Mawhin. You can also add me up on a more social note on my Facebook, Bas Mawhin, or on Skype, which is also Bas Mawhin. And if you really want my personal details, I’ll leave my email address, and then you guys can always reach out to me for any other follow-up questions.
Derek: Fantastic. Okay. That was Bas Mawhin. If you want to get in touch with Bas or know any more about this episode, then get our show notes, which is at outsourceaccelerator.com/168. See you next time.