PH outsourcing industry seen to hit $25B revenues by 2016

By Cathy Rose A. Garcia,

Posted at Jan 30 2012 02:10 PM | Updated as of Jan 31 2012 06:22 AM

MANILA, Philippines - The Philippines expects the information technology-business process outsourcing (IT-BPO) industry to employ as much as 1.3 million and generate as much as $25 billion in export revenues by 2016, amid an growing anti-outsourcing sentiment in the U.S.

At Monday's press briefing "Strategies and Prospects of the IT/BPO Industry in the Philippines," government officials and industry executives expressed confidence on the IT-BPO industry's continued growth in the next five years.

"We are very positive, very bullish that we can be number 1 (in the world)," Science and Technology Secretary Mario G. Montejo said.

Alejandro P. Melchor III, deputy executive director of the Department of Science and Technology Information & Communication Technology Office (DOST-ICTO), said the industry has already proven to be "recession-proof, slowdown-resistant, electoral politics-bullet proof."

He pointed out the industry has grown significantly in the last few years, even with the global economic slowdown in 2008 and 2009. The industry registered growth rates of 26% in 2008 and 17% in 2009.

Last year, the industry is estimated to have grown by 22% to $10.9 billion, employing 640,000.

By 2016, the industry is forecast to double the number of direct jobs to 1.3 million and to generate $25 billion in export revenues. Some 3 million indirect jobs are also expected to be created by 2016.

Fred Ayala, chairman of the Business Process Association of the Philippines (BPAP), said the industry has shown its resilience and is confident it can hit the targets.

"Demand is there but it is not our God-given right. India, Egypt, Tunisia, Nicaragua, are all focused to win big in this industry. We need to be very competitive," Ayala said.

The Philippines is already number 1 in call centers, moving past India. To propel its growth, the local IT-BPO industry is pinning its hopes on 4 fast-growing outsourcing services, namely, healthcare information management; finance and accounting; human resources; and creative process.

"We intend to attain market leadership in the UK and Australia as well... (We will also) double our market share by 2016 in information technology outsourcing, engineering services outsourcing and multilingual BPO," Melchor said.

The DOST-ICTO has created several programs that would further develop the industry, such as the ICT Workforce Capability Development Program, Next Wave Cities Program and the Domestic ICT Industry Development Program.

"Our programs are not limited to that of industry but also improving the quality of our graduates and improve their chances of landing jobs not only in the BPO sector but in other industries as well," said ICTO executive director Louis Casambre.

The ICT Workforce Capability Development Program is aimed at tripling the size of the information and communication technology (ICT) talent pool by 2016, improve employability and develop core skills required.

While the IT-BPO industry has been concentrated on urban areas such as Metro Manila and Metro Cebu, the Next Wave Cities Program hopes to develop other IT hubs in Cordillera-Ilocos, Central Luzon, Western Visayas and Davao Gen San.

'Not worried' about anti-sourcing bill in US

The government and industry officials remained bullish about the IT-BPO sector, despite recent statements made by US President Barack Obama against outsourcing, as well as the filing of a bill against outsourcing in the US Congress.

"We're not worried," BPAP's Ayala said, noting that the tax exemptions being proposed by Obama are not significant to prevent US companies from outsourcing.

Melchor noted the US officials have proposed similar anti-outsourcing bills during election years in 2004 and 2008, but these failed to prosper.

"They introduced it in 2004 and failed, 2008 and failed. There is very little likelihood it will pass. Most of US companies have outsourcing as core strategy, and taking it away they will not survive," he said.

Melchor, a former IBM executive, noted that US companies outsource their services to countries like the Philippines for three reasons: access to talent; business environment; and cost. 

Many American companies have been outsourcing their call center services to the Philippines in recent years, since wages here are much lower than in the US.

Melchor noted Filipino BPO employees are paid one-fifth of the salary of their American counterparts. He added US companies are also offered 5-year tax holidays if they establish operations in PEZA economic zones.

"I think US companies will quietly lobby their own senators and congressmen (vs the anti-outsourcing bill). They will tell them, 'your job is to make us competitive'," Melchor said.

However, there is a growing feeling among some Americans that outsourcing is the reason for the lack of job opportunities in the US.