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IT-BPO: Thanks, Mr. President, and there’s more to do

“Mr. President, we have three main messages for you,” Business Processing Association of the Philippines (BPAP) chairman Alfredo Ayala said Tuesday afternoon in remarks welcoming Philippine President Benigo S. Aquino III to the International Outsourcing Summit (IOS). “Thank you, so far so good, and what lies ahead.” 2012 has been another banner year for the Philippine IT-BPO industry, and the industry is increasingly well positioned to address the inevitable challenges ahead, in significant part because of an effective partnership with government.

During the three-day IOS—the fourth in a series of annual meetings—BPAP officials announced that industry revenues are expected to reach US$13.4 billion this year, a 22% increase from $11 billion in 2011. Direct employment will increase to more than 770,000, up from 638,000 at the end of last year. Next year, IT-BPO revenues—including voice and non-voice services—is projected to reach $16 billion and the industry to employ 926,000 Filipinos.

That’s about one tenth of the number of Filipinos who work overseas and send about $20 billion back home to relatives every year. In the first half of 2012, overseas Filipino workers (OFWs) remitted $11.3 billion. IT-BPO is a much more efficient generator of revenues than exporting people, and by 2016 will earn up to $25 billion a year and employ 1.3 million Filipinos.

Despite its size and rapid growth, the IT-BPO industry can employ more, enabling would-be OFWs to remain home with their families while pursuing rewarding careers. But nine out of 10 Filipinos who apply for jobs in the industry fail to receive an offer because they lack the necessary skills. Mr. Ayala was referring to progress in addressing that skills gap when he said, “Thank you.” to Mr. Aquino.

“We have made significant progress,” Mr. Ayala said. “With an unprecedented P668 million in (support) funding,” primarily from the Technical Education and Skills Development Authority (TESDA) but also the Commission on Higher Education, the Department (CHEd) of Science and Technology’s Information Communications Technology Office (DOST-ICTO), and other agencies. Remedial training funded by TESDA will benefit 100,000 Filipinos, and 70% of them will receive and accept offers of employment in the IT-BPO industry.

As a result of these and other initiatives, Mr. Ayala believes cooperation between government and the private sector has produced a situation he characterizes as, “So far, so good.” He cited the Philippine industry’s status as the number one voice services provider in the world, its capacity for reliably generating tens of thousands of new jobs every year, and the increasing value of its export revenues, which for the years 2012-2016 should reach a cumulative $96 billion.

When the industry looks ahead, despite these gains, executives point to some crucial and persistent concerns, however. The talent gap continues to loom large. Twenty-three percent of IT-BPO executives responding to a late 2009 survey said their number one concern was the tight labor market. In a similar survey conducted in August by BPAP and TeamAsia that number had jumped to 49%. (Disclosure: I am managing director of TeamAsia, and BPAP is a client of the firm.)

After the talent gap, industry executives said their second priority concern was susceptibility to calamity. Both surveys followed periods of severe inclement weather, but the most recent survey showed a sharp increase in this concern given the widespread flooding and disruption in business operations in general. Increasing competition from other emerging services providers is a competitive threat.

“These concerns boil down to three key themes,” Mr. Ayala said, “Talent, risk, and cost, which are what we and government need to tackle together.” As the reach of government-funded training programs is extended, Mr. Ayala believes greater progress in narrowing the talent gap will result. New service management curricula in colleges and universities will, too, especially in addressing shortfalls in middle management. A DOST-ICTO initiative to promote the industry in “Next Wave CitiesTM” is paying off.

Mr. Ayala also said that IT-BPO industry benefited from initiatives by Mr. Aquino’s administration to “reduce corruption at both the national level and the local level.” He welcomed the signing into law of the Data Privacy Act and the Anti-Cybercrime Act, which are critical to assuring industry clients that their data is safe and that laws to enforce data security are in place. Separately, BPAP has also said that certain provisions of these laws should be revised.

Appreciation of the peso has put pressure on industry margins, but Mr. Ayala told Mr. Aquino that the industry realizes exchange rates are set by the market. Instead, he asked for support in addressing high power rates and maintaining investment incentives. If these things are done, Mr. Ayala said, “We are even more confident now that there are many opportunities to move up the value chain and aggressively increase market share.” And employment.

(Michael Alan Hamlin is the managing director of TeamAsia and a Manila-based author and commentator. His latest book is High Visibility: Transforming Your Personal and Professional Brand. Write him at mahamlin@teamasia.com and follow him on TwitterFacebook and LinkedIn. Copyright © 2012 Michael Alan Hamlin. All Rights Reserved.)