OBG talks to Lito Tayag, Country Managing Director, Accenture; and Board Member, Business Processing Association of the Philippines

Interview: Lito Tayag

How is the Philippines suited for growth in the business process outsourcing (BPO) sector?

LITO TAYAG: The Philippines has numerous competitive strengths when it comes to the BPO sector. There is plenty of professional talent, a firm command of English and despite wage inflation in recent years the Philippines continues to be cost competitive in comparison to other countries, including India and China.

The government supports the industry’s growth by providing both physical and legislative infrastructure for the IT and BPO sectors. The deregulation of the telecoms industry successfully spawned a high level of competition therein, which has resulted in a robust and cost-competitive infrastructure baseline.

Additionally, the tax regime and business environment are conducive to continued investment and industry expansion in this sector. Strong incentives are offered to BPO companies by the Philippine Economic Zone Authority, which not only encourages existing players to invest further in the country but should also attract the entrance of new companies.

However, it is widely known that electricity prices in the Philippines are among the highest in the region, which is challenging not only to the BPO sector but also to every industry in the country. While in the short term there is little that can be done to address the situation, the country is laying the foundations for a gradual decline in prices over the medium and long term to more internationally competitive rates.

How can the Philippines encourage a movement towards knowledge process outsourcing (KPO) and more value-added outsourcing?

TAYAG: Because the Philippines is well known for its voice-based services, most firms initially enter the country to invest in voice-based centres. This presents the country with a valuable opportunity to showcase its capacity as a viable location for KPO and value-added services. As the country works to move beyond call centres, there are certain niche markets within the broader BPO sector that hold great potential for the Philippines. For example, the huge surplus of nurses in the country means there is ample opportunity for growth in the health sector. There are also other emerging outsourcing sectors, including insurance, engineering and paralegal services, from which the Philippines can benefit if the right steps are taken.

How can the Philippine education system ensure that it is producing graduates that are in demand by businesses, including BPO?

TAYAG: The university system in the Philippines is quite large, with nearly 500,000 students set to graduate in 2012. This offers the country a significant pool of human capital, that if properly utilised could serve the business community in a tremendous way. However, despite the fact that most applicants to the BPO sector in the Philippines are college graduates, the yield rate is quite low across the sector. While this signifies a wealth of workers, it also implies that the quality of applicants is relatively low by sector standards. It therefore appears that there is still a gap between the graduates that the university system is producing and the types of employees that the industry needs.

To support the continued growth of the BPO sector this gap must be bridged, which will only be accomplished through cooperation between the BPO industry, the government and educational institutions. To this end, BPO companies are increasingly looking at partnering directly with universities to identify certain courses and skills that are needed by the industry. Further collaboration between educational institutions and BPO companies is possible in terms of increased internship offerings, which provide students with valuable on-the-job experience, and function as a useful recruitment tool for industry players. Additionally, since proficiency in English is one of the country’s major competitive advantages, it is vital that the government develops a comprehensive education system that develops English language skills from an early age.