Unveiling the Phenomenal BPO Industry of the Philippines - A Journey of Exploration
In order to address challenges such as reducing costs, focusing on core functions, and overcoming talent shortages, businesses may want to consider utilizing business process outsourcing (BPO). The Philippines is recognized as one of the world's leading providers of offshoring services due to its highly literate population, specialized talent pool, cultural affinity, and cost-effectiveness.
Despite facing obstacles in the past, the country's BPO industry has consistently grown and operated smoothly. This makes it an attractive option for companies seeking to outsource their business processes. If you're interested in learning more about the thriving Philippine BPO industry, please keep reading.
An Overview of the Current State of the BPO Industry in the Philippines
Initially providing low-end services with a narrow focus, the Philippine business process outsourcing industry has evolved over time into a vast sector that caters to a diverse range of skills and services for global clients.
Driven by the need for companies to streamline their core business activities, lower costs, and address talent shortages, the Philippine BPO industry has gained significant traction in the global market. According to a 2021 Deloitte report, the most commonly outsourced services worldwide are information technology (IT) at 54%, followed by finance (44%), payroll (32%), and customer service (22%). Although India is the global leader in outsourcing services, the Philippines follows closely behind.
While India is known for its impressive IT skills and infrastructure, the Philippines' strengths lie in its customer service agents' soft skills and high English proficiency. The country's strong cultural affinity with the U.S. makes it a formidable player in the outsourcing industry.
PH now allows BPOs up to 100% work-from-home without losing tax perks
In a recent development, the Philippine Fiscal Incentives Review Board (FIRB) has authorized IT Business Process Outsourcing or Business Process Management (IT-BPO/BPM) companies operating within ecozones to shift to a 100% remote work setup without losing their tax incentives.
To qualify for a fully remote setup, IT-BPO/BPM firms are required to transfer their registrations from the Philippine Economic Zone Authority (PEZA) to the Board of Investments (BOI). This transfer process is expedited to ensure that businesses can continue to benefit from tax incentives.
This move by FIRB is thanks to the efforts of the Department of Trade and Industry (DTI), which recognizes the crucial role played by the BPO industry in providing employment opportunities for Filipinos and attracting foreign investments to the country.
The IT-BPO sector holds the title of being the biggest employer in the Philippines.
The IT-BPM sector experienced a growth of 9.1% in 2021, hiring 120,000 full-time employees (FTEs) year-on-year and contributing to the country's post-pandemic economic recovery. The number of IT workers in the Philippines has now reached 1.4 million.
Furthermore, the sector aims to expand its workforce and add up to 1 million direct jobs over the next six years, which could increase the industry's total headcount to almost 2.5 million by 2028, with a projected growth rate of 8.5%. To achieve this, the BPO industry plans to hire individuals from provinces outside of Manila, where more than half of the one million job targets are located.
Additionally, the outsourced tech solutions market is expected to nearly double in size by 2028, with an anticipated annual revenue of $59 billion and a compound annual growth rate (CAGR) of 10.4%.
The Philippine BPO industry will persist in the automation of AI.
Aside from cost savings, companies nowadays prioritize digital transformation, production efficiency, and adaptability. The Philippines is still an attractive destination for businesses due to its affordable labor costs, and back-office outsourcing to the country can help companies meet their staffing needs and keep up with the rising trend of artificial intelligence (AI).
According to a Kearney report, AI is expected to increase the gross domestic product (GDP) of Southeast Asian countries by 10% to 18% by 2030. For the Philippines, the projected growth is 12% of the GDP by 2030.
The report also revealed that 54% of Filipino businesses plan to integrate process automation, 26% are interested in developing and investing in an AI strategy, 9% have scaled end-to-end AI implementation, and 4% are scaling across industries.
The BPO sector has a promising future ahead.
As per the IT and Business Process Association of the Philippines (IBPAP), the Philippine BPO sector has 1.4 million FTEs and generated $29.1 billion in revenue during H1 2022. This can be attributed to the growth in e-commerce, healthcare, financial technology, and IT, resulting in a surge in demand for outsourced services worldwide. The industry's growth is also fueled by the trust clients have developed in work-from-home (WFH) arrangements. These factors have been instrumental in the industry's contribution to the Philippine economy's recovery. Despite the pandemic's adverse impact on BPO companies, they quickly adapted and invested in infrastructure to maintain operations. IBPAP predicts that the industry's rapid recovery will continue to fuel demand for IT-BPM services, leading to increased investment, job security, real estate opportunities, and rural development.
Why is the Philippines considered a leading provider of BPO services?
The Philippines' position as a premier BPO provider depends on three key factors: labor, cost, and regulations. These criteria determine the country's competitiveness and sustainability as an outsourcing destination. When evaluating the Philippines, companies consider several factors. Firstly, regulations, which include minimum capital requirements, business regulations, and tax-payment procedures. Secondly, cost, which encompasses wages and infrastructure costs, such as fit-out expenses and office rental. Lastly, labor, which encompasses talent availability, quality, and professional and technical expertise.
The Philippines is a top choice for data entry and voice-related services, and its capacity to provide non-voice IT services and BPM is increasing rapidly. Factors such as reliable infrastructure, scalable talent pool, government support, and a proven track record contribute to the country's success in BPO. Additionally, the Philippine government has favorable tax laws, and companies can apply for tax exemptions under PEZA registration, which includes technical support outsourcing, software development, back-office solutions, and more.
Which services are provided by the BPO industry in the Philippines?
The BPO industry in the Philippines provides a variety of outsourced services, with a primary focus on back-office functions such as HR, IT, and finance, along with front-office activities such as CCaaS and customer support. Additionally, companies often outsource processes such as transcription, data mining and input, animation services, game development, and software development to the Philippines. These processes require significant labor investment, but due to the ability to work remotely, companies choose to outsource these services to the Philippines.
Ensuring the Future Success of the Philippine BPO Industry
Despite the promising future of the Philippine BPO industry, there are challenges that must be monitored to ensure its continued success. One challenge is the rise of automation, which can lead businesses to opt for AI-powered services instead of human workers. While automation has benefits, it cannot replace the personal touch and adaptability of human experts.
Another potential obstacle is technical issues, particularly for remote workers who rely on stable internet connectivity. Without reliable Wi-Fi, remote work efficiency may suffer.
Finally, the BPO industry may face a shortage of skilled workers, as only a select few candidates meet the requirements of the recruitment process. This issue is particularly concerning as technology continues to evolve rapidly. To address these threats, the Philippine BPO industry must remain vigilant and adapt to changing circumstances to secure its future success.
The Rise of Knowledge Process Outsourcing in the Philippines
As new technologies emerge, leading outsourcing providers in the Philippines are taking measures to stay ahead of the game. To combat the challenges posed by AI, some have turned to knowledge process outsourcing (KPO).
Filipino workers, in addition to being proficient in English, possess strong analytical and creative skills. They are not only capable of communicating well in English, but also offer a wealth of knowledge and expertise, making them valuable assets to any business.
To meet the demands of the evolving industry, top BPO companies in the Philippines now offer KPO services, including professional consulting, creative design, web development, research, and digital marketing. As digital innovations continue to emerge, outsourcing options are expected to expand even further.
The Bottom Line
Thanks to its outstanding infrastructure, favorable tax policies, and strong government support, the Philippines has become one of the most popular global destinations for outsourcing services. Recently, the country has allowed BPO firms to operate remotely while still enjoying tax benefits. The IT-BPO sector is also the biggest employer in the country, with 1.44 million workers, and is predicted to create up to 1.1 million direct jobs over the next six years. By continuously supporting BPO firms and attracting foreign direct investments through various incentives, the Philippines has established itself as an attractive investment hub and a prime location for outsourcing services.
Atento BPO Services offers comprehensive outsourcing solutions that can help various industries make the most of the thriving BPO sector in the Philippines. With our expertise in delivering high-quality services, Atento BPO Services can assist companies in streamlining any processes, reducing costs, and increasing productivity. Our solutions cover various areas such as customer service, technical support, back-office processes, and more, all while adhering to strict quality standards. By partnering with Atento BPO Services, businesses can take advantage of the Philippines' favorable outsourcing landscape and focus on their core competencies, while leaving non-core activities to the experts.
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