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Outsourcing is a huge, multi-billion dollar market, with many verticals involved in this continuously growing arena, including call centers, insurance, banking, healthcare, and most recently, more complex work such as knowledge management and the legal profession.

In fact, in 2011 alone, the Philippines’ IT-BPO market contributed approximately $11 billion in export revenue, generated 640,000 direct jobs and approximately 1.5 million indirect jobs in the country. Overall, the BPO industry comprised 5.4 percent of the country’s GDP in 2011 and officials expect this figure to reach nearly 8.6 percent by 2016.

Sitel, an icon in the call center outsourcing space, has revolutionized this industry by raising the bar on the customer experience, and the company is seeing firsthand the rapid growth of this space. I recently had the chance to speak with Steve Barker, group general manager of the Asia-Pacific division at Sitel, all about the current state of the industry and its future.                                 

When asked why he believes that the call center outsourcing industry is growing at such a rapid pace in the Philippines, Barker identified two specific factors. “The Philippines is set up very nicely from an economic perspective in terms of the cost of running an operation there, which provides an opportunity for any organization that is looking to offshore to lower its costs in order to serve its clients,” he said. “In essence, it’s ‘smart kids’ in another geographic location who can provide the same sort of coverage but a much lower, more cost-effective cost to the consumer. Also, the talent and the alignment of this country to the U.S. are incredibly strong due to the 100 plus year history that exists.”

In addition, Filipinos are fully acculturated to the American lifestyle from a very young age, including learning American English in school. Many analysts observe that the Philippines is the most westernized of the Asian markets, with the official languages Filipino (Tagalog) and English. The top three daily newspapers, magazines and a number of television shows are in English.

The country’s workforce also has a unique edge over most major worldwide markets in terms of labor quality. Sitel’s agents, for example, are 100 percent college educated, with degrees in IT, communications, business and sciences. This allows companies to outsource everything from customer care to skilled technical services, such as engineering, architecture and software development.

Added Barker: “If the quality of the individuals wasn’t as high, both from an educational and accent perspective and given the different markets that they are engaged in, then I think there would be little appreciation for that closeness. It really is a 24/7 business.”

The biggest benefits of outsourcing call center services to this region is getting a global industry view of what is happening in a particular vertical or what might be happening in the marketplace, thus providing invaluable insight that can be used to make crucial business decisions in the future.

Hence, “if not global yourself, you get to see a global perspective from your partner. You could be a Telco based in the U.K. and you then get to see attributes of outstanding service or supply type initiatives that fly through to you that have been tried and proven in other markets, as well as the best practices that a very large organization like Sitel would bring to be a standard way to run a business. With a standard way that you leverage to engage with clients as opposed to the practice that you would have developed in-house or had brought people in for, a standardized approach is how to successfully run a business for all customers,” he commented.

This year marks the first period of time where the Philippines is now ranked as the number one destination for call center outsourcing, overtaking India, which held the position for many years.

“I think what has occurred over the past 10 years is that India was the first to market with an offshore perspective that kind of got driven by Y2K, enabling early adopters to relocate to this country to avoid higher costs,” Barker stated. “Now, what you are seeing is a much larger menu for customers to start choosing from as to where they can place their business. So, if you take the Philippines for example, they took all the success factors that were embedded in the Indian market and developed their own BPO based on all of the things that went well for India and all of the things that didn’t necessarily go well, and then structured it as a very simple offering based on quality and the right outcomes of how to do business in the Philippines.”

The key to success in the Philippines is training. In addition to training agents, it’s important to provide an extensive management development program to groom future leaders. Sitel, for example, has developed training methodology and processes that has been developed over 10 years in the Philippines. Running a successful management program begins by teaching hands-on skills and training frontline managers to drive continuous improvement using variation-based management.

Looking at the past five years, specifically related to the phenomenal growth in the Philippines, at the same time there was also growth in parts of Latin America that hadn’t traditionally been used as outsourcing locations. This presented a number of different options that Sitel’s customers and the outsourcing customer base as a whole could look at and ask “what is the right fit is for us?” and considering their focus, from technology support work, to collection work, to moving financial transactions somewhere.

Very quickly, what’s occurred is more of a” flat Earth” approach where it really didn’t matter if it was India, the Philippines, or Latin America – and some cases even China – as an option, as companies could take their work to any of these countries and cut costs.

But with the U.S. Call Center and Consumer Protection Act – legislation that would in effect punish companies for outsourcing and make them ineligible for federal grants or loans – currently looming, Barker believes “this is one of those watch and wait scenarios because the decision doesn’t necessarily affect us straight on but its more about the options our customers might have to look at as they try to deal with legislation. Clearly, for our perspective, it may reduce some of the growth but I wouldn’t imagine it would stop the growth in totality because outsourcing is a global business using global markets. It would be really interesting to see how that change if it comes to fruition occurs.”

In the next five years, the call center outsourcing vertical will only get bigger due to many different industries which will be getting involved.

“There are a number of different types of industry verticals that have yet to embrace outsourcing as a way of lowering costs and creating very little expenses, as well as improving and standardizing the customer experience,” Barker concluded.