Dec. 3 (Bloomberg) -- For the past decade, Americans dialing customer service stood a strong chance of being connected to someone in India. Now they’re more likely to end up phoning the Philippines.
Strong government support, a supply of English-speaking college graduates and an effort by call-center operators to reduce their dependence on India have helped the Philippines overtake India in call-center revenue, Bloomberg Businessweek reports in its Dec. 6 edition.
“It’s not that we are trying to take business away from India,” said Oscar Sañez, chief executive officer of the Business Processing Association of the Philippines, an industry group. “We’re just looking for our own place in the sun.”
The Philippines will earn $5.7 billion for call-center work this year from the U.S., Europe and Australia, compared with the $5.5 billion generated by India, according to the Everest Group, a Dallas-based outsourcing advisory firm working with the Philippines industry. The two hubs account for about half of the $21 billion global industry, according to Everest data.
Call-center operators said they like the Philippines because English is taught in schools and Filipinos have a cultural affinity for the U.S., which ruled the country from 1898 to 1946.
6 Percent of GDP
“Clearly, these guys had a much later start, but they have caught up,” Everest Group partner Nikhil Rajpal said.
India continues to lead in overall outsourcing revenue with $70 billion, compared with $9 billion for the Philippines, according to BPAP and India’s National Association of Software and Services Companies, a New Delhi-based lobbying group. The outsourcing industry now employs 530,000 people in the Philippines, according to Everest, and makes up about 6 percent of gross domestic product, according to data compiled by Bloomberg.
A decade ago, millions of young Filipinos, especially English-speaking nurses and law students, emigrated to the U.S., Hong Kong and elsewhere. The billions of dollars they sent back to their families every year represented the country’s second-largest foreign-exchange earner after computer chips from Texas Instruments and other technology companies, according to World Bank data.
Frustrated government officials looked to India for inspiration, said Celeste Ilagan, who spent the past decade working in government programs to encourage outsourcing and now heads communications for SPi Global, a call-center operator owned by Philippine Long Distance Telephone Co., the nation’s largest company by market value.
“India had become very famous for call centers, and we decided to learn from their example,” she said.
To better understand India’s success, Filipino officials visited industry representatives there. The Filipino government streamlined the approval process for companies setting up call centers and changed its rules to allow individual buildings to be designated special economic zones, according to the Philippines Economic Zone Authority.
Such zones offer tax breaks, quick clearances for building permits and an exemption from import duties on computers and telecommunications equipment. About 40,000 students have benefited from government-sponsored training to improve their English and communication skills, Sañez said.
Bantering in English
Call centers are changing the rhythms of Filipino life. Malls, bars, cinemas and cafés have popped up near buildings where young, nocturnal workers earn as much as 300,000 pesos ($6,850) a year in a country where the annual per capita GDP in 2009 was about 83,000 pesos, according to data compiled by Bloomberg.
Weaned on radio stations that play U.S. Top 40 pop and hip-hop, teens seeking jobs in call centers can banter in English as naturally as their native Tagalog. Most shifts start at 8 p.m., just as the U.S. East Coast wakes up.
“There used to be some doubts about letting young people work so late at night, but now this has become an industry that young people aspire to,” said Thea Lu, 30, a team leader with 24/7 Customer, based in Campbell, California.
Several companies now operating in the Philippines participated in India’s outsourcing revolution and then expanded abroad. A tax break for Indian outsourcing shops is set to expire in 2011, though the industry is lobbying hard against it.
Wipro, Tata Consultancy
In Bangalore and Gurgaon, India’s biggest outsourcing hubs, companies rely on diesel generators to ensure electricity, run fleets of buses to ferry employees to and from work, and struggle with attrition that can reach 50 percent a year. Those challenges, as well as a desire to diversify geographically, have spurred both Indians and Americans that operate call centers in India to shift work to the Philippines.
Wipro Ltd., based in Bangalore, India, set up in the Philippine city of Cebu in 2007 and now has 2,000 workers in the country. By 2014, it expects to have 8,000.
24/7 Customer, which started operations in India in 2000, opened a Philippines office in 2005. It now has 4,000 employees in the country, compared with 3,000 in India.
Tata Consultancy Services Ltd., India’s largest software services firm, said Dec. 2 it would open a business processing outsourcing center in the Philippines.
“It’s very sad that India could not keep up with its neighbors,” 24/7 co-founder Shanmugam Nagarajan said.
The Philippines outsourcing industry has set a goal of at least doubling revenue by 2015, Sañez said. The biggest challenge is the dearth of managerial talent, Rajpal said. In an industry so young, few people have been around long enough to handle management or strategy jobs.
“Where are we going to find the right kind of managers who can make our operations stand out?” said Steve Barker, who heads Asian operations for Sitel Worldwide Corp., a Nashville, Tennessee-based company that has 10,000 workers and seven facilities in the Philippines.
The Philippines also produces only about 10 percent as many engineers as India, according to graduation data from both countries. India’s ready supply of engineers has helped its outsourcing firms go from answering phone calls to account management, technical support and consulting jobs that include helping banks manage financial derivatives and improving retailers’ supply chains.
“Ten years down the line, the Philippines may be a hotter destination,” said Sanjeev Bhatia, who oversees international operations for Wipro BPO. “But in IT and software, India really doesn’t have any competition.”
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