What’s Going on in the Offshore Back-Office Processing Outsourcing Services Market Activity in the Philippines

Surveys reflect similar findings among PITON consultants and other offshore back-office processing outsourcing service providers Philippines community. Expansive growth is expected in 2007.

Now that 2006 is coming to a close, it is useful to analyze actual offshore back-office processing outsourcing services market activity in the Philippines versus the overall perception for the year. It is important to take measure of the years of significant offshore back-office processing outsourcing services activity in the country. In the Philippines, PITON’s quarterly surveys—in which we query our own global advisors and the local industry’s offshore back-office processing outsourcing service providers Philippines—present insights into sector trends and projections. Each quarter, 70 to 100 senior advisors and nearly 20 leading offshore back-office processing outsourcing service providers Philippines answer our questions on the offshore back-office processing outsourcing services market. This year’s headline in the Philippines is “stability”—offshore back-office processing outsourcing services demand, pricing, offshore back-office processing outsourcing service providers Philippines’ capacity, and sales cycles did not vary significantly from quarter to quarter.

Strong offshore back-office processing outsourcing services demand. Offshore back-office processing outsourcing services market demand in the Philippines was strong. Although its strength dropped from torrid in the first quarter, it does nothing to diminish clients’ continuing desire to invest in offshore back-office processing outsourcing service providers Philippines. A majority of PITON ’s advisors cited increased levels of offshore back-office processing outsourcing services Philippines market growth (versus declining) in each quarter, with their citations ranging from 83 percent observing growth in the first quarter to 59 percent citing growth in the fourth quarter. In comparison, offshore back-office processing outsourcing service providers Philippines cited market growth of 67 to 93 percent, depending on the quarter polled.

Offshore HRO and FAO back-office processing outsourcing services lead demand in the Philippines. Last year, HRO was the strongest back-office processing outsourcing services area. Truth is, HRO has claimed the top spot every single quarter, ranging from 26 to 29 percent of cumulative advisor citations, followed by FAO, which ranged from 18 to 23 percent of advisor citations. Between 66 and 80 percent of total advisors polled each quarter stated that benefits and payroll were the strongest HR functional process areas of offshore back-office processing outsourcing service providers Philippines in last year’s surveys. Offshore back-office processing outsourcing service providers Philippines’ responses validated the same findings. Within FAO, accounts payable was again cited as the leading sub-process by an overwhelming number of advisors (80 to 93 percent).

Accounts receivable/credit and collections was the second strongest FAO demand, cited by 59 to 79 percent of our advisors; travel and entertainment (51 to 56 percent) was third. FAO offshore back-office processing outsourcing service providers in the Philippines confirmed these results. Sales Cycle and Time-to-Contract of offshore back-office processing outsourcing service providers Philippines. Last year, the sales cycle was also very stable quarter to quarter, as declared by 64 to 74 percent of PITON advisors. A majority of offshore back-office processing outsourcing service providers Philippines—71 to 82 percent—also cited a stable sales cycle. In our experience, the average cycle is 9 to 12 months. The time-to-contract is typically four to five months; this remained stable last year despite heightened noise from Wall Street analysts worried about contract signings.

Preferred offshore back-office processing outsourcing service providers Philippines Delivery Models. There is much debate over different back-office processing outsourcing services delivery models in the Philippines. While the concept of transformation is compelling to buyers, there is uncertainty over what it means, and how and when back-office processing outsourcing services Philippines can enable its achievement. In the previous year, the preferred back-office processing outsourcing services delivery model was “outsource and transform,” according to PITON advisors in the Philippines. The traditional “transform first and outsource later,” and the more incremental “outsource and continuous process improvement” models were not deployed as frequently.

Pricing. Throughout the previous year, back-office processing outsourcing services pricing was cited as stable by 43 to 68 percent of PITON ’s Philippines advisors in each quarter. The majority of offshore back-office processing outsourcing service providers Philippines also stated that pricing remained steady for three of four quarters in 2005. This pricing equilibrium between buyers and offshore back-office processing outsourcing service providers is healthy for the Philippines industry as a whole, with neither side currently gaining undue advantage over the other party.

Multi-shore. Advisors stated that the offshore and multi-shore component of back-office processing outsourcing service remained strong and stable inside and outside of the Philippines, with 48 to 55 percent per quarter citing steady offshore back-office processing outsourcing service. Offshore back-office processing outsourcing service providers Philippines, on the other hand, claimed that offshoring was strong and rising practically every quarter, with citations ranging from 48 to 69 percent per quarter. Most of the back-office processing outsourcing services work in the Philippines last year was performed by multi-national offshore back-office processing outsourcing service providers Philippines, not necessarily pure offshore providers.

Contract Profitability. Finally, the health of the Philippine industry appears to be stabilizing. Consolidation among offshore back-office processing outsourcing service providers Philippines has helped. In 2006, offshore back-office processing outsourcing service providers Philippines cited improved profitability, reaching it in 12 to 24 months with returns on invested capital of 10 to 20 percent. This bodes well for a prosperous and productive 2006 as back-office processing outsourcing services Philippines continue to grow and reach new heights.

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