The Outsourcing Industry in the Philippines

In 2018, the global market for outsourcing totaled to $85.6 billion. With more businesses recognizing the need for outsourcing, this number is predicted to grow more in the future.

The Philippines remains one of the top outsourcing destinations worldwide. Even the Philippine government recognizes the Business Process Outsourcing (BPO) industry as the main contributor to its growing economy. As a result, they showed more support to nurturing the industry.

The outsourcing industry in the Philippines is showing no signs of slowing down. Many countries still recognize the Philippines as a top outsourcing destination today. ASEAN even predicted there would be 1.3 – 1.5 million new jobs for Filipinos in the outsourcing industry.

The options for a business’ outsourcing needs aren’t limited to administrative tasks only. Some also outsource their marketing and sales needs. Some businesses also hire Filipinos to handle complex business operations for them.

Today, we take a look at the state of this growing industry in the country. Why does the country remain as a premium option for outsourcing? What factors contribute to its growth? What are the foreseeable threats to the outsourcing industry in the Philippines?

The Current Status of the Outsourcing Industry in the Philippines

Thanks to the rising economy of the Philippines, the country has become an outsourcing hotspot. According to Reuters, there are 1.5 million Filipinos employed in BPO companies in the country last 2017.

In fact, the Philippines was hailed as the call center capital of the world. This is due to their 16 – 18% contribution to the global market for BPO. In 2022, Reuters predict this contribution will rise to around $250 billion.

In 2017, the Philippines has also ranked in 7th place as the world’s top outsourcing favorite. Tholons has also ranked the country in third place in the Top 20 Digital Nations list. Manila has placed fourth in the Top 20 Super Cities, while Cebu City ranked 12th.

The United States leads the list of top countries that outsource to the Philippines. They’re followed by Australia, New Zealand, and the United Kingdom.

The Factors Behind the Growth of the Outsourcing Industry in the Philippines

There are several factors that contribute to the success of the outsourcing industry in the country.

First, the high English literacy rate in the country, which is 96.3%. They also rank 3rd as the most English-proficient country in Asia.

The A.T. Kearney Index also commended the English skills of Filipinos in the call center industry. According to them, Filipinos maintain a neutral accent that sounds almost alike with American English.

Through the years, Filipinos have recognized the importance of English fluency for work. It has become an integral part of the country’s early education curriculum. The exposure to Western media has also helped shape their English skills to a conversational level. This, in turn, has produced millions of Filipinos with outstanding English fluency.

Different businesses worldwide also enjoy consistent quality outputs from Filipinos. Businesses had achieved doubled ROI from their low-cost investment in outsourcing in the Philippines. Even start-ups who have low budgets can get their hands on quality performance from them. This is especially handy for high-cost outsourcing needs, like digital marketing.

Filipinos are also versatile employees. For instance, a virtual assistant can handle your website management and content marketing for you. They are also willing to learn new skills to help you grow and automate your business.

When it comes to culture adaptation, Filipinos greatly deliver. The country is a product of different cultures, which has helped them adapt to businesses across the world without hassle. Understanding of culture is deemed important for overseas outsourcing to find success. If one is not familiar with other cultures, there would be problems when migrating business processes.

The Biggest Threat in the Outsourcing Industry in the Philippines

The rise of Artificial Intelligence is threatening the outsourcing industry in the Philippines. According to IT and Business Process Association of the Philippines (IBPAP) President and CEO Rey Untal, AI technology might take over low-skilled or process-driven jobs soon. That totals to an estimated 400 – 500,000 jobs lost.

Unfortunately, English skills may not be a competitive edge anymore when AI takes over businesses. Even Rajneesh Tiwary, chief delivery officer of Sutherland Global Services, fears the same. “Five, ten years from now, our excellent command of English may not matter anymore.”

To survive the AI wave, Filipinos has to incorporate their English skill with technology. They need to familiarize themselves with data analytics, data mining, and machine learning.

Untal believes the same. He says if Filipinos learn to adapt their skills with AI technology, “who can compete with us?”

However, despite the roaring success, the outsourcing industry in the country is slowing down these past few years. The annual growth for the industry is expected to go down to 9% until 2022.

This does not mean the outsourcing industry is dying, though. Instead, this is a sign that the Philippine outsourcing industry should level up. Which brings us back to the idea of learning data-driven skills.