According to the recent reports from the Philippine Embassy, the Business Process Outsourcing (BPO) sector in the country is expected to further expand thanks to the competitive edge the Philippines has over India—the current leader in the global BPO industry. This will thus have a major role in spurring the growth of the country’s gross domestic product (GDP).
According to Oscar Sañez, Chief Executive Officer of the Business Processing Association of the Philippines (BPA/P), “Despite the continued peso strengthening, the industry remains optimistic that its projected $12B revenues and about 1m jobs generation would be achieved by 2010.” Sañez believed the BPO is expected to grow further considering that the Philippines is very competitive in its services.
New York-based research firm GlobalSource assessed in a special study that the BPO service industry in the country has produced collateral benefits to the domestic economy such as encouraging consumption spending.
Based on a recent International Monetary Fund (IMF) study, the Philippines is second to India in terms of people, service maturity, financial benefit, and infrastructure.
GlobalSource also noted that the BPO service industry has grown in “leaps and bounds” in the past years from a mere “one-half of a percent of GDP” at the turn of the millennium. The firm also stressed that BPO has attracted attention because of its rapid growth in terms of “revenues, employment, and export earnings.”
The decision of foreign banks and other financial institutions like HSBC and Standard Chartered Bank to put their own BPO subsidiaries aimed at supporting their major banking and other back room operations is the huge proof of growth.
The BPO industry in the country covers a range of services from call centers to data transcription, and software development. Its large growth has trickled down to the other segment of the service sector of the economy with the rise of new establishments and expansion of food chains that are open 24 hours.
More and more SMEs are delegating parts of their operations to outside experts, which affords business owners the time to focus on their critical needs and growth.
Following the trend of large companies, owners of small and medium sized enterprises have begun to outsource a range of their services, from HR to finance and accounting to customer services. But the process of outsourcing requires some time—and investment—to find the right vendor, build a working relationship, and allow employees to adjust to the new set-up.
The all-important question is: outside experts can perform better, faster or more cost-effectively than your in-house staff? Joanna Krotz of the Microsoft Small Business Center evaluated the question carefully in a recently-published white paper and provided these two guidelines:
1. Define your core.
The smartest strategy is to hold on to operations or areas that define the core mission of your business, then consider outsourcing the other operations that are not as strategic.
If, for instance, your point of difference is customer service, make sure you have enough friendly and attentive full-time employees to make good on that. If, however, you promise rock bottom prices, then relying on an outsourcer, such as a Web-based virtual assistant, an automated phone system or an overseas call center, might make more sense.
Also, think through potentially outdated conventions about on-staff specialists, especially given the reach and effectiveness of today's desktop technology. Traditionally, small businesses have outsourced payroll and human resources services.
But owners can now tap outside facilitators for a much greater range of services. For instance, entrepreneurs with strong sales often assume they need a full-time bookkeeper to oversee the books. But, in fact, you can be running a $5 million company and still not really require a full-time bookkeeper. Such services have little to do with the volume of sales and more to do with the level of accounting activity, such as invoicing, bill paying, payroll and the like. Companies with a full-time bookkeeper can save about $30,000 a year by using outsourced bookkeeping services.
2. Move slowly and commit incrementally.
Outsourcing's advantages will vary with the services, the kind of business you run and, of course, the quality of your provider. It's worth your while to move slowly and commit little by little. Don't sign two-year contracts before testing performance and the relationship.
To get a feel for the process and to accustom your staff to the idea, first try outsourcing one stand-alone project, and then move on to hiring professionals for other areas or ongoing needs.
1. Allow lots of time
An outsourcing program needs time and effort from the executives driving the change.
2. Win over the bosses
The CFO has responsibility for running the arrangement with the provider.
3. Build a consensus
Everyone needs to be involved – find business line ‘champions’ who embrace the idea.
4. Do your homework
The key is the work done up front, including in depth analysis of existing costs and performance.
5. Craft the contract carefully
Formulate a contract that incentives the right behaviors for both parties…one sided arrangements never work in the longer term. The success of an outsourcing arrangement cannot depend entirely on a single document – so once it’s complete and signed, the key aspects need to be broadly embedded in the service management process.
6. Change Management & Communication
Leverage all channels and methods to ensure clear understanding of changes, issues and actions.
7. Stick to specifics
Affected staff need to receive concrete information as soon as possible.
8. Measure performance
Applying metrics both measures the success of an arrangement and provides data to protect the programme from backlash.
9. Operational discipline
It is challenging to focus on operations stabilization in the early stages of transition… but it is critical for both parties.
10. Build a Partnership
Be open about business objectives and goals. Set up a suitably sensitive and flexible governance structure…this is key for the good times and to navigate through challenges.
According to Reuters, the country’s outsourcing sector expects industry revenues to rise about 43% to nearly $7 billion by the end of 2008, up from $4.88 billion in 2007, supported by new investments.
About a dozen companies in the outsourcing business were likely to sign new deals this year, and drive up industry revenues and employment, the Business Processing Association of the Philippines (BPAP) stated, adding that most of the activities involved back office operations such as in finance and accounting.
The Philippines ranks second only to India as the biggest supplier of outsourcing services, with global demand valued at about $80 billion last year. The sector wants to generate $13 billion in revenues and employ 920,000 people by 2010 as part of an industry roadmap. Industry revenues have grown 35% and 50% in 2006 and 2007, respectively, as foreign companies tapped cheaper local talent and location for their back office operations.
The industry employed 320,000 at the end of 2007, and additional investments in 2008 could add 200,000 more jobs.
In this fast growing global economy, geographical borders and cultural differences are slowly fading away. However, certain cultural differences still do exist, whether we like it or not. Acknowledging these differences—and appreciating them—will make the small businesses to have deeper relationship with their outsource service providers. Ultimately, this helps both the small business and the outsource server provider to achieve success in the outsourced projects. Here are some general issues to consider while working with outsource service providers:
Training Issues
In a typical BPO project, small businesses may need to change its internal working process to accommodate the external outsource service provider. It is necessary for both small businesses and the outsource service provider to train their employees to understand the changes in their business processes so that both teams can have a realistic expectation from each other. In most cases the training can be accommodated remotely using latest tools and technologies.
Communication Issues
Communication may be hampered due to cultural differences, for instance people in US and other western countries may say "Yes" to confirm a contract while outsource providers from India or the Philippines may say "Yes" to acknowledge that they had understood the client's point of view, even if they didn't agree with it. Research studies have shown that inefficient communication result in almost 10% increase in project time. The advances in Internet and other communication make it possible for people across the globe to be in contact for most of their working day. Some BPO providers also work night shifts to ensure that they are working in real time with their clients across the continents. Furthermore if required on site visits may be organized to facilitate better communication and interaction.
Relationship Issues
Generally, service provider’s employees in the Philippines and India follow centralized decision structure; they typically follow the decisions made by their supervisors without raising any questions about the decision. Employees in western countries have more decentralized decision structure where each employee will question the decisions made by their managers. Small businesses should take this issue in to consideration while coordinating the project plan between its own employees and with offshore service provider’s employees.
Service Provider Communication Issues
It is important to encourage the service provider to speak up freely and voice their opinions. BPO vendors from the Philippines, for instance, have a tendency of agreeing easily to the proposals made by the small businesses and may not give a realistic view of the situation and thus the small businesses may want to take this into consideration and ask for practical and realistic deadlines that can be met under normal circumstances.
Boost your day-to-day operations. Your options are endless when you outsource. The roster of choices for high performing, affordable outsourcing services keeps growing. Here are some examples of functions you might consider:
Virtual Assistants
Virtual assistants, or independent entrepreneurs who provide administrative, creative or technical support, are a growing phenomenon in today’s fast-paced world. They work on a contractual basis via online or electronic communications, handling functions, such as keeping your schedule or your files or your customer intelligence database up to speed.
Public Relations
Most small companies cannot afford a PR professional full-time. Much of the news or publicity that smaller companies seek is generated when a new product launches, or to support the CEO’s profile as an expert in the industry, or to call attention to expanded services or new hires and so on. To find a PR company that can work well for you, look for someone who understands your industry and takes on smaller-company clients.
Outsource Brokers
When you outsource services or projects, you still need reliable managers to track progress and monitor results. Increasingly, there are third-party services that will manager your outsourcers for you. These brokers, exchanges and networks can recruit, interview and manage the services you need.
E-commerce solutions
An online service such as Microsoft's Commerce Manager can quickly turn your business website into an online store. Your e-commerce platform includes an online catalog, online shopping-cart software, round-the-clock access for customer orders, secure transactions for credit card purchases and payments, plus continuous tech support — all for around $25 a month.
Business Process Outsourcing(BPO) industry has boomed in many countries in Asia including India and Philippines. The number one reason of this growth of the industry is because of the strong demand in the United States and other countries to outsource their call center business operations, the advantage of offshore location in terms of communication, availability of skilled and well versed professionals in terms of manpower supply, low cost location rentals in terms of major finance factors, low cost hardware materials needed for the business, low set-up costs for the business, convenience in handling as it allows the call center business to improve more on other major assets and explore liabilities to make immediate solutions, no need to worry on handling a part of the business and lessens costs in operation and labor for manpower and more.
BPO industry is booming in the Philippines. The most common BPO services here in the country are call centers, software development, transcription, encoding, animation, human resources, accounting and payroll outsourcing. The Philippines at present is second to India in terms of supplying the workforce in the BPO industry, and it has already been recognized as the “premiere global destination for these types of IT enabled services”. The City of Manila has been named the second top Business Process Outsourcing (BPO) destination in the Asia-Pacific region by the International Data Corporation (IDC), just three months after the Philippines was named as the ‘Offshoring Destination of the Year‘ by the United Kingdom’s National Outsourcing Association. Three other Philippine cities have been included by the London Financial Times in the survey of ‘Top Ten Asian Cities of the Future‘, thus validating the country’s position as a major player in the global offshoring and outsourcing (O&O) market. Quezon City ranked 7th, Cebu 8th and Davao 10th in the survey commissioned by the London Times.
“We are proud of what we had achieved but we are anxious to solidify our gains. We’re anxious not to be complacent in the face of rapid change.” – President Gloria Macapagal-Arroyo