Philippines drops to rank 9 in BPO listing

By Dennis D. Estopace, Business Mirror

Posted at Feb 07 2011 02:00 AM | Updated as of Feb 10 2011 07:22 AM

MANILA, Philippines - The country dropped two rungs on the list of countries most attractive for offshore-business activities, management consulting firm A.T. Kearney bared.

However, its Global Services Location Index (GSLI) for 2011 avoided citing specific reasons for the drop, saying only that, in general, the “fallout from the financial crisis shook up the rankings, as once-expensive countries moved up.”

The Philippines was at seventh place in the firm’s 2009 ranking, now held by Thailand, which also dropped three rungs. The Philippines’ ninth place in the current ranking was previously assigned to Jordan, which plunged 13 rungs to 22.

“While a sluggish recovery continues to create the kind of pressure for economies that drive business outsourcing, an increasingly complex global economic environment has led to major changes in the ranking of the most attractive offshoring destinations,” the Chicago, Illinois-based A.T. Kearney said in a statement.

India, China and Malaysia remained in the top three spots—positions they’ve occupied since the inaugural Global Services Location Index in 2003. A.T. Kearney cited a combination of human resources and low cost as reasons for this consistent ranking.

With Vietnam rising two notches at eighth place, it has overtaken the Philippines; while Chile dropped to the 10th place, having dropped also two rungs in the ranking.

Vietnam was given strong scores in terms of financial attractiveness (3.27), people skills and availability (1.19) and business environment (1.24) for a total score of 5.69, which is just 0.04 point ahead of the Philippines’ overall score of 5.65.

India, the leader, was given a total score of 7.01, while Chile, the 10th, 5.52.

Even in terms of financial attractiveness, Vietnam outpaced the Philippines and the other 48 countries included in the ranking with an overall score of 8.17.

A.T. Kearney gave more weight to financial attractiveness, citing that “financial factors constitute 40% of the total weight in the Index…because cost advantage is typically the primary driver behind location decisions.”

The consulting firm said financial attractiveness included costs in compensation of employees, rent and other infrastructure-related elements, and tax burden and other regulations, as well as of corruption.

Nonetheless, A.T. Kearney used the Philippines as a model for two Asian countries in the top 10.

“With increased promotional efforts and removing crucial roadblocks, Indonesia and Thailand could repeat the Philippines’ success.”

A.T. Kearney added that it still considers the Philippines as “an offshoring behemoth, employing half a million people in the BPO [business-process outsourcing] sector and generating $7.2 billion in revenues in 2009.”

“The Philippines’ long-established tradition of providing leading call-center support continues to be strong.”

A.T. Kearney noted that call centers make up the majority of the country’s operations, at $5 billion in revenues, “but growing BPO niches such as services catering to the health care and pharmaceutical industries help fuel overall growth.”

“The Philippines, an early entrant into the service sector, is also relatively well-rounded. It has had more than a decade to hone its capabilities, and by now has moved into ITO [information-technology outsourcing] from being primarily a contact-center hub.”

A.T. Kearney said, “Amid fierce competition from other regional players, the Philippine government has launched a plan to build a virtual BPO university and extend training in call-center skills to an additional 10,000 students to retain its competitive edge.”

A.T. Kearney said the 50 countries included in this year’s GSLI “were selected on the basis of corporate input, current remote services activity, and government initiatives to promote the sector.”