In recent years, the Philippines has emerged as one of the premier destinations for outsourcing various business processes. With a highly skilled workforce, favorable economic conditions, and a strong cultural alignment with Western countries, it has become a preferred choice for organizations looking to outsource their operations.
The Business Process Outsourcing (BPO) industry has been one of the leading stars of the country’s economy over the last 2 decades. In this process, the Outsourcing industry employs more than 1.5 million people generating close to US $30 Bn annually in revenue.
The success of the Philippines’ outsourcing business may be ascribed to the several benefits the nation provides to its customers and investors that are keen to invest in the rapidly growing BPO industry. Learn more about the factors that contribute to the Philippines becoming the greatest outsourcing location:
1. Service Culture
Long before the Philippines became an outsourcing hub, Filipino overseas workers have been known to globally work across domains such as retail, hospitality, healthcare, and shipping to name a few. Filipinos are known to be polite, enterprising, and hard working. All these cumulative years of recognition as the global workforce have created a service culture in the country. This service culture is very clearly reflected in the phone or in other communication tools whether it is customer service or telesales or any other domain. The country has mastered its service culture thus becoming a cornerstone of the outsourcing industry (which is itself a service industry)
2. Proficiency in English
The majority of Filipinos speak English fluently and this number could be about 75% in the major urban centers. Thus, the Philippines with a total population of 110 million people becomes a large reservoir of English-speaking talent.
Most local youngsters start learning the language before they join the school. Their English skill is enhanced after they begin formal schooling. English is the predominant language of teaching in the Philippines, as well as the primary language of trade.
The Philippines ranks 13th in the world for English competence in the sixth edition of the EF’s English Proficiency Index. The country is ranked third in Asia, after only Malaysia and Singapore
3. Cost Arbitrage
One of the important factors that drive the growth of the outsourcing industry is the cost arbitrage that is available between the developed countries and the Philippines. The cost arbitrage is not just defined to the salary but it extends across the whole spectrum as the office cost and other support costs are also lower compared to the developed nations. The cost savings would vary as per different positions depending on whether it is customer service or more skilled work like NOC or software development. The overall saving could range between 50 to 70% based on the domain of work being outsourced.
The minimum wage in the Philippines is approximately US$ 250 a month, which is of course very low compared to developed economies at a baseline comparison. The BPO staff however is not the baseline staff. Nevertheless, overall cost savings are substantial as pointed above.
4. Melting pot of cultures
The Philippines, a country once colonized by the Spanish, Americans, and Japanese, retains vestiges of its history. Western culture is still deeply embedded in people’s daily lives, and Filipinos continue to be very adaptable to other cultures. Philippines is thus a melting pot of influences of Europe, USA and of course its Asian heritage
Furthermore, hospitality is an essential component of Filipino culture and custom. Because of these traits, Filipinos are easy to socialize with and work with. Thus, visitors whether tourists or business visitors feel very comfortable in the Philippines.
5. Volume of Graduates
Philippines has a very high volume of graduates entering the workforce. This constant flow of graduates positions the country with a fresh supply of educated youth that can cater to the discerning needs of the foreign companies that wish to use Philippines as an outsourcing destination.
Every year, local institutions and colleges add more than 500,000 skilled and qualified employees to the labor force. According to analysts, the Philippines will gain from this youthful and skilled workforce in the future years. Philippines has the right demographic dividend for further growth of BPO industry.
6. 24 *7 Operations, no matter what time zone you are.
The workforce in the Philippines is mainly focused toward providing coverage 24 hours a day, seven days a week. So, regardless of your company’s timezone or your clients’ timezone, the Philippines can meet your needs.
The Philippines’ single largest customer country is the United States, with a 12-hour time difference. As a result, about 2/3rd or more of the outsourced labor in the Philippines still works the nightshift to cover the US hours. This is quite common in the Philippines. Rotating hours and weekend coverage are also fairly common and accepted working conditions in the outsourcing business.
These characteristics are especially relevant for customer service and online sales tasks, where having 24/7 assistance coverage is a regular necessity
7. Workforce that is Highly Skilled
The Philippines has a big youthful population that is outgrowing the country’s dependent children and retired workers. This youthful population’s median age is 23 years old. In addition to an adequate supply of labor, the figures indicate a highly educated workforce with a literacy rate of 97.5 percent.
8. The Recruitment Angle
One factor that is often ignored is that when you outsource your work, you are also outsourcing the recruitment of the manpower. If for example the customer service operations are kept onshore in USA, then not only the wage bill goes up but the cost of recruitment is also significantly as cost of HR agencies or digital adverts would be higher in USA. Besides the cost, it also saves the administrative effort of the company and hence its HR team size can also be smaller.
The recruitment angle is an important factor that is over not taken into calculations.
9. Legal responsibilities and management concerns have been reduced
Employing people in any nation has a slew of regulations, compliance, administrative, tax, and cost considerations. Some countries and industries impose a greater burden than others. Hiring overseas personnel through a Philippine outsourcing provider allows you to avoid the risk and expense of hiring people in-house or directly.
This does not imply that you may mistreat your employees, but it does simplify your administrative processes and lowers your cost and liability exposure – which is excellent.
The Philippines has well-established labor legislation and is typically pro-labor. If you have to deal with it directly, it can be a complicated system. When you partner with an outsourcing provider, however, they will handle all of the day-to-day and compliance parts of your team’s HR.
10. Data protection and privacy
For the past 30 years, the Philippines has been a popular outsourcing destination. During that period, it has developed an extremely complex business as well as a solid regulatory environment to support the sector. For more than two decades, the Philippines outsourcing sector has been processing extremely sensitive client data. The Philippine outsourcing sector processes everything from US health insurance, medical information, and personal financial data for some of the world’s largest public and private enterprises. The Philippines can supply any type of compliance environment and work system, and the country has one of the most severe data privacy legislations in the world (modelled on the European GDPR).