It seems that pinning your future economic hopes on the business process outsourcing industry is a good long-term move. And while many companies are rooting for India, some are realizing the benefits of outsourcing to the Philippines. Why? In India, the salary is rapidly increasing as well as the retention problems on BPO companies.
But before we proceed, let us define outsourcing. Outsourcing is defined as the strategic use of outside resources to perform services or activities handled by internal employees. It is a well-known strategy where an organization contracts out some processes or functions to specialized outsourcing providers, who will turn out to be a valued business partner.
Ok, we already know what outsourcing is. But why companies prefer to outsource to the Philippines nowadays.
Outsourcing to the Philippines Due to Cultural Compatibility
Unlike in India, the Filipino culture is well suited for Western cultures. The Philippines has been a Spanish colony for years and was governed by the United States for about 50 years (1899 to 1946). The effects of this colonization are still very evident today. Movie theaters in the said country are almost fully dedicated to American productions and are shown in English without subtitles. English is also the primary language for business and education even though their official language is Filipino. In fact, their government has considered changing their official language to English due to its prevalent use.
With the strong presence of the US, the Philippines has developed a government that is somewhat similar to the US system. This makes Western companies more comfortable doing business in the Philippines.
Companies Outsource to the Philippines Due to Low Costs
The cost of living in the Philippines is a very low compared to other Southeast Asian countries. Salaries there is a fraction of those in the US and in the UK, with the daily minimum wage set at about $9 per day. In fact, new graduates there from reputable colleges and universities can be hired at around $350 per month. And all of which applies to all other business expenses such as house or office rentals, utility costs, supply costs, and third party services.
The only thing expensive in the Philippines is their internet connection. On the good side, their internet infrastructure is being upgraded maybe because their government realized the need to invest in this segment to sustain the current BPO developments in the country. On the bad side, internet connections in the Philippines are quite slow compared to countries like Korea, Japan, and Singapore. The cost for a good internet connection is high which is why savings on labor and operational costs can sometimes be countered by the telecommunication costs.
With that being said, Philippines will always be very low compared to costs in the US, Australia, and Europe. You can expect to operate your offshore services there at about 40-50% of the costs of a domestic team. For more pricing details, read Origo BPO’s pricing section.
Highly Skilled Professionals
Many companies outsource to the Philippines because they have a very high literacy rate of about 97.5%, with basic education available to almost the entire population. The University of the Philippines (Diliman, Manila, Los Banos), Ateneo de Manila, De La Salle University (DLSU), and the University of Santo Tomas (UST) are reputable universities delivering future-proof professionals who occupy top positions globally. Filipinos are known to be creative and expressive by nature, who choose courses like multimedia arts/design, creative writing, freehand drawing, and animation. There are numerous universities also that provide excellent education and training aside from the above-mentioned universities, in these creative fields.
Economy wise, the country is weak because they always had a hard time providing jobs to their people each year. This is the main reason why many Filipinos opt to migrate overseas. The Philippines owes a lot to its rapidly growing BPO industry for providing employment opportunities to their people that would otherwise have to leave their country.
Also, one of the things that kept the Philippines from developing was their political instability. There had been several coup attempts and terrorist attacks that have prevented foreign investors from seriously considering the Philippines. As a result, some of the investors chose different destinations like China, Thailand, and South Korea; these countries grew as the Philippines stood still. By the way, this situation has changed as investors rediscover the Philippines, especially with the management of their newly elected President, Rodrigo Duterte.
The Philippines seems to be more stable now due to strict implementation of the law and continued fights against terrorism and corruption. Yeah, the current government still has a lot of work to do especially against poverty, bureaucracy, and find ways to fill in the gaps between rich and the poor. These factors and indicators have served to further magnify the importance of the BPO industry in the country. No wonder, their government is consistently supplementing the emergence of BPO or call center operations.
The Philippine Government Supports BPO Industry
The BPO industry is one of the main revenue generators of the Philippines, which is the why their government fully supports all its endeavors. In fact, they have set up special economic zones in the country and grants incentives such as a 4-year or 8-year income tax holiday to their BPO providers. It’s quite surprising also that even Indian BPO providers have started their operations there.
With the ongoing trend, the country may become one of the best offshoring or outsourcing destinations in the world. Metro Manila now has the highest concentration of BPO activities (85%), but as more investors see huge potentials of the Philippines, other cities even provinces have emerged as BPO locations or hubs. Cebu, Pampanga, Bacolod, and Davao are being dubbed as the next wave cities because they have proven to be great alternative BPO locations to Metro Manila with their pools of highly qualified English-speaking professionals and conducive business environment.
We, ORIGO BPO, plays a huge role in promoting the Philippines as the ideal location of choice and in supporting BPO providers. Since their people is the primary driver of the BPO industry, we are continuously collaborating with government agencies to further improve their education system. We aim to implement industry-specific training programs to further develop the skills of Filipino employees and make them suitable for BPO or call center work.
The Philippines has indeed gained a good reputation as the preferred BPO destination, an excellent source of highly skilled professionals, and home to some of the warmest and friendliest people not only in Asia but also in the world.
If you have any inquiries about outsourcing to the Philippines, or you want to get started, feel free to contact us.