Philippines Catching up with India in the Outsourcing Industry

By Winston Pepito
Posted Thursday, November 11, 2004

India, the dominant player in outsourcing touted as the “back office of the world,” would soon have to contend with a third-world rival—the Philippines.

A highly skilled English-speaking labor force. A reliable telecommunications infrastructure. Low cost of qualified personnel. These are some significant reasons for choosing India or the Philippines for outsourcing support.

IT OUTSOURCING IN INDIA

India, a former colony of the British Empire for almost two centuries, has the second-largest IT talent pool in the world, a result of its Britain-influenced education system that places great emphasis on science and mathematics. With 120,000 trained IT professionals added to the Indian workforce yearly, India is gearing to be an IT giant in the third world and is ranked as the first choice of U.S. companies for software outsourcing. According to Nasscomm, a conglomerate of India-based software and services companies, Indian companies are software solution provider to more than half the Fortune 500 companies.

The launch of India’s first private undersea cable has tremendously improved the international bandwidth situation. In addition, considerable bandwidth is available with the state-owned Videsh Sanchar Nigam Limited, partially owned by India’s largest business conglomerate. The privatization of telecom industry has also resulted in a significant drop in telecom rates. Observers predict that the entry of newer industry players will see a further drop in telecom prices. In the last ten years, telecom costs in India have dropped by 85 percent.

Over the years, India has built a strong brand equity as an attractive destination for software development and support. India is host to established IT companies such as IBM, Intel, Microsoft, Oracle, Cisco, Sun, HP, and Alcatel.

OFFSHORE DESTINATION: PHILIPPINES

But the Philippines—one of the world’s second-largest English-speaking populations—is fast catching up to India.

With a literacy rate of 94%, the Philippines has a large pool of information technology professionals and a cost-competitive telecoms infrastructure. The country ranks third in Knowledge and Information-based jobs in the 2002 Global Technology Index research done by the META Group. Three million college graduates join the workforce each year, providing a tremendous source of talent.

An American colony for close to 50 years, the Philippines has a Western-influenced culture, a unique trait that clearly distinguishes the country from other offshore destinations. Although Asian in orientation, Filipinos watch American TV and are thus able to communicate effectively in American English.

PHILIPPINES: CALL CENTER HUB

In recent years, the Philippines has become the offshore destination of choice for call center outsourcing, specializing in customer support services. Because of the Filipinos’ high level of English proficiency and strong customer orientation, many leading multinationals have used the Philippines as a global center for customer service. American OnLine, the largest U.S. Internet service provider, maintains a staff of 600 at its call center in Clark, Pampanga. Caltex, Procter & Gamble, Barnes and Noble, among others, have built large-scale service centers in the Philippines.

One very promising industry that has sought outsourcing support in the Philippines is the medical transcription business. The Philippines boasts a large talent pool of medical professionals, including doctors, nurses, and medical technologists. The demand for medical transcription has risen as U.S. hospitals are now required by federal regulations to convert medical records into data format. Seventeen medical transcription companies are now in operation, employing 1,200 Filipinos.

GIVING INDIA A RUN FOR ITS MONEY

While the Philippines may not be as a huge an offshore provider of web and software services as India, it holds great promise in the customer service industry. Although India does charge lower than the Philippines—for data encoding work, India charges around $4 (U.S.) versus $10 in the Philippines—more multinationals are choosing the Philippines because of the high quality of work. Moreover, Filipinos make good customer service agents not only because they are fluent in American English but also because of their helpful and friendly nature.

More companies are choosing the Philippines for offshore support. Among the services offered in Philippine-based outsourcing companies are copyediting and indexing; web design and maintenance; data conversion, data warehousing, data capture and data entry; OCR and scanning services; proofreading; encoding and keyboarding; imaging services and graphics design; call center and customer service; abstracting and document conversion; typesetting; and tagging, among others.

About the Author
Winston Pepito is the President of Phil-Am Outsourcing Solutions, Inc. (one of most successful outsourcing companies in Asia) based in Cebu City, Philippines. More details about his company can be found at (http://www.outsourcing-services.net) winston@outsourcing-services.net