OBG talks to Jose Mari Mercado, President & CEO, Information Technology and Business Processing Association of the Philippines (IBPAP)

Interview: Jose Mari Mercado

How does the Philippines encourage investment in business process outsourcing (BPO) and IT?

JOSE MARI MERCADO: The industry employs 777,000 people and generated $13bn for the Philippine economy in 2012. For every job the industry creates, the multiplier effect is 2.5 jobs. As a result, the government has been keen to support the expansion of the industry.

The Philippine Economic Zone Authority (PEZA) has worked closely with the government to maintain incentives, address misperceptions about the industry and demonstrate that the jobs they offer extend beyond telephone operation. This has stimulated sector growth.

How can BPO firms partner with educational institutions to address the industry’s skills shortage?

MERCADO: We have a road map for 2016 that identifies the key areas that we need to focus on. In this industry, our product is our people so the number one requirement would be talent. Every year we produce 500,000 English-proficient graduates who have a strong cultural affinity to North America. These are the natural ingredients to make the sector successful, however, there is work that may not be necessarily built into the educational system. For example, one of the things that we found lacking is critical thinking and business communication skills. With the academy, we put together a 21-unit service management programme (SMP) that got accreditation from the Commission on Higher Education (CHED) and is now going to be offered as part of the curriculum in several schools.

The CHED is also allocating PHP125m ($3m) for the SMP programme across 17 state universities and colleges over the next couple of years. A large portion of the budget will be focused on training the teachers. We now also have the Philippine Software Industry Association (PSIA) developing a minor specific to IT, while the Health Information Management Outsourcing Association of the Philippines is developing a minor for health care. These initiatives essentially expand the talent pool and improve the industry’s sustainability.

What niches do you feel are growth areas in the knowledge process outsourcing segment?

MERCADO: Health care is the fastest-growing segment, along with finance and accounting. The Philippines produces 10,000 accountants a year and our accounting system is based on the US’s generally accepted accounting principles, therefore compatibility is much higher and a lot of shared services are happening. A third market the industry is constantly challenged to tap into is IT, whether application development or IT infrastructure outsourcing. The main challenge facing the sector is that the bulk of the nation’s SAP programmers move to Singapore or Dubai. There needs to be a push to generate a trend of reverse migration in order to attract those qualified workers who have developed their skills and want to return. IBPAP is also in talks with the PSIA to build an IT industry.

Given the competition, what room for growth exists for small and medium-sized BPO firms?

MERCADO: Another pillar of our strategy involves next wave cities, areas outside metro Manila, metro Clark and metro Cebu, like Metro Bacolod, which now has 18,000 people working for our industry, or Santa Rosa, which now has around 10,000. Next wave cities are taking off and we are approaching their development systematically, with the educational system working to make them ready. Our challenge in next wave cities is not the agents, but the managers.

The priority for both IBPAP and the government is to build the pool of management talent. Private firms are pushing management development programmes and working with the government to award scholarships, which will stipulate that graduates must work in these firms. IBPAP is assisting small and medium-sized enterprises (SMEs) to sign up for this programme to guarantee a supply of employees, lest these workers end up working for bigger BPOs and kill the entire process. We also encourage our bigger members to forward small jobs, creating opportunities for SMEs.