BPO--The Real Scoop II
By Paul Catiang

On October 23, 2006, the Manila Golf Club once again played host to another John Clements Business Forum. The second in the series of industry talks aligned with business process outsourcing, this iteration of the Real Scoop was graced by three leaders from the outsourcing industry: BPA/P Director Mitch Locsin, JP Morgan Chase Operations Director Barry Marshall, and TeleTech's Vice President and General Manager for the Philippines Maulik Parekh. As in the first Business Forum held in September, the event was facilitated by Frank Holz of Outsource2Philippines.

The Business Processing Association of the Philippines: Managing Growth <-- Click here for a copy of the presentation

An association led by the private sector and comprised of six representative segments of the business process outsourcing and IT-enabled services industries, the Business Processing Association of the Philippines (BPA/P) serves as a one-stop information and advocacy gateway for the industry and its support sub-sectors. The BPA/P was created to provide one point of contact with the rest of the world, and currently has 144 company members and four association members.

Mr. Locsin opened his presentation with an industry update, delving into the sub-sectors of outsourcing.

As of the second quarter of 2006, the contact center industry is still the fastest-growing in the Philippines, numbering up to 124 contact centers in the country, employing around 145,000 full-time employees and generating up approximately US$ 1.7 billion in 2005. These are the combined numbers from both third-party providers—companies like Sykes, GENPACT, TeleTech, eTelecare, and Sutherland Global Services—and captive contact centers—operations including Dell, Deutsche Bank, JP Morgan Chase, Shell and HSBC.

Next is Business Processing, the back-office operations sub-sector, which has grown to 62 service providers in the Philippines, with 30,500 full-time employees. This sub-sector steadily grew at a rate of 80 percent in 2005, and generated revenues of up to US$ 180 million. Back-office operations are also divided into two categories: third-party providers (companies like Accenture, Daksh Services, the Environments Collaborative, and so on) and captive operations (AIG BPSI, Hewlett-Packard, Manulife, HSBC, McKinsey & Co., and so on). The services provided by this sub-sector are gradually expanding, and its already-considerable repertoire not only includes basic processes like accounting, bookkeeping, and human resources administration, but are now spreading into niche markets like publishing, health insurance, litigation support, and even travel services. Other emergent services in this sub-sector are more complex in nature, offering services in fields like market research and analysis, and intellectual property management.

Medical and legal transcription are next, a sub-sector that also posted a growth of 80 percent in 2005 and generated revenues of around US$ 70 million. There are around 100 medical transcription firms in the Philippines, employing up to 8,500 people. One of the reasons most hospitals in the US outsource their medical transcription processes to the Philippines is the high level of performance; transcriptionists here have a 98 to 99 percent accuracy rate and a turnaround time of 12 to 24 hours. Some of the key players in medical transcription are companies like MedScribe, Transkripsyo Inc., Total Transcription Solutions, Inc., and Dictation Source.

As for legal transcription, growth is only about to catch up, as there are as yet only nine legal transcription firms in the Philippines. This number, however, belies the 2005 revenues amounting to US$ six million, the 1,500 legal transcription professionals and the 50 percent growth rate posted in 2005. Companies in this sub-sector include companies like Quisumbing Torres, SPI Technologies, CD Asia, Inc., and SVI Corporation.

The software development sub-sector, on the other hand, while larger than the transcription sub-sector, has only experienced a 40-percent growth rate in the previous year. One has to note, however, that this 40 percent growth means that the industry has grown to 500 companies, around 79,500 IT professionals, and US$ 200 million in revenues. The industry is made up of companies like Accenture, Headstrong, Oracle, Sun Microsystems, and other similar organizations.

Animation is also one of the emerging sub-sectors in outsourcing these days, having grown by 25 percent in 2005 and generating up to US$ 40 million. What began with Hanna-Barbera as manual animation in previous decades has now expanded into 3D animation for contemporary cartoons like Dexter’s Laboratory and the Powerpuff Girls, as well as animation for interactive gaming for both personal computer games and console games. Medical animation is also one unexpected yet welcome development in this field.

Lastly, engineering design is a growing field in outsourcing these days; the sub-sector has grown by 30 percent in the past year, with 24 companies and around 3,800 full-time engineers, and has generated revenues of up to US$ 48 million. The key players in the Philippines for this field include Fluor Daniel, Bechtel, Hyundai Engineering and other companies. This field of outsourcing is particularly viable for the Philippine workforce, as 40,000 engineering graduates are added to it annually, and their training invariably includes training in computer programs like CAD-enabled engineering and Computer-Integrated Manufacturing. From 1995 to 2000 alone, the Philippines produced over 75,000 licensed professionals in the engineering field.

According to Mr. Locsin, the Board of Investments (BoI), the Commission on Information and Communications Technology (CICT), and the BPA/P have projected that the total outsourcing workforce will grow to over one million professionals across all fields and sub-sectors, generating over US$ 12 million in revenues. They also expect expansion into the provinces, citing locations like Iloilo, Bacolod, Cagayan de Oro, Lipa, Naga, Legaspi, Tacloban and Subic.

The BPA/P’s current agenda is sevenfold. First, the association is advocating human resources development by encouraging the return of English as a medium of instruction to enhance the workforce’s potential to serve in the industry. This is currently being undertaken through partnerships with the government, several media channels and American and European chambers of commerce. Second, the BPA/P is working towards encouraging the adoption of international data security guidelines; while all outsourcing operations in the Philippines have their own security standards, the BPA/P aims to standardize these security practices to better market the Philippines as a safe and secure location for companies looking to outsource here. Third is the standardizing of incentives from the Philippine Economic Zone Authority and the Board of Investments, as well as the additional local government incentives. Fourth is the boosting of the Philippines’ infrastructure, both for telecommunications and real estate requirements. Fifth, the BPA/P is establishing partnerships with other associations abroad, like with the National Software and Services Commission (NASSCOM) in India and with the American Telecommunications Association (ATA) in the US. Sixth, the BPA/P has been tasked to market the Philippine ITES-BPO industry to the UK, Australia and Canada in 2006. Lastly, the BPA/P has undertaken a five-year roadmap for the industry with research firm McKinsey & Co. to determine the best directions in which the industry may grow. The BPA/P also expects to complete its compilation of the Philippine Database with the study and projections of supply and demand through this project.

Mr. Locsin concluded his presentation with an enumeration of the opportunities and challenges the industry faces these days. Firstly, the industry needs to beef up its manpower resources, quality certification and security compliance, all of which are being addressed and are in the final stages of implementation. Secondly, the BPA/P sees opportunities in the finance and accounting sub-sector, given that 28 percent of Philippine graduates come from Business Administration and other related courses, making them more than ready to take the available positions in the sub-sector. Thirdly, the Philippines can now move up the value chain of outsourcing to provide high value-added services in Knowledge Process Outsourcing.

JP Morgan Chase: Creating a Winning Culture <-- Click here for a copy of the presentation

Mr. Barry Marshall, Operations Director for Chase Card Services, Manila, began his presentation by relating his own personal experience with the company, saying how he had started out with JP Morgan Chase as a college student and eventually stayed on with the company. He said his decision to stay was influenced to a large degree by the corporate culture fostered by JP Morgan Chase. The company prides itself in creating a winning culture: an unexpectedly ephemeral goal, and yet it is a more potent motivator than high salaries and profits.

With this as a starting point, Mr. Marshall proceeded to dispel several myths concerning the BPO industry.

Myth #1: Multinational Companies set up call centers and BPO operations in the Philippines just to save on labor costs.

This is a general, off-the-cuff opinion when outsourcing is mentioned. The dollar exchange rate does make operating in the Philippines more cost-effective. As far as JP Morgan Chase is concerned, however, the Philippines is a strategic location that offers more benefits than reduced operations and labor costs. The company itself has been operating in the country for over 40 years, and all these decades in the Philippines have shown JP Morgan Chase the higher levels of English proficiency, the service-oriented culture, and the affinity for US culture that Filipinos have. These characteristics and more have convinced the company to create a corporate culture that will leverage the experience, education and insight of their staff to create business opportunities and process improvements. As Mr. Marshall put it, every encounter--even short phone calls--with a customer must leave the customer feeling amazed and extremely happy to do business with JP Morgan Chase. To accomplish this, one has to sell the company to the employees, and all this begins with the corporate culture.

Myth #2: Call center and BPO Operations have limited career growth.

Again, working from the perspective of a winning corporate culture, it becomes easy to disprove Myth #2. Establishing a corporate culture goes beyond making employees feel good about working for the company, as this only works in the short term. Employees need to be offered a future with the company, and JP Morgan Chase is ripe with diverse and growing career opportunities as the market continues to develop, deepening and diversifying the opportunities available. "We leverage internal talent from around the globe," said Mr. Marshall, citing that the demand is high and that the potential is great for experienced managers for the various lines of business JP Morgan Chase has. These include investment banking, commercial banking, treasury and security services, equity sales, research, trading operations, home finance and card services.

The hallmarks of JP Morgan Chase's corporate culture are acting with integrity, treating everyone with respect and dignity, contributing to team success, leading by example, and making a difference in the customer experience. This corporate culture is created through the fundamentals of behavior, motive, and outcome.

Since JP Morgan Chase began operations in November 3, 2005, their ranks have grown to 355 full-time staff and are continuing to ramp up to fill their 24/7 operations. The center in Manila performs multiple functions, including fraud, collections, telemarketing, and data entry.

TeleTech: Setting Trends <-- Click here for a copy of the presentation

TeleTech describes itself as a global company that performs millions of customer interactions daily in 80 customer management centers in 16 different countries, providing service in 150 distinct languages. TeleTech employs around 40,000 people in five continents. In outsourcing alone, the company has eight large customer management centers with a headcount of approximately 8,000 employees and growing. It has proven to be one of the fastest-growing BPO companies globally, and is best positioned for future growth, expecting to be largest BPO company.

In the Philippines, the global outsourcer has taken a different tack in tapping the manpower potential of the country. Their strategy is simple enough: by bringing jobs to the people, traveling to their facilities takes less time and becomes more convenient. In Metro Manila alone, TeleTech has set up operations in locations that, while unconventionally away from most business districts, are closer to the residences of their employees. Such locations include Novaliches, Cainta, and the Fort, and provincial locations are Bacolod, Mandaue City, Dumaguete, Lipa, and Roxas. This goes a long way toward attracting talent and retaining talent. Maulik Parekh, TeleTech's Vice President and General Manager for the Philippines, even mentioned that some employees live so close to the center that they actually walk to work.

This goes beyond the effort saved by TeleTech employees. Mr. Parekh says that this is also a recognition of Filipino family values; the more time an employee spends with his or her family reflects well on the employer. This also eases the worries associated with working the night shift. TeleTech has many other ways of taking care of its employees, thus ensuring greater retention. Performance recognition is only the beginning. The company also sponsors team events and spot bonuses, as well as events that involve the employees' families. Sports are also included, with activities as varied as mountaineering and diving clubs. Employees may also avail of spa treatments to help alleviate the strain of work. Fashion plates are also given the chance to indulge their creative inclinations through discounts available with certain establishments. Lastly, TeleTech employees are also treated to concerts, travel opportunities and other such benefits.

When it comes to growing their talent pool, TeleTech facilitates a strong partnership among government and educational institutions and the private sector. Not only does the company seek a larger pool from which to draw entry-level talent, but also the development of future leaders and managers to support the unprecedented growth of BPO industry. The company is looking for competent leaders and managers, regardless of what industry they are most familiar with. As with other BPOs and call centers, leadership capability is valued more than knowing the particulars of the industry, as these can be learned along the way.

TeleTech continues to go against the grain in that it wants to position the Philippines as the next frontier for non-voice back-office operations while other operations focus on voice-based processes.

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Errata: In our previous issue, Mr. Frank Holz, CEO of Outsource2Philippines, was mistakenly associated with another company and his name was misspelled. This writer apologizes for the misspelling of his name and the misattribution in our previous issue.