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Philippines challenges India for outsourced dollar http://www.reuters.com/article/inDepthNews/idUSMAN27345920070226
Sun Feb 25, 2007
By Rosemarie Francisco
MANILA (Reuters) - It's dusk in the Philippine capital Manila and the five-storey office of Advanced Contact Solutions Inc. (ACS) is beginning to fill up.
By 10 p.m., all 1,600 call center agents will be at work, rebooking airline flights in the United States and dealing with clients of phone companies and insurance firms.
The Philippines, with a large pool of English speakers and a cultural affinity with the United States, is developing as a strong second to India in the global outsourcing market.
"We're actually flooded, we have a deluge of client visits. Every week we are entertaining somebody," said Arthur Harow, vice president for operations at ACS, which is looking to expand into non-voice outsourcing, including documentation, IT and financial services.
"In the past, you would sell the concept of 'Why the Philippines?' Now you don't have to sell the Philippines."
ACS has 5,400 seats now in call centers, up from 800 in 2004, and shares in its parent firm Paxys climbed threefold in 2006 and are up 39 percent so far this year.
The Philippines earned $3.6 billion from outsourcing in 2006, up 50 percent from the previous year, and the government estimates revenue could jump to $12.2 billion by 2010 as the industry diversifies.
India, the leader in the global outsourcing market, earned $6.2 billion in the 12 months to March 2006, and this is likely to jump to $8 billion in the year to March 2007.
Even outsourcing firms based in India are moving some of their operations to the Philippines.
"India is getting to be an important source of investments in IT and IT services," said Celeste Ilagan, executive director for international promotions at the government's investment agency.
"Clients of Indian companies have dictated that apart from operations in India, they should have a backup offshore and the Philippines is always chosen to complement Indian operations."
INDIA AS PARTNER
Big outsourcing players from the United States such as Sykes Enterprises Inc., Convergys Corp., PeopleSupport Inc., Accenture Ltd. and eTelecare Global Solutions Inc. already have branches in the Philippines.
Last year, the world's largest maker of personal computers, Dell Inc., opened its first call center in the country and a second contact center is in the works.
Kiran Karnik, president of India's software and service industry group, said that, for some lines of business, the Philippines was a better bet because it has stronger cultural ties to the United States than India does.
"If you want to do a marketing kind of thing, India is not the place. Go to the Philippines because the cultural affinity is very, very high," Karnik said at a recent conference in Manila.
The stakes are high, with the Philippines tapping less than a fifth of the $80-billion global outsourcing market at the end of 2006. India corners at least 43 percent.
"I think 2007 is going to be another positive year for the industry," Ilagan said. "Since 2007 started, there have been more enquiries on IT outsourcing, software development. It has become more diverse."
Ayala Corp., the country's oldest conglomerate and its fourth most valuable firm, joined the outsourcing bandwagon last year when it set up a unit focusing on high value services such as graphics design and legal process outsourcing.
But while the high value of so-called business process outsourcing (BPO) is growing, the Philippines will remain mainly a voice-based center.
STRONG PESO
The expansion in the foreign-currency-based BPO industry comes despite continued strength of the Philippine peso.
"We have enough margins to absorb that," Endaya said of the strong peso. "The margins in this industry are good if you know how to run the business."
The impact of a continued rise in the peso will be felt more by new players in the industry.
"Those companies which entered quite late in the business, instead of registering break even in two years, because of the peso they may have to wait for a few more years," said Jojo Uligan, a director at the country's call center industry group.
Entry-level wages for call center agents in the Philippines have risen as much as 69 percent in 2006 from 2003, but that should not dampen interest in the Philippines, Endaya said.
"India has quite a few costs like free meals, door-to-door pickup of agents, those are standards in India. We don't have those costs," he said.
($1 = 48.05 pesos)
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