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Introduction
In the global BPO landscape, the Philippines stands out as an excellent destination, blending a broad range of benefits for companies seeking unparalleled outsourcing opportunities. This mainly covers the advantages of offshoring tasks to a skilled and cost-effective labour pool, leveraging cultural compatibility, and strategically positioning operations for enhanced competitiveness.
Often recognised as the BPO Hub of Asia, the Philippines holds around 10–15% of the global business process outsourcing market*, consistently maintaining its reputation by excelling in various services, including customer support, call centre management, back-office operations, software development, KPO, and content moderation. These efforts continually attract an increasing number of businesses opting to contract out specific processes, harnessing the proficient and hard-working workforce of the Philippines. The largest outsourcing clients of the destination are the United States, diverse European countries, Australia and New Zealand. On the other hand, the Philippines is home to around 1,000 BPO companies**, providing services for their customers worldwide, utilising the outstanding resources and conditions of the island nation, where both sides benefit from strategic and successful collaboration.
It is also worth emphasising that the BPO industry serves as a resilient economic foundation for the Philippines, contributing significantly to a relevant part of the national GDP. This fosters greater financial prosperity and job creation, prompting this exceptional archipelagic country to develop, innovate, and diversify its strategic resources further. According to Jack Madrid, President and CEO of IBPAP, local BPO growth is credited to the combined efforts of the private sector, government, and academia, striving to ensure the industry’s competitiveness on a global scale. Below are a few statistics by IBPAP***, shedding light on the destination’s remarkable performance and perspectives:
Nevertheless, the remarkable growth in employment and revenue numbers is not solely a result of organic expansion. Over the last few years, there has been a noticeable surge in the global demand for external resourcing by many organisations aiming to achieve cost-cutting and operational optimisations, especially in response to the challenges posed by ongoing inflation and recession. The Philippines is a key beneficiary of this trend, responding with agility and adaptability, proving its unique capability to provide efficient and resilient solutions, both continually and ad hoc. This makes the Philippines a smart and desirable business outsourcing location and an attractive destination many BPO providers want to include in their portfolio.
The Philippines as a Premier Global BPO Destination
The Philippines has rightfully earned its status as a premier outsourcing destination, offering a winning combination of cultural affinity, cost efficiency, skilled talents, resourcefulness and a well-established BPO infrastructure. Here are more detailed compelling reasons why global companies choose this country as their outsourcing partner:
1. English Proficiency
Considering global outsourcing, high English proficiency is one of the country’s strengths and critical assets, as evidenced by its 20th position out of 113 countries in the 2023 English Proficiency Index. Although Filipino is the official language of the Philippines, English also holds significant importance, rooted in the historical connection with the United States. It is widely used and understood across business, education, and government domains. Interestingly, the Philippines stands out for its neutral accent, making it particularly appealing for global companies seeking clear and easily understandable communication in English.
Approximately 80 per cent of the population can understand spoken English, 69 per cent can write in English, 55 per cent can speak the language, and 47 per cent can think in English. (Source: The Social Weather Stations)
2. Strong Cultural Alignments to Western Markets
What further distinguishes the Philippines is its robust connection with Western cultures, characterised by shared values, practices, and a deep understanding of norms. This relationship is rooted in a combination of historical, linguistic, and societal influences, contributing to an environment conducive to ease of doing business and effective collaboration. These enable Filipino professionals to become particularly adept at engaging with clients and customers from these regions. Moreover, according to a UNESCO assessment, the Philippines performs exceptionally well in intercultural dialogue, demonstrating a solid commitment to freedom of expression, human rights, and pluralism.
3. Highly Educated and Skilled Workforce
Among over 117 million inhabitants, approximately 64.15% constitute the working-age population, with a median age in the Philippines of 25 years, as reported by sources such as Rappler, Statista, and Worldometer. This demographic profile translates to a substantial pool of qualified professionals, making the country an attractive destination for a diverse range of skilled talents. Furthermore, the completion rate for a bachelor’s or equivalent degree is around 24.4%, as the Philippine Business for Education estimates.
4. Hospitality
The warm and welcoming nature of the Filipino people plays a significant role in the outsourcing industry. Strong hospitality attitudes foster positive relationships with international clients and partners, contributing to effective communication and collaboration. This cultural trait aligns with the customer service orientation of many inhabitants, making them well-suited for roles in consumer support and service-oriented industries within the outsourcing landscape.
5. Attachment to Global Time Zones
The Philippines’ strategic location in the Asia Pacific region caters to customers within the area and positions it favourably for businesses serving clients across continents. The country’s time zone, GMT+8, allows for overlapping working hours with key markets in the United States, Europe, and Australia. The Philippines deals with it efficiently, synchronising their schedules to provide real-time support, continuous operations, and seamless communication with global clients. Filipinos’ adaptability and strong work ethic make them adept at handling various shifts, ensuring that businesses can consistently meet the demands of different time zones. However, under the Philippine Labour Code, the night shift must be paid an extra 10% of the basic hourly rate.
6. Cost-efficiency
The costs of living, wages, and other operational expenses are very attractive in the Philippines, making it a desirable destination for businesses seeking to achieve cost savings without compromising work quality or productivity levels, even during salary pressure. For instance, a typical annual salary in the Philippines is $7,000 U.S. dollars. In contrast, it is $52,000 U.S. dollars in the United States, $46,000 U.S. dollars in the United Kingdom, and $52,000 U.S. dollars in Australia, as stated in the Average Salary Survey.
Consequently, companies can save up to 70% on wage payouts by outsourcing to the Philippines. As a developing Southeast Asian nation, it offers a lower cost of living than its neighbours and significantly lower costs than many developed Western countries. (Source: Outsourcing Accelerator).
7. Government Support
The Philippine government actively supports the growth of the business process outsourcing industry through strategic policies. These measures aim to boost investment and operational proficiency, increase competitiveness, and hold the position of the preferred BPO hub in Asia. The incentives encompass tax holidays, simplified import and export procedures, exemptions on imported capital equipment, or hiring privileges. Various acts have been issued to facilitate overseas partnerships, regulate data handling, and promote work-from-home arrangements, pivotal for outsourcing efficiency, security, and seamless communication. In addition, special economic zones have been created, providing tax advantages to companies operating within their boundaries, further enhancing the appeal of the Philippines as an outsourcing destination.
8. Stability and Friendly Business Environment
The Philippines’ strength and stability are underscored by consistent economic growth and a well-established legal system, making the country an attractive place for businesses and providing a secure and conducive atmosphere for local and foreign enterprises to flourish. An advantage is a comprehensive regulatory framework governing labour, contracts, and business operations, prioritising protecting workers’ rights and ensuring a fair environment. Additionally, the legal system supports businesses through regulatory measures that encourage honest competition, protect intellectual property, and uphold ethical practices reinforced by regulatory bodies and government agencies.
9. Infrastructure and Technology
With a focus on innovation and research, the Philippines is at the forefront of digital transformation, integrating advanced technologies like AI and automation. Government initiatives, improved connectivity, and cybersecurity measures further fortify its potency, making the location competitive in the global outsourcing arena. Filipinos also invest in modern telecommunications, ensuring a reliable, high-speed internet connection for seamless communication. This infrastructure and dedicated business centres tailored for BPO hubs position the Philippines as a modern place for smooth and efficient operations.
10. Specialised Services
In recent years, the Philippines has strategically positioned itself as a specialised outsourcing destination, tailoring its services to cater to specific industries. The country has become a hub for outsourcing in finance, travel and hospitality, gaming, social media, e-commerce, and more domains, leveraging a skilled and versatile workforce. The Filipino agents are equipped with industry-specific skills, knowledge, and resources, making it an ideal choice for businesses seeking outstanding expertise in a narrow specialisation.
Key Locations
There are several key BPO destinations in the Philippines, each contributing to the country’s status as a premier outsourcing league player. Collectively, these locations showcase the Filipinos’ prowess in providing diverse, competitive, and efficient outsourcing solutions. This primarily refers to locations like:
- Manila: It is the capital city, shining with a diverse array of outsourcing services, supported by a skilled multilingual workforce and modern infrastructure. Furthermore, its vibrant business districts are key venues for international conferences and forums on outsourcing and technology. This helps cultivate networking, knowledge exchange, and showcasing the latest trends and innovations in the sector.
- Cebu: This is another prominent hub that excels in customer support, IT services, and back-office functions, leveraging a large pool of English-speaking professionals. Its strategic location in the central Philippines and several economic zones dedicated to technology and BPO make it an inviting destination for global firms looking to tap into the ASEAN market.
- Iloilo: This compelling BPO centre handles voice and non-voice tasks, benefiting from a business-friendly climate and a skilled, youthful workforce. Advanced telecommunications, new IT parks, and business centres bolster its infrastructure. The expansion of Iloilo International Airport and upgrades to transport networks further enhance the city’s accessibility, making it an appealing choice for investors and job seekers.
- Davao: The city gains recognition for finance, animation, and software development outsourcing, benefiting from its strategic location and government backing. The city’s dedication to safety and high quality of life further enhances its appeal to expatriates and businesses seeking a conducive environment for growth.
- Quezon: It is a thriving centre for IT-related services, equipped with technology parks and educational institutions. Its proximity to the country’s top universities ensures a steady supply of fresh graduates ready to innovate in the tech industry.
A Short History of the Philippines Outsourcing Journey
The history of outsourcing in the Philippines is marked by key milestones that propelled the nation into becoming the world’s leading BPO hub. It began in 1992 when the country’s first contact centre arose. Subsequently, the Philippine Economic Zone Authority (PEZA) was founded in 1995 to facilitate foreign business operations. In 1997, Sykes Asia emerged as the first multinational BPO company. Since then, the industry has expanded at full speed, offering diverse services beyond contact support. In 2010, the Philippines earned the world’s BPO capital title according to IBM’s Global Locations Trend, surpassing India and other major players.
Filipino Outsourcing Use Cases
Numerous global companies have recognised the advantages of outsourcing to the Philippines, appreciating its proficiency in delivering high-quality services, cost-effectiveness, and the ability to cater to their diverse needs. Whether in customer service, content moderation, IT development, or other processes, the Philippines remains a strategic and valuable partner for many global businesses representing various market segments. Below are some examples illustrating the trend:
The Philippines at a Glance
The Philippines is an archipelagic country located in Southeast Asia. It is situated in the western Pacific Ocean, with the South China Sea to the west, the Philippine Sea to the east, and the Celebes Sea to the southwest. The Philippines has over 7,000 islands and is renowned for its breathtaking natural wonders. Pristine beaches, lush tropical forests, and unique biodiversity attract nature enthusiasts and adventure seekers alike. With a rich history influenced by a blend of indigenous, Spanish, and American cultures, the country boasts a diverse cultural tapestry. Filipinos are also known for their warmth and hospitality, welcoming visitors to this tropical paradise. Moreover, in recent years, the Philippines has experienced significant economic growth, becoming one of the emerging markets in Asia.
* Nexford University
** Source: A.T. Kearney
*** The IT & Business Process Association of the Philippines (IBPAP)
