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BPO sector: An economic pillar

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The Department of Trade and Industry (DTI) defines business process outsourcing (BPO) as the “delegation of service-type business processes to a third-party service provider.” The industry, according to the department, is generally divided into the following sectors: contact centers, back office services, data transcription, animation, software development, engineering development, and game development.

Since its emergence in the country in the 1990s, the industry has exhibited exemplary growth throughout the past years. The sector has then become vital to the country’s economy that it has often been referred to as a “major economic pillar” and an “economic lifeline.” Oxford Business Group (OBG) described the BPO sector as an “economic powerhouse” and “one of the largest white-collar employers in the country.”

“Rarely has a new industry traced the trajectory from concept to prime economic driver as quickly as business process outsourcing (BPO) has in the Philippines. In a very short time span, BPO has grown from a handful of contact centers to a global back-office resource hub and call-center capital of the world, drawing jobs and investment from all corners of the globe along the way,” OBG noted in a 2016 report.

The same report stated that the BPO sector’s contribution to the country’s gross domestic product (GDP) has risen together with the number of companies setting up operations in the country. The industry, as OBG reported, accounted for just 0.075% of GDP in 2000, rising swiftly to reach 2.4% in 2005, 4.9% in 2011, and 5.4% in 2012. Moreover, the sector’s estimated GDP contribution in 2015 was 6%.

“According to industry analysts, revenue from the country’s BPO industry grew 10-fold from $1.55 billion in 2004 to $15.5 billion in 2013, reaching an estimated $18 billion in 2014,” the report from OBG stated.

On the other hand, on a 2017 report, OBG stated, “In 2015 US source, a small group that provides clients with outsourcing needs, reported that the IT-Business Process Management (IT-BPM) sector — which includes IT, BPO, and engineering services — saw industry revenues soar by 18.7% year on year to hit $18.4 billion in 2014. Growth was even stronger in 2015, with IT and Business Process Association of the Philippines (IBPAP) reporting that annual industry revenues reached $22 billion that year, a 19.6% increase over 2014 and exceeding a target of $21 billion.”

In 2016, the IT-BPM revenue for 2016 came in at $22.9 billion. By 2020, US source expects BPO revenue to reach $55 billion. OBG added in the report that the Bangko Sentral ng Pilipinas stated that the industry will soon overtake the value of remittances from overseas Filipino workers, which currently account for an estimated 10% of annual GDP. It is known that remittances from overseas workers, along with the BPO industry, are the country’s top two earners of foreign exchange.

“The industry will soon surpass foreign remittances as the single largest contributor to GDP, driven by growth in the emerging segments of health care, analytics, and financial services outsourcing,” OBG stated.

On the employment aspect, OBG indicated that the BPO industry has also experienced a similar rise in its record for job creation. The sector was reported to have generated an increase in job opportunities from 101,000 employees in 2004 to 900,000 in 2013. OBG also reported that IBPAP had indicated an estimate of 1.1 million people employed in the industry at the end of 2015, with new jobs primarily generated in knowledge-intensive business services including computer and IT services, as well as in research and development.

By 2016, the sector is reported to have employed approximately 1.15 million Filipinos as driven by the expansion of global in-house call centers. On the other hand, it was forecasted that the sector’s employment reached to 1.3 million in 2017.

Meanwhile, IBPAP drafted a new Philippine IT-BPM Roadmap 2016-2022, which targets the following: 1.8 million direct jobs; 7.6 million direct and indirect IT-BPM employment; 500,000 jobs outside of NCR; $40 billion in revenue; 15% global IT-BPM market share.

The said road map aims to strengthen domain expertise and capabilities in the emerging sectors and ensure that the Filipino talent is future-ready amid rapid innovations in the areas of digital transformation, artificial intelligence, big data and analytics, as well as evolving delivery models. — Romsanne R. Ortiguero