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The Philippines Vying To Become The Next India

November 25, 2007
Related Topics: Managing International Operations, Outsourcing, Workforce Planning, Featured Article
Philippines officials want to compete for a share of India’s outsourcing market, but what’s driving business to the archipelago nation is precisely that it is not India.

   Louise Mabel, a director at Integreon, a New York-based business process outsourcer, says her company was motivated to establish offices in Manila after clients became concerned that the company did not have an adequate business continuity plan to deal with man-made and natural disasters in India, where Integreon has offices.

   The move to the Philippines was kick-started by the unusually heavy monsoon in India in July 2005 that immobilized much of Mumbai for a week, Mabel says.

   “We had 4 feet of water in the street,” she says.

   Integreon kept its business open, but clients, mainly top-tier investment banks for whom Integreon produces research and PowerPoint presentations, urged the company to find an alternate location.

   Integreon chose the Philippines because of workers’ English proficiency and cultural affinity with the United States. It also helped that an Integreon investor was the Ayala Corp., among the largest private companies in the Philippines. But Integreon’s story shows why the Philippines is becoming something of an outsourcers’ apprentice to India.

   Though India dominates the offshoring and outsourcing market, capturing 40 percent of a market currently valued at around $45 billion but estimated by McKinsey & Co. to grow to $130 billion by 2010, Philippines officials are aggressively marketing the country as an alternative to India.

   Philippines President Gloria Arroyo was in New York late last month for the United Nations General Assembly and spoke about the country’s efforts the past two years to turn around an economy plagued by cronyism and corruption, balance its budget and create an environment attractive to companies looking for outsourcing alternatives to India.

   “We’re making long overdue investments in human and physical infrastructure,” she says.

   The country’s trade group, the Business Process Association of the Philippines, announced during a conference sponsored by the Philippines government that it would be publishing a McKinsey report on the country that will include a scorecard detailing how various cities compare on issues like talent availability and cost.

   The association wants to double the country’s market share by 2010. To meet that target, the Philippines would have to increase its available talent pool from the current level of 400,000 to as many as 1 million workers.

   There is wide agreement that the benefits of outsourcing to the Philippines include a cultural affinity with the United States—the country was an American colony in the early 20th century—and the fact that English is spoken, which cuts training costs.

   But the country’s inexperience in call center work means its employees are less familiar with the 24/7 shift work that dominates the Indian market.

   “In the Philippines, that may be more difficult,” Mabel says, “but our clients demand it.”

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