DESPITE missing revenue expectations in the third quarter, business-process outsourcing (BPO) firm StarTek executive Larry Jones said the BPO model is too far ahead for most Americans to retreat from.

“While there is government pressure for companies to keep operations within the United States, these are mostly manufacturing,” Jones told a week before the company reported revenue down $0.8 million from the $73.3 million the company recorded in the second quarter of this year.

Jones explained that outsourcing remains a viable option, especially for those in the financial sector in the US.

“American business is saying, ‘I’m sorry but to offshore we increase the percentage of cost reduction from 40 percent to 60 percent.’ Those percentage points matter a lot,” he said.

Desperate in jump-starting a moribund economy, the US government is seen as moving to restrict more firms from going offshore, according to DPC Data Inc. chief executive Peter Schmitt.

Schmitt said in an outsourcing conference last month that the challenge to American business is balancing between keeping job opportunities on-shore and cost-reduction opportunities offered by operating in countries like the Philippines.

Jones said that from the client perspective, the US economic downturn has led to less transaction volume and further reducing costs.

StarTek, for example, reported that revenue from its largest customer dropped 3.5 percent from the second quarter “due to layoffs of company employees in the second quarter and a hiring freeze in the third quarter.”

Despite these, he said, he observed that there’s an increasing percentage of companies outsourcing, even accelerating migration to offshore.

Both are aimed at reducing costs, especially those in the financial services, he said.

From a vendor perspective, Jones said BPOs are now chasing new labor markets—less Canada and Europe; more use of home agents in the US—and are focusing on profitability, on the growing verticals sectors, like health care and communications.

Other cost savings include eliminating nonperforming vendors and relying on technology to offset labor costs.

“Technology, not labor, will drive BPO ‘value-added’ [services],” Jones said, dismissing the notion that the Philippines’ high labor cost hobbles BPO growth.

“The key is to spread the risks and the costs,” he told the BusinessMirror. Jones said even if the number of StarTek’s employees in the country increase to a thousand, the cost will just be under a percent because its operations are spread across the world.

The 20-year-old Denver, Colorado-headquartered BPO has 20 delivery centers in the Philippines, Costa Rica, Canada and the US.

“We’re even ramping up our operations here,” Jones said. The company said in its financial report for the third quarter that it expanded its Philippines operation to over 500 full-time equivalent agents as of the end of September and reported gross margin of 7.1 percent.

StarTek said it recently opened its shared services operation in the country with current staffing of 80, which it expects to grow to over 150 by the end of next year.

The company added that its cash position increased slightly to $21 million on September 30, from $20.3 million on June 30, but “due primarily to working capital changes.”

Jones said that for the Philippines to remain competitive, he recommends the industry develop the country as “customer-care technology” center.

This means banking on technology, e.g., call-center automation and the so-called next generation technology.