Is it Still a Great Time to Consider Outsourcing to the Philippines?

Ever since it started in the early 1990s, the business process outsourcing (BPO) industry of the Philippines has been a key player in its modernization. It generated jobs and enabled the development of the local IT and financial services sectors. By 2011, the gross revenue from the BPO industry was at least 4.9% of the country’s GDP, according to the Oxford Business Group.

Local and foreign industry players and policymakers are confident that the Philippine BPO superstructure is too big to fail. However, uncertainties in the business climate are creating serious challenges for companies that provide virtual assistant services and call center services, among others.

In 2017, the BPO industry suffered a major setback brought on by local political instability and calls for tighter controls on the outsourcing market for North American companies.

Investment pledges were on a freefall, with a significant decrease of at least 34%. In fact, analysts have projected dismal growth figures for both the industry and the national economy as a whole. No doubt, the current situation can have a significant impact, particularly on providers of IT, customer relations, and virtual assistant services.

 

So, is it still a great time to hire a virtual workforce in the Philippines? Yes, it is. Here are the main reasons.

The US has a share of at least 70% in the country’s billion-dollar BPO industry. And despite calls to limit outsourcing,  American companies continue to transact with capable service providers in the Philippines.

This reliance is due partly to rising wages and employment costs in the US, and partly to the quality of work that Filipino BPO companies and virtual assistant services companies are capable of producing.

 

Reforms in the Philippines’ tax policies under the Tax Reform for Acceleration and Inclusion Law has spurred fears of an increase in the cost of doing business in the country.

However, the second round of tax reforms will provide the industry with larger incentives. This is in response to the threat of AI, the need to invest in new infrastructure, and the demand for quality skills that are at par with global standards.

With the Tax Reform for Attracting Better and High-quality Opportunities Bill, the Philippine government is expected to spend at least $500 million to stimulate the BPO industry within a five-year period.

 

The Philippines continues to pride itself as an economy that favors outsourcing. Citing the English-language proficiency of the country’s virtual workforce, industry experts are quick to say that quality is a significant factor in the BPO industry’s continuing success.

Despite political developments within and outside the country, the BPO sector remains as “one of the world’s most vibrant and flourishing industries” according to an article published in news website ASEANBriefing.com. India’s Prime Minister Narendra Modi even said that the Philippines has become a “powerhouse” in the services sector during a business summit with members of the ASEAN.

 

A high concentration of BPO companies is found in Manila, which is the country’s capital and seat of power. In fact, at least 80% of prime office spaces are occupied by IT-BPO, making up about 3.8 million square meters of commercial property. This comes as a drawback since it has caused a surge in property prices amid a shortage of supply. Along with Cebu, Manila’s BPO saturation will cause investors to look for emerging markets elsewhere in the country.

With the Duterte administration’s drive to decentralize the political and economic structure of the country, cities like Davao, Baguio, Dumaguete, and Iloilo will end up as the biggest winners.

Iloilo, for one, is sought for its business environment where work-life balance is central to building an empowered workforce. And with the influx of capital and the rise of residential and commercial developments, Iloilo is becoming an ideal breeding ground for a globally competitive virtual workforce.

 

Are you thinking of outsourcing your business operations to Iloilo? Why not start with OneVirtual Solutions to see what Ilonggos can bring to the table.

Set an appointment with us today.