Business Process Outsourcing & Knowledge Process Outsourcing in the Philippines

A phenomenon brought about by globalization, outsourcing is absolutely creating a new trend in doing business nowadays. Though already existing in the country some several years ago, it was only during the last five years that the outsourcing industry boom was felt, as evidenced by the increasing number of outsourcing providers and the large volume of outsourced or out-tasked services.

In its continued growth, the dynamic industry of business process outsourcing (BPO) takes on a more mature level in the form of knowledge process outsourcing (KPO). While BPO focuses more on contracting with various specific tasks, KPO is built on the knowledge, skills, and experience of personnel in order to execute high-end knowledge work.

Responding to this global demand for KPO, the Philippines is all set to become a first rate provider of knowledge process outsourcing through the following competitive edges:

World-Class English Language Proficiency
Unlike other Asian countries, the Philippines has the greatest advantage in terms of English language proficiency, being the third largest English-speaking country in the world.

The U.S. invasion of the Philippines gave Filipinos the capacity to adjust well to accents and understand American idiomatic expressions better. This makes their verbal skills more favorable with U.S. buyers.

With 72% of the total population capable of speaking and writing confident English, the Philippines has a significant edge in becoming the most desirable BPO/KPO destination in the world.

Large Pool of Quality Workforce at a Low Cost
The Philippines takes pride in its large pool of talented, highly competitive, productive, trainable, and multi-skilled labor force. Every year, the country produces 500,000 graduates in a wide range of disciplines highly required in the outsourcing industry. Its high literacy rate of 94% is recognized as one with the highest in Asia.

Highly regarded by business analysts such as Gartner, META Group, and the Economist Intelligence Unit, the Philippine workforce produces excellent labor outputs, yet with cost-competitive salary rates, which is considered to be one of the lowest hourly rates in the world. Besides the quality of manpower, labor cost is what makes the Philippines a viable BPO/KPO provider.

In addition, Gartner stated that Filipinos highly value their jobs, have outstanding work ethics, and are both loyal and committed to their employers. True enough, as affirmed from Kelly Services’ research the Filipino outsource workers’ performance is the second highest in the world in terms of job tenure.

Low Cost of Doing Business
Compared with the United States, wages in the Philippines are a way lower by one fifth. The same is true with the costs of utilities such as electricity, housing, and communication, which are 50% lower. Based on the estimates of foreign companies outsourcing programming and business processes to the country, they have 30%-40% overall business cost savings; 15%-30% savings on call center services and application systems; and 35%-50% savings on software development.

Strategic Business Location
Located right in the heart of Asia, the Philippines offers easy access to all businesses in the world. It only takes a 4-hour flight to get to the Philippines from major Asian capitals. The country is also a significant entry point to over 500 million people in the ASEAN market and to international shipping and airlines, which are ideal for European and American businesses alike.

Since its 7,100 islands are surrounded by water, the Philippines is strongly positioned as a regional center for Information and Communication Technology (ICT). It also has strong potentials for becoming a center for healthcare, retirement, and hospital services based on the analysis of the organization.

The table below shows the travel time from Manila to the other cities and countries around the world (PHILEA, 2006):

Country/City	Average Flying Time (Hours: Minutes)	Distance (Miles)
Hong Kong	1:40	705
Paris	11:30	6,676
San Francisco	11:00	6,968
Taipei	1:40	721
London	11:30	6,668
Singapore	3:00	1,489
New York	15:00	8,495
Kuala Lumpur	3:15	1,533
Washington, D.C	15:00	8,562
Vancouver	11:20	6,562
Shanghai	4:00	1,149
Jakarta	3:25	1,732
Los Angeles	12:35	7,306
Sydney	8:00	3,897
Seoul	3:25	1,628
Tokyo	3:40	1,863
Bangkok	4:30	1,372
Rome	11:20	6,547

Reliable Overall Infrastructure
The Philippines overall infrastructure (including power, water, roads, office buildings, and others) is favorably comparable to India and China, as it is sufficient enough to guarantee continuous business operations. Lower operational costs, with cost savings pegged at 40% to 60%, also sets it apart from other offshore BPO/KPO suppliers.

The Philippine government is continuously allocating funds for improving the country’s overall infrastructure. Some of its infrastructure development projects include:

A network of digital infrastructure for the purpose of interconnecting the entire country;
More indigenous and renewable energy resources;
Major highways, rail projects, and international ports; and
Water supply, sewerage, and sanitation systems.

Cultural Affinity with the East and West
It is a known fact that the Philippines was once a U.S. protectorate for more than a century. What was then viewed as a drawback to a freedom loving and patriotic nation, now, became a key advantage to today’s globally competitive Philippines. The exposure, influence, and close affinity to the U.S. culture have made Filipinos a popular choice to work with. In fact, according to Gartner Research International, many American clients are impressed with the Filipinos’ interpersonal norms and organizational culture. Furthermore, outsourcing buyers find Filipinos capable of working well within their professional environment.

Egidio Zarella, global partner-in-charge for IT Advisory in KPMG, an international audit, research and consultancy firm, emphasized that Filipinos’ cultural affinity with both the East and the West is the Philippine’s key advantage in the KPO industry, specifically in Architecture, Engineering, and Construction (AEC) solutions.

With all these competitive advantages, the Philippines is actively in the BPO/KPO race, and is bent on winning the challenge!