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Studies
up the Kazoo!
By Michael Alan Hamlin
October 14, 2002
The Philippines is under a microscope
these days. No, I'm not feeling frisky and I'm not referring to
the Abu Sayyaf, NPA, or the kidnapping gangs. Instead, I'm referring
to the number of research papers floating around town that exclusively
or as part of a group of nations examine the Philippines' suitability
for e-commerce and its attractiveness as an outsourcing center for
software development and the provision of e-services.
Among the papers are two presented
in the past two weeks. The Department of Trade & Industry (DTI)
hosted a launch and summary of two Gartner Research reports examining
"Offshore Outsourcing Opportunities in the Philippines."
The Gartner reports, underwritten by the Makati Business Club with
the support of DTI and its Bureau of Investment, present an encouraging
picture of the prospects for the Philippines to become an important
center for outsourced software and e-services. If you don't already
know, e-services refers to such things as call centers, medical
transcription, back office business processing (BPO), animation,
engineering, and other IT-enabled services.
IT-enables services of course refers
to those things we can do from the Philippines for clients and clients'
customers who reside and work in other countries. The Gartner researchers,
however, seem to feel that most of the opportunity for the country
lies in call centers and BPO services, at least in terms of employment
generation and revenue flows. The report concludes that "within
the next five years, the Philippine advantage will be clear to U.S.
buyers of specific contact centers and BPO services."
The basis for Gartner's optimism
is principally the Philippines' talent pool, but the report's authors
warn that having a strong IT resource isn't enough on its own. "How
the Philippines responds during the next few years to changing geopolitical
events, emerging competition, and the need for more brand equity
will determine whether it capitalizes on its talent pool of low-cost,
knowledge-based workers for business and IT sourcing," the
report cautions.
A report funded by Microsoft and
undertaken by US consultants Laura Sallstrom and Robert Damuth provides
a number of recommendations for how to respond to the challenges
identified in the Gartner reports. Foremost among them is getting
tough on software piracy, with the implication that local developers
won't prosper if users are stealing their work. In fact, discussion
groups, such as the popular DigitalFilipinas community, are concerned
that they don't get credit or remuneration for much their work because
it is ripped off by other Filipinos. Recent threads have been directed
toward columnists and politicians who suggest that developing economies
should be allowed to legally pirate the creations of others because
locals can't afford them.
The problem with such short-sighted
perspective, in the view of local programmers themselves, is that
they are among the victims. So a country that winds up stealing
intellectual property not only steals from others, it steals from
itself, in sort of a figurative act of self emollition. But it's
happening everywhere. Piracy in Singapore is 50 percent, according
to the report, and ranges from around 60 to 90 percent in most of
the rest of Southeast Asia. Among Southeast Asian developing countries,
the Philippines had the lowest piracy rate of 63 percent.
The report offers a number of other
recommendations as well, as do reports from the Giga Information
Group and Software Outsourcing Research. Like Gartner's, recent
reports by these organizations point to the Philippines as one of
the world's top four offshore outsourcing destinations for application
development and call center services. And Giga has said the country
is the world's best offshore alternative to India and has the potential
of becoming the call center hub of Asia. The Meta Group already
ranks the Philippines overall ahead of India in its Global Technology
Index.
The Philippines also figures prominently
in a study published by The Center for International Studies at
the University of Washington entitled "Obstacles to Developing
an Offshore IT-Enabled Services Industry in Asia: The View from
the U.S." The Asia Foundation in cooperation with DigitalPhilippines
recently published an update on e-commerce in the Philippines (e-services
is also e-commerce) called "SMEs and e-Commerce in Three Philippine
Cities." And local institutions are also in on the action.
The AIM Policy Center at the Asian Institute of Management also
has a study on contact center development in the country. I'm sure
there are others, as well.
On one hand, all these studies should
be reassuring. After all, they suggest that the Philippines does
matter, despite general assumptions to the contrary, to the global
marketplace in a positive, even meaningful way. On the other hand,
however, it's easy to get the sense that plenty of study and not
much else is happening in at least two respects. First, government
interest in the ICT sector in general is waning just when the opportunity
is greatest. Tough economic conditions mean that multinationals
and large corporations in developed economies are looking for ways
to lower costs and increase productivity. Outsourcing is a great
way to do that.
Second, it's important to get this
information pushed out to the market. Since government isn't, or
can't due to lack of funds, developing and implementing an appropriate
country branding strategy, private groups are taking the task on.
Most recently, industry players have been meeting to establish Outsource
Philippines, a consortium of software and e-services providers.
Good thing. We've got studies up
the kazoo. Now, it's time to do something about them.
(Michael Alan Hamlin is the managing
director of consultancy TeamAsia and the author of three books on
Asian economies and companies. His latest book is Marketing Asian
Places, of which he is a co-author (Wiley, 2001). He can be reached
at mahamlin@teamasia.com.).
Copyright © 2002 Michael Alan
Hamlin. All Rights Reserved.
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