Wednesday, May 21, 2008 [ philstar.com ]
The business process outsourcing (BPO) industry is expecting a 70-percent surge in revenues this year as the profit crunch from the global slowdown force companies to cut down operating costs through outsourcing.
The Bangko Sentral ng Pilipinas (BSP) said the BPO industry could be the probable mitigant as the export sector braced itself against the negative impact of a slowdown in demand from markets.
According to BSP Deputy Governor Diwa Guinigundo, BPO industry leaders are projecting a sustained growth, estimating total revenues of $10 billion annually by 2010. At present, the industry is generating $3 billion a year.
“The BPO is the possible mitigant to the drop in merchandize export,” Guinigundo said. “The most recent prognosis continues to be bullish and the latest projected growth is a high of 70 percent growth in revenue for 2008.”
Guinigundo explained that the bullish prospects in the BPO industry stemmed from the anti-cyclical nature of the business. “Businesses want to reduce their operating costs when things are down and their earnings are suddenly under threat,” he said.
As a result, Guinigundo said a downturn in the business sector is normally followed by a surge in BPO contracts since companies want to cut costs by searching for service suppliers that can do a lot of their tasks cheaper.
“BPOs help companies cut costs,” Guinigundo said. “That means that even without the threat of a downturn, competition also creates the continuous pressure to oursouce to reduce costs.”
Aside from the BPO industry, Guinigundo said the BSP was also counting on the resilient strength of remittances from overseas Filipinos, followed by foreign direct investments particularly in the mining sector.
A baseline survey earlier conducted by the BSP revealed that the BPO industry’s gross value added to the economy was estimated at 62.93 percent. This meant that for every peso invested in BPOs, about 63 centavos is added to the economy as a whole.
In terms of employment, Guinigundo said the survey indicated a strong 46 percent growth from the 94,488 jobs in 2004 to 138,000 jobs in 2005.
BPO companies paid total compensation of P26.4 billion in 2004 and this surged to P42.4 billion in 2005 with revenues topping at $1.8 billion in 2004 and reaching $2 billion the following year.
“Our caveat here is that we may not have captured the big ones,” Guinigundo said. “But in time we will capture them in the succeeding surveys.”
The preliminary result also showed that 63 percent of foreign investments into BPO came from the US and Europe came in a distant second with 26.8 percent. Japan accounted for 1.4 percent and “other Asia” accounted for 8.4 percent.
The “other Asia” category included investments from India, Malaysia and Singapore.
Initially, the survey also indicated that the biggest expansion was seen in medical transcription which account for only a small percentage of BPOs in the country but has been expanding at a phenomenal rate of 85 percent.
The survey also revealed that although India was the country’s biggest competitor in the BPO business, there were Indian companies that invest in BPOs in the Philippines as well.
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