PH: Top Outsourcing Despite Rising Competition

February 16, 2024

A report by advisory firm Tholons found that China has overtaken the Philippines as a top outsourcing provider. Bloomberg reports that in recent years China has funded universities to offer courses on outsourcing and high-end technology parks to boost China’s IT outsourcing companies. China aims to reach $100 billion of outsourcing revenue by 2020 with a focus on digital and high-technology services.

Neighbouring countries around the Philippines are also rising threats such as Malaysia, Thailand, and Indonesia. Vietnam is also being spotted as an upcoming BPO giant due to the country’s advanced infrastructures and a large workforce.

According to Rey Untal, head of the Philippine Association of Outsourcing companies, this serves as a wake-up call to the Philippines. Other countries competing against the Philippines have already upgraded their skill sets in terms of infrastructure, talent, and incentives.

Plenty of countries are gradually turning their attention to the IT-BPM sector due to the potential of investments and job opportunities. The graph below categorizes the outsourcing destinations into three groups: Leaders, Alternatives, and Emerging or Developing Players.

The Philippines and India are a top outsourcing provider for the IT-BPM sector. China and Mexico are considered as alternatives due to its rising capabilities and services. Poland, Brazil, and Chile are considered strong regional participants while Southeast Asian countries like Thailand, Indonesia, and Malaysia have potential growth in the outsourcing industry.

With main services in Banking, Financial Services, and Insurance (BFSI), Healthcare, High-Tech and Telecoms, and Manufacturing, the Philippines continues to outperform other countries as demand for these sectors are met. These sectors drive IT-BPM as regulatory environment, process optimization, and capital requirements continue to advance.

Despite the competition with other Southeast Asian countries and China, multinational companies continue to outsource in the Philippines due to the majority of English proficient Filipinos, the young thriving population, cheap labour, and high familiarity and adaptability with the US and the UK culture.

What to expect in the following years?

Being a large source of private jobs in the Philippines, the country plans to improve the outsourcing sector for it to remain as a top outsourcing provider. According to the IT Business Process Association of the Philippines, the country is aiming a total revenue of $39 billion by 2022.

The overall market growth is projected to grow at a compound annual growth rate of 9.2% from 2016 to 2022. While the numbers seem low this time, the Philippines will still outperform the global IT-BPM sector 5.6% in terms of revenue. The slow growth is a sign of a maturing sector and the impending impact of technology.

In the following years up to 2022, top outsourcing companies in the Philippines are expected to offer more high-value services as the country’s value improves. These include services in the following sectors:

  • Contact Center and BPO
  • Information Technology Services
  • Health Information Management
  • Animation and Game Development
  • Global In-house Center

To cater to these industries, skill sets must be upgraded in order for the IT-BPM sector to increase the workforce’s value. This changes include specialized high-skilled entrants, upskilled workforce from low to mid or high, and mid to high, and widened the reach of new talents. Furthermore, it is best to strengthen the foundational skills of the workforce, particularly in Science, Technology, Engineering, and Mathematics.

Other improvements included are implementing High Impact Programs, attracting the educated workforce to join the industry, and establishing delivery centres outside the capital among others to support the continued growth of the IT-BPM sector in the Philippines.

All development plans for the Philippine IT-BPM industry can be accessed on their recent Executive Summary.