Beyond Manila: BPOs expanding to new destinations

By: Administrator  |   1/7/2009 1:51:24 AM

 It's already 9 p.m. but the day has just started for a group of call center employees in an outsourcing firm in Quezon City. They will be wearing headsets and talking to customers calling from the other side of the world, particularly the United States and the United Kingdom, until 6 a.m. Every two hours, they will be given 30-minute breaks, which most of them spend by smoking outside their office buildings.

More than five years ago, one could see this familiar scene only in the business districts of Makati and Ortigas, where most business outsourcing (BPO) firms are located. Now, the scene is replicated all throughout the archipelago-from Baguio to Bacolod and from Dumaguete to Davao.

Driven by shrinking talent pool, wage inflation and increasing rental rates, BPO companies in the Philippines have been expanding and locating in the provinces, outside established outsourcing hubs, for the past few years.

"We are avoiding another Bangalore in the making," said Teletech senior vice president Maulik Parekh in a local governance conference on October attended by representatives from local government units (LGUs) interested in attracting investments from the BPO industry. Parekh was explaining why some BPO firms are establishing their presence outside Metro Manila and he was referring to the case of India's outsourcing hub where concentration of BPO firms in one location resulted in high labor and rental rates.

Dubbed as one of the sunshine industries of the Philippines, the BPO sector employs around 300,000 workers and generated US$4.9 billion in 2007. For the past three years, the industry revenues have grown by an average of 50 percent.

Manila-centric

Around 80 percent of BPO workers, however, are employed by outsourcing firms based in Metro Manila. In contrast, data from the Commission on Higher Education (CHED) showed that 74 percent of around 400,000 graduates every year are from outside Metro Manila.

The expansion of the industry has driven the growth of some sectors, particularly real estate. Rick Santos, chair of the commercial real estate service firm CB Richard Ellis (CBRE) Philippines, told reporters last October that offshoring and outsourcing will continue to drive the demand in most real estate segments, particularly office.

The concentration of BPO firms in outsourcing hubs like Makati, however, has resulted in the rapid increase of office space rents and has prompted some companies to look for sites in the provinces where a there is huge potential talent pool and where rents are lower.

Promises of the provinces

"BPO companies that have been in the country for three to four years are looking at the provinces to leverage the large labor pools in these areas and to leverage the benefits of lower rates for office space and operating costs," said Joey Radovan, vice chair and head of global corporate services in the Philippines of CBRE in a forum in Singapore last September.

David Leechiu, country head of global property consulting firm Jones Lang La Salle Leechiu told abs-cbnNews.com/Newsbreak that while BPO firms in Manila pay their employee a monthly salary of around P20, 000, their counterparts in the provinces only give monthly salary that ranges from P8, 000-P12, and 000. The rent per square meter of office space per month in Makati may reach P900 while the price in the provinces can go as low as P250 per square meter per month.

Jojo Uligan, executive director of the Contact Center Association of the Philippines (CCAP), said that apart from the low wage and rental rates offered by the provinces, call centers want to have branches in other sites to increase their redundancy.

"We do not want to put all the eggs in one basket," Uligan told abs-cbnNews.com/Newsbreak adding that having operations in different locations allow continuous operations even if one site is affected by weather disturbances or political unrest.

With these growing trends among BPO companies to go to other parts of the country, local officials have been riding the bandwagon and become keen on attracting investments to their cities and provinces. Even the governor of Batanes-the archipelagic and northernmost province that is often battered by typhoons-has expressed his dream of attracting BPO investments in his province.

No one can blame these local officials for their desire for investments in the BPO industry. The entry of BPO firms in some localities has made local economies more dynamic because it has benefited other businesses like restaurants and recreation centers and generated indirect employment. Commissioner Monchito Ibrahim of the Commission on Information Technology (CICT) said that for every one employment in the BPO sector, three indirect jobs are created.

The Department of Trade and Industry (DTI), CICT)and the Business Process Association of the Philippines (BPAP)-an umbrella organization of BPO firms-recently came up with a scorecard showing the next-wave of cities suitable for the BPO investments.

Clusters of LGUs in Laguna and Cavite, Iloilo, Davao, Bacolod are among the locations that topped the list. Also included are Angeles-Clark-Mabalacat cluster in Central Luzon, Baliuag-Marilao-Meycauayan cluster in Bulacan, Cagayan de Oro, Malolos-Calumpit in Bulacan and Lipa City in Batangas.

The scorecard ranked the cities using three criteria: availability of talent (50%), infrastructure (30%), cost (5%) and business environment (15%).

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