BPO sector seen to grow 23%

MANILA, Philippines - The country’s business process outsourcing (BPO) sector is expected to grow 23 percent this year in terms of revenues and number of people employed, officials of the industry’s leading association said.

Business Process Association of the Philippines (BPAP) president Oscar Sanez said from last year’s $6 billion revenues, the country’s sunrise sector is projected to post higher revenues of between $7.2 to P7.5 billion this year.

At end-2008, the industry was employing between 380,000 to 400,000 people.

By 2011, BPAP sees the county’s share growing to $13 billion in terms of revenues. By 2020, some experts predict the Philippine BPO sector to be a $100-billion industry.

Sanez noted that while the first quarter was relatively slow due to transition caused by new ownerships and managements of a number of client-firms following the onslaught of the global financial crisis in late 2008, the BPO sector is still expected to post higher revenues of 23 percent in 2009, albeit slower compared to the 26 percent growth posted in 2008.

He emphasized that the outsourcing sector could provide a big boost to the economy that has become reliant on just a few sectors such as OFW remittances and exports.

“It is therefore important to sustain the growth of the outsourcing sector, otherwise, we might run out of things to hope for. But we are confident that this sector will survive for so many more years and we will continue to see sunrise,” he said.

BPAP executive director for industry affairs Jonathan de Luzuriaga also stressed that the recent global financial crisis was less harmful to the Philippines compared to other offshoring destinations.

Of the more than 600 companies in the information technology-enabled sector, the BPAP has about 240 member companies in the BPO industry.

The Philippines is still a strong second as an offshoring (voice and non-voice) destination with a global market share of 15 percent, second only to India which accounts for 40 percent. In terms of voice, however, the Philippines is considered the leader.

Luzuriaga pointed out that the challenge for the Philippines is to continue to be a strong second overall and the strong leader in terms of voice.

“We therefore have to be able to leverage our strength, which is voice, as an introduction to other higher value processes such as knowledge process outsourcing (KPO),” he said.

Going into the KPOs, he noted, is a natural progression for those who go into voice first. In the case of India, it started out more with back-office processes then went into voice. “But we don’t expect India to be able to leverage back-office processes for a long time,” he said.

Voice currently accounts for about 67 percent of all IT-enabled services. Non voice includes medical and legal outsourcing, publishing, financial accounting, among others.

The BPAP, together with government, is currently preparing a roadmap that will take the industry to 2016. The new roadmap, Luzuriaga said, will be more focused and will look at the development of the so-called next wave cities.

“By 2016, we expect non-voice to account for 50 percent and voice, another 50 percent.

Dr. Ganesh Natarajan, vice chairman and CEO of Indian IT giant Zensar Technologies, expects the Philippine BPO sector to grow into a $100-billion industry by 2020.

He estimates India’s BPO sector to grow from $47 billion to $250 billion in 12 years.

Right now, the global outsourcing industry is estimated at around $83 billion in terms of revenues and is expected to grow by as much as $500 billion by 2020.

Natarajan noted that the Philippines is a fast growing second player. “Going into partnerships is also the key to the future and the Philippines is number one in terms of potential to be a partner in tapping the expected $500-$700 billion addressable market by 2020,” he said.

The expected $100 billion revenues for the Philippines by 2020, he added, will translate into up to 4.5 million jobs and another six cities being developed as BPO destinations outside of Manila and Cebu.

He, however, pointed out that there are challenges that the Philippines needs to address to prepare for the future, such as skills and information security. “If the Philippines will be able to address all these, then there is no problem reaching $100 billion in revenues,” he said.