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Mindanao builds up business process outsourcing hubs

[ Manila Bulletin Online ] July 13, 2008

Davao in step with emerging BPOs in Indonesia, Uruguay

ZAMBOANGA CITY—With Davao and Cagayan de Oro well on the way to becoming business process outsourcing (BPO) hubs, other Mindanao cities are also working to attract locators in search of a sustainable supply of trained workers and low overhead.

The Business Processing Association of the Philippines (BPAP) said in its recently completed industry roadmap, the country’s BPO sector and its allied information technology and engineering sectors have the potential to grow by 40 percent annually through 2010.

To succeed in this, BPAP said, the Philippines must "develop the 75 percent of available talent presently residing outside the National Capital Region, and were not being fully leveraged by the industry."

This could "raise total direct employment to 900,000, meaning 600,000 new jobs," BPAP stated.

XMG Asia Pacific, in a recent study on the global BPO industry cited by various news organizations, has classified Davao with other emerging offshoring cities like Jakarta in Indonesia and Montevideo in Uruguay.

Both Davao and Cagayan de Oro have attracted leading call center operators, such as Link2Support, Inc. Other Mindanao cities are looking to benefit from the rapid growth of the BPO industry in these two hubs, as firms continue to search for trained labor and cheap locations.

To maintain the Philippine industry’s momentum, BPAP advocates a more balanced geographic spread for locators, to help mitigate overhead costs and salaries, "and even rates of attrition."

Promising locations in Mindanao include General Santos, Zamboanga, Cotabato City, Marawi and Iligan, according to USAID’s Growth with Equity in Mindanao Program, which is helping to expand employment opportunities and improve IT infrastructure in the region

Sustainable supply of workers

With white-collar jobs scarcer in Mindanao than in Luzon, incoming BPO firms face less competition in hiring the "best and the brightest" in the region, where a quarter of the national population resides.

Davao’s workforce is estimated to be twice that of Cebu, seven times that of Angeles/Clark, and six times that of Baguio, according to the XMG study. Another major advantage cited is Davao’s large annual yield of information technology- and BPO-qualified graduates; 40 percent higher than that of Baguio.

These statistics do not include the potential workforce supply from nearby cities and provinces. One of Mindanao’s competitive advantages is that most of its provinces form a single land mass, in contrast to the rest of the archipelago. Improved road infrastructure has resulted in increasingly shorter commutes into cities by workers from other municipalities.

Mindanao’s tertiary-level academic institutions—which are at par with the rest of the countryare concentrated in urban centers which are likely BPO locations. Zamboanga City, the sixth most populous city (approx.imately 750,000) in the Philippines, has more than 60 universities and colleges.

The cities of Iligan and Marawi, just half an hour apart, have a combined student population of 25,000 in their Mindanao State University campuses alone.

BPO wage rates are competitive in Mindanao, where BPO agents earn R6,500 to R10,000 a month, reflecting the lower cost of living. This is significantly less than the R9,000 to R18,000 earned by agents in Metro Manila.

Inter-agency support

Brenda Nazareth-Manzano, regional director of the Department of Science and Technology in Zamboanga, pointed out that BPO firms locating in Mindanao have the benefit of strong backing by local governments, line agencies and the private sector.

"In Zamboanga, the telecoms and energy sector agencies are working with the city government and the business community to bring in firms," said Nazareth, adding that "BPO firms who come in will have the full benefit of this cooperation."

There is also support from among Mindanao academic institutions which have grown increasingly aware of the BPO market for their graduates.

"Schools are tailoring the curriculum to integrate English into the entire academic program, which develops the students’ facility with the language," said Joji Bian, president of the Philippine Call Center Alliance and owner of an academy which has conducted call center training across Mindanao, in partnership with private schools and government agencies.

Iligan’s MSU campus houses one of the country’s top technical schools, the Iligan Institute of Technology, which is collaborating with a Manila-based BPO firm to provide its faculty members with cuttingedge software development training.

"The firm is looking to us to help them source IT talents from among our students," said Dr. Emmanuel Lagare, an MSU-ITT faculty member and chairman of the ICT Council of Iligan. "We’re also in the process of forming an in-campus unit that can be contracted for software engineering projects."

Niche markets, hidden advantages

Cities with telecommunications infrastructure less developed than Davao or Cagayan de Oro may still have an edge in BPO subsectors. Zamboanga and Cotabato City, where universities have strong nursing and commerce programs, are promising locations for medical and business transcription centers.

Mindanao has also begun to spawn smaller firms with services ranging from legal transcription and financial accounts to software engineering, web development and multimedia design. Ateneo de Zamboanga graduates have gone into animation production.

English is the universal language for call centers, but its variations among ethnic groups may spell opportunity for specific areas of Mindanao.

"We’ve noticed that our trainees from Cotabato don’t have a strong Visayan accent," said Trexia Garcia, the head of call center training at Davao 1st E-Academy, which trains agents for accounts in Singapore, Australia and various U.S. regions. "Another plus is that they don’t mix English with Tagalog."

Kim Elago, a lawyer and city councilor who sits on the Regional Information Technology and E-Commerce Committee in Zamboanga City, said speakers of Chavacano (a Spanish-based creole language) are particularly suited to speaking Latino English.

Call center agents from Zamboanga have been successful in servicing Latino clients in the US, Elago pointed out. "This is a labor resource which can’t be found elsewhere in Asia."

Ryan Dorego, business development manager at Davao 1st Transcription Center Corp. and QualiServ Contact Solutions, agreed. "We study the accents of applicants to determine their likely success as agents," he said. "Zamboanguenos have done well in accounts covering Latino areas in California."

Competitive drive

Mindanao also offers BPO locators what a regular training course alone cannot provide: highly motivated personnel.

The competition for scarce corporate jobs in the region, the opportunity to enter a fast-growing industry without having to leave their families and communities, and a sense that information technology is bringing Mindanao into the global mainstream have given the region’s workers an added edge.

"The BPO industry in Mindanao being relatively new, [trainees] are very curious to learn how it works and are determined to do well," Garcia said.

"Filipinos in general are fast learners, hospitable, and patient in handling calls," added Garcia. "But clients have told me that they find Mindanao agents poised and persistent, they know how to convince buyers."

The Philippines has already captured five percent of the global BPO market and, BPAP believed, can achieve a 10-percent share by 2010, with estimated annual revenues of US billion. This can only be done by gaining access to new locations—like Mindanao—with a sustainable supply of new talent who will help build up the industry for the long term.
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