India claws back BPO from Phl

Rajiv Rao for New Tech of lndia wrote: “India has watched a large exodus of BPO business to the Philippines thanks to the country’s employable youth who are equipped with fluent English and perfect American accents.”….” Apparently, the Americans did a better job of colonizing them than the Brits did us, since the country’s large, English speaking populace there can speak the language fluently and with a natural American accent. Moreover, 30 percent of the graduates in the Philippines are employable compared to 10 percent in India.”

Rao’s article then quoted a research outfit, Tholons which cited the Top 100 Outsourcing Destinations for IT and BPO. Bangalore is still on top with Manila as the second.  Mumbai is number 3 followed by Delhi, Chennai, Hyderabad and Pune. Seven Philippine cities were in the top 100 with Cebu in the 8th position. Poland and Dublin are in the 9th and 10th position.

“It is estimated that in the ongoing decade, India might lose $30 billion in terms of foreign exchange earnings to Philippines, which has become the top destination for Indian investors,” Assocham secretary general D S Rawat said. The new Indian government’s fixation with promoting Hindi over other languages may not help the situation any.”

Back in 2000, we were struggling to get companies to set up call centers here. That same year, we set up an organization called Outsource Philippines which was the precursor of IBPAP of today. The first Outsourcing conference ever held was in the Philippine Plaza(now Sofitel) in 2002.  The Waldorf Astoria in New York City was the venue for the first BPO roadshow in 2003. President Arroyo opened the conference.  Our major supporters were PLDT and AIG. The vice chairman of AIG, former Ambassador Frank Wisner was instrumental in getting businessmen to attend the conference. Our next road show was held in London that same year.  Thanks to our Ambassador to the UK, Cesar B. Bautista, we had a successful conference.  He and his staff invited 100 plus interested and engaging businessmen. It was at that conference that Deutsche Bank decided to open a BPO operation in Manila. Our efforts to tie up with the Indian BPO industry failed.  Every time we communicated with them, the response was a patronizing negative. It would seem they considered us a potential competitor. We even imported a noted American industry journalist to demonstrate our skills and hopefully publicize our cause. . He candidly told us that we did not have the critical mass or infrastructure. 

As this article of Rajiv Rao indicates, they now consider us a serious competitor who has secured at least 50 percent of their BPO business. The IT and Business Processing Association of the Philippines (IBPAP) reports that there will be over one million employees in the business this year.  Last year, the industry posted $16 billion as revenue. I never dreamt that we could attain these figures. Our congratulations go to IBPAP and DTI who share the credit for this outstanding achievement. For the record, it was the unstinting and sustained support of President Gloria Macapagal Arroyo during her tenure that made the difference.

Wake-up call

Further to my column of last week, allow me to emphasize my previous words of caution. Rao’s article points out that “Companies are beginning to migrate back due to a greater need for integrated tech services….” the “days of pure voice play is fast fading”.  In terms of the future, he is correct. A former colleague in IBM informs that BPO is evolving with what Gartner calls as PETS-Process Enhancement Technologies and Services – which embeds cloud, analytics, social and process automation. I think the new generation of buyers are comfortable with these technologies and would much rather interact with an AI (artificial intelligence) engine than a person – so investing in engines and process automation – allows you to have less dependence on people churn. Secondly, the interactions are now moving up the value chain to involve multi-channels, multi-users – a call center agent increasingly will have a hard time coping with this (e.g. on the go customization of products based on user responses requires real time knowledge databases, not scripts). The Philippines will continue to have a niche but not the whole industry as it is today. Another multinational executive told me that you will find global delivery centers or shared services centers – they will weave in their corporate IP and invest in technologies – but they will make it “captive” as it will be a strategic advantage for them. These “captives” will hire people more for their hard skills in analytics, AI technologies etc. rather than for their accents. 

What we are seeing is the continuous disruptive nature of technology. When I was president of IBM Philippines in the 80s, there were more data entry operators in the Philippines as compared to programmers/analysts. Most programmers/analysts were being recruited abroad as fast as we could turn them out. Eventually, the data entry business became obsolete. Why?... because of technologies  such as  bar-code scanners,  3270 terminals, PCs – which captured data at source. As technologies incorporate more of the knowledge of call center agents and multi-channel automation comes into play, we will see the non-captive BPOs and voice - going the way of data entry centers.

In reality, India and other countries have greater talent pools for decisioning and analytics. This is a key area which requires greater focus from all stakeholders: the private sector, IBPAP, and especially priority focus from the government. We have to prepare for this shift now, or BPO will end up as a temporary uplift to the economy and not a lasting one. I believe this is recognized by most industry players, but there are no tangible holistic programs being deployed to develop advanced skills for the long term. This is no time to rest on our laurels. We must prepare for the next wave.