IT Business

BPO Philippines – Historical Background

BPO Philippines

BPO in the Philippines has risen from almost nothing to become the world’s premier destination. That it has done so from a standing start — there was almost no outsourcing at the turn of the century — overcoming the first mover advantage held by India, is nothing short of remarkable. Its rise owes a lot to the far-sighted policymaking of the Philippines government, and to the Filipinos themselves.

In the late twentieth century, there were only a handful of small outsourcing providers in the Philippines. That all changed when, in a bid to attract investment from overseas, the government introduced the Philippine Economic Zone Authority in 1995. This reduced both the requirements for development and offered tax incentives for businesses investing in the area. As hoped, this stimulated foreign investment, including in 1997 the first multinational outsourcing provider.

“The government has continued to support to the industry, both practically and in policy. The industry has remained a priority for growth in subsequent national development plans. This has resulted in measures such as the extension of economic zone status for new businesses and areas. Following the 2008 financial crisis the government funded training for Filipinos returning from overseas to work in outsourcing businesses,” says Ralf Ellspermann, CEO of PITON-Global in Manila.

The government has also promoted the industry abroad. Even in the early days, it entered into agreements with multinational companies and addressed issues like data protection and financial regulation. Because of the Philippines history — it was an American colony until the end of the Second World War — many of its institutions are modelled on the west. That continues today, with legal frameworks amended to meet the rigorous standards of western regulators. These enable companies outsourcing to the Philippines to have confidence that the standards required by their domestic laws are met, even though they are offshoring their business processes to the Philippines.

However, the other big advantage has come from the local workforce. The Philippines’ long association with the West has meant that staff frequently boast a high level of English-fluency. This is reinforced by the strong cultural affinity there for the west. Fluent Filipinos do not just understand the English language, they will understand and use the idioms and slang that western customers can and do use. It enables them to rapidly form a rapport, which can be crucial in contact centres.

“Perhaps the major motivation for many businesses looking to outsource, offshore outsourcing to the Philippines can offer a significant saving. The low labour costs there mean that, although it is a well-rewarded career option for educated Filipinos, it can be as much as half the cost of an in-house operation. 

Because of the history that created the sector, which extends beyond when outsourcing would have been unimaginable, the sector also has a bright future. Changes in the way we live and work, along with the ongoing support for the sector means that, means that, every day, more businesses are discovering the benefits of outsourcing to the Philippines,” says Ellspermann.

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