integrating global processes2 2.5 3 3.5 4 voice clarity accent neutrality fluency grammar 3.96 2.71...
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INTEGRATING GLOBAL PROCESSES THE PHILIPPINE OUTSOURCING ADVANTAGE
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Leading the Outsourcing Evolution
• Established leader for voice services
• 30% share of U.S. and 15-20% of APAC
• $5.70 billion revenues in 2010, higher than
India’s projected $5.58 billion
VOICE
• Credible 10% share that is rapidly growing
• Large industry-specific opportunity (e.g. BFSI, healthcare, media, HR, KPO
• Evolving value-propositions - tools, process improvement, end-to-end accountability
Non-voice
• Highly penetrated applications market
• Emerging opportunities to penetrate ASEAN, innovate for the U.S.
• Third largest pool of engineers after India and China in APAC
IT/ESO
Source: Everest analysis
Philippine IT-BPO industry size2006–2009; US$ billion
3.2
4.8
6.17.2
9.0
2006 2007 2008 2009 2010E
# FTEs
(~„000)240 300 370 440 530
Global
share15% 6% 6% 7% 8%
FTEs = full-time employees, YoY = year on year
1 Philippines IT-BPO market as percentage of global offshore
services market, in revenue terms
Sources: BPAP; Everest analysis
The Philippine IT & BPO Industry
~50% ~26%~19% ~25%
Courtesy of the Business Processing Association of the Philippines
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Cost competitive, almost as much as India, across service segments
One of the lowest cost destinations for English work, and for non-
voice and IT services work
Relatively minimal inflation and currency volatility indicate
continued cost competitiveness in future
Large, scalable talent
pool—next only to
India, China
Top-3 global location in
graduate pool size
Third-largest talent pool in
delivery of voice
BPO, F&A, and IT services
Amongst the largest
experienced talent pools
Primed for Leadership
Costs
Relatively minimal risk
perception, primarily directed
at geopolitical concerns
High-quality physical and
social infrastructure
Favorable investment
climate
Limited risks to talent
scalability
Natural disasters in certain
regions and sporadic
political incidents are key
albeit manageable
concernsSource: Everest experience
Courtesy of the Business Processing Association of the Philippines
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Next Wave of Growth for the Philippines
Voice BPO
Non-voice
BPO
IT-ESO
Market dynamics
Maturing market
Philippines a strong global leader
30% share in U.S.; 15%‒20% in UK/APAC
Near-shore competition for U.S., UK, EU
Large industry-specific opportunity
(e.g., banking, health care, media, KPO)
Credible Philippine share (~10%). Effective
alternative to India in several non-voice areas
Evolving value expectations: tools, process
improvement, end-to-end accountability
Highly penetrated applications market
Limited market share (~1%) in a large and
growing, yet highly competitive market
Emerging opportunities to penetrate
ASEAN, innovate for the U.S.
Growth Opportunities
Extend impact in the U.S. across services
Leverage credibility in healthcare, banking, teleco
m and media to drive rapid, non-voice growth
Capture select opportunities outside of the
U.S.
Voice and non-voice in the UK
IT-ESO and regional shared services for APAC
ASEAN = Association of Southeast Asian Nations, KPO = knowledge process outsourcing
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• 3rd largest English speaking country, 12th most populous country
• 90+ million population, 36+ million work force
• Goldman Sachs N-11
Scalable Talent Pool
• 400,000 college graduates per year (28% Business and Accountancy, 21% Engineering and IT)
• Western based legal and accounting curriculum and certification
• 93% Literacy Rate
Solid Western-based Educational System
• Only sizeable colony of the US, 1898-1946
• Western pop culture pervasive (“They get it”)
Cultural Affinity with the West
• Warm and patient (“They answer the phone with a smile”)
• Highly empathetic, eager to please and not to disappoint
• Cultural bias against conflict
Service Orientation
• Neutral accent, acceptable to American and British customers
• Familiar with Western slang and accents
• Natural rapport building skills
Excellent Communication Skills
Slide courtesy of Stream Global BPO
Hallmarks of Our Value Proposition
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• One of the lowest labor-cost providers, with total labor costs at a small percentage of the cost of equivalent jobs in the U.S. or U.K.
• All-in costs amongst lowest in the world
Cost Competitiveness
• Unlike India, few other growth sectors competing for talent
• Positive perception of BPO careers (not just for fresh graduates)
Relatively Low Attrition
• Abundant and low-cost real estate in several urban areas
• Renters‟ market today, 1.1 million sq. m. in new supply 2009-2010 of which less than 10% is committed
Plentiful Quality Office Space
• 4 to 8 year Income Tax Holiday
• Approximately 15% tax rate after lapse of holiday
Attractive Investments packages
• Catching up with India rapidly; now #1 for voice BPO
• Outsourcing Destination of the Year – NOA UK
• Positive experiences of captives JPMorgan, Citigroup, P&G, Deutsche Bank, Nestle AOA, HSBC, Shell, etc.,
Global Reputation
Slide courtesy of Stream Global BPO
Hallmarks of Our Value Proposition
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• One of the lowest labor-cost providers, with total labor costs at a small percentage of the cost of equivalent jobs in the U.S. or U.K.
• All-in costs amongst lowest in the world
Strategic Location in Asia
• Began deregulating early in the mid-90s
• Cost of bandwidth has dropped over 85% in last 5 years (from $14K in 2001 to < $1.5K per month for E1 lines to US)
Excellent Telecom Infrastructure
• Privately-owned companies providing energy sources such as renewable, geothermal, hydro, solar and wind
• 9 international airports, 12 roll-on roll-off ports,
• Economic zones and IT parks
Reliable Infrastructure
Support
• Accessible and affordable luxuries – value-for-money housing, modern recreational facilities, first-rate educational institutions adopting international standards, business centers, hospitals, etc.
• Top ten in World Economic Forum‟s Gender Gap Index
Top Choice for Quality of Living
• Comprehensive Everest-O2P-BPAP (Business Processing Association of the Philippines) Roadmap 2016 to achieve $25+ Billion revenues, 1+ million employees
Strong Government –Private Sector
Partnership
Hallmarks of Our Value Proposition
Centers of
Excellence
Top 10
Next Wave
Cities
Cities in
WaitingAspirants
Manila-NCR
Cebu
Clark
Davao
Santa Rosa
Bacolod
Iloilo
Metro Cavite
Lipa
Cagayan de
Oro
Malolos
Baguio
Dumaguete
Cabanatuan
Cainta
Dagupan
General Santos
Legaspi
Naga
Rizal
South Bulacan
Subic
Tuguegarao
Urdaneta
Balanga
La Union
Tagbilaran
Tarlac
Absorptive Capacity
Potential IT-BPO support
Super cities >15,000
Large cities = 10,000–15,000
Mid-sized cities = 5,000–10,000
20+ cities = <5,000 each
Eases concerns on salary and rental costs, talent availability
About 15% of 442,000 FTEs and 22% of BPO in 2009 activities
were in NWCs (BPAP)
Development Path of IT / BPO Locations
Notes: National Capital Region (NCR) includes Makati , Fort Bonifacio, Pasig, Quezon City, Alabang, Manila, Mandaluyong
Increasing Location Attractiveness
Next Wave Cities
Centers of Excellence
Next Wave Cities
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Wide Range of Verticals
Supplier presence across industry verticals1
Wide range of industry-verticals serviced Captives of 60+ Fortune 1000 firms
# FTEs servicing (’000s)
75+
# Firms
50+
40+
40+
25+
15+
25+
Banking and financial services
MDR and healthcare
Telecom, travel, energy, and media
BFSI = banking, financial services, insurance; MDR = manufacturing, distribution, retail
1 Per Everest-O2P survey of ~200 firms across the Philippines IT-BPO industry
Sources: BPAP database; survey results
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Established Mature Tier-1 Destination
Mature Credible Emerging
Eastern Europe:
Established near-
shore destinationChina:
Domestic and APAC centric
scale and capabilities
Mexico, Brazil, Columbia,
Chile, and Argentina:
Evolving rapidly as near-
shore base to drive
penetration in North
America
Philippines:
Reaching #1 in voice
BPO (330K+ FTEs)
#2 in non-voice/IT-BPO
(200K+ FTEs)
India:
Industry leading scale and
capabilities
Voice: 350K+ FTEs
Non-voice IT-BPO: 1.4M+ FTEs)
Egypt, Morocco, and
South Africa:
Significant government-
backed push to target
UK and Europe
Source: Everest analysis
Proprietary & Confidential. Copyright © 2010 BPAP, Everest Global, & Outsource2Philippines
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India Philippines Poland Malaysia Egypt Romania China Mexico
Relatively stable, though there are concerns around safety and labor pool sustainability
Skilled English-
speaking talent
availability
Safety and
security
Investment
climate
Risk Index for English BPO*
Physical and
social
infrastructur
e
1.75 1.871.811. 761.87
2.012.15 2.19
Proprietary & Confidential. Copyright © 2010 BPAP, Everest Global, & Outsource2Philippines
*(Higher Score Implies Higher Risk)
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0
0.5
1
1.5
2
2.5
3
3.5
4
Voice Clarity Accent Neutrality Fluency Grammar
3.96 2.71 3.04 2.87
3.99 2.15 2.55 2.28
Philippines India
Spoken English Test
Philippine Benchmarking and E-volution Study
(PhilBEST) - Tholons 2009
Courtesy of the Business Processing Association of the Philippines and Tholons Southeast Asia
Undisputed English Proficiency
Pearson Talent Assessment Versant
English (July 2010)
Philippines is #1 in English proficiencywith a score of 61.84
Latin America and East Europe follow
with a score of 58; India is at third
with 55.62 followed by Korea and
China
One of the most widely used tests for
spoken English competency
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Direct operating cost1 per FTE for F&A transactional work
2010; US$ ’000s a year per FTE
Lowest Cost Non-Voice BPO Location
64‒66
35‒37
22‒2419‒21 18‒20
15‒17
Dublin Krakow Kuala Lumpur Cairo Metro Manila Delhi/NCR
1 Ongoing costs only; excludes margins/mark-ups, centralized corporate overheads, initial investment, set-up
costs, and travel costs
Note: Exchange rates for local currencies with respect to the U.S. dollar have been averaged for 12 months from Oct.
1, 2009, to Sept. 30, 2010
Source: Everest analysis
MARKET AVERAGES
FAO EXAMPLE
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47‒4944‒46
32‒3430‒32
23‒2520‒22
19‒21
Mexico City Krakow Kuala Lumpur Beijing Cairo Metro Manila Delhi/NCR
…and for IT services
1 Ongoing costs only; excludes margins/mark-ups, centralized corporate overheads, initial investment, set-up costs, and travel costs
Note: Exchange rates for local currencies with respect to the U.S. dollar have been averaged for 12 months from Oct. 1, 2009, to Sept. 30, 2010
Source: Everest analysis
MARKET AVERAGES
ADM EXAMPLE
Direct operating cost1 per FTE for IT Applications Development and Maintenance (ADM)
2010; US$ „000s per annum per FTE
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1 Ongoing costs only; excludes margins/mark-ups, centralized corporate overheads, initial investment, set-up costs, and travel costs
Note: Exchange rates for local currencies with respect to the U.S. dollar have been averaged for 12 months from Oct. 1, 2009 to Sept. 30, 2010Source: Everest analysis
Cost-Competitive Location – Voice BPO
70-72
14-1515-1616-17
19-20
24-2629-32
US Tier-2 Mexico City Krakow Kuala Lumpur Cairo Metro Manila Delhi/NCR
Reflective of market averages.
Range could vary depending upon
Tier-1 vs. Tier-2 cities
Suppliers vs. captives
Scaled operations vs. mid-size
operations
Direct operating cost1 per FTE for English voice work
2010; US$ ’000 per annum per FTE
MARKET AVERAGES
ENGLISH-LANGUAGE VOICE EXAMPLE
Proprietary & Confidential. Copyright © 2010 BPAP, Everest Global, & Outsource2Philippines
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Awards and Distinctions
Offshoring Destination of the Year (2007, 2009, 2010)
31 New Emerging Destinations: Davao & Iloilo
Top 10 Established Outsourcing Cities: #4 Manila & #9Cebu
Top Emerging Cities: Davao, Santa Rosa and Bacolod
Top 10 Outsourcing Cities in APAC: #3 Manila
World leader for voice-based customer support and sales
Top ranking destination by estimated jobs in business support
services (October 2010)
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“It is clear by our continued growth in the country that Convergys employees in
the Philippines share our steadfast commitment to provide our clients with the
highest level of customer service in the industry,”
- Jeff Fox, Convergys Corporation President and CEO
Client Testimonials
“To me Philippines is not a threat, it is a treat, because it is a great delivery
destination, customers like it and we are very much present there. There is an
economic advantage that comes to us as an enterprise”
- Aparup Sengupta, Global CEO, AEGIS BPO
“With the growth of our business in Asia Pacific, it makes sense for us to open
an operations hub in the Philippines. It is one of the world’s leading business
processing destinations and builds on our existing presence in the Philippines.
“The Manila hub will allow us to tap into Manila’s large, well-educated workforce
to help support our continuing growth in the region. It will also provide greater
geographic diversity for our operation support functions.”
- Alex Thursby, CEO of ANZ Asia Pacific, Europe and America
"Many centres in Metro Manila and Cebu City are experiencing growth of over
40% in sales and headcount. HSBC, JP Morgan, Accenture and IBM, all large
firms, are witnessing tremendous growth."
- Nikhil Rajpal, Principal, Everest Research Institute
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Client Testimonials
“Our new BPO center in the Philippines strengthens our Global Network
Delivery Model and allows us to enhance our delivery capability to our clients
across Asia Pacific and the rest of the world. We’re very excited about the
talent pool available in the Philippines for our new BPO centre and look
forward to leveraging our best practices and technology excellence from
around the world to further develop talent in the region.”
-Vish Iyer, TCS Head, Asia Pacific
"US-based clients ask for the Philippines as a destination. However, the
processes that get outsourced to the Philippines are now not just limited to
voice but other high-end processes spread across domain-specific back
office, medical, legal and financial accounting work."
- Rohit Kapoor, President and CEO, EXL Service
“Currently, we offer only customer services in the Philippines, which we are
planning to expand into areas like legal, financial and accounting
outsourcing. Philippines offers a market of quality talent pool in these areas”
- Ritesh Idnani, CEO, Infosys,
(from The Financial Express, September 2010)
“Work ethic here is just phenomenal. When [typhoon] Ondoy hit, we
registered no missed calls despite the heavy impact of that storm on Metro
Manila and our personnel. This dedication to the job and the Filipino’s natural
warmth triggered generosity from our clients and our employees at other
sites.”
- Mike Ettling, CEO, NorthgateArinso
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Voice – Based Services Suppliers Homegrown Suppliers
Banking, Financial Services and Insurance IT and Software Services
NASSCOM’S Top BPOsShared Service Centers / Captives
Who Are With Us
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Maintenance, Repair, Overhaul ServicesClinical Research Outsourcing
HR Outsourcing Legal Process Outsourcing
Engineering Services OutsourcingCreative Services Outsourcing
Medical Services Outsourcing
Who Are With Us
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Contact Information :
Assistant Secretary FELICITAS AGONCILLO-REYES
Investments Promotion Group
Board of Investments
385 Gil Puyat Avenue, Makati City 1200
Philippines
Tel: (632) 896 9212
Fax: (632) 897-2181
Email: [email protected]
Website: www.boi.gov.ph