Second Ceboom?
Tuesday, Apr 01, 2008
The economic slowdown in the United States would have most other people worried. But industry players and analysts actually expect it to boost the growth in the country’s business processing outsourcing (BPO) sector, which includes call centers (or contact centers) and other companies that handle back-office jobs for international firms, particularly those in US.
Mitch Locsin, executive director of Business Processing Association of the Philippines (BPA/P), the umbrella organization of contact center, BPO and other information technology (IT)-enabled service companies in the country, said there were about 164 contact centers the country as of 2007 with aout 160,000 full-time employees.
Locsin said the BPO industry in the country, of which 60 percent is composed of contact centers, has been growing at 35 to 40 percent every year since the year 2000.
Nowhere is this growth more significant than in Cebu. The number of call centers in the province grew in 19 from only one in 2002.
With Metro Manila’s high rental fees and property prices, even IT outsourcing companies prefer to put up operations is Cebu, according to international research from neoIT.
Growth in the BPO industry has buoyed the real estate and retail sectors.
In Cebu, most of the recently completed buildings, as well as those still being built, are designed to accommodate companies that handle the outsourced back office operations of corporations in the US, Canada and the United Kingdom.
Cebu Investment Promotions Center (CIPC) managing director Joel Mari Yu said US companies outsource some back-office operations to cut costs.
“They’re cutting costs because they have to be competitive,” he said.
He added that the cost of customer service, for instance, would be 10 times higher for a company in the United States than one operating in the Philippines.
Customer care and sales promotion are among the most outsourced tasks by voice and non-voice contact centers. Recently though, outsourcing companies that handle medical transcription, editing and accounting, among others, have put up shop in Cebu.
Businessman and Sun.Star Cebu columnist Wilson Ng wrote that outsourcing could be a business that is recession-proof because companies will outsource as way to expand or save money.
Reflecting on Cebu’s good fortune, Eonoco Arellano, chief administrative officer of the Department of Labor and Employment (Dole) 7, said, “In my estimation, there are ,ore or less 10,000 people employed in call centers here in Cebu.”
He said unemployment in Central Visayas dropped because of investments in BPO sector that created more jobs.
“If a lot of people are hired, they will receive salaries (which enable them) to buy prime commodities, and so the economy improves,” he added.
Skyline
Much of change in Cebu’s skyline can be attributed to the growing BPO industry, said Cebu Holdings Inc. (CHI) president Francis Monera.
He cited existing buildings and those being constructed at the Asiatown IT Park, Cebu Business Park and Synergis IT for Sykes Asia, among others.
Monera said Synergis IT (for Sykes Asia), i2, Robinland IT Bldg. and the Cebu Tower at the Cebu Business Park were built to house call centers and other BPO companies.
Market Beat, the newsletter of real estate research firm Colliers, reported that the Philippine real estate industry is expected to sustain its growth momentum in 2008 and grow at 8.5 percent next year because of the demand from the BPO sector.
Night economy
As call center employees get higher salaries than those employed in other sectors, they tend to spend more than other employees.
Contact Center Association of the Philippines (CCAP) executive director Jojo Uligan said the industry’s labor force has resulted in the development of a “night economy.”
Retail outlets near contact centers open past conventional store hours or operate 24 hours a day to serve the needs of BPO employees.
CIPC deputy center manager Albert Gumarao said the mushrooming of such retail outlets coincided with the boom in the call center sector from 2002 to 2004.
Restaurant, bar and coffee shop owners and other enterprising individuals have established outlets near call centers. Malls are also developing retail segments that are designed for BPO or call center workers, most of whom toil at night (because of the time difference with the US, which they serve) and get off work in the early morning hours.
Uligan said the opening or more retail outlets and extension of store hours also mean more jobs as storeowners have to hire additional workers for the graveyard shift.
The BPO industry has also generated indirect employment through call center training schools that offer courses to hone the skills of those hoping to find jobs in the BPO industry.
The call center sector not only gave birth to these call center training schools but also prompted universities and colleges to offer call center training courses.
Even the transport sector has benefited from the growth of call centers.
Ryan Benjamin Yu, managing director of the Cebu Integrated Transport Service Cooperative, said the income of public utility jeepney and taxi drivers has increased with the establishment of call centers and other BPO companies.
Jeepneys passing Asiatown IT Park, for instance, get to pick up passengers at the park on the way to the interior of Barangay Apas, Cebu City.
M and J Taxi driver Rizalindo Arita Lauron, 61, said Most of his passengers during the night are call center agents. Some taxi drivers even already have regular customers among call center employees.
Taxes
The government-local and national- also benefit through taxes.
CIPC’s Yu said call center employees earn from P15,000 to P120,000 a month.
“These people go to Ayala (Center Cebu) or SM (City Cebu) and spend (a lot). (They) increase the sales of shops, (which in turn) pay more taxes to the City Government, “ he said.
Aside from this, BPO companies, which earn in US dollars, help strengthen the peso, Yu said.
“Call centers (earn by providing) services (rather) that products, so nothing (in terms of raw materials) is imported. What is declared as revenue by the company, all of (that) comes back and nothing goes out,” he said.
Locsin said the BPO industry generated revenues of about US$2.3 billion in 2006.
“Our target is to create one billion jobs and generate $13 billion in revenues by the end of 2010,” he added.
Industry experts believe Cebu will get a bigger share of future investments in the BPO sector.
“Cebu is definitely one of the areas where most investments are going,” said Uligan.
A recent survey conducted by industry publication Global Services and investment advisory firm Tholons named Cebu as the fourth emerging outsourcing destination for global companies.
Yu said Cebu’s main selling points as an investment and IT location are its “demonstrated capability and track record, good infrastructure and amenities, cost advantage and quality lifestyle.”
Uligan also agreed with Yu that Cebuanos do a better job than the Indians and Chinese in call centers because their (Cebuanos) accent is “attuned to the Amercian accent.”
Main advantage
Locsin, on the other hand, said the Filipino culture, in general, is the main advantage.
“The Filipinos, by nature, are friendly, accommodating, very patient, very helpful. Due to this, we’ve been ranked number one in terms of voice operations around the world,” Locsin said. “Even Indian companies in the last eight months have now set up in the Philippines.”
The BPA/P said 12 Indian companies have been established in the Philippines recently, including Wipro, which is housed at the Cebu Business Park.
But Yu said there are clouds in the horizon. He said the industry’s growth is hampered by the shortage of qualified workers.
“What’s hurting our labor pool more is that many of our skilled people are going overseas,” said Yu.
