BPO in India and the Philippines: Growing Our Slice of the Pie
Carmen Hidalgo

The scuttlebutt in the Philippine call center industry is that we are poised to overtake India. The Philippines—with its annual turnout of 400,000 college graduates, adult literacy rate of approximately 94%, highly Americanized pop culture, and population of English-speaking citizens with accents which can (it is believed) be “neutralized” within 7 days of training—is commonly thought to be more fertile ground for the rapidly burgeoning field of Business Process Outsourcing.

Carol Dominguez, President and CEO of leading HR firm John Clements Consultants, Inc., says we couldn’t be further from the truth. “We are so, so far behind India,” she states emphatically. “They’ve got their act together. We don’t even know where we are on the [BPO] map.”

Carol—together with Grace Sorongon, head of the Professional Staffers Division of John Clements; Rita Estella, head of the Staffbuilders Asia Division, also of John Clements; Cesar Averia, President and CEO of EDI Staffbuilders Asia; and Tully Moss of Magellan Alliances, Inc.—recently flew to India on a two-week trip. While there, they visited three major cities: Mumbai, New Delhi, and Bangalore.

With the assistance of the Philippine Embassy in India and longstanding John Clements partner, real estate broker CB Richard Ellis, Carol set up meetings with major industry players, such as HP, Tata Consulting, Infosys, and Wipro. “I wanted to learn from them, to gain insight on the different types of processes that are being outsourced to India, and to see how we could improve our own processes and provide better services to our clients,” Carol says. She adds, “I also wanted to see if we could find possible partners with whom to collaborate.”

What she found, and what others in the Philippines are coming to realize, is that India is a thriving, highly organized IT hub, one with an educational system and infrastructure capable of sustaining long-term growth which were put in place 30 years before the actual boom. The city of Bangalore alone churns out 380,000 graduates a year from its 23 universities and 3000 colleges, majority of which are dedicated to engineering.

In 1997, riding the crest of the IT wave, thousands of Indians surged to US shores. According to Cesar Averia, 60% of all H-1B visas issued at the time were to Indians. Many of these immigrants then worked their way up the ranks and into key positions of American companies. At one point, major companies like Mackenzie and US Airways were run by Indian nationals. In 2001, following 9/11 and the bursting of the dotcom bubble, many Indians fled home—and brought business with them. Everything turned to the East, and thus came the rise of the BPO. Today, 85 % of the total $30-40B dollars posted annually by offshore outsourcing goes solely to India, which has 250 million English speakers to fill the BPOs.

“We simply cannot compete with India, especially in terms of scalability,” says Grace Sorongon. “When a job opening is posted in India, HR firms receive 20,000 applicants in one day, as opposed to the few hundred we receive here.” Cesar Averia concurs. He says, “For every 1 of us, there are 5 to 8 of them. If a multi-national sets up a call center here, they look for 400 people. In India, they look for 5,000.”

Aside from sheer numbers (in 2004 they reported a population of 1.1 billion), India also has the advantage of knowing how to invest in data. Entities such as India’s National Association of Software and Service Companies, or NASSCOM, dedicate time and money to the gathering of information and subsequent dissemination of it—to everyone from government officials to the average taxi driver. Recently, when the news reached a worried India that China was bent on getting its slice of the BPO pie, NASSCOM immediately commissioned a study on the potential of China as a BPO site. The study, titled “Learning from China,” concluded that China did not, in fact, pose a threat in the near future, due to its lack of English-speaking workers. More important than the results of the study, however, was the study itself. NASSCOM claims that it is the first comprehensive report on the Chinese IT market. In other words, India not only knows where it is, it knows where everyone else is.

India has got it together, literally. “The support that BPO gets from the Indian government is amazing,” enthuses Carol. “All the sectors know how to come together and cooperate for the good of the nation.” The Governor of Bangalore, who was featured in Fortune Magazine as the visionary behind India’s famed industrial city, planned his entire city around the growth of the IT industry. Also legendary are the annual road shows India holds in the US, which are collaborations between the Indian government and private sector dedicated to selling India and its BPO industry.

So we know we can’t compete. What are we then to do? “I think what we came away with from our trip to India is that we have to follow the example they’ve set,” Carol concludes. She elaborates, “First, we need to understand where we are, in terms of hard facts. We need to do studies and gather data on key cities in the Philippines. Then we need to come together with the government and private sector, and formulate a real plan.”

In line with this, John Clements has already formed a partnership with Magellan Alliances to come up with a study on the overall potential of the Philippines in the BPO-call center-shared services sector. This study will include a quantification of employment, revenue, and other benefits, and development of a timeline for achieving those benefits. It will serve as a concrete means for us to market ourselves to the rest of the world as an ideal BPO destination. “When we tell people `Come to the Philippines! Invest in us,’ we have to be able to tell them why. We need to be able to back it up with figures and facts,” says Carol.

Perhaps the biggest lesson we can learn from India, though, is the importance of finding our niche. India’s stronghold on the BPO market consists of its formidable IT background. Between its three major cities—Mumbai, New Delhi, and Bangalore—India graduates 70,000-80,000 software engineers every year. Software development and other “high-end” IT outsourcing are considered the almost exclusive domain of India, while the rest of the prime BPO destinations (the Philippines, Eastern Europe, Ghana, China, Vietnam, Panama, and Costa Rica) are left to scrabble over voice call and other less specialized offshore outsourcing services. With the Philippines’ strong legal, accounting, and medical education system, perhaps it is time for us to shift our paradigm and focus on selling services like legal and medical transcription, payroll processing, and tax administration.

Sunil Mehta, Vice President of NASSCOM, has this to say on the matter: “I think we all have to define what we want to be when we grow up. Instead of fighting for our individual slices of the pie, we have to realize that we only hold a small fraction of what’s really out there. The total outsourced services market is worth 300 billion dollars a year, and offshore outsourcing only makes up a tenth of that. Instead of looking at it as a competition, we should all define our niches and come together as a collective. If we do this, we have the potential to grow by 10 times our [combined] slice of the pie.”