In this BPO Corner:
Local Call Centers to Grow by a Quarter in Six Years
by Maricel E. Estavillo

The number of call center companies in the Philippines is expected to grow by 25.1% to 481 by 2011 from 80 last year, business consulting firm Frost % Sullivan said in a recent report.

The report, entitled Strategic Assessment of the Philippines’ Contact Center Market, has projected the number of call center seats to balloon to 309,000, employing more than 394,000 people in 2011 from 45,000 seats and 72,000 workers in 2004. Apart from new facilities being set up, the expansion of existing call center locators would take the number of seats in the country to 77,000 by the end of this year.

Outsourced call centers, or firms servicing third-party clients, continue to comprise the bulk of the industry, but in-house call centers or those set up by individual companies to service their own clients are seen growing at a faster rate. During the eight-year period, in-house call centers are expected to grow at a compounded annual growth rate of 29.1%, to reach more than 111,000 seats by 2011 while outsourced call centers are expected to grow 2.63% to 198,000.

Last year, more than two-thirds of the industry were outsourced call centers, while the remaining third were in-house call centers. By 2011, the ratio between outsourced and in-house call centers will change to 64% from 36%.

The consulting firm said the growth is driven by the increasing number of United States companies setting up facilities in the country and the growing outsourcing trend in both US and local firms.

Filipinos’ proficiency in English, cultural affinity to the West especially the US, low labor cost structure and good government support for the industry are among the reasons considered in choosing the country as a call center location.

In the area of cost alone, it is estimated that local industry locators spend 40%-45% of their total costs on personnel compared with the 60%-70% labor budget in the US. “Though India currently leads the Asia-Pacific outsourced call center market, the Philippines is tailing India closely and narrowing the gap. Today, India and the Philippines are both considered by companies as locations for outsourcing their call centers.”

But it noted that with growth comes the problem of insufficient labor supply, particularly for high-skilled labor force or those agents who can service technical, financial, and multilingual requirements.

“Labor supply is a pressing problem troubling the otherwise booming industry. As Philippine call centers move up in the service value chain, the demand for highly skilled laborers has increased, and call centers are increasingly finding it hard to get the right talent for the high skill work.”

Frost & Sullivan also said agent attrition rate in the country remains high at 35%. “Since majority of agents in the Philippine call centers are fresh graduates, pursuing higher education, better monetary incentives by other call centers and better career opportunities have been the key reasons for the high attrition rates,” the study said.

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Originally printed in BusinessWorld, p. S1-8, August 29, 2005