I had lunch with an old friend from our UP Diliman days. He is now New York-based but he spends quite a bit of time here managing a BPO operation. I asked him how his BPO is doing and he said it is threatened by AI. He has laid off some workers already who are involved in simple tasks that clients have now assigned to AI. But he keeps his connections with young engineering graduates of UP for more complicated tasks.
Last Monday, I came upon this tweet on X:
“Sourced from Reddit… ‘I work in a call center, so do 17 million people around the world. Ninety-five percent of costs associated with call centers are due to staffing, and it’s a 300-billion-dollar industry. I’ve recently been made aware of a demo with a new call center AI agent and I immediately started looking for a different career.
‘The bad part is, my job and everyone else’s in this industry is over. The good part is, you will never be put on hold again, the AI agent will likely already know who you are when you call, have predicted the issue you are most likely having and be ready to offer the solution to that issue. Most people will not be able to tell they are talking to an AI Agent. Two years max for the call centers to train these friendly, helpful AIs on every possible scenario, implement them and fire everyone. AI will take all our jobs. Fine by me - working in a call center sucks.’”
That was what my friend was explaining to me about the business. It is either you move up the value chain or perish. From what I have been hearing from the local BPO people, they are aware of this threat and are indeed moving up the value chain. But the speed of response to the AI challenge is crucial. Because we don’t have significant manufacturing, the BPO industry is one of only two legs propping our economy with OFWs as the other leg. We can’t afford to lose it.
To get it from the horse’s mouth, I asked ChatGPT how AI will impact the Philippine BPO industry. Here is how ChatGPT responded:
“AI has the potential to transform the Philippine BPO industry by driving efficiency, reducing costs and creating new service opportunities. However, it also brings challenges such as job displacement, skill gaps and increased competition. Balancing these positive and negative impacts requires a strategic approach, including investment in technology and workforce development, as well as careful attention to ethical considerations and data security.”
ChatGPT gave me a breakdown of the positive and negative impact of AI on our $30-billion BPO industry that employs over a million people in more than 750 companies operating in 20 key regions of the country.
Positive impacts for business
Enhanced efficiency and productivity: AI can automate repetitive and mundane tasks, such as data entry and simple customer queries, significantly improving efficiency and allowing human workers to focus on more complex tasks. This can lead to faster service delivery and increased productivity, enhancing the overall competitiveness of BPO firms.
Cost reduction: AI-driven processes can lower operational costs by reducing the need for manual labor and minimizing errors. Companies can offer more competitive pricing or reinvest savings into other areas of their business.
Improved accuracy and quality: AI technologies, such as machine learning algorithms, can analyze large volumes of data with high accuracy, reducing human error and improving the quality of service. This can lead to better customer satisfaction and more reliable service delivery.
Scalability: AI systems can easily scale up to handle increased workloads without a proportional increase in costs. BPO companies can expand their operations more efficiently to accommodate growth or fluctuations in demand.
New service opportunities: AI opens up new avenues for offering value-added services, such as advanced analytics, predictive insights and customized solutions. BPO firms can diversify their service offerings and tap into new market segments.
Enhanced data analysis: AI tools can process and analyze vast amounts of data to provide actionable insights and support data-driven decision-making. This can help BPO companies better understand client needs and market trends, leading to improved strategies and performance.
Negative impacts
Job displacement: Automation of routine tasks can lead to job losses, particularly in entry-level positions that are most susceptible to AI-driven processes. This can result in a need for workforce reskilling and potentially lead to unemployment or underemployment in certain sectors.
Skill gaps and workforce mismatch: The increasing reliance on AI requires new skill sets that may not be widely available in the current workforce. This can create skill gaps and make it challenging for companies to find qualified personnel, impacting their ability to implement and manage AI technologies effectively.
High initial investment: Implementing AI solutions requires significant upfront investment in technology, infrastructure and training. Smaller BPO firms may struggle to afford these investments, potentially leading to a competitive disadvantage compared to larger players with more resources.
Increased competition: As AI becomes more widely adopted, the global BPO market may experience intensified competition, with firms from other countries leveraging similar technologies. Philippine BPO firms will need to continuously innovate and offer superior value to maintain their competitive edge.
Data privacy and security concerns: The use of AI involves handling large volumes of sensitive data, which raises concerns about data privacy and security. BPO companies must ensure robust data protection measures and compliance with regulations to avoid breaches and maintain client trust.
One thing not mentioned directly is the end of our low labor cost advantage. Clients can employ AI in their home countries and need not be offshore. Our BPO industry must think of a really compelling reason to keep their BPO operations here as the labor cost advantage falls off the table. How about because it is more fun in the Philippines?
Boo Chanco’s email address is bchanco@gmail.com. Follow him on X @boochanco.