Written By: Sheila Lobien
Published on July 28, 2023
The 2023 Kearney Global Services Location Index (GSLI) report showed that the Philippines fell three notches to place 12th in the list of most attractive outsourcing locations among 78 countries, from its previous ranking of 9th in 2021.
The GSLI ranks a country’s attractiveness as an offshore location for business services using four major metrics namely financial attractiveness (35 percent), which includes a company’s labor, infrastructure, and tax expenses; people skills (25 percent), which includes IT and business processing outsourcing (BPO) experience, quantity and quality of manpower and English language proficiency; country environment (25 percent), which includes infrastructure, cultural adaptability, social, political and economic stability and security of intellectual property; and digital resonance (15 percent), which includes the labor pool’s digital skills, legal and cybersecurity.
Global companies have always sought cost efficiencies through the reduction of labor and overhead costs.
Southeast Asian nations, including the Philippines, have become preferred destinations due to the availability of cheap labor and lower real estate costs. Revenues from the BPO industry have become a key component of these countries’ national income.
In the case of the Philippines, the BPO industry directly employed 1.2 million Filipinos and generated $32.5 billion in 2022, which is 8 percent of the country’s $404 billion gross domestic product (GDP). The BPO industry’s performance, then, is closely watched not only by its players and the government but also by real estate practitioners.
Simply put, more BPO employees means more office space requirements. Numerically, the 1.2 million headcount requires close to 4 million sqm of office space. If the IT-BPM industry is targeting to double its headcount by 2028, this means that an additional 4 million sqm will also be needed in the next five years.
Thus, the alarm that the Kearney GSLI report brought to BPO industry watchers is justified. However, we need to understand at least three factors from the details to assess their impact on our country’s BPO industry.
Need for digital skills
First, the Kearney GSLI report updated several metrics for this latest edition, which included the need for digital skills enhancement of the labor pool and upgrading of the technological innovation capability of the country.
The Philippines’ target market is basic customer service (voice and non-voice) and slowly moving to specialized knowledge services such as data analysis and cloud computing. Hence, in the short term, the futuristic bent of the metrics may not significantly impact the five-year growth plans of the IT-BPM industry.
However, the country still needs to correctly identify the evolving technical skills required by global companies and strategize to capture the economic benefits of an ever-changing global BPO industry.
Second, Mexico and Colombia outranking us is primarily due to US companies seeking Spanish-speaking labor, and their proximity to the US to allow “near-sourcing.” The Philippines cannot compete in these two fronts.
Hence, in lieu of focusing on US companies, the country may target Australian and Canadian companies seeking English language proficiency and lower costs instead.
Third, the $59 billion revenue target of the IT-BPM industry might be a tall order at a glance. However, this is just 6 percent of the total global BPO revenues by 2028. Thus, in terms of magnitude, we are still too miniscule compared to the global amount, making our targets realistic and achievable.
Wake up call
In conclusion, the most recent Kearney GSLI report may be a good wake-up call for the country to have a comprehensive approach to re-skill and redeploy the BPO workforce to maintain our competitive edge. But it should not create too much panic and derail our aspirations as one of the top destinations for the global BPO business in the next five years.
The author is the chief executive officer of Lobien Realty Group Inc., a full-service real estate consultancy and property investments strategy firm.