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Recent figures show that business process outsourcing (BPO) firms in the Philippines have managed to grow by one-third in 2008 despite experiencing project delays due to the global economic downturn.

Recent figures show that business process outsourcing (BPO) firms in the Philippines have managed to grow by one-third in 2008 despite experiencing project delays due to the global economic downturn.

BPO is a form of outsourcing where the operations of a specific business function are contracted to a third-party service provider. It is usually divided between back office outsourcing, which involves internal business functions such as billing and purchasing, and front office outsourcing, which involves more customer-related services such as sales and tech support. Moreover, BPO focuses on information technology enabled services, knowledge processes and legal processes.

BPO primarily helps increase a company’s flexibility in its resources management, core competencies, and overall organization. By outsourcing some of their business functions, companies can reduce its variable costs so that they are able to respond to changes more efficiently. In addition, by outsourcing business functions such as customer service, companies can focus more on its core business. Moreover, BPO enables big bureaucratic companies to downsize to a smaller but more entrepreneurial and efficient company.

The BPO industry is estimated to be worth between $122 million and $154 million. Countries such as India, the Philippines, Morocco, Egypt and South Africa are the usual destinations of outsourcing.

In the Philippines, BPO is a significant industry. In 2006, the Philippines earned $2.1 billion in offshore service revenues. It is estimated that the BPO industry in the country employs over 200,000 people. By 2010, the Philippine BPO industry is forecast to earn $11 billion in revenues and employ 900,000 people.

Initial growth of the BPO industry in the country was led by the increase in demand for offshore call centers. Recent growth is now due to more high-end outsourcing such as legal services, web design, medical transcription, software development, animation, and shared services.

The relatively high skill quality of Filipinos combined with their fluency in the English language make the Philippines an attractive choice for the offshore operations of global companies. Moreover, the Philippine government has been encouraging the growth of the BPO industry by offering fiscal and non-fiscal incentives to attract more foreign investment.

But the Philippines still has some obstacles to overcome in order to maintain its attractiveness for offshore operations. According to a McKinsey Global Institute report on the industry, the Philippines needs to develop a clearer marketing strategy, improve its infrastructure, enhance the number and quality of its labor supply, attract more flagship clients, and establish an industry association.

Despite the obstacles, BPO remains to be a huge potential cash cow for the country. The industry’s revenues rose from $4.9 billion in 2007 to $6 billion in 2008. Despite the global economic downturn, it is expected that the industry will grow up to $8 billion in 2009 as foreign companies try to cut costs by increasing their offshore operations.

For the future of the BPO industry, the Philippines hopes to improve the quality and number of its skilled labor force so that it can diversify its offshore services from call centers, which have low additional value, to areas such as finance and software development, which have the potential to add more value to the Philippine economy.

Source: www.AsiaEcon.org
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Source: www.asiaecon.org |

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