India's BPO collapse a good thing for RP

India's demise in hosting Business Process Outsourcing (BPOs) companies could be a blessing in disguise for the Philippines now that the downside of BPO hosting has been revealed.

Soaring salaries and poor manpower quality have reportedly prompted foreign BPO companies to shut down operations in India.

Earlier, US-based Apple Computer and software maker Pervasive have joined Powergen, a British subsidiary of German energy supplier E.ON, in announcing the closure of their centers in India's technology hub of Bangalore.

The National Association for Software and Service Companies (NASSCOM), India's premier software body, earlier reported that salaries of freshers had shot up within11 percent to 15 percent in the past few years, while wages for senior managerial positions had risen by a whopping 30 percent.

What happened in India would serve as a warning for countries like the Philippines on how to go about handling the fast growing BPO industry in the country and keep this million-dollar earner sector to stay afloat for long-term.

Department of Trade and Industry (DTI-7) regional director Asteria Caberte said the Philippines, may be able to benefit from what happened to India now, but if the cautions are not taken into consideration, there is a possibility that the same problem may arise in the long run.

BPO industry is a cost sensitive industry. High operational cost in other countries is the very reason why the industry was born wherein big establishments now opt to outsource their after sales services, among others.

"We might reach that point of demanding for high salaries, because cost behaves on the supply and demand equation," Caberte said.

Unlike India, where the BPO industry is considered maturing, the Philippines on the other hand is still on its starting stage, and is still trying to establish itself as preferred or alternative site for BPO investments.

"We are still asking them [BPO firms] to come. What happened to India may not happen in the Philippines in the short term, however, if Filipinos will be demanding for higher pay in the long term, we will then be learning from what happened to India now," Caberte said.

According to Caberte, cost is a very important factor in encouraging more BPO investments. The Philippines, she said aside from manageable cost of manpower, the quality of software developers, and call center agents are much competitive to that of India.

A Mexico-based call center company, Qualfon Philippines Inc. decided to set up its operations in Cebu, Philippines, instead of India, because of the sufficient English-speaking Filipinos.

"We decided to set up in Cebu because of Cebu's strong infrastructure, and friendlier business environment, and ample supply of highly qualified workers," said Alejandra Romero, the company's operations director.

The Philippine Software Industry Association (PSIA) expects software exports to grow by 33 percent this year due to a growing domestic market and the outsourcing industry. It anticipates earning US$272 million in 2006, up from last year's $204 million.

The Philippines is home to major software companies such as Accenture, IBM Solutions, Sun Microsystems, Software Ventures International Hewlett-Packard, Canon, Fujitsu, and WeServ.

Cebu on the other hand, has increasingly attracted software outsourcing firms like NEC Telecoms, Epson Precision, Lexmark Research and Development, among others.

"We have to be careful in the cost component in hosting the BPOs," Caberte said, adding that the main reason why the government is constantly improving its incentive programs and tax perks for outsourcing firms to encourage more investments, and keep the existing operations for long term.