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Ii. PHILIPPINE COMPETITIVE ADVANTAGE
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According to International Data Corporation, the Asia/Pacific Outsourcing
Services marketplace will experience strong growth rates across all
countries in the region and types of services. In this study, the
Philippines has been identified as a key outsourcing provider for
US companies, emerging as a specific alternative to India’s
(Bangalore IT Hub), developing steadily for the last 6 years.
It has been forecasted that global demand for outsourcing services
will reach US$180 billion in 2010, broken down as follows :
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The Philippines is a premier outsourcing hub not just because of
its affordable labor force; its political, social, cultural and economic
environment contribute to the creation of a high-quality manpower
pool and friendly business environment for the establishment of services.
The country is ranked #1 in the availability of knowledge-based jobs
and workers worldwide and ranked 4th among Asian nations in labor
quality, according to a survey conducted by the U.S. based Meta Group.
Aside from the huge pool of productive, trainable and multi-skilled
labor force, the Philippines competes in the quality of its managers
and IT staff and engineers. The unique edge comes from a high level
of proficiency in English (the Philippines is the 3rd largest English-speaking
country in the world).
The Philippines is not only a strategically located hub for both
Asian and Western operations, its culture and infrastructure support
cross-cultural needs such as time or zone differentials and physical
networking. The democratic and liberalized structure for investment,
ownership, and the low costs in terms of lifestyle and taxes make
the country an attractive spot for investments for overall cost
and profit efficiencies. |
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A. |
The Philippines Outsourcing Record |
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Call Centers
The Philippines is emerging as a specific alternative to India,
due to historical and cultural factors according to IDC Call
Center Forecast and Analysis Report (2001-2002).
Call center services done in the Philippines covers both
inbound (inquiries, help desk, technical support, payment
authorization, order taking, complaints handling, directory
assistance, among others) and outbound (telemarketing, telesurvey,
telecollection, sales verification, sales dispatch, reactivation
of lapsed accounts, among others). Solutions offered include
customer relation management, partner relationship management,
quality management systems, and loyalty management programs.
These are all done via phone, fax, email, chat, and web collaboration
tools.
Outsourcing Record
More than 8,000 companies have been outsourcing knowledge-based
work to the Philippines such as America Online, Andersen Consulting,
Barnes and Noble, Caltex, Citibank, Fluor Daniel, Manulife,
Morgan Stanley, Northwest Airlines, Procter and Gamble, People
Support, to name a few.
Business process outsourcing includes companies doing litigation
support, scholarly publishing, content conversion, shared
services, such as Elsevier Science, Blackwell Science, Microsoft,
Nature Publishing, Lexis-Nexis, AIG, International Red Cross,
AlItalia, Great Plains Software, Fujitsu, Accenture, Headstrong,
NEC, Simteria, Trend Micro Labs, Sea Land, among others.
Creative cartoon work is also done in the Philippines; Hanna-Barbera,
Disney and Cartoon Network productions have been established
in the country.
Software Development
The Philippines is also a significant alternative for software
development. Its IT professionals are diverse in terms of
skills covering Cobol, DB2, CICS, VMS, Oracle, Visual Basic,
C++, UML, Java, J2EE, EJB, EDI, XML, among other technologies.
The country has more than 200 companies specializing in software,
web, and wireless application development.
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In the Philippines, outsourcing is classified as an IT-enabled service
sector; this high degree of specialization narrows the scope or categories
outsourcing providers operate in. However, apart from outsourced IT
services, there are other areas familiar to Philippine business :
Traditional Outside Services
Business are often less than capable of hiring enough personnel
to handle all their needs. Businesses, whether small, medium or
large-scale enterprises have outsourced messenger services, printing,
cleaning services, security services, and equipment maintenance.
Secondary Specialist Services
Industry and market needs are sometimes too specialized or too expensive
for firms to consider doing in-house. Specialist services include
advertising, product promotions, employee training, product warehousing,
truck delivery services, packaging design, and even legal services.
Intermediate Outsourced Services
When companies who traditionally have been doing certain functions
in-house start to farm out these functions to specialist providers
due to skilled staff shortages, economies of scale and specialization,
rapid technological developments, substantial technology investments,
and simple convenience find relief in intermediate outsourced services.
The most commonly outsourced intermediate functions include:
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bookkeeping |
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accounting |
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payroll, hiring |
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HR administration |
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cash management & control |
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financial reporting |
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tax reporting |
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accounts receivable collection |
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accounts payable administration |
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customer statements processing |
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customer call centers |
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distribution logistics |
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transaction processing centers |
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temporary staffing |
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website design |
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Advanced Partner Services
This advanced type of outsourcing covers services that are tailor-fit
for large-scale multi-site services, and typically large-scale enterprises.
These include:
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E-commerce systems |
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enterprise accounting systems |
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enterprise HR systems |
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dedicated customer service centers |
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electronic payments services |
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document custody services |
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B. |
As an Outsourcing Hub |
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The Philippines is an ideal base for business, a critical
entry point to over 500 million people in the ASEAN market. Further,
global markets and businesses have made territorial distinctions a
thing of the past, and the Philippines offers a close cultural fit
for European and North American businesses because of its rich knowledge
base and close ties with Western culture. The country provides housing,
sporting and recreational facilities, quality healthcare and first-rate
educational institutions, and has a politically stable democratic
system that allows fair, open market practices. It is rich in diverse
natural resources, from land to marine to mineral resources. |
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C. |
Low Cost, High Margins |
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Wages are typically less than a fifth of that in the
U.S. Local communication, electricity and housing costs are also 50%
lower compared to the U.S. rates. Foreign companies that are now outsourcing
programming and business processes to the Philippines estimate 30
to 40% business cost savings, 15 to 30% call center services and application
systems and 35 to 50% software development. |
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D. |
Government Policies |
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The government supports business-friendly policies;
it has opened up the economy by allowing 100% foreign ownership in
almost all sectors. It has strengthened capital markets and deregulated
the banking, insurance, as well as the shipping and telecommunication
sectors, and has removed most of the monopoly structures in the Philippine
market economy.
The Board of Investments (BOI), the lead investment promotion agency
has helped in facilitating the setting-up of investment operations
to as quickly as 45 to 90 days. Under the Philippine Export Development
Plan (PEDP), IT-enabled services sector, or the local outsourcing
industry, have five specific areas - contact centers, business processing
outsourcing including share service centers for multinational companies,
application outsourcing, digital animation and medical transcription.
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E. |
Tax and Tariffs |
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The Philippines has complied with WTO, APEC, and AFTA agreements
and has reduced tariff rates on manufactured goods. The Philippines
has enhanced and primed up various areas of business for investors
and offers a dynamic consumer market accustomed to an array of product
choices created by a competitive domestic economy. There are incentives
in investing through the country's numerous Special Economic Zones
and Industrial Estates. These zones are being nurtured to become balanced
agricultural, industrial, commercial and recreational hubs. Apart
from the incentives and tax breaks for qualified enterprises, corporate
income tax has been reduced to 32% from 34% in 1998, with companies
located in economic zones/export zones subject to only a 5% overall
tax rate. The overall expenses associated with establishing operations
and production in the Philippines translates into high quality service,
and high margins of profit for businesses. |
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