Stability, skills availability to drive RP outsourcing

By DAVID DIZON, abs-cbnNEWS.com

Posted at Feb 10 2009 10:13 PM | Updated as of Feb 11 2009 06:31 AM

Business executives in the United States on Tuesday said countries that are positioning themselves as business process outsourcing (BPO) locations should possess two key things: the stability of the local and regional business environment, and the availability of knowledge workers.

Warren Fristensky, senior VP and CIO of global publishing company John Wiley & Sons, Inc., said US companies give a premium to the stability of a country’s political and social sphere.

“What is important about where we source? The word is stability, stability, stability. We want to partner with someone who’s going to be around. We want their government to be supportive. We want their society to be supportive,” he said via videoconferencing in the 9th e-Services Conference and Exhibition in Manila.

Aside from the situation of the country where they are mulling to outsource, Fristensky added that they also examine that country’s neighbors.

“We want the region including their neighboring countries to be stable because they can influence that partner,” he said.

Companies that outsource want to be cost efficient over time, he explained. “We don’t want to jump from place to place, city to city all the time to source our stuff. It’s got to be a holistic relationship.”

Outsourcing models

These criteria have been included in the outsourcing firm’s checklist, which was usually topped by the availability of qualified staff in the host country.

Fristensky cited the case of India, the top outsourcing location in the world, is instructive. He said stability of a qualified labor force, language, and cultural expertise remains as a key driver in their decision to choose an offshore partner.

Aside from low cost offerings, Jan Stopa, vice-president of financial service firm JP Morgan Chase, said BPO firms should also offer high value services.

“You hardly ever see expertise as the added value. It’s usually the low cost that is the main driver. This must be a consideration in order to fulfill a client’s business needs,” he said.

The ability of an offshore partner to absorb demand requirements of an outsourcing firm and the current skill base of offshore partners is a hot topic “because lots of people (in the US) are losing jobs as a result.”

Stopa added that the global economic downturn that has led to thousands of job cuts has forced many US companies to take a closer look at prediction models for outsourcing some of their core businesses.

He said this could affect traditional outsourcing destinations since there is no clear direction and no typical scenarios for companies that invest heavily in an offshore partner.

Next wave cities

Commissioner Monchito Ibrahim of the Commission on Information and Communications Technology, meanwhile, said the government is developing potential outsourcing hubs in the Philippines to develop specific high-value services for offshore clients.

Ibrahim said the 10 "next wave" cities were chosen as outsourcing locations because of high availability of talent, infrastructure, cost and business environment. He said making the next wave cities "BPO ready" is just the first step since local IT companies must be develop the right competency for locators.

"We are getting them to develop their pool of talent into specific competencies. They will have to specialize in something. For example in a town in Camarines Sur, [companies] are developing their niche in the animation industry. That will be the next level of development for this city," he said in the conference.

The CICT earlier identified the next wave cities as Metro Laguna (Santa Rosa City, Calamba City, Los Banos, Cabuyao and San Pablo City), Metro Cavite (Dasmarinas, Bacoor, Imus and Cavite City), Iloilo, Davao, Bacolod, Angeles-Clark-Mabalacat, Baliuag-Marilao-Meycauyan, Cagayan de Oro, Malolos-Calumpit and Lipa City.

Ibrahim said he expects a dozen more cities to become BPO locators by the end of the year.

Last year research firm Gartner Inc. chose the Philippines as one of the world's 30 top offshoring destinations, mostly due to the country's attractive labor costs.

According to Gartner, the Philippines was rated as "very good" in terms of cost, along with China, India, Pakistan and Thailand. The same study, however, said the Philippines performed weakly in terms of stability of the political and economic environment.

President Arroyo on Monday said competitive labor costs and English proficiency of Filipino workers are just two of the reasons why the Philippines is one of the most favored offshoring destinations for global companies.

The Philippine BPO industry employs around 300,000 workers and generates almost US$5 billion revenues as of 2007. Industry experts are targeting US$13 billion revenues and a million workers in 2010.