The Figures Tell the Facts

Growth of the BPO industry in the Philippines continues.

Among offshore BPO service providers in the Philippines, 72 percent reported an increase in demand for BPO services in the second quarter of 2005, a decrease from the 83 percent rate reported in the first quarter, and for the third straight quarter, no BPO service provider in the Philippines felt that demand had slowed.

Within HRO, payroll and benefits administration were cited as the two areas with strongest demand in offshore BPO services in the Philippines, by 80 percent and 66 percent, respectively.

Within FAO was again cited as the leading sub-process area by an overwhelming 95 percent of the offshore BPO service providers in the Philippines. After which, credit and collections (70 percent), travel and entertainment (56 percent), and general accounting (41 percent) were the most active areas and retained their positions relative to the first quarter 2005 survey. All of which are services by PITON, an offshore BPO service provider in the Philippines.

In PITON’s experience, the average length of the sales cycle is six to 12 months, while time-to-contract is typically three to four months. However, sales cycles vary significantly as it is dependent on various aspects such as process areas, clients, offshore BPO service providers in the Philippines and the legal advisory in the local setting. Sales cycles are more variable than time-to-contract.

There is much debate in the BPO industry over different models by which to deliver services and the degree to which process transformation is considered a desirable and viable element of BPO. While the concept of transformation is compelling to buyers, there can be uncertainty over what it means, and how offshore BPO service providers in the Philippines can enable achievement.

PITON polled offshore BPO service providers to the Philippines on which delivery models buyers prefer for offshore BPO services – ranging from the traditional lift and shift through transformational Philippine outsourcing. Outsource and transform were cited as the leading model by 36 percent of BPO service providers, followed by the more expansive outsource and continuous process improvement at 30 percent. Outsource and maintain or lift and shift lagged at 18 percent, while transform first and then outsource to the Philippines – arguably the safest but most challenging approach – came in at 16 percent. These findings closely mirrored our first quarter 2005 results.

Investment and skills in the form of people and processes to adequately perform relationship management and governance (RMG) for outsourcing arrangements is one area where buyers and offshore BPO service providers are often found to be somewhat lagging in the past years. The general rule of thumb is that offshore BPO service providers in the Philippines should spend 3 to 5 percent of the annual cost of an outsourcing engagement on RMG, the bulk of which is personnel cost. At present, the trend has been geared towards human resources development and people management. This has arguably boosted growth in sales for the offshore BPO service to the providers in the Philippines.

PITON, a leading offshore BPO service provider in the Philippines, reported similar RMG spend levels for Q2 2005 over Q1 2005: 44 percent (compared to 51 percent in Q1 2005) cited that buyers were spending in the favored 3 to 5 percent range, while 28 percent reported higher spend levels (compared to 20 percent in Q1 2005). These higher-than-normal levels are in part due to the use of a sourcing offshore BPO service provider in the Philippines who can help buyers define and rationalize this investment. They are also a result of the maturity level and outsourcing experience of buying an offshore BPO service provider and the offshore BPO services’ process areas involved. It is important to note that the recommended and preferred offshore BPO service provider in the Philippines also varies based on the size of the deal, its complexity, what’s being outsourced, and the degree of multi-shore components.

What is the bottom line of all these figures? The offshore BPO services in the Philippines industry is experiencing healthy and gradual growth, and HR, F&A, and IT are all strong performers and an offshore BPO service provider can help your company in the long haul.

To learn more about our industry-specific BPO capabilities please contact us by calling +1-310-844-7805 or by filling out our inquiry form. We look forward to hearing from you.