A Glimpse Into the Past, Present, and Future Growth of the BPO Industry in the Philippines
The business process outsourcing (BPO) industry is one of the fastest growing and most robust sectors in the Philippines, creating well-paying jobs for millions of Filipinos and providing $25 billion annually to the Philippine economy.
At the height of the pandemic, as many businesses struggled to stay afloat, the country’s BPO sector not only survived but thrived amid adversity. In 2021, the BPO industry brought in $29.49 billion in revenue, rising by 10% compared to the previous year.
This article will take a look back at the history and present state of the industry to help you fully understand and appreciate the growth and success of the BPO sector in the Philippines. Then, we’ll look forward to the promising future for Philippine BPO companies.
A Brief History of the BPO Industry in the Philippines
The Philippine BPO sector had humble beginnings, starting in 1992 when the Accenture Group established the very first contact center in the country. Soon after, the government realized the potential of the BPO industry in revitalizing the country’s economy.
So, two years later, the Philippine Congress created and passed the “Special Economic Zone Act,” which offered tax incentives to foreign investors, encouraging them to outsource to the country. This strategic decision proved successful, bringing in more contact centers and BPO corporations such as Sykes Asia and eTelecare into the fold.
By the early 2000s, the BPO industry accounted for 0.075% of the country’s GDP. More multinational companies, such as PeopleSupport and Convergys, decided to open headquarters in the Philippines, leading to the country gaining 3% of the global BPO market by 2005.
The Philippines as the New “Call Center Capital of the World”
Fast forward to only five years later, and the Philippines ranks first in the global outsourcing market. The country was dubbed “the BPO Capital of the World,” dethroning India by revenue and headcount.
During the early 2010s, the Philippines continued to be an attractive outsourcing destination for international clients, bringing in $15.5 billion in revenue and employing over 900,000 Filipinos. The country continued attracting new customers, particularly powerhouse companies like Amazon.
At the same time, established BPO companies like Accenture and Teleperformance expanded their operations nationwide. As of September 2021, industry analysts reported that the Philippines accounted for 12% of the world’s outsourcing market revenue.
The Current State of the Local BPO Industry
As previously mentioned, in 2000, the Information Technology and Business Process Outsourcing or IT-BPO industry accounted for a mere 0.075% of the country’s total gross domestic product (GDP).
Today, the IT and Business Process Association of the Philippines (IBPAP) estimates that the industry contributes at least 7% of the country’s GDP. Additionally, the sector employs over 1.44 million full-time employees, bringing in a revenue of $29.1 billion during only the first half of 2022.
The Rise of Countryside Development
In the past, Metro Manila was seen as the Philippines’ primary outsourcing location. However, nowadays, global organizations and the Philippine government are discovering the advantages of investing in the provinces.
According to IBPAP, about 30% of business process services are now outsourced to the provinces. Some popular BPO destinations outside Manila include Pampanga, Davao City, and Cebu City.
The World’s Call Center Capital Opens the Door to New Industries
Filipinos are known for their English language proficiency and soft skills, which are crucial for customer service. As such, the Philippine BPO sector previously focused on providing call center work. However, the industry is expanding to offer more specialized outsourcing services.
In a 2022 report, analysts shared that the Philippines has improved its capacity to offer non-call center outsourcing solutions, including high-skill services such as IT, software development, finance and accounting, healthcare, and knowledge process outsourcing.
As more businesses seek to hone their workflow management, the demand for outsourced virtual assistants has increased. Companies hire Filipino VAs to take over their repetitive and routine administrative and support tasks, enabling them to focus on their core business activities and improve their bottom line.
Post-Pandemic Opportunities for the Philippine IT-BPM Sector
Despite initial challenges, the COVID-19 pandemic also created unprecedented new opportunities for the Philippine BPO industry. Since social distancing measures limited physical interaction, businesses had to adapt and transition to digital platforms while consumers turned to remote or online services.
By the fourth quarter of 2020, specific sectors, including healthcare, technology, gaming, communications, and media, experienced a sudden and significant increase in demand. The rapid adoption of digital platforms paved the way for the accelerated rise of artificial intelligence, omnichannel communication, business automation, data analytics, cloud computing, and other new technologies.
In addition, the Philippine Economic Zone Authority (PEZA) allowed the Information Technology-Business Process Management or IT-BPM sector to implement remote work arrangements during the Enhanced Community Quarantine (ECQ) period of the pandemic. It was seen as a temporary solution to the nation’s COVID problem.
After much debate and discussion, PEZA, as supported by the Fiscal Incentives Review Board (FIRB), is allowing the work-from-home setup to continue even post-pandemic for many companies, reducing the need for dedicated office space. The greater adoption of remote work opens many doors for the nation’s IT-BPO sector, allowing BPOs to facilitate more effortless scalability and flexibility for clients.
What’s Next for the Philippine BPO Industry?: Servicing New Markets and Industries
The future looks bright for the Philippine BPO industry. The continuous growth and success the industry has achieved over the past few decades show no signs of slowing down. Experts predict that the country’s outsourcing industry will continue to expand and thrive.
To stay competitive, many BPO companies in the Philippines have expanded their services to meet the needs of different industries. BPO providers are investing in new technologies and developing ways to enhance their capabilities and provide value-added services.
Here are just a few of the previously overlooked industries that BPO companies can cater to:
Automotive and Transportation
During the COVID-19 pandemic, almost two-thirds of vehicle manufacturing operations were halted. The lockdown severely impacted the global supply chain, causing inventory shortages. Industry analysts predict that these supply chain disruptions will continue in 2023.
In addition to supply chain problems, the automotive and transportation industry needs help transitioning to newer digital technologies. As industry players compete with each other to gain advantages from innovative technologies, the need for outsourcing services, which help drive innovation and automation, will grow.
According to industry experts, the global automotive engineering service outsourcing market was valued at $74 billion in 2022, and its value is expected to continue rising in the coming years. Philippines BPOs can help automotive, and transportation companies keep their business operations running smoothly and without disruption through efficient back-office operations.
To remain competitive in today’s digital world, retailers must adapt to the newest trends, technologies, and customer preferences. BPO firms can help retail companies access top-of-the-line technology, evolve alongside constantly changing market conditions, and cater to the needs of their global customers.
Some outsourcing services retailers can take advantage of include digital marketing, virtual assistant solutions, finance and accounting, data entry, inventory management, and customer service.
Manufacturing, Distribution, and Logistics
Manufacturing, distribution, and logistics businesses had to halt production due to pandemic-related lockdowns, trade interruptions, and travel restrictions.
Now, post-COVID, the industry will have to make significant changes to boost its resilience and future-proof its operations in the event of another global crisis. Outsourcing can help these businesses become more flexible in an unpredictable consumer market.
The healthcare industry has been plagued with worker shortages in the past year. A 2021 Mercer Report estimated that 9.7 million people worked in the healthcare sector, but more than 6.5 million workers will leave the industry within the next five years.
To make matters worse, less than 2 million people will be available to fill the vacancies. Pandemic burnout is one of the main reasons for the ongoing US healthcare shortage, and it may also explain why many are hesitant to pursue a career in this sector.
New technologies can automate and streamline specific processes and help reduce the workload of healthcare staff, but certain tasks still require actual human workers. Thankfully, specialty healthcare outsourcing offers several services that can lighten the load for healthcare workers suffering from fatigue while giving patients the empathetic, human touch they deserve.
Read more: State of the US Healthcare Labor Shortage in 13 Compelling Numbers
Although most sectors faced challenges brought on by the COVID-19 pandemic, the hospitality industry was among the most affected. Because local and international travel ceased during lockdowns, hotels endured decreased demand and lower sales and revenue.
However, now that the world is recovering from the pandemic, the hospitality industry has the chance to bounce back with renewed force. With help from BPO firms, hotels can improve their customer experience just in time to meet pent-up demand.
Travel and Tourism
Pandemic lockdowns and restrictions caused the global travel and tourism industry to shut down operations. However, now that the world is recovering from the effects of COVID-19, international travel is expected to bounce back to pre-pandemic levels.
Through outsourcing, travel and tourism companies can quickly scale their operations depending on consumer demand, helping build versatility and resilience for their business.
Media and Communications
Even before the COVID-19 outbreak, people relied on media companies to disseminate important news and information. However, the pandemic accelerated the need for easily accessible media and entertainment, creating a surge in digital engagement.
Outsourcing enables media and communications companies to expand their workforce and capabilities, helping clients reach a wider international audience without breaking the bank.
Businesses can expand their reach through digital platforms as more people flock to the internet for information, entertainment, and communication. Before the pandemic, over two billion people made purchases through the internet, but online retail sales quickly grew by 25% during the COVID-19 pandemic.
The BPO industry in the Philippines can capitalize on this sudden growth in consumer demand by providing outsourcing solutions such as digital marketing, web development, customer service, data entry, and inventory management.
Read more: What E-Commerce Outsourcing Can Do for You: 7 Tasks You Can Outsource for Your Online Business
Banking, Finance, and Insurance
The financial services industry faces various disruptions as accounting talent shortages worsen and the demand for financial technology (fintech) rises. As money and financial functions grow more complex, outsourcing enables these financial institutions to expand their operations while also gaining significant cost savings.
Partnering with a BPO provider can help these institutions maximize resources and evaluate business performance and growth without burdening their in-house employees and staff. The right outsourcing partner can also help ease the transition to more digitized financial services.
Changes in the economy or market can cause fluctuations in consumer demand. Sometimes, there will be reduced sales and decreased need for new products, while other times, there may be spikes in demand.
Electronics manufacturers must be flexible enough to keep their inventory aligned with the constantly changing customer preferences. Outsourcing can help electronics companies easily upgrade or downgrade their operations depending on consumer demand.
Partner With a Reliable Provider of BPO Services
The future of the global IT-BPM sector is looking bright, and the BPO industry of the Philippines is no exception. Take advantage of the sector’s promising growth and discover the benefits of outsourcing for yourself.
By working with a BPO, businesses can address staffing shortages, boost demand for their products and services, and improve operational efficiency, all while lowering costs.
If you’re ready to take your enterprise to the next level, your next step is finding an outsourced services provider to help you meet your specific needs and goals. Ideally, your BPO partner can customize solutions depending on your business model while offering premium services with affordable pricing points.