Outsourcing Industry Update

By John Mangun

The stock market has occupied most on the headlines of business pages for the last two months, and other business stories have taken a back seat.

That is only natural. However, it might be good to look at the current situation with the industry that deserves much credit for getting things going again with our economy and stock market.

The outsourcing industry in the Philippines just continues to roll successfully. But we cannot become complacent about this important sector.

There are some funny, perhaps even bizarre, aspects to this outsourcing phenomenon.

one major US pizza restaurant outsourcers its customer calls for food orders to the Philippines. The companies has thousands of outlets and guarantees very quick delivery. So a customer in Las Vegas, Nevada, orders a pizza from the store that is literally few blocks from his house. Yet, when he calls for his pizza, he is talking to a Filipino sitting in a call center at Fort Bonifacio. He could take 10 minutes to walk 300 meters to pick up the pizza. But, instead he makes a 12,000 kilometers phone call. And it is less expensive and more efficient for the company to engage in this type of globalization. What an age we live in!.

The outsourcing business in the Philippines is alive and thriving. for many companies around the globe, the question from if they will outsource to when they will outsource.

And the question of the location for their offshore operation is becoming less, "The Philippines of some place else?" to more of, "Do we locate in Metro Manila or some place else?"

I am indebted to my good friend Mr. Richard Mills, staunch supporter of Philippine outsourcing and chairman of Chalre Associates, an executive search and management-consulting firm.

I do not mind giving Richard's company (and his Filipina wife and partner) a pat on the back because he has been a great asset to a local industry by finding the executives that these outsourcing companies require to keep their operations thriving in the Philippines.

In his recent article in ComputerWorld magazine, Richard interviewed another long-time Philippine-outsourcing advocate, Mr. Dan Reyes, the head of Sitel Corp., a major player in the Philippine outsourcing business.

Mr. Reyes in one of the most experienced managers in this industry, being a founder and former president of the Business Processing Association Philippines. As a result of a merger with Clientlogic Inc., Sitel is now the largest call-center company in the world, and all of it's expansion plans are focused on the Philippines.

When asked about how the Philippines compares with the other outsourcing destinations, Mr. Reyes said that he saw little growth any place else except India.

"Only the Philippines can offer both quality and quantity of skilled people", he said.

Hey, that is no secret. We all knew that. But this is the statement that astounded me.

Question: "How is the Philippines perceived compared with India these days?" Answer: "The Philippines is considered the No. 1 option. Before, we were the backup solution or an alternative to India. Now this has changed in a big way."

The significance of this perception about the Philippines is amazing. Only a year ago, the Philippine was the second choice to India. If a company could not get exactly what they wanted in India outsourcing, they came looking at the Philippines.

Now firms are coming here first and if they are successful, they do not even bother to travel to India. Even if not everyone might feel this way. it is, nonetheless, a monumental change of attitude.

One concern for the industry is that a strong peso might have some negative impact on the outsourcing business here in the Philippines. Interestingly, though, the free-market system always find a way to make money. As the US dollar has appreciated against the peso, the dollar is weak against the British pound sterling and the Australian dollar.

Q: "Is the softening  of the dollar a concern for you?" A: "Right now, we are spreading ourselves to other markets. Australia and the UK are examples where we see strong growth ahead."

This shows that the industry here in Philippines has matured to a point that these companies are committed to doing business here and are gaining the ability to adjust and find some flexibility to their business model while expanding the Philippines.

Q: "Do you still hear silly remarks about the Philippines as a BPO destination?" A: "I have not gotten dumb questions lately. Word of mouth about the positive is getting around."

The only question that Richard did not asked Mr. Reyes was why Sitel has not yet considered listing on the Philippines Stock Exchange. But I suppose that eventually, our stocked market will be viewed as positively as our outsourcing business.

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Executive Search & Management Consulting:

Chalre Associates provides its Executive Search & Management Consulting services throughout the Asia Pacific region.  We are proactive and well known in our sectors of focus.  Regional Managers use us to help bridge the gap between local environments and the world-class requirements of multinational corporations.