AI could be bigger threat than Trump to BPOs – analysts

MANILA, Philippines – Computers are getting smarter everyday, and they may have a larger effect on the long-term future of the country's business process outsourcing (BPO) industry than politics.

The future of the Philippines' sunshine industry has been in the headlines the past few months, initially because of President Rodrigo Duterte's shift away from the US, followed by the election of US President Donald Trump and his promise to bring jobs back to the US.

Both are undoubtedly causes for concern, especially as the US and its firms are the industry's biggest customers, bringing in more than 70% of industry export revenue.

Some analysts said, however, that the rise of artificial intelligence (AI) could prove to be the bigger threat.

Jubert Alberto, business operations head for IT research firm International Data Corporation (IDC) Philippines, noted that the factors that led to the industry's rise in the first place are still present.

"At least for the short term, we still have sound macroeconomic fundamentals, a service-oriented labor force good at speaking English, and at this point, the country still has one of the lower labor operations costs in terms of onshore or anything that has to do with BPO, so the core strengths are still working for us," he said in a briefing on Thursday, February 9.

No less than Philippine Stock Exchange (PSE) president and CEO Hans Sicat pointed this out, telling Rappler earlier this year that Trump's protectionist policies won't have a significant effect on the service industry.

"For the BPOs, it's often secondary thinking. BPO services are usually ancillary to any business and don't tend to attract as much [political] attention as jobs in manufacturing attract," Sicat said.

"But that's obviously in the short run. I think the bigger challenge for our BPOs medium term, 5 years from now, could be the development of artificial intelligence, and computers doing the same jobs BPO workers are doing and cutting in on jobs," he added.

Rise of AI in business

Long dreamt up by science fiction as human-like robots, AI has come along quickly in recent years, generally in the form of software applications such as Siri on the iPhone.

IDC defines AI as "a deep set of technologies that use deep language learning and understanding to automate." The research firm noted that AI is beginning to make its presence felt in the business world, especially since big data is becoming essential to the new economy.

Research completed by IDC in January estimates that $47 billion will be spent on AI-related applications globally by 2020, while the estimated boost to a firm's compound annual growth rate (CAGR) is 69% for the top 3 AI use cases worldwide.

The increased focus is especially pronounced in banking, healthcare, and retail, which have each spent more than 15% of total industry spending on AI-related applications.

The banking industry, which devotes 18% of its spending to AI, mainly uses it for financial assessments and to assess credit scores.

In healthcare, AI applications constitute 16% of spending, such as rapid diagnostic tools for X-rays and MRIs.

Retail firms, meanwhile, are using AI to create personalized shopping experiences for customers and at the same time analyzing a shopper's spending history, mood, and expressions.

In addition, IDC predicted that 75% of software enterprises and independent software vendors will include AI functionality in at least one application by 2018.

Embracing technology

It's important to note that while AI use is undoubtedly growing worldwide, the speed of adoption would be much faster in more developed countries.

This, however, still presents a looming danger to BPO firms. The direction of new technology should be a key consideration in the BPO industry's stated goal of shifting to higher-value services, noted IDC's Alberto.

"The rise of AI will definitely affect the BPOs so my take is that it's a call to action [for the BPOs] to embrace technology despite the fact that it's a sensitive topic because of the possibility of losing jobs," he explained.

Alberto also shared that the IT and Business Process Association of the Philippines (IBPAP) is already reviewing its recently released roadmap for 2022 to take into account not just resources but also new technologies.

"It's an opportunity as well. If you have people who will be able to be on that AI platform, then there [are] definitely new jobs to be created to address the gap," he said. – Rappler.com