|
As a way
to compensate for its lack of capital, the Philippines,
a major labor-surplus economy, has found ways to ride
the crest of the ongoing global outsourcing revolution.
Call it creativity or a spurt of the human genius on the
part of its entrepreneurial class, but the fact is that
the Philippines is benefiting immensely from
business-process outsourcing (BPO), which has emerged as
the nation’s newest sunshine industry.
While it
has grown by leaps and bounds over the past decade, the
BPO industry faces a slowdown in a year or two, negating
earlier forecasts it would earn at least $11 billion and
provide jobs for at least 900,000 workers in 2010. Two
culprits are emerging: the projected victory of the
Democratic candidate in 2010 presidential elections in
the United States; and the lack of a sustainable policy
to enhance BPO growth and protect it from criminal
elements.
Illinois
Sen. Barack Obama, the front-runner for the Democratic
nomination, has taken a strong position on what he has
called the unabated export of labor. This trend,
according to him, has been depriving Americans,
especially the minorities, tens of thousands of jobs,
which have gone to Asia-based workers, mostly Indians,
Chinese, Filipinos and Malaysians.
An Obama
presidency and a Democratic majority in US Congress are
developments which local BPO firms fear most. These
could lead to a policy shift which could mean a
combination of heavy taxes for US firms that export jobs
to Asian markets and tax incentives for those firms that
keep them in the United States. Obama has made this
policy shift one of his campaign promises, showing his
seriousness in pursuing it to its conclusion.
Another
concern is the lack of a privacy of information law
mainly intended to protect all information and data that
foreign firms outsource to Filipino firms. Foreign
client firms have been asking Congress to enact a
data-privacy law; but Congress, true to its tradition of
ineptitude and lack of direction, has been doing a lot
of things which are mostly irrelevant to its
constitutional task of policy-making.
Incidentally, several bills on data privacy have
remained pending in Congress. Their salient provisions
include a strict ban on the release of any information
or data which the foreign principals, as part of their
functions, provide to outside parties. These bills seek
to elevate as a national policy the confidentiality of
all information and data, which foreign client firms
have entrusted to local BPO companies. Also, the bills
seek to stop criminal elements from any access and
misuse of those information and data.
Required
to stay competitive in a globalized environment, Europe
and US-based firms have assigned—or have been
assigning—to outside providers, mostly in Asian nations
like India, China and the Philippines, specific
processes of their firms. This is called
business-process outsourcing, or simply outsourcing. But
others prefer calling it partnering, teaming or
collaboration.
American
firms started this novel business concept. At first,
they had assigned the rural population to handle certain
business processes of urban-based firms to save on cost.
Later, they tapped overseas manpower to perform these
processes, leading to what is now called offshore
outsourcing.
Outsourcing, whether onshore or offshore, has many
benefits, as it enables firms to concentrate on its core
business, energize its operations, reduce cost and
maximize profits and opportunities. By forming
partnerships with outside providers, firms perform core
functions that require greater specialization.
The
Philippines has been the fitting destination of typical
offshore outsourcing, which includes services on
customer relations, data entry, billing, staffing,
telemarketing, human resources, technical support,
research, bookkeeping, content management, inbound calls
and other Web services.
Although, its earnings still come largely from
call-center business operations, the Philippines is
developing special competence to become the Asian center
for high-end outsourcing, which its competitors could
hardly provide. These include legal services, web-site
design, medical transcription, software development,
animation and shared services. The Business Process
Association of the Philippines (BPAP), which groups 110
BPO firms in the country, is moving toward this
direction.
The
success of offshore outsourcing depends on the quality
of broadband services that major telcos provide.
Outsourcing businesses use plenty of voice and data
services, or a combination of the two. Many contracting
firms and their offshore providers employ leased lines
because they need bigger bandwidth for their operations.
Hence,
outsourcing has become a major source of income for the
local telcos. Amid the stagnant, albeit declining,
revenues of the fixed-line business, outsourcing has
provided PLDT, BayanTel, Digitel and Innove, Globe
Telecom’s fixed-line arm, a new lease on their sagging
corporate fortunes.
The
Philippine outsourcing business is now the
fastest-growing technology-based industry. Reports have
placed its offshore-services revenues at $2.1 billion in
2006, placing third behind India and China and slightly
ahead of Malaysia. This was an increase to
foreign-exchange earnings of between $1.3 billion in
2005 and $640 million in 2004.
The BPAP
(not the government) has set a goal of cornering at
least 10 percent of the global outsourcing market, which
is placed by some estimates at about $180 billion by
2010. Incidentally, a study by BNP Paribas said
outsourcing is projected to contribute to 6.5 percent of
the nation’s GDP by 2010. This translates into a 20-fold
increase in revenues from around $600 million in 2004 to
$10 billion on the assumption that the country gets a
target-market share of only 5 percent. While the
private sector knows what it is doing, the government
has been relatively quiet in pushing for the further
development of this sunshine industry.
Already,
local outsourcing firms feel the crunch of development
problems, which include those on human resource and
training. Because of the rising demands, the nation
could hardly provide qualified staff. English
proficiency is another problem.
In
contrast China has been training its staff by the
planeloads to become a major competitor. Unless it comes
out with solutions, the quality of service could
deteriorate, losing what could be considered the
country’s competitive edge.
Concerned sectors in the
US
economy, especially labor unions, have expressed fears
that the growth of the global outsourcing business could
lead to serious unemployment there because the generated
employment among overseas providers could displace
US-based workers. This is already being acknowledged by
the Obama camp, which has shown greater resiliency to
attract white-collar workers, whether black, white,
Asian or Hispanic, to favor the black candidate.
There
are no available estimates on the adverse impact of
outsourcing to American firms, but the impact could be
best illustrated by a New York-based insurance firm that
was forced to collapse a department that processed
insurance applications and claims.
The firm
used to employ 50 people to compose a department that
handled a monthly average of 12,000 applications and
claims. What it did early this year was to outsource
this business function to an Indian outsourcing firm at
a rate of only $1 per application, or about $12,000
every month.
The firm
dismissed 44 employees and paid them separation pays. It
has retained only the services of six employees, whose
job now is to coordinate with the Indian service
provider. The firm has saved close to 80 percent of its
cost. Obama has all the reasons in this world to get the
support of those dismissed workers.
E-mail:
telecom_digest@yahoo.com |
