Gloria Macapagal-Arroyo

President of the Republic of the Philippines 2001 - 2010

THE PHILIPPINE IT-BPO INDUSTRY

IT is a major driver of the Philippine economy.

It is the fastest-growing industry in the country with an annual growth rate of 84%, having grown from US$56 million in export revenues from contact centers alone in 2001, to over US$7 billion from all sectors at the end of 2009.

It is a major source of employment, with a workforce growing from 5,600 in 2001 to over 500,000 by the end of this year—an annual growth rate of 65% in the last nine years.

It is an industry that grew 26% in 2008 and 19% in 2009, leading all industries in growth during the global financial crisis, keeping the Philippine economy afloat together with OFW remittances.

It is a continuing success story where an industry and its associations, led by the Business Processing Association of the Philippines (BPAP), are working in close coordination with the government through an agency, the Commission on Information and Communications Technology (CICT), which was created to promote the growth of ICT in the country.

These are the facts of the Philippines' information technology and business process outsourcing (IT-BPO) industry which covers the following export services: contact centers, back-office operations and knowledge process outsourcing, IT outsourcing, engineering services outsourcing, transcription, and creative process outsourcing.

In terms of manpower, this industry began unnoticed in 2001 with a few thousands of contact center workers. After just eight years, including all sectors, there were over 442,000 IT-BPO workers in the Philippines, an increase from 100,500 in 2004 (the year industry statistics started to be tracked). The total IT-BPO workforce is expected to grow 26% to over 557,000 by the end of 2010.

Parallel to the growth in the workforce is the striking growth in export revenues. From contact centers alone, export revenues grew from US$56 million in 2001 to US$5 billion at end-2009 at a compound average growth rate (CAGR) of over 75%. Total export revenues from all IT-BPO sectors rose from US$1.5 billion in 2004 to US$7.2 billion in 2009 at a CAGR of over 37%. Industry revenues are expected to grow by at least 26% in 2010 to US$9.1 billion.

In 2001, records show there were 13 contact centers operating in the Philippines; by 2009, the number of contact centers had grown over 42% a year to 218. Including all IT-BPO sectors, BPAP tracked 676 IT-BPOs in the country, up from 404 in 2006—growing just under 19% a year.

Government's initiative and support

IT-BPO development in the Philippines is a story of growth, expansion, improvement, and success in which stakeholders constantly strive to reach stretch goals. They are fully aware of the industry's untapped potentials and the depth of its workforce.

The administration of President Gloria Macapagal-Arroyo (PGMA) played an important part in the industry's impressive growth. The government actively supported initiatives to strengthen the industry such as encouraging the establishment of BPAP; creating CICT; providing investor support through BOI and PEZA, which included accrediting buildings used by the industry; driving regional initiatives under CICT (Cyber Corridor) and the Department of Trade and Industry's Regional Operations and Development Group; and completing infrastructure programs such as airports.

A key initiative of the Arroyo Administration was to address the anticipated demand for well-trained and qualified IT-BPO workers. PGMA instructed the Technical Education Skills Development Authority (TESDA) in 2007 to allocate ₱ 350 million to subsidize IT-BPO training in 2008. This subsidy was used to train fresh college graduates in skills required by the industry. The same amount was allocated in 2009. This subsidy has greatly helped the companies hire qualified IT workers as they joined the highly competitive industry.

In 2008, BPAP received 43,620 training vouchers worth ₱244 million from TESDA. All these vouchers were distributed to training companies, IT-BPOs, and associations and resulted in a total of 28,548 trainees being hired, for a hiring rate of 73%.

In 2009, BPAP received 25,295 training vouchers worth ₱136 million from TESDA. All these vouchers were distributed to training companies, IT-BPOs, and associations and resulted in a total of 17,131 trainees being hired, for a hiring rate of 69%.

In addition, in 2009, the Office of the President, through CICT, allocated ₱62 million for the industry's talent development, process improvement, and promotional activities.

Industry organizations

To support the fast-growing industry, companies organized themselves into different organizations. The Contact Center Association of the Philippines (CCAP) was established in 2001. This was followed by the establishment of the Medical Transcription Industry Association of the Philippines Inc. (MTIAPI) in 2003.

In 2004, industry and government leaders decided to establish BPAP as the industry's umbrella organization, with Mitch Locsin as BPAP's first executive director, by merging two large associations. Older sector associations, the Philippine Software Industry Association (PSIA, established in 1988) and Animation Council of the Philippines Inc. (ACPI, established in 2000), with CCAP and MTIAPI became charter member associations of BPAP. The Game Developers Association of the Philippines joined BPAP when it was formed in 2009.

In 2007, BPAP published Offshoring and Outsourcing Philippines: Roadmap 2010 and formed Team 2010, with Oscar Sañez as BPAP's first chief executive officer leading this team of full-time executives to drive industry initiatives toward the goal of capturing 10% of global IT-BPO market share by 2010.

BPAP drew support from and appreciated the importance given by the government to the IT-BPO industry. This support was manifested in several important ways including, but not limited to, the following:

  • an attractive incentives regime for investors mainly through PEZA and the BOI
  • PGMA's direct interaction with industry leaders and her willingness to listen to industry concerns and take immediate action to address these concerns
  • PGMA's presence and participation at industry events and missions
  • OP allocation of funding for training subsidies (through TESDA) and for talent development, process improvement, and promotion funding support (through CICT)
  • inclusion of industry leaders in government discussions affecting the industry
  • assignment of the CICT chair as industry champion in government
  • partnership with CICT in major industry initiatives for talent development, IT-BPO readiness and hosting capabilities in cities and municipalities in most regions, improving the business environment, and advocating legislative action in support of the industry
  • inclusion of industry leaders and executives in government forums, seminars, workshops, meetings, and organizations related to industry concerns

Commission on Information and Communications Technology

In 2004, President Arroyo created the Commission on Information and Communications Technology (CICT) to oversee ICT development. CICT plays an important role in providing a singular voice in government on issues that affect IT-BPO operations in the Philippines.

President Arroyo also designated Secretary Ray Anthony Roxas-Chua III, a Wharton Economics and Applied Science (in Computer Science) graduate, as the Outsourcing Czar in 2007. The naming of the CICT chair as industry champion facilitated the interaction between government and industry on many key issues and initiatives. It ensured timely and coordinated communication and action in both directions.

Having an official in the Cabinet to represent industry concerns ensures that the industry, which is an important driver in the national economy and a major source of employment, can sustain its global competitiveness and growth. These concerns range from inclusion of the industry in key development and investment plans, to immediate actions required to address unplanned events. They also range from policies that affect investors and business operations on a large or national scale, to rules and regulations that affect employees, employers, communities, and institutions in specific situations or locations.

BPAP works closely with CICT in the true sense of a public-private partnership for the growth of the Philippine IT-BPO industry. The partnership evolved from coordination and merging of efforts in developing the Cyber Corridor and Next Wave Cities™ (NWCs), through ICT Councils and a scorecard, to broader concerns. The latter included funding of training initiatives, advocating investment-friendly legislation, improving the business environment, creating greater awareness of the benefits and opportunities offered by the industry to the general public and stakeholder groups, promoting the Philippines and the industry as an investment destination, and providing resources to implement initiatives to ensure industry growth.

The results of the partnership between CICT and BPAP included the passage of the Rationalization of Fiscal Incentives bill, the exemption of the industry from special non-working holidays, government support for training and other important industry initiatives, increased awareness on the benefits of ICT and IT‑BPO in the locations outside Metro Manila and Metro Cebu, joint promotion and marketing efforts (bringing in millions of dollars of investments), joint investor support, and timely reactions to specific issues.

International recognition

The Philippine IT-BPO industry received its first major international award in October 2007 when the Philippines was first named the Offshoring Destination of the Year by the National Outsourcing Association (NOA) of the United Kingdom. In 2009, the Philippines received its second Offshoring Destination of the Year award from NOA.

Cyber Corridor and Top 10 Next Wave Cities

CICT's Cyber Corridor initiative pioneered in gathering data on IT-BPO capabilities in Philippine cities and municipalities across the country, thus introducing many local stakeholders to industry requirements. The establishment of ICT councils in several locations sustained and deepened these pioneering data-gathering, educational, and organizational efforts. Furthermore, the establishment of the National Federation of ICT Councils is helping to institutionalize these programs.

With CICT and DTI's intrinsic involvement in BPAP's NWC initiative, which focused on providing objective information to investors and stakeholders on the best locations outside Metro Manila and Cebu, the efforts of government were merged seamlessly with private-sector efforts to address the concerns of industry. CICT's data-gathering capabilities, field experience, and analytic skills were combined with industry knowledge and experience to accurately identify the best locations in the Philippines to set up IT-BPO operations. These results were presented jointly by BPAP, CICT, and DTI to the public as the Top 10 NWCs in November 2008 and in the first NWC report in July 2009. The top-10 NWCs for 2010 will be announced by BPAP and CICT in April 2010.

By 2009, BPAP had recorded IT-BPO operations in about 35 Philippine cities and municipalities outside of Metros Manila and Cebu. This was an increase from about 18 in 2007. There were at least 54,000 IT-BPO workers in these areas in early 2010, an increase from 46,500 in mid-2007.

Philippine IT-BPO 2010 and beyond

Up to the first half of 2010, BPAP was allocated ₱62 million by the Office of the President, through CICT, for initiatives in talent development, process improvement, and promotions. The positive impact of this funding support will continue to be felt in years to come, however, some of the immediate results are as follows:

  • 30 universities and 22 BPOs partnered to deliver English-proficiency training to students resulting in increased suitability for students in voice-related work; 133 teachers were trained, 25 BPO trainers certified, 7 master trainers certified, a full-time master trainer hired; 17 schools and 49 teachers in Region 3 participated
  • the BPAP National Competency Test for IT-BPO skills was tested, launched, and will be piloted with 10,000 students in 2010
  • 8,000 people in 11 cities participated in two-day events organized by CICT, BPAP, ICT councils, and 27 companies to raise awareness on the benefits of IT-BPO and to discuss issues with local stakeholders
  • at least US$1.5 million in new investments from international missions and participation in international conferences (not yet including investments from missions of BPAP's member associations)
  • 250 participants from 10 countries converged in Manila in October 2009 for the country's first International Outsourcing Summit to augment the Philippines' status as a global leader in offshore outsourcing
  • over 100 industry leaders met to discuss the Philippine capability in knowledge process outsourcing, identified in a BPAP survey and international reports as a new and important growth area for BPOs; another 100-plus stakeholders were apprised of the industry's accomplishments in 2009
  • high-profile presence of the Philippines in key global reports and publications and webinars such as Global Services and Tholons' Top 50 Emerging Global Outsourcing Cities 2009, Oxford Business Group's The Report: The Philippines 2010, Smart Money Magazine (for placement), First Magazine (for placement), Everest's Market Vista 4Q 2009 Webinar, and SSON Webinar (for placement)
  • participation of sector associations in specialized international conferences and missions and resulting investments plus increased awareness of Philippine capabilities in IT, animation, game development, and transcription
  • specialized training in sector-specific skills such as health records management, transcription, IT, and animation
  • support for sector-specific promotions through conventions, seminars, collaterals (including AVPs, brochures, Web sites, and the like)
  • research initiatives for IT, quality assurance, and industry directions beyond 2010

However, while the country's achievements in the global IT-BPO are laudable and impressive, further collaboration between the industry and government is needed to sustain and build on these achievements. Such collaboration can include, but need not be limited to, the following:

  • government funding and private-sector implementation of a global awareness program on the capabilities of Filipino professionals
  • continued support of the PGS program, which has proven effective and can be enhanced
  • government funding support for the IT-BPO industry's talent development, process improvement, and promotion initiatives beyond 2009
  • government funding and private sector implementation of a road map to guide industry growth to 2016 (funding allocated in 2009 for this study is for a preliminary road map)
  • public-private initiatives to increase national ICT literacy, e-government, and access to PCs and the internet

In the 14th Congress, the bill creating the Department of Information and Communication Technology (DICT) was certified by President Arroyo as a priority measure. It passed the House of Representatives but the attention of the Senate turned to other issues in the final days of the session.

A department focused on the ICT industry would have enhanced and institutionalized the support provided by CICT to the industry. All sectors of the industry had signed resolutions supporting the DICT bill; its failure to be passed was highly disappointing to them.

Industry leaders plan to encourage the next administration to support the passage of the DICT bill in the next Congress. They believe it is the best way to institutionalize the importance of ICT in national development and to ensure that government support cannot be easily withdrawn when government administrations change.