India, Philippines Account for 50% of BPO Market:

Out of the U.S. $35-37 billion offshore BPO market in 2008, India remained the leading offshore destination with 35% market share. The Philippines, which is barely 1/10th of India's size, represented 15% of the offshore BPO market. The Philippines has emerged as a key destination for English-based work especially for the North American market.

Growing at 46% annually since 2004, the US $6.8 billion Philippines' offshore market today employs over 450,000 people. Most of the people employed are for voice-based services. The Everest Research Institute study called "The Silent Knight: The Philippines' Emerging Non-Voice BPO Capability", shows that the Philippines is poised to emerge as an important destination for non-voice offshore BPO work. The Philippines is an offshore option for buyers that are looking beyond India. It is estimated that by 2012, the offshore BPO market will be worth U.S. $220-280 billion -- almost 90 percent of this addressable market opportunity will be in non-voice BPO services.

Lack of Awareness The Everest Research Institute study also shows that while the scale of work is currently low, a number of providers are already leveraging the Philippines for non-voice functions. However, there is less awareness of the Philippines' real capability in non-voice services, which has grown significantly over the past three years.

Philippines' success in voice-based BPO services has made it the second largest low-cost BPO destination after India. Both countries combined account for 50% of the offshore BPO market in revenue terms. Most of the non-voice BPO services in the Philippines is related to transactional services. However, even tho there has been an increased traction in judgment-intensive knowledge services such as research, analytics and legal services, the scale and maturity remains low. The Filipino government is focused on developing the non-voice BPO industry, providing incentive programs to attract investors as well as providing grants and infrastructure developments.

A Number of Factors Favour Growth in Philippines According to Everest Research Institute a number of factors favour the growth of non-voice BPO in the Philippines. These include acceptance as a key destination for customer service and support, competitive costs, sizable English speaking talent, and a starting base of captives and suppliers. There also happens to be a strong cultural similarity between the Philippines and the United States, making it easier for Filipino agents to relate to U.S. customers.

In terms of operating cost per employee for transactional back-office work, the Philippines offers about 75% and 70% respective savings over tier-II cities in the U.K. and the U.S. This is less as compared to India but substantially more than other offshore destinations like Monterrey (Mexico) and Prague (Czech Republic). In terms of graduates per annum, Philippines trails India's 30,00,000 with just a figure of 480,000. Yet it has more graduates per annum than countries like Egypt, Argentina, South Africa and Mexico.

Talent-related Constraints Must be Dealt With However, the Everest Research Institute warns that managing talent-related constraints will be critical to ensure operational success in the Philippines. The country will need to address key talent-related challenges like scalability of entry-level talent, availability of specialized skills, availability and quality of managers, and migration of skilled talent. Availability of specialized skills, access to quality management talent, and talent migration are challenges that are also much more pronounced in the Philippines as compared to India.

Challenges regarding shortage of entry-level talent exist in India as well as the Philippines. According to the NASSCOM-Everest study, "Roadmap 2012 Capitalizing on the Expanding BPO Landscape", while the number of people required to support impending growth of BPO in India are available, the future growth may lead to a shortage of approximately one million entry-level graduates by 2012. This can change only if the current focus on ready-to-eat talent is altered. As of now, with the current Philippines' non-voice BPO market and prevailing talent-related challenges, the Philippines is unlikely to replace India as the leading non-voice BPO delivery location. The Philippines can still serve as an important 'satellite delivery location' for such services.