IT-outsourcing industry in PH to hit $48B revenues by 2020

MANILA, Philippines – A $48-billion revenue by 2020 is what the Philippine information technology-business process management (IT-BPM) industry is set to achieve, officials said during the International IT-BPM Summit that started Monday, October 13 and concluded Tuesday, October 14.

The target is achievable, given that the industry is set to hit the $25-billion revenue target in 2016, officials said.

With the 2020 projected revenue, the Philippines would account for 19% of the $250-billion global outsourcing industry, Vikrant Khanna, principal of strategic consulting firm Tholons, said in a presentation.

“The advantage of scale, talent, and cost would propel the Philippines to be an attractive location and retain global leadership,” Khanna said.

Khanna added that the Philippines is already a “trusted brand” in outsourcing. Manila is the world’s second leading outsourcing destination.

The IT-BPM industry, Khanna said, has grown 12-fold since 2004 in terms of revenue, faster than the global industry which grew 5 times. In terms of workforce, the Philippines grew 10 times.

The industry workforce size is also seen to double by 2020 from 1.3 million full-time employees in 2016, Department of Science and Technology Secretary Mario Montejo said.

Individual sectors like call center, non-voice business processing, healthcare information management, IT, creative (animation and game development) should also come up with their own game plans and firm targets aligned with IBPAP’s 2020 road map, Montejo added.

Moving to high-value sectors

The cost savings for a work done here than in the US is from 65% to 85%.

The IT-BPM industry is expected to hit $18.4 billion in revenues this year and was expected to cross its target of creating 1.04 million workers last September, Jose Mari Mercado, president of Information Technology Business Processing Association of the Philippines (IBPAP) said.

Out of the $18.4-billion expected revenues this year, 62% or $11.5 billion would come from the contact center and customer relations.

Under a new road map, the share of contact center to total business would reverse and shrink to about 40% as the industry shifts to new and high-value sectors, Montejo said.

As it is, voice has evolved to more complex services that are non-transactional.

The sector is still growing by 15% to 17% with 600,000 workers to date or net of 100,000 from 2013. The industry needs 170,000 new workers per year to meet demand and to address attrition, Benedict Hernandez, president of the Contact Center Association of the Philippines (CCAP), said.

But there is a growing trend in the establishment of more global in-house centers (GICs) or captives wherein multinational corporations set up their centers for certain work like finance and accounting (F&A), Mercado noted.

“We are barely scratching the surface. There are opportunities in tax management and data management,” said Noel Paraso, vice chair of the Global In-house Center Council.

Other high-value sectors include the health information management service, which grew 200% over the years, hitting $1 billion in 2012 and is poised to double that to $2 billion in 2016. Already, its revenues grew 114%.

IT, like software development, also has untapped potentials as the Philippines accounts for only 1% of total global IT.

Rural BPOs

Following the success of its next wave cities roadmap, IBPAP is now developing new sites that are adopting rural business process outsourcing (BPOs) firms.

Rural BPOs is a successful third-party outsourcing scheme in India and the Philippines hopes to duplicate the same. The idea is to have small sites, sometimes operated from home in remote areas.

Rural BPOs are already making strides, contributing to an increase in the annual average household income to 33%.

Hernandez said that “rural impact sourcing” has so far been piloted in Tanjay, a class 4 city in Negros Oriental operated by Visayas KPO (Knowledge Process Outsoucing).

Hernandez said Visayas KPO has 40 workers and plans to scale up to 100 this year following its accreditation with the Philippine Economic Zone Authority.

Accenture, headed by Hernandez, is among the companies that heeded the rural BPO program. – Rappler.com