There are numerous reasons why companies outsource to the Philippines; from cost savings to quality work, outsourcing helps companies gain a competitive edge in their respective industries. According to the IT and Business Process Association of the Philippines (IBPAP), the Philippine Business Process Outsourcing (BPO) industry generated a total revenue of $32.5 billion in 2022, an increase of 10.3% compared to the previous year. The growth was driven by various sectors such as financial services, healthcare, retail, technology, and telecommunication, which exceeded the government’s expectations. 

Looking ahead, IBPAP predicts that the industry may witness a workforce increase to 1.7 million and revenue growth to $35.9 billion in 2023, representing a rise of 8.3% and 10.5%, respectively. But what are the reasons behind the BPO success? Why do companies continue to outsource to the Philippines? Based on the most recent surveys and latest news, this article highlights the top 5 reasons why companies choose to outsource to the Philippines in 2023.

5 Top Reasons Companies Outsource to the Philippines

1. Cost Savings

Companies outsource to the Philippines because the country offers a favorable cost structure, with competitive wages and lower operating costs compared to other outsourcing destinations such as India and China. In a recent survey by Deloitte, 57% of executives outsource to cut costs, typically through staff augmentation. According to Andy Schachtel, Ceo and President of Sourcefit, staff augmentation is a great way for companies to ensure more business continuity and lower costs. 

In addition, outsourcing helps companies expand into new markets without incurring the high costs associated with setting up a physical presence. By partnering with a local outsourcing provider, companies can benefit from the provider’s existing infrastructure, resources, and expertise, thereby minimizing the need for upfront investments in new facilities, equipment, and personnel.

Outsourcing also helps companies reduce costs by tapping into economies of scale. By outsourcing to a country like the Philippines, companies can access a large pool of skilled professionals who can work on multiple projects simultaneously. This approach can help reduce labor costs while maintaining or even improving quality standards. Additionally, outsourcing helps optimize processes, streamline operations, and improve overall efficiency, thereby reducing costs and improving profitability.

Cost-cutting is one of the top four major reasons for companies to outsource to the Philippines. However, according to Deloitte’s survey, it is not as significant as gaining access to new capabilities, adapting to changes in business and operating models, and staying abreast of advancements in technology and regulatory requirements.

2. Access to New Capabilities and Skills

One of the biggest advantages of outsourcing to the Philippines is access to a highly skilled workforce. The country is home to a large pool of talented professionals who are fluent in English. Additionally, the Philippine government has made significant investments in education and training programs to ensure that its workforce is equipped with the skills needed to compete in the global marketplace. As a result, the Filipino workforce is well-versed in a wide range of industries and technologies.

For instance, the IT and Business Process Association of the Philippines (IBPAP) recently partnered with government agencies to enhance the skills of workers in the IBPAP information technology-business process management (IT-BPM) industry. According to Jack Madrid, the CEO and President of IBPAP, the industry will continue to support the government’s talent development agenda through various initiatives that are already underway.

Some of the IBPAP plans include to assist the government by implementing a national talent upskilling program, enhancing the capacity for specialized degree courses, introducing early-stage interventions to improve proficiency and employability, and creating an online talent hub for IT-BPM services. These initiatives will continue to cement the country’s position as a leading outsourcing destination.

3. Advancements in Technology

The latest report from IT giant Infosys, titled “Future of Work 2023”, highlights that a transition to a flexible, diverse, and digital work model could bring about an increase of 7.7 percentage points in profit growth and 6.7 percentage points in revenue growth. The study also predicts that companies will focus on investing in process automation (PA) and upgrading digital tools in the next two years, leading to an impressive profit of approximately $123 billion. The Philippines has become an ideal outsourcing destination for companies seeking to leverage these technological advancements since the government’s continuous support has enabled the digital sector of the country to flourish. The digital transformation program, which was initiated during the Duterte Administration, is still going strong, as the Marcos Administration has expressed its commitment to carrying forward the program.

This digital transformation program aims to improve the country’s ICT infrastructure through various initiatives such as setting up a cloud data center, developing software to enhance business processes, turning local government units into smart cities, enhancing cybersecurity measures, and implementing a national broadband plan to improve internet and mobile services. 

The Duterte Administration believed that improving ICT would enhance the quality of life of Filipinos and address business challenges. To support this program, former President Duterte signed the Ease of Doing Business and Efficient Government Service Delivery Act and allowed up to 100% foreign ownership of public services, including telecommunications. The Philippines’ growing middle class and young population are also key drivers of IT demand, resulting in increased spending on technology, particularly premium brands. Google has also played a key role in promoting digital transformation in the country through its programs and products.

Finally, with one of the fastest internet speeds in Southeast Asia, the Philippines offers a smooth and uninterrupted communication experience, enabling companies to effortlessly communicate with their offshore teams and carry out business operations. In the January 2023 Ookla Speedtest Global Index, the Philippines ranked 82nd of 142 countries in mobile internet speed with 24.59Mbps and 41st of 181 countries with 88.13 Mbps. Adding to this, Elon Musk’s SpaceX announced its satellite internet service Starlink’s availability in the country. This high-speed, low-latency broadband internet service could signify an impact on IT-based industries such as IT-BPO and IT-BPM by providing high-quality internet connectivity.

4. The need to Adapt to Changes in Business and Operating Models

According to Deloitte’s survey, the way in which companies obtain resources is evolving and there are now three distinct types of third-party delivery models.

Traditional Outsourcing 

In this model, companies outsource certain tasks or functions to third-party service providers in order to reduce costs. This model is often used for simple, repetitive tasks that can be easily automated or outsourced. Examples of these tasks include data entry, data processing, and customer service. These tasks can be outsourced to third-party service providers in the Philippines who have the necessary infrastructure and expertise to handle them efficiently.

Managed Services 

 This model is focused on providing services based on specific performance metrics and service levels. Companies may choose to outsource critical functions or tasks to third-party service providers in the Philippines who can provide specialized expertise and high-quality service. Examples of these services may include IT support, HR services, and finance and accounting services. The service provider in the Philippines would be responsible for delivering the agreed-upon outcomes and would be compensated based on their performance.

Operate Services 

This model is an emerging delivery model that is highly collaborative and focused on outcomes. It is powered by technology and skilled workers who work closely with the client to deliver high-quality results. This model is often used for complex functions or tasks that require specialized skills and expertise. The Philippines has a large pool of skilled workers who can provide the high level of collaboration and expertise required for Operate Services, as well as the necessary infrastructure to support this type of work. Examples of Operate Services that can be outsourced to the Philippines include software development, digital marketing, and design services. 

5. Keeping Up to Date with Changes in Regulatory Requirements

Another reason why companies outsource to the Philippines relies on the increasing need of keeping up to date with constant changes in regulatory requirements.  Third-party providers in the Philippines are familiar with the regulatory requirements of various countries, including the US and Europe. In addition, the country has a large pool of skilled workers with expertise in regulatory affairs, including professionals with scientific, technical, and legal backgrounds. As a result, these companies not only help their customers stay up to date with the latest legislation, guidelines, and other regulatory information, they also offer a wide range of regulatory affairs services to their clients, including strategic regulatory advice, regulatory maintenance, and lifecycle support. 

According to Businesswire’s 2022-2027 Report, regulations are examined in various aspects of business, such as sales and marketing practices, government reporting of drug prices, privacy controls, and clinical practice. These regulatory changes are considered one of the top three disruptive business trends facing pharmaceutical and life sciences companies. Major pharmaceutical companies view these changes as the biggest threat to their future growth potential.

Conclusion

In conclusion, outsourcing to the Philippines offers numerous benefits to companies and as a result, the country has emerged as a leading outsourcing destination. Looking ahead, the BPO industry is expected to witness further growth in 2023, with a predicted workforce increase and a steady revenue growth. With a highly skilled and fluent English-speaking workforce, favorable cost structures, and a government committed to supporting technological advancements, the Philippines will continue to cement its position as a top outsourcing destination.

To learn more about outsourcing, you can read our The Future of Global Outsourcing: Trends and Predictions for 2023 article. We invite you to follow us on social media and to visit our website to learn more about our services.

About Us: Sourcefit is a widely recognized US-managed business process outsourcing company based in Manila, Philippines. We proudly serve over 100 clients with a workforce of more than 1,300 employees. Our global centers can serve multiple markets, and our staff is highly proficient in English, Spanish, French, and Portuguese. Whether you need a few or many employees, we can help you achieve your business goals and build high-quality offshore teams.

Latest Awards

Sourcefit’s commitment to excellence has been recognized through numerous industry awards and certifications.

We recently received the Fortress Cyber Security Award from the Business Intelligence Group. Sourcefit was also honored with the prestigious recognition of Best Outsourcing Solutions Provider in the Philippines during the 2023 Business Excellence Awards.

Other awards include: FT ranking of 500 high-growth Asia-Pacific, The Marketing Excellence Awards, Inquirer Growth Champion,  HR Asia Awards, among others.

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