Offshoring, Outsourcing IT-BPO Industry in the Philippines

News Articles for Outsourcing Industry

Information Technology-Business Process Outsourcing (IT-BPO) the fastest growing industry in the Philippines today is boasting a steady growth in revenue with an average of 9 percent yearly toward 2022 and covering about 15% of global outsourcing market. A prime outsourcing destination in Southeast Asia, according to the National ICT Confederation of the Philippines (NICP), direct employment for Filipinos in this sector was at 1.15 million in 2016. The BPO sector is projected to increase employment to 1.3 – 1.5 million new jobs in the next three years both direct and indirect jobs.

According to the IT-Business Processing Association of the Philippines (iBPAP) 2022 Roadmap, the BPO sector is expected to grow at USD40 billion in revenues and 7.6 million direct and indirect jobs with 500,000 jobs outside of the National Capital Region (NCR). Leading consulting firm, Kittelson & Carpo Consulting is also seeing an increase in newly registered IT-BPOs in the Philippines. The firm is registering as many as 3 per week.

The Philippines’ offshoring/outsourcing industry is composed of shared service offices, global in-house centers, captives and third party outsourcing providers. Large multinational companies outsource functions of their operations to the Philippines; international 3rd party providers offer services from the Philippines to foreign multinationals and independent Philippine companies provide services to international clients. Through these options, many offshore outsourcing services performed in the Philippines can be offered to companies of all sizes and needs.  The two main areas of expertise are Contact Centers and Business Process Outsourcing (IT-BPO). The Philippines formerly ranked second in outsourcing worldwide, just after India. However, recent developments in the global outsourcing industry have propelled the Philippines to the top spot in voice BPO and ranking 2nd in non-voice complex services.

The Philippines ranks top 3 in location for talent according to analysts, both on graduate-level pool and among professionals in IT-BPO sectors such as accounting, engineering, health care and finance and other non-voice, complex services and is among the top 3 IT-BPO and GIC locations in the world, after India and China in terms of number of graduates. The Philippines records approximately 500,000 tertiary graduates annually.

The outsourcing or IT-BPO industry is considered as one of the fastest growing industries in the world. It has grown at an average annual expansion rate of 20%. IBPAP stated that the IT-BPO and Global In-house Center (GIC) industry is the Philippines’ most important generator jobs. Its contribution to gross domestic product (GDP) is approximately 17% in 2016, and it is now the Philippines’ second largest net foreign exchange earner after remittances from an estimated 10 million overseas workers.

The IT-BPO boom in the Philippines is currently led by demand for offshore call or contact centers. In 2016, the Philippines raked in offshore service generating revenues of $25 billion, placing third behind India and China. That’s up 62% over the $21.5 billion it gained in 2015, and a huge increase from the start of the decade when the outsourcing industry in Manila employed just 2,400 people and the industry had revenues of merely $24 million. In February of 2015, the Philippines has become the call center capital of the world, and now employs over 1 million employees in the local call center industry, this according Don Lee of Los Angeles Times, and in 20163, the Philippine IT-BPO generated US$25 billion in revenues. Projections from industry analysts and market experts states that the Philippines is still number one in the world for voice and number two in non-voice complex services.  

India-based call centers and IT-BPOs are also expanding operations to the Philippines, including big name companies like Compvue, iOPEX, OmniGlobe, and TCS. Wipro Technologies, an outsourcing company headquartered in Bangalore, India, has already set-up a center in the Philippines, and now employs close to 2,000 employees.

The recent growth spurt in the outsourcing industry in the Philippines has been fueled not by traditional low-value-added call centers but by the higher-end outsourcing or knowledge process outsourcing (KPO), including legal services, accounting, business analysis, web design, medical transcription, software development, animation, and shared services. Though call centers still comprise the largest part of the IT-BPO sector, the Philippines has begun leveraging its creative design talent pool, vast amount of lawyers, and its CPAs or general accountants. The demand for IT-BPO and GIC industry are expected to more than double by 2022 to approximately US$ 250 billion. If this is achieved, as mentioned earlier, the industry will need to employ more than 1.3 million direct employees, thus contributing almost 17% of GDP, making this industry the second largest source of foreign exchange for the Philippines.

Industry experts are seeing a shift from cost-effectiveness to skills quality and competence. This development continues to strengthen the Philippines’ position as an emerging global leader in the IT-BPO and KPO industries. To achieve and sustain this rapid growth, the Philippine government is offering significant fiscal and non-fiscal incentives to attract direct foreign investment in the outsourcing industry as part of the 2017 Investment Priorities Plan (IPP).  The IPP is issued every three years and lists the priority investment activities that may be eligible for incentives. It is prepared by the Board of Investments (BOI) of the Philippines, the government agency responsible for promoting investments in the country, and is focused on the sectors identified in the Medium-Term Philippine Development Plan (MTPDP) 2004-2010 (PBOI 2006). Another government agency in the Philippines that offers tax breaks and incentives is PEZA.

The Philippine IT-BPM Roadmap 2022 crafted by IBPAP is all about accelerating the growth of the PH IT-BPM industry, to ensure that the Philippines will continue to expand market share while moving up in complexity and value of its IT-BPM capabilities, and provide another one million higher value direct jobs.The Philippine government’s role is to support and enable the growth of the sunshine industry and the visions of the Roadmap 2022, which coincides with the creation of the new Department of Information and Communication Technology (DICT) by the Philippine government. The new DICT Secretary, Rodolfo Salalima, has ordered the government agencies to expedite processing of permits for telcos to operate in remote areas.

Many IT-BPO facilities are located in the following areas:

  • Makati
  • Manila
  • Ortigas
  • Fort Bonifacio Global City
  • Eastwood
  • Cebu City
  • Baguio City
  • Cagayan de Oro
  • Clark
  • Dagupan City
  • Davao City
  • Dumaguete City
  • Santa Rosa
  • Iloilo City
  • Legazpi City

Most Common Offshore Outsourcing in the Philippines

Philippines Outsourcing Workforce

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Kittelson & Carpo Consulting is a distinguished business consulting firm in the Philippines with expertise in delivering quality solutions that help companies of all sizes move forward.