How the Philippines overtook India in call centers

January 19, 2011

Recently and according to various reports and industry experts, the Philippines “officially” overtook India in call centers and voice related work. In fact and in a December 2010 article in Business Week, the Everest Group estimated that the Philippines will have pocketed US$5.7 billion in 2010 for call center work from the US, Europe and Australia verses US$5.5 billion for India’s call centers (although India still leads in overall outsourcing revenue at an estimated US$70 billion verses US$9 billion for the Philippines) while according to IBM’s latest Global Locations Trend Annual Report, the Philippines is now the world leader in business support functions like shared services and BPO with India ranked as number two for the first time. Interestingly enough, the IBM report also noted that Sri Lanka was another Asian country that was succeeding in positioning itself as an alternative outsourcing destination to India. 

So just how did the Philippines go from having virtually no call centers or outsourcing operations a decade ago to become the premiere destination for outsourced voice related work? History and luck plus government support all played a role and offer lessons for both India and other countries such as Sri Lanka who seek to compete with India for outsourcing business. Consider the following:

  • The Philippines was a US colony from 1898 until 1946. Hence, there is a strong affinity and familiarity towards American culture and many Filipinos now live in the USA. Moreover, English is used in the education system and is widely spoken by Filipinos.
  • In order to understand why India was successful in outsourcing and in voice related work, Filipino officials visited industry representatives in India. When they returned to the Philippines, they streamlined the approval process for the setting up of call centers and changed their rules to allow individual buildings to become special economic zones offering tax breaks, quick clearances for permits and exemptions from import duties for necessary IT and telco equipment. In addition, a government-sponsored training program was created to improve the English and communication skills of nearly 40,000 students so they could work in the industry.
  • This government support continues to this day with a recent article in the Philippine Daily Inquirer noting that in November 2010, Philippine senator Miriam Defensor-Santiago was quoted as saying that she would file a measure to further jump-start support for the BPO industry and its workers plus she urged other legislators to come up with laws that would support this so-called “booming sunshine industry” in the country.

On the other hand, Business Week noted that a tax break for Indian outsourcing companies is set to expire in 2011 (although the outsourcing industry is lobbying for an extension). Furthermore and in big Indian outsourcing hubs such as Bangalore and Gurgaon, outsourcing companies are still forced to rely on diesel generators to ensure adequate amounts of electricity, operate fleets of buses in order to get their employees to and from work and struggle with attrition levels that can reach as much as 50% or more per year. In other words, India is not exactly rolling out the welcome mat for new call center, BPO and outsourcing operations in general – let alone making it easy for existing ones to operate effectively and efficiently in the country.

Nevertheless, India at the moment still has little competition in knowledge intensive industries such as IT and software. However and if a country like the Philippines can rise from nothing to overtake India in a major outsourcing segment in less than a decade, India should not be resting on its laurels.


No Responses to “How the Philippines overtook India in call centers”

  1. bradwilliam on January 28th, 2011 12:29 pm

    India’s BPO industry has evolved and matured to present higher-end services that require judgment-based analysis and domain expertise, rather than function-specific, rules-based performance parameters alone. As service providers strive to offer end-to-end services, we see BPO falling into different segments. At one end of the spectrum is the traditional rules-based transactional outsourcing; while at the other end is judgment-based transaction processing and full-service business process outsourcing.

    India has won its spurs as the world’s outsourcing destination of choice. Currently the country has a commanding share of the global outsourcing market.
    India is undoubtedly the most favored IT/BPO destination of the world. This raises the question why most of the big MNCs are interested in outsourcing their operations to BPOs in India. The answer is very simple- India is home to large and skilled human resources. India has inherent strengths, which have made it a major success as an outsourcing destination. India produces the largest number of graduates in the world. The name of India has become synonymous with that of BPOs and IT industry hence the name BPO India.

    Besides being technically sound, the work force is proficient in English and work at lower wages in comparison to other developed countries of the world. India also has a distinct advantage of being in a different time zone that gives it flexibility in working hours. All these factors make the Indian BPOs more efficient and cost effective. In order to meet the growing international demand for lucrative, customer-interaction centers, many organizations worldwide are looking to BPO India.

    A subset of outsourcing, Business Process Outsourcing (BPO) involves contracting the operations and responsibilities through a third party service provider. From the last couple of years, the BPO industry has evolved as the most substantial sector in the Indian market. India has emerged as the most favored location for all Bpo services across the globe. This has accelerated the Indian economy to the heights, progressively boosting the statistics depicting the growth in the years to come and it has been however forecasted that by 2020, more than 80% of the world of business process outsourcing services will be served by the Indian companies. Marked as the best place to attain superior quality services globally, the BPO industry is strengthening its foundation in India.

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