The Philippines: India’s outsourcing step child
May 31, 2009
The Philippines, with is 90 million plus people at home and a growing Diaspora abroad, has long marketed itself as the third largest English speaking country in the world and as an alternative location to India in the world of outsourcing – especially in voice related work (See the May 30, 2009 Wall Street Journal article entitled: Philippine Call Centers Ring Up Business). After all, even Indian based call centers will concede that the Philippines is a more attractive place to do voice related work as the Filipino accent is much easier on North American ears and bluntly speaking, Filipinos are simply better at being customer service representatives than Indians. Moreover, having been a former colony of the USA, there is a great affinity towards and understanding of American culture in the country.However, any call center HR manager there (or for that matter, any long time resident of the Philippines) would be the first to question the notion that the Philippines is the “third largest English speaking country” in the world. Why? Well, due to misguided nationalistic policies starting with the Cory Aquino administration back in the 1980s, English was largely replaced in public schools by Tagalog as the medium of instruction for most subjects.
The results: Today many (of the well known MNC) call centers have hiring rates as low as 5 or 6% for call center applicants. Of course, when so called “near-hires” who eventually find work in other call centers with lower quality standards or attend special training programs to improve their English are counted, the overall hiring rate would be pushed back up into the low double-digits. Nevertheless, the English fluency problem is viewed as being so acute that the industry and the government has implemented various training schemes to address it and there is some evidence according to recent surveys or anecdotes that the slide in English proficiency has slowed and perhaps is even starting to be reversed.
Nevertheless, deep rooted problems with the country’s education system in general continues to hold back the full potential of the Philippines to be a truly dominate player in non-voice outsourcing related work. For starters, there is a general lack of funding for the nation’s public schools, most of the country’s top private schools are still largely run by very traditional religious orders, there is still a general weakness in math and science education and there is no Filipino version of India’s highly successful IIT system that can produce vast numbers of highly skilled technical graduates. The weakness of the country’s education system is further aggravated by the fact that good Filipino teachers (especially those who teach math, science or English) are often recruited to go work abroad – along with many of the good accountants, engineers, IT, health care and animation professionals that the country’s education system does produce.
To address this situation and the other factors that both contribute to and inhibit the country from reaching its full potential as an outsourcing destination, the Business Processing Association of the Philippines or BPA/P (the association representing the country’s outsourcing industry) together with McKinsey & Co. has put together a so-called roadmap (Offshoring & Outsourcing Philippines: Roadmap 2010). This roadmap sets a goal of achieving a 10% share of the global outsourcing market by 2010 – a lofty goal but the Philippines certainly has room for growth in non-voice related outsourcing work where fluency in English is not necessary (then again, many other non-English speaking countries are also poised to grab a piece of this action as well).
Nevertheless, the Philippines remains a clear leader over Indian outsourcing vendors and other rivals for the quality of the voice related work done there and has a head start over potential new rivals for non-voice related work. However, a big question mark remains as to whether or not the country will get its act together, especially on the education front, and live up to its full potential as a leading outsourcing destination of choice.