Why Philippines Is One Of The Best Outsourcing Destinations In The World?

Why Philippines Is One Of The Best Outsourcing Destinations In The World

The Philippines is one of the world’s best tourism. And I’m biased on this since I came from the Philippines — born and raised. Its beaches are one of the best on the planet.

But the Philippines is also known as the best destination for businesses and companies looking to outsource business processes. The Philippine offshore market dates back to the early 90s and, over the years, has grown tremendously. 

The paradise in the corner of the Pacific Ocean is home to many satellite offices of various foreign corporations and multinational firms. These companies are from a variety of sectors, from manufacturing to technology.

The Philippines’ first business process outsourcing (BPO) contact center opened in 1992. It was followed by the Philippine government’s creation of special economic zones in 1995 after realizing the potential of the BPO industry to contribute to the country’s economic activity. The fiscal incentives offered by these special economic zones boosted the BPO industry and enticed many foreign companies in the West to open shops in the Philippines. 

With its massive English-speaking population, the Philippines became the ideal destination for customer service contact centers. But over the years, the BPO industry in the Philippines has evolved and offers more variety of services. 

In 2019, an estimated 1.3 million people were employed in the BPO industry in the Philippines. The sector contributes approximately $30 billion to the Philippine economy, with around 10-15% market share of the global BPO industry.

Brief History: Philippine Outsourcing

Accenture always comes up when discussing outsourcing and its history in the Philippines. The Irish-American professional services firm was the first to open a shop on the shores of the Philippines, the start of what would become a significant economic driver in the country. 

In 1992, Frank Holtz established Accenture Global Center. Accenture provides management consulting and professional services globally, and its Philippine hub services its global operations. Currently, Accenture employs 50,000 people and continues to be one of the leading BPO companies in the Philippines.

Here is a quick rundown of the crucial developments that contributed to the success of the BPO industry in the Philippines:

  • 1992 saw the establishment of the first contact center by Frank Holtz-founded Accenture Global Center. It was located in Mandaluyong City’s Robinson Cybergate 2 tower.
  • 1995 saw the passage of the Special Economic Zone Act by the Philippine Congress, which offered tax breaks to international investors in the BPO industry.
  • Sykes founded its first international BPO business in the Philippines in 1997, specializing in incoming call center assistance.
  • Jim Franke and Derek Holley established eTelecare in 1999.
  • 2000, the BPO sector was estimated to have contributed 0.075 percent of the Philippines’ GDP.
  • According to reports from 2005, the Philippines gained 3% of the global BPO market.
  • With 525,000 call center employees and an estimated $8.9 billion in revenue in 2010, the Philippines was dubbed the global BPO capital.
  • 2016 saw a 17 percent annual growth rate for the BPO sector.

The significant events above show the massive growth of the outsourcing industry in the Philippines. From a potential economic driver, the BPO industry contributes 7.5 percent to the Philippine GDP in 2021. It is also expected to grow 8.8 percent in 2023.

You Might Also Be Interested: Philippine Holidays and How to Compute for Holiday Pay

What makes the Philippines attractive for outsourcing? 

Outsourcing to the Philippines is not exclusive to multibillion-dollar companies. The success of Human Proof Designs exemplifies how smaller firms can benefit from the excellent outsourcing environment in the Philippines. The company’s COO, Brad Vandenberg, saw his staff grow from 15 employees to 200 individuals in less than 18 months.

In six years, Virtual Staff PH has grown from a simple online jobs board to a one-stop shop outsourcing platform, with its traditional online job marketplace, contract management, workflow management dashboard, and employer-of-record services exclusive to the Philippines.

Companies big and small outsourcing to the Philippines are thriving. They get to enjoy the usual perks of outsourcing plus so much more. Let me discuss the benefits of outsourcing to the Philippines below.

Benefits of Outsourcing to the Philippines

I’m listing here the reasons why you should choose the Philippines as your outsourcing destination:

Proficiency in English

Still a big surprise to many in the West, the Philippines is one of the biggest English-speaking countries in the world. The country is in Asia, a former colony of Spain for three centuries and an American colony for four decades. As they say, Filipinos are Asians with Latin names who speak fluent English. 

According to the 2020 EF English Proficiency Index (EF EPI), the Philippines kept its top spot in Asia, coming in second place only to Singapore in English competency. Overall, the Philippines came in 10th in the overall index. The country’s English competency makes it a desirable choice for companies and entities looking to outsource. 

Fluent English speakers make up over 70% of the Philippine population. The majority of local kids begin language study before they enter school. Once kids enter formal education, their command of the English language is further developed as the primary academic instruction is in English. In the Philippines, English is one of the official languages and the principal language in the academe, business, and government.

Outsourcing in the Philippines is advantageous for international businesses, especially in the BPO sectors that mainly rely on chat support and virtual assistance due to Filipinos’ knowledge of English and other considerations. And the neutral accent of the Filipinos is perfect for contact centers.

Cost Efficiency

Outsourcing in the Philippines can reduce operational costs by 60 to 80 percent. It is a result of the low cost of living in the country, which means wages and salaries are way lower. Compared to their peers in the West, recent graduates in the Philippines earn way less. But don’t mistake this as a form of exploitation. 

Even if you pay them much lower per Western standards, the pay for many outsourcing professionals in the Philippines puts them on a higher scale of wage earners. BPO employees enjoy a better quality of living as their payscale can afford the cost of life’s comforts.

But, paying less for outsourced services in the Philippines does not mean sacrificing quality. You can get the same quality of work for more affordable rates as the Philippine labor market comprises highly educated and skilled workers.

Cultural Likeness

The Philippines still bears the scars of its past colonization by the Spanish, Japanese, and the United States. If you visit the Philippines, you’ll notice that all signages, street directions, and billboards are in English. Western cultural influence is prevalent in Philippine society, and Filipinos are one of the most Westernized people in Asia.

With cultural likeness, it would be easier for businesses to build rapport and work culture with their outsourced team in the Philippines. Cultural sensitivities won’t be as challenging due to the proximity of Philippine culture to Western values.

Work ethics and behavior are also very similar to the West. Thus, work barriers are virtually non-existent. Efforts to bridge cultural and practice gaps will be minimal due to compatibility with Western countries.

Workforce Flexibility

Outsourcing to the Philippines offers a distinct advantage in terms of workforce flexibility. The country’s labor market is characterized by a large pool of highly skilled and educated professionals across various industries. 

This diversity allows businesses to quickly scale their operations up or down based on their specific needs. Whether it’s customer support, IT services, or back-office tasks, the Philippines provides a flexible workforce that can quickly adapt to changing demands. 

Additionally, the time zone proximity to major global markets enables seamless collaboration, ensuring that tasks are completed efficiently and within specified timeframes. 

Overall, the Philippines stands out as a strategic outsourcing destination, offering the adaptability needed for businesses to thrive in dynamic and competitive environments.

Skilled Workforce

The Philippines, known for its highly skilled workforce, is experiencing a demographic shift, with many young people outgrowing the country’s dependent children and retired workers. 

The median age of this dynamic group is 23 years old, reflecting a youthful and vibrant workforce. The data further showcases the strength of this workforce, boasting a high literacy rate of 97.5% and a plentiful labor supply.

Local institutions and colleges play a pivotal role in shaping this talent pool, contributing more than 500,000 trained and qualified workers to the labor force annually. This influx of skilled individuals adds to the country’s competitive edge in outsourcing, ensuring a continuous supply of capable professionals across various industries. 

Experts predict that the Philippines will reap substantial benefits from this young and talented workforce in the upcoming years, solidifying its position as a prime destination for businesses seeking both skill and adaptability in outsourcing endeavors.

Reduced Management Issues and Legal Liabilities

Navigating the complexities of employee management involves juggling various rules, compliance standards, administrative tasks, tax considerations, and cost factors across jurisdictions, with some nations and industries imposing more substantial demands. 

Opting for a Philippine outsourcing firm to hire offshore personnel offers a strategic solution, mitigating the potential risks and expenses associated with internal or direct hiring.

While emphasizing the importance of fair treatment, utilizing an outsourcing firm can streamline administrative procedures, minimizing financial and legal liability risks. 

The Philippines, known for its pro-labor stance and well-established Labor Code, can present challenges when dealt with directly. 

However, partnering with an outsourcing company proves advantageous, as they adeptly handle all operational and legal aspects of your team’s human resources, providing a comprehensive and efficient solution for businesses seeking to optimize their workforce management processes.

Data security and confidentiality

Over the course of three decades, the Philippines has emerged as a favored destination for outsourcing, fostering the growth of a sophisticated business landscape and establishing a stable regulatory framework to bolster the sector. 

With a track record spanning over 20 years, the Philippine outsourcing industry has adeptly managed sensitive customer data, including critical information from major global public and private entities such as US health insurance, medical records, and personal financial data.

Distinguished by one of the world’s most stringent data privacy laws, the Philippines offers a compliant working environment and system, aligning with the principles outlined in the European General Data Protection Regulation (GDPR). 

This commitment to robust data protection practices further enhances the country’s appeal as a trusted hub for outsourcing, assuring businesses of a secure and reliable partner in managing their sensitive information.

Dependable Government Backing

Recognizing the Business Process Outsourcing (BPO) industry as a pivotal catalyst for the nation’s economic growth, the Philippine Government has proactively extended significant support to the sector. This commitment is manifested through various regulations and incentives designed to attract businesses to choose the Philippines as their offshore headquarters. 

Key initiatives include the establishment of the Philippine Economic Zone Authority (PEZA) and the creation of special economic zones (SEZ), both aimed at providing strategic advantages and incentives.

Illustrating the government’s dedication to fostering a favorable environment for the BPO sector, notable benefits include substantial tax breaks lasting four to eight years. This fiscal and non-fiscal support underscores the Philippines’ appeal as an optimal destination for outsourcing. 

In alignment with this vision, the local government has outlined its steadfast commitment through the Philippine IT-BPM Roadmap 2022. This comprehensive plan aims to generate $40 billion in revenue for the Filipino economy and create 1.8 million new job opportunities by the specified year, solidifying the BPO industry’s role as a cornerstone of the nation’s economic expansion.

Latest Technological Infrastructure

The Philippines collaborates closely with the US and Australia in the realm of technology and stands out for its commitment to robust infrastructure development, with a particular focus on urban areas. Take Manila, for example, where the landscape mirrors that of major American or Australian metropolises, boasting a plethora of substantial corporate facilities. 

The city is adorned with contemporary office spaces equipped with cutting-edge amenities, underlining the country’s dedication to providing a conducive environment for businesses.

In addition to modern workspaces, Manila enjoys the support of dependable utility providers, ensuring a seamless and uninterrupted supply of essential services. The city’s infrastructure is a testament to the government’s significant investments, reflecting a commitment to fostering an environment conducive to economic growth and technological advancement. 

Moreover, the telecommunications infrastructure in Manila is robust and reliable, aligning with international standards. This comprehensive ecosystem positions the Philippines as a prime destination for businesses seeking a blend of technological prowess and modern infrastructure to thrive in the global market.

You Can Also Read: Why Outsource to the Philippines?

Disadvantages of Outsourcing to the Philippines

The Weather

Situated on the western fringe of the Pacific Ocean, the Philippines, with its tropical archipelago, faces the formidable challenge of approximately 20 storms annually, especially in flood-prone communities along the typhoon’s trajectory. These storms can potentially disrupt everyday life, causing power outages and necessitating the suspension of work and school activities.

Moreover, the country is prone to volcanic eruptions and earthquakes due to its location within the Pacific Ring of Fire. While experiencing about 100 tremors annually, the occurrence of volcanic eruptions, despite having 53 active volcanoes, is relatively infrequent.

In the face of these environmental challenges, Filipinos exhibit resilience, facilitated by the adaptability of remote work. Several outsourcing firms, such as VirtualStaff.ph, allow employees to work from home. This not only enhances flexibility but also serves as a crucial continuity strategy in the event of a natural disaster, ensuring the seamless operation of businesses despite external challenges.

Holidays

The Philippines distinguishes itself with a rich tapestry of cultural diversity, reflected in its calendar that includes 18 official non-working government and religious holidays, a notable contrast to the 11 official holidays in the United States.

Given that most of the Philippine population adheres to Christianity, many of these holidays hold cultural and religious significance, garnering recognition and endorsement from the government. These occasions provide moments for reflection and celebration and contribute to the vibrant tapestry of the nation’s cultural identity.

However, recognizing the diverse needs of businesses and the importance of operational continuity, employers retain the prerogative to request that their staff report for duty during these holidays. 

It is noteworthy that Philippine labor regulations stipulate increased compensation for employees working on legal holidays, thus safeguarding their rights and compensating them fairly for their service during these special times. 

To accommodate the specific preferences and requirements of the clients, the decision regarding staff attendance during holidays is left to their discretion, allowing for flexibility while adhering to legal and ethical standards.

What frequently outsourced services do Philippine BPOs provide?

Here is a list of the numerous tasks that businesses frequently outsource to the Philippines:

Within Calls:

1. Accounts for Finances and Banking:

  • Outsourcing IT services in the Philippines is common, particularly in the banking and finance sectors, where inquiries and concerns are efficiently addressed without disrupting daily business operations.

2. Services and Goods:

  • Businesses outsourcing in the Philippines often delegate control of client hotlines, allowing customer service representatives (CSRs) to manage orders and address customer queries, emphasizing the importance of the customer-CSR relationship in ensuring successful interactions.

3. Technical Assistance:

  • Filipinos’ adept mastery of the English language reduces the risk of misunderstandings in technical support, making it a frequently outsourced task. Handling queries and providing directions to resolve issues are key responsibilities in this domain.

4. After-Sales:

  • After-sales involves post-purchase interactions between businesses and clients, ensuring customer satisfaction and addressing any concerns or inquiries following the initial acquisition.

5. Administrative Assistant:

  • Administrative coordinators play a crucial role in maintaining offshore organizations’ smooth operation. This role requires managerial, supervisory, and excellent communication skills to bridge the gap between employers and employees.

After Sales, for Outgoing Calls:

6. Generating Leads:

  • The process of turning someone into a potential client, lead generation involves creating opportunities for individuals to express interest in a company’s goods and services.

7. Call to Sell:

  • Utilizing strategic marketing, businesses make sales calls to generate interest and, ultimately, schedule face-to-face appointments with potential clients, paving the way for successful sales outcomes.

8. Email and Chat Assistance:

  • Outsourcing non-voice support involves using chat or email to communicate with customers. Prompt responses and acknowledgment of client concerns are crucial for providing quality customer service.

9. Back Office:

  • The back office, comprising administrative and financial duties, plays a pivotal role in a business’s success. Engaging offshore staff ensures the company complies with regulations and adheres to correct procedures, allowing uninterrupted focus on core activities.

The Philippines’ comprehensive array of outsourced tasks reflects the country’s versatility and proficiency in providing diverse and specialized business process outsourcing solutions.

Takeaway

The Philippines stands out prominently among nations with thriving outsourcing businesses, and its key differentiator lies in the exceptional fluency of Filipinos in English, a quality that significantly facilitates communication.

Ranked among the top 15 non-native English-speaking nations globally, according to Education First’s English Proficiency Index of 2020, the Philippines holds an impressive standing, considering the inclusion of 72 countries in the index. 

Within Asia, the Philippines secures the second position out of twenty, with Singapore claiming the top spot. This underscores the nation’s linguistic prowess and affirms its ability to keep pace with the continuous expansion of the outsourcing industry.

The proactive support from the government plays a pivotal role in sustaining this growth. Entities such as the Board of Investments (BOI) and the Philippine Economic Zone Authority (PEZA) extend tax incentive packages through the Department of Trade and Industry (DTI), promoting BPO activity across the nation. The Department of Information and Communications Technology (DICT) further contributes to the industry’s development, as exemplified by the Philippine IT-BPM Roadmap 2022, unveiled in 2016 to catalyze the expansion of the BPO sector.

However, the true backbone of the Philippines’ outsourcing success lies in its labor force. Accounting for 10 to 15 percent of the global BPO market, Filipinos are renowned for their natural diligence, kindness, resourcefulness, and adaptability. 

The prevailing group mentality in the Filipino work ethic, contrasting with Western individualism, fosters a collaborative and harmonious work environment, making it easier for teams to adjust and work together effectively towards organizational goals.

An instrumental turning point in the industry’s early success was Microsoft’s generous donation of free Microsoft Apps Licenses to the PCPS program. This gesture reduced government capital expenses and streamlined the industry’s launch, contributing significantly to its development.

The triumvirate of low labor costs, English proficiency, and unwavering government support emerges as the triumphant formula propelling the success of the Philippines’ dynamic and flourishing BPO industry.

The VA Reviewer

The VA Reviewer

The VA reviewer is an avid traveler, a licensed accountant, practicing corporate and tax lawyer, and an online entrepreneur. He has leveraged his online job experience and professional qualifications to provide solutions to problems hounding businesses.

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