IT-BPO Market and Workforce in the Philippines

The Philippines’ information technology-business process outsourcing (IT-BPO) industry has experienced rapid growth since entering the market two decades ago. In 2000, its contribution to the Philippines’ GDP was 0.075 percent. By 2016, it was a US$ 23 billion dollar industry, accounting for approximately 7 percent of GDP.

Today, the Philippines is the second most popular outsourcing destination in the world, according to Kearney’s Global Services Index. It accounts for 12-15% of the global IT-BPO market. It is the number one call center provider, occupying 18 percent of the global market share.

According to a 2016 report by the Oxford Business Group, rarely has a new industry traced the trajectory from concept to prime economic driver as quickly as business process outsourcing has in the Philippines. IT-BPO has grown, in a short span of time, from a handful of contact centers to a global back-office resource hub and call-center capital of the world.

IT-BPO Industry in the Philippines

There are currently 1,493 registered IT-BPOs in the Philippines. Back-office and call centers currently dominate the industry, representing 80 percent of IT-BPOs. However, there is rapid expansion into other sub-sectors, such as healthcare, financial services, analytics, data transcription, engineering, software development, and animation. These higher-value, complex services are referred to as knowledge process outsourcing (KPOs). With diversification into KPOs, the industry is expected to soon surpass foreign remittances as the number one contributor to GDP.

The IT-BPO industry currently employ 1.13 million Filipinos, making it the largest private employer of white-collar workers. The number of jobs has increased by more than 1000 percent since 2004. Creation of an additional 654,000 jobs is expected in the sector by 2022. IT-BPO employees typically earn twice the average annual income of the Philippines.

The pro-business government recognize IT-BPOs as an ‘economic lifeline’ for the nation. To continue the flow of foreign investment, revisions were made to the tax code. Republic Act 7916 allows IT-BPOs to register in ecozones, exempting them from local and national taxes where they pay only 5 percent of their gross income in tax.

The government has also earmarked US$ 180 billion to improve the country’s infrastructure and utilities.  Six airports, four seaports, nine railways, and 32 new roads and bridges are planned. Four energy facilities will also be constructed, providing a stable, affordable power supply to the nation.

Labor Force in the Philippines

Foreign investors are drawn to the Philippines’ large pool of young, highly skilled labor. The median age in the Philippines is 23.5. By comparison, the median age in India is 28 and in Indonesia it is 30. The US News and World Report recently praised the young workforce as loyal and hardworking when recognizing the Philippines as “Best Country to Invest In” for 2018. The ranking was based on a survey of 80 countries.

The workforce is further bolstered by its English proficiency. English is the official language of business in the Philippines. According to the EF English Proficiency Index, the Philippines ranked second in Asia for fluency. As a former American colony, Filipinos have a relatively neutral accent along with a western-friendly business culture.

Labor costs remain competitive. Payscale, a career research center, reported that the average annual salary for a customer support representative in the Philippines is US$ 4395. This is lower than other top outsourcing destinations such as Malaysia, China, Poland, and Mexico.

Growth Prospects in the Philippines’ IT-BPO Industry

The Department of Information Communication and Technology (DICT) recently launched an online portal, digitalcitiesPH, to help employers match with the location that best suits their needs. Firms can readily assess the quantity, quality, and cost of workers throughout the Philippines. The portal also provides an overview of infrastructure, cost of doing business, and digital readiness for 81 provinces and 145 cities.

DICT also has many training initiatives for IT-BPO workers to ensure they keep up with international competition. An industry based curriculum has been implemented in 13 universities and colleges throughout the Philippines.

“This is the one industry where we are global leaders and we intend to keep it that way by responding to industry requirements in terms of policy, infrastructure and educational support,” said Ibrahim Monchito, Undersecretary for DICT.