If you’re a business owner planning to outsource, you may want to explore more about the BPO industry statistics in the Philippines. This will help you make informed decisions about whether or not to outsource certain processes, and if so, which service provider to choose.
When we talk about top outsourcing destinations, the Philippines often emerges as a top choice for many foreign companies. But there’s more to the Philippines as the world’s BPO capital. Get to know more about the Philippine BPO industry and the challenges it faces today.
Philippine BPO Industry Statistics: What Does the Number Say?
Here are some BPO industry statistics you should know about the Philippines:
- The Philippines is the world's top provider of business process outsourcing (BPO) services. It is the preferred outsourcing destination for voice-related services such as call center services and helpdesk support among American companies.
- The BPO industry in the Philippines currently employs around 1.3 million people in over 1,000 BPO companies since 2019.
- BPO industry statistics revealed that the Philippine IT-BPM industry's revenue increased by 10.6 percent in 2021, while headcount increased by 9.1 percent.
- The Philippine BPO industry accounts for around 8% of the country's gross domestic product (GDP).
- The Philippines has a large pool of English-speaking talent. According to BPO industry statistics, the Philippines ranks 14th in the world for English proficiency, with a rate of 92.5 percent. It ranks second on the EF English Proficiency Index of 24 Asian countries in 2020.
- The BPO industry in the Philippines is expected to continue growing in the coming years, driven by the increasing demand for outsourced services and the country's favorable business environment.
- The government of the Philippines has been actively promoting the BPO industry as a key driver of economic growth and has implemented policies and programs to support the sector's development.
- The BPO industry in the Philippines is expected to create more than one million new jobs by 2030.
What companies failed at outsourcing?
Outsourcing can be an efficient way for a company to meet labor demands while keeping costs down, but it can also fail when it is implemented without careful consideration. According to the "Barometer of Global Outsourcing," 20% to 25% of outsourcing contracts endure no more than two years, and 50% of them last no more than five.
Let's take a look at five of the worst outsourcing failures to see what you can learn from them.
IBM – Queensland Disaster
In 2007, IBM was contracted by Queensland to create a payroll application for the state's health department. However, the project faced numerous technical issues, causing the cost to increase from the original $6 million estimate to $27 million. The project continued to struggle for several years and the payroll platform did not function correctly, leading to thousands of employees not being paid or being overpaid.
The final cost of the project was $1.2 billion, a 16,000% increase from the original estimate. As a result, Queensland banned IBM from working on future government projects and sued the company to recoup its losses. The incident showed that even well-known outsourcing vendors can have problems with their projects.
The State of Texas and IBM
In 2006, IBM entered into a seven-year contract with the State of Texas worth $863 million to consolidate the state government's data centers and provide other services. The State had hoped to save money with the IT system, but the project quickly became backlogged and by 2010, only 12% of the projects had been completed. IBM eventually had to pay the State and was replaced by Xerox and Capgemini. This incident was a setback for IBM's reputation in the technology industry.
Accenture and Hertz
Accenture, a well-known company that develops websites and mobile apps, was sued by Hertz in 2019 for its failures in an outsourcing project in 2017. In the project, Accenture was hired by Hertz to develop a technology platform, but ignored some of the platform's scalability requirements and made it only applicable to a specific region, making it impossible for the company to use it outside of North America. This incident damaged Accenture's reputation.
Virgin Airlines and Navitaire
In September 2010, Virgin Airlines experienced a 24-hour shutdown of all its airport operations due to errors in its internet booking, reservation, check-in, and boarding system developed by Navitaire. The incident was not the first time the airline's operating system had experienced issues in the previous three months. Navitaire, the SaaS vendor, was unable to fix the error as required in the contract and did not switch to backup hardware, leading to a significant loss of finance, customers, and reputation for Virgin Airlines.
Royal bank of Scotland and their IT vendor
In 2012, the Royal Bank of Scotland and its IT vendor experienced an outsourcing failure that had significant consequences. When the bank's software system, which had been updated by the IT vendor, crashed, it caused disruptions and delays for millions of customers.
The issues persisted for nearly a week, and even the bank itself was unable to display accounts due to the failure. As a result, many customers lost trust in the bank and moved their businesses to other banks once the issues were resolved. The incident highlights the importance of money and the trust that customers place in financial institutions, particularly when it comes to handling their finances.
Why is outsourcing declining?
Due to fluctuations in demand and restrictions on the mobility of workers during the pandemic, the BPO industry expected its annual growth to decline to 9% until 2022. Here are other reasons why outsourcing may be declining in recent years:
Increased labor costs
In some countries, the cost of labor has increased significantly, making it less cost-effective to outsource work to these locations.
Changes in government policies
Some governments have implemented policies that make it more difficult or costly for companies to outsource work to other countries.
In some countries, there may be political instability or unrest that makes it risky for companies to outsource work there.
Some companies may be concerned about the quality of work produced by outsourced contractors, which could lead to a decline in outsourcing.
Communication can be a challenge when working with contractors in different countries, which can lead to misunderstandings and delays in projects.
Cultural differences can also be a challenge when working with outsourced contractors, as it can be difficult to understand and accommodate different work styles and expectations.
Data security concerns
Companies may be concerned about the security of their data when it is handled by contractors in other countries.
The rise of automation and technology
The increasing use of automation and technology has made it possible for companies to handle certain tasks in-house, which may reduce the need to outsource work.
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