In this BPO Corner:
BPO Saves IT Sector in 2005; Bright Prospects Seen Ahead
By Edu H. Lopez

The information technology (IT) sector did not perform well in 2005 except for some sub-sectors such as business process outsourcing (BPO), contact centers, medical transcription, financial services and animation.

The traditional IT sub-sectors such as hardware and software sales, services, IT education, and semiconductors had not done much in 2005.

“But there is something relatively new that saved the day for us—and that’s BPOs such as call centers, medical transcription companies, administration and financial services, and animation.

“These sub-sectors today are employing roughly 100,000 Filipinos,” says Gus Lagman, president of SSI, a local systems integrator and software developer.

Lagman stressed that it’s BPOs that saved IT. “Other than that, I can’t think of any major achievements in IT. Well, I think we can consider the creation of the CICT as major enough.”

However, Lagman, one of the pillars of the IT industry, is optimistic that 2006 would be better than 2005.

“For some reasons that I can’t explain, I feel 2006 might be better. The pent-up demand for more IT power just might trigger relatively more brisk hardware and software sales. And of course, BPOs will continue to grow.”

The concern of the industry, Lagman believes, is also the concern of all other industries: the unstable political situation. “I think that until President Gloria Arroyo gives way, this instability will continue to deter more rapid growth.”

In addition, Lagman noted that there have been, in recent years, many government IT contracts that were allegedly awarded through anomalous processes.

Lagman’s business was not also doing good in 2005 and in the last three to four years. “If we are surviving, it is only because we downsized our preparations to a level that brought us back to profitability.”

But again, Lagman believes 2006 may be better than the previous years.

“Our software development company is due to take off in 2006. We expect to sell a number of licenses locally, after which we plan to launch the products worldwide,” says Lagman.

Political Stability Key Success

Microsoft Philippines stressed that political stability is key to its success in the country. “I think that all the economic indicators are showing an upswing such as an increasing employment rate, appreciating foreign exchange, improving investors’ sentiment, budget deficit reduction and declining oil prices,” says TJ Javier, general manager of Microsoft Philippines.

Microsoft has had a very successful year in 2005. Its headcount has grown by about 40 percent. In fact, Microsoft is moving to a new office, which is 300 percent bigger than its current size.

Javier noted that there were two biggest developments on the local IT industry. These were the Fly High Roadmap and the government’s strong stance on intellectual property for software, audio and video entertainment.

The Fly High Roadmap was a study done by public and private sectors, together with the academe, associations and the thought leaders of the country. “It marks the software industry where it is right now, where it wants to go in five years’ time, and how it is going to get there,” says Javier.

Javier expects that 2006 would be marked by lower costs of personal computers (PCs) for consumers and students, hosted email services and other commercial applications.

He also expects activities around the promotion of the country as a services hub, the use of our schools as research and development laboratories, more certified training programs for public school teachers and Overseas Filipino Workers (OFWs) and facilitating employment readiness for call centers.

Consolidation

Consolidation and mergers also marked the IT industry in 2005. “This means that users can expect more streamlined products and services, while enjoying the benefits of cost-efficiency from industry consolidation,” says Ronnie Latinazo, country manager of EMC Philippines, a leading computer storage vendor.

EMC has acquired several software companies to boost its portfolio and offer more choices to its customers in helping them better manage and protect their information infrastructure.

In the storage industry, companies have accepted the information lifecycle management (ILM), a strategy for aligning IT infrastructure with the needs of business, based on information’s changing value.

Through ILM, organizations get the most value from their information, at the lowest TCO, at every point in its lifecycle.

Latinazo expects ILM rollout would further drive tiered storage, where there will be high-performance storage, high-capacity online storage, online archival storage, and offline storage.

“We remain positive about growth prospects for 2006 as EMC continues to expand into new markets and verticals with the broadest portfolio of information management and storage solutions in the market today.”

Latinazo expects the commercial and small and medioum business (SMB) space to be a high-growth segment for EMC.

“As the market leader, it is also important for us to continue to drive the ILM vision and help our customers manage their entire information lifecycle from end-to-end—affordably, simply and easily.”

“Assuming that economic health of each of the geographies remains positive, what will fuel EMC’s growth regionally is its ability to address the pain points across our customers’ information lifecycle,” says Latinazo.

“We will do this through our continuous expansion of our partnerships, breadth of products and solutions, focus on services and outstanding customer service.”

EMC continues to see positive growth prospects. “We will look to expand into new markets geographically and new verticals, bringing together vision, partnership and an integrated solution offering plus solid customer service,” says Latinazo.

He believes that EMC’s vision of ILM will continue to be adopted widely across Asia and more companies will looking towards them to manage, store and protect their information in a highly flexible but secure manner.

Software Industry

Fermin Taruc, president of the Philippine Software Industry Association (PSIA) says the organization will continue to effectively promote the interests of the Philippine software industry.

“We will do this through a combination of proactive leadership, advocacy, participation and collaboration,” says Taruc.

The Fly High 2010 document provided the framework for the 2005 initiatives of PSIA. The goal is to maintain the same framework for the next five years, with the support of the succeeding PSIA board until the targets contained in the plan are achieved.

PSIA is finalizing a follow-up baseline study which will define exactly where the industry is with regard to the metric identified in the Fly High document.

The study will define the following, based on the Fly High targets:

- Current number and list of software development companies that are aligned to international quality standards (ISO and CMM will be validated, other certifications will be reported as claimed).
- Current locations and a list of top 50 foreign-based software development companies in the Philippines.
- Current number and segmentation by nature of employer and skill sets of software development professionals and the current recruitment, obsolescence and retention rates.
- Current Intellectual Property compliance level for software products.
- Current government investment level for software products and services in terms of spending amount and type of spending packaged software or software services.

Taruc says the baseline project will provide one source of this baseline information, using assumptions and definitions provided by the industry itself.

“By 2010, we expect the industry to be successful in achieving its objectives as indicated by how far we’ve come from the 2005 baseline information,” Taruc added.

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This article was originally published in the Manila Bulletin on January 13, 2006. Reprinted with permission.