Last week, Business Processing Association of the Philippines (BPAP) president and CEO Benedict Hernandez announced that the IT-BPO industry grew 24% to US$11 billion in revenues in 2011, maintaining its eight percent share of the global market despite the emergence of more than 100 competing centers worldwide in recent years. Perhaps reflecting a gradual shift to non-voice, complex services, employment grew slightly slower at 22%.
Some 640,000 Filipinos were employed in the industry at the end of 2011.
Acknowledging the contribution of the industry to the Philippine economy and job creation while seeking to sustain and extend that contribution, Philippine president Benigno S. Aquino III and his Information and Communications Technology Office deputy executive director Alejandro Melchor in recent months and weeks have announced a series of government grants to the industry. These funds are administered by BPAP.
Some P800 million in grants will go to remedial training (P450 million), strategic training and educational initiatives, brand visibility marketing to prospective employees and the individuals who influence them, and brand visibility internationally to increase awareness and recall of the Philippines for a variety of IT-BPO services (P350 million in 2012). Mr. Melchor says the government will provide P500 per annum in funding to support the industry from next year.
Quarterly surveys conducted by the BPAP and Outsource2Philippines reveal more than 20 outsourcing segments being served by the Philippine IT-BPO industry. For reporting purposes, BPAP aggregates these sectors into seven categories: Voice BPO, Non-voice BPO/KPO, ITO, Health Information Management and Care, Engineering, Animation, and Game Development.
Revenue for each of these segments grew fairly to very significantly last year, save one. That was Animation, which has struggled somewhat in recent years as a result of unrelenting competition, the introduction of new technologies, and shift in demand. Still, the industry employs almost 9,000 Filipinos and generated $128 million in revenue last year, a fall of 10% from 2010.
On the other hand ITO—which encompasses a wide range of IT services—grew a whopping 37% to almost $1 billion in revenue and almost 50,000 employees. Growth in ITO is particularly notable because the Philippines’ competitors for these services—particularly India—has worked diligently to cast the Philippines as a capable voice services provider that lacks the maturity to provide ITO services.
These results show that that while India may have been somewhat successful in perpetuating the myth of the Philippines as a solid voice services provider, the reality is that an increasing number of firms leveraging ITO are turning to the Philippines. Anecdotal evidence suggests that trend is continuing to accelerate and that voice services providers are expanding into this segment as a result of growing demand.
Of course, the industry continues to be dominated by voice services, which posted revenues of $7.4 billion last year, a 21 percent increase. The sector employed close to 420,000 Filipinos. Although this segment is very large, it’s worth noting that it continues to grow as if it were in the early stages of development. Voice has been expanding for more than a decade, overtaking India in both revenues and employment in 2010.
The biggest growth last year was seen in health information management and care. According to BPAP, that sector grew 172% to $277 million in revenue and almost 25,000 full-time employees (FTE). BPAP senior executive director Gillian Virata cautions, however, that the increase is in part due to the decision to reclassify some non-voice BPO/KPO services to the health segment. But by any measure, 2011 was a breakout year for the health segment.
Non-voice also posted impressive numbers, growing 24% to more than P2 billion in revenues and almost 130,000 employees. Services in this segment also vary dramatically, from finance and accounting processes to financial risk analysis. Like ITO, competitors and some analysts have questioned the Philippines’ capability to provide these services. Last year’s impressive growth seems to show that there is little, if any, reason to do so.
Engineering services grew a modest five percent to $172 million in 2011, and employed over 9,000 Filipinos. What is notable about this industry is its shift from providing relatively low-value engineering drawings to high-value project conceptualization and management. Although this sector shuns visibility anecdotal evidence once again tells me that Filipino engineers are creating and managing very large engineering projects all over the world. From here.
Finally, game development grew a respectable 13% last year to $8 million in revenues and 1,400 FTEs. The sector is highly competitive, but the Philippine industry is making some significant contributions. WORDTROTTER—whose creators call, “The World’s Coolest Word Game,” claims to be the first Filipino video game on Facebook. More accurately, it was the first Filipino-owned game on Facebook. Filipino developers create dozens of Facebook games annually for clients.
IT-BPO isn’t the Philippines’ only economic leg, as some economists have said recently, and indeed it shouldn’t be. But it’s a healthy leg. One for other industries to emulate.
(Michael Alan Hamlin is the managing director of TeamAsia and a Manila-based author. His latest book is High Visibility: Transforming Your Personal and Professional Brand. Write him at firstname.lastname@example.org and follow him on Twitter, Facebook and LinkedIn. Copyright © 2012 Michael Alan Hamlin. All Rights Reserved.)