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Philippines to replace India as global BPO hotspot
By siliconindia
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Thursday, 04 November 2010, 11:18 IST
New Delhi: India is likely to be overtaken by the Philippines as the world's back office for voice-based customer support and sales this year. In order to keep off India's high staff turnover, companies like Cisco, HSBC, T-Mobile and BT Group are shifting work to the nation and thereby building an alternate support hub, reports Harsimran Julka of the Economic Times.
Some of the major reasons for this shift are identified as better affinity with the American culture, lack of competing industries for skilled workforce, higher tax incentives and a strategy to de-risk from a pure India-based call centre model.
While India's BPO industry is expected to post $5.58 billion of voice-based revenues this year, the Philippines BPO industry is expected to be almost $5.70 billion in 2010, said research firm Everest and the Business Process Association of Philippines (BPAP).
Experts said that if this pace continues, the Philippines will surpass India's $12.4-billion BPO industry in five years. In the last two years, Philippines' $9.5-billion offshoring and outsourcing industry grew at a compounded 27.6 percent, while India's BPO industry has showed a CAGR of 11.92 percent in the last two years.
Companies like Cisco and BT are outsourcing handling of customer queries and support to cheaper locations, including the Philippines. Cognizant, which had established a call centre in Manila last month, says that staff attrition in the Philippines is less than half of what call centers face in Indian.
A key factor contributing to the shift is that in the Philippines there is 100 percent tax exemption for up to 8 years for IT-BPO enterprises. Moreover, upon the expiry of the tax holiday, the nation only charges a 5 percent special tax on gross income while exempting BPO firms from all other taxes. Another top reason is the Philippines' stronger cultural ties and understanding of American consumers.
Indian BPO giants like IBM, Accenture and EXL have established centers in cities like Metro Manila, Cebu City, Davo and Angeles. While EXL has a centre in Pasay with over 800 employees, IBM and Accenture are estimated to have over 20,000 people in the nation.
India's growing GDP and availability of other options like banks, telecom, and insurance industry are also contributing towards the growth in BPO (industry) in the Philippines. In 2009, Filipino GDP grew at only one percent compared to India's 7.4 percent.