BPO and outsourcing are among the latest buzzwords following a surge in companies moving their operations abroad. When the pandemic happened, companies started outsourcing and hiring BPO companies, particularly in low-cost countries.
However, BPO and outsourcing have always been used interchangeably by a vast majority of business owners. Some would even think they are synonymous. Without a clear understanding of these terms, other businesses often choose the wrong strategy for optimizing their operations.
In this blog article, we’ll shed light on the difference between BPO and outsourcing and give you insights into the Philippine BPO industry.
What is the difference between BPO and outsourcing?
BPO and outsourcing both involve hiring a third-party company to handle business functions. The main difference between the two is the type of work that is being outsourced.
On the one hand, BPO refers to outsourcing non-core business operations, such as phone support or data entry. On the other hand, outsourcing pertains to subcontracting service providers to perform any business function, including core business operations like manufacturing or product development.
To sum up, BPO is simply a type of outsourcing that focuses more on non-core functions that are not directly related to a company’s main products or services.
What is the main purpose of outsourcing?
Here are some common reasons why companies choose to outsource certain business functions:
- To reduce costs: Outsourcing allows companies to reduce employment costs by hiring external employees with no recurring monthly benefits.
- To improve efficiency: Outsourcing improves a company’s operational efficiency by streamlining its operations with 100% quality assurance.
- To access specialized expertise: Outsourcing enables companies to access specialized skills and expertise that are not available in their organization.
- To enhance scalability: Outsourcing provides companies with the flexibility to quickly and easily adjust their capacity in response to changes in demand or market conditions.
- To mitigate risk: Outsourcing helps companies mitigate operational risks such as costly disruptions by transferring certain business functions to a third-party service provider.
What is a good example of outsourcing?
Online retailers are among business owners that can benefit from outsourcing certain business functions. For example, an online retailer that sells clothing products may choose to outsource his order taking answering service to an expert outsourcing provider.
The service provider would be responsible for receiving and processing orders, answering general product inquiries, and handling product cancellations and refunds. This allows the online retailer to focus on other aspects of his operations, such as sales and marketing, while the service provider manages his customer support.
In the long run, it helps the online retailer reduce costs, improve efficiency, and provide better customer service.
Is BPO good in the Philippines?
The BPO industry in the Philippines continues to grow with no signs of slowing down. In fact, it holds an estimated 15% of the global BPO market and is expected to grow by 8-10% annually in the next five years.
Based on the latest Philippine Statistics Authority (PSA) data, the Philippines has around 851 registered BPO companies, 788 of which are call centers. The BPO industry currently employs over 1.3 million people and is predicted to generate over $29 billion in revenue by 2022.
The IT-BPM (Information Technology and Business Process Management) sector, composed of customer service, technical support, and KPO (knowledge process outsourcing), is the country’s fastest-growing industry.
According to the IT and Business Process Association of the Philippines (IBPAP), the IT-BPM sector has the potential to see an annual increase in headcount of 5.0% and revenue growth of 5.5% between 2021 and 2022.
The sector's growth is attributed to the build-up of demand from foreign investors, increased confidence in flexible work arrangements, and the rise of promising sub-sectors such as the retail industry, financial technology, and healthcare.
Why is the Philippines best for BPO?
The Philippines has been among the top outsourcing destinations to many multinational companies, including but not limited to Google, Microsoft, and Amazon. Here are some of the major reasons why it continues to attract foreign investors:
A large pool of skilled workers
Every year, the country produces over a million university graduates, many of whom enter the BPO industry. It is estimated that more than 1.6 million students will graduate from 200 state-run higher education institutions by 2022.
Competitive salary rates
The Philippines’ average salary of P15,200 was ranked as among the lowest in 110 countries surveyed by Picodi. This is the reason why companies in the United States outsource to the Philippines to cut on labor costs.
Superior English Proficiency
The Philippines is known for having a high proficiency in English, ranking 14th globally with a 92.5% proficiency rate. In a 2020 English proficiency index of 24 Asian countries, it ranked second.
Adaptability to different time zones
Filipino agents can work for their clients on night shifts and even during weekends and holidays. They can provide after-hours customer support to businesses that want to operate 24/7.
Strong government support
The Philippine government is committed to supporting technical education to prepare future employees for the BPO industry. To further this goal and improve the workforce for IT-BPO positions, the government has established a partnership between the Technical Education and Skills Development Authority (TESDA) and the IBPAP.
Strong affinity with Western culture
The Philippines is known for having a strong affinity with Western culture, particularly in terms of cultural influences such as American cuisine, sports, music, and movies. It is the only country in Asia with such a close connection to the West.
Robust data security policies
The Philippines has passed favorable policies to enhance the data security of its IT-BPO industry. One example is the “Data Privacy Act of 2012”, which protects information from illegal access, bringing the country’s security practices in line with international standards.
Which countries are top in BPO?
Each year, Tholons publishes a ranking of the top outsourcing countries based on factors such as digital competitiveness, population, total workforce, and literacy rate. Here are the top outsourcing players that are shaping the future of the global BPO industry:
Philippines
The country has been dubbed the world’s call center capital for over a decade. It ranks first in the world as an outsourcing destination for voice-related services.
India
Known as the world leader in software outsourcing, India has the biggest number of technology specialists of any country in the world.
China
To date, China has become a manufacturing hub to top global companies due to its robust business environment, lack of regulatory compliance, minimal taxes, and cheap labor.
Poland
With one of the biggest markets for outsourcing services in Eastern Europe, this country also has specialized expertise in finance and accounting that is more cost-effective than its Western counterparts.
Mexico
Mexico and the US share the same time zone, meaning they have the same work hours. This geographic proximity allows US companies to outsource administrative functions such as human resource services at a low cost.
Why should you outsource to the Philippines?
Companies that have successfully outsourced to the Philippines saw faster ROI from their outsourcing initiatives. Not only did they reduce their operational costs by up to 70%, but they also increased their efficiency and freed up internal resources resulting in higher revenue growth. If you want to get your outsourcing journey off to a good start, consider partnering with us!
ManilaPros is a full-service company offering five-star customer care for retailers. We have been a reliable service provider to global companies in the retail space. By partnering with us, you will get trained customer support Pros that can communicate efficiently using your brand's voice, values, and goals.
Contact us today and start building the perfect extension of your team in the Philippines!
