Outsourcing to the Philippines

Posted by: Joe Weber on May 26

By Frederik Balfour

philippines_flag.gif It’s tough not to feel upbeat sitting aboard a plane making its approach to Cebu, the second largest city in Philippines. With its lush, emerald green hills, a gentle surf breaking on azure waters and a luminous coral reefs, it’s a postcard perfect version of a tropical getaway. But in recent years Cebu has started to attract more than just sun worshipping tourists: it’s a hot new location for the fast growing business process outsourcing business in the Philippines, where despite the global slowdown, the industry is expected to grow 20-25% this year.

A good place to get a sense of how fast things are changing is at Asiatown IT Park. Five years ago, the area was just scrub grass, but today it’s home to more than two dozen new call centers and IT outsourcing shops trouble shooting for Dell customers, crunching numbers for banks and insurance companies such as Prudential of the U.K., and processing medical records for HMOs. Managing accounts receivables and debt collection is an areas that has seen lots of growth since thing started going pear-shaped in the U.S. With its careful landscaping and slew of funky cafes where twentysomething employees of the centers sip ice cappuccinos and cruise the web on laptops, it looks more Southern California than Southeast Asia—except the mood here is decidedly more bullish.


Just ask Marife Zamora, Philippines chief for Cincinnati-based Convergys, which hopes to nearly double its Philippines staff, to 20,000, this year in several centers, including Cebu. “We are growing like crazy,” she says. By the end of 2010 the Philippines hopes to grow its business process outsourcing revenues to $13 billion from $6 billion in 2008, and provide jobs for 900,000, up from 370,000 at the beginning of this year.

That’s a tall order, to be sure, but businesses and being forced to find ways to save costs more than ever, and moving offshore is seen as one of the best ways to trim overheads. People are discovering that in the Philippines, things can be done “faster, cheaper and better,” says Beth Lui, country managing director at Accenture which employs 16,000 there. Growth is coming from other companies like S.C. Johnson, JP Morgan and Siemens which are expanding their own back office facilities there in the desire to complement their Indian operations.


The growth of the outsourcing sector in the Philippines is one reason why its economy is expected to grow a 2.5% this year, while neighboring Indonesia will expand 3.6% and Vietnam 4.5%. For an in-depth look at the region please check this week's feature story in BusinessWeek magazine.While those figures about half the average seen in recent years, they look pretty attractive compared to most parts of the world. Another reason is these economies have large populations—Philippines has 96 million, Vietnam 86 million and Indonesia 237 million---and are less dependent on exports than Singapore and Malaysia which have gotten whacked by the global slowdown.

So what solace can U.S. readers get from this news in Asia? Well, if you remember that the region went through its own painful crisis more than a decade ago that was kind of a dry run for what the rest of the world is experiencing today. Governments were forced to clean up their act, companies de-leveraged and banks patched up their balance sheets, one big reason why none of them ever needed a government bailout this time around. So while the business of shedding debt might be tough medicine for U.S. companies and consumers right now, things will eventually be healthier all around. Now that’s something to look forward to.


Reader Comments

Andrew Kokes

May 27, 2009 03:29 PM

You make great points, Frederik. The Philippines has a strong and highly-talented workforce, with new university graduates, career shifters, former overseas workers and individuals who have been retrenched by other companies all in the mix. The area has become a significant draw for diverse business process outsourcing services, particularly as U.S., U.K., Australia and New Zealand based businesses look to more carefully manage their budgets, diversify their risk across multiple geographies and most importantly, deliver top shelf customer service.

In fact, at Sitel just last week, we hosted President Gloria Macapagal-Arroyo to cut the ribbon on our sixth and largest site opening in the Philippines. The President even sat down to a meal with several Sitel leaders and distinguished guests to share success stories of career development within Sitel.

Here is some video from the event of the President speaking with many of Sitel's frontline agents:
http://www.youtube.com/watch?v=dz3SrZOxTCY

Joseph Weber

May 27, 2009 05:22 PM

Sounds like an interesting place, Andrew. Shoots of growth such as this may well blossom around the world. Thanks.

maila

June 16, 2009 06:34 AM

~~~~~,xta hahahhahahahahhah~~~~~~

Roderick Allan Baylon

July 14, 2009 03:24 AM

Outsourcing helps US companies cut costs. The Philippines has hard-working and talented manpower to service global outsourcing needs from virtual offices, call centers, medical transcriptions, to web design and web development.


I currently work for Mynd Consulting (http://www.myndconsulting.com), an outsourcing company based in Davao City, Philippines. Davao City is a great place to outsource business processes because of its generally fair weather, talented manpower from all over Mindanao, recreational spots, and its peace and order.

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BusinessWeek’s Joe Weber, Patricia O'Connell, Michelle Conlin, Frederik Balfour, Peter Coy, Greg Spielberg and Roger Crockett examine The Case for Optimism by looking past the financial turmoil and economic unrest gripping the globe to focus on the promising future that lies on the other side of this storm. We’ll chronicle the forward thinkers investing in R&D, launching promising new products, entering new markets, or implementing management and leadership.

See why BusinessWeek Editor-In-Chief Stephen J. Adler is optimistic about the economy amid the sharpest downturn since the Great Depression.

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