INDUSTRY REPORT: THE PROBLEM OF SUSTAINABLE COMPETITIVE ADVANTAGE IN PHILIPPINE CALL CENTERS Aileen S. Alava* Facing high outlooks as the newest “sunshine industry” . the call centre industry in the Philippines appears to hold subdued chances in the coming old ages. Having experient rapid growing from 2000 to 2003. the industry experienced a lag in growing from 2004 to 2006. raising the inquiry of how sustainable the country’s competitory advantage is against neighbouring rivals such as India and China. This paper uses Porter’s Diamond Model to analyse the factors ensuing in competitory advantage between states. and provides industry participant and market information on the Philippine call centre industry. every bit good as updates on how the industry’s participants are seeking to turn to the industry’s challenges.
I. INTRODUCTION The call centre industry is heralded as the newest sunlight industry in the state. gaining around US $ 1. 8 billion in 2005 entirely. with grosss forecasted to make US $ 5. 3 billion by twelvemonth 2010. Employment for this sector has more than doubled every twelvemonth. from 2. 400 agents in 2000 to 150. 000 in 2006. and is expected to make 300. 000 full-time employed agents in 2010. The Philippines is among the top locations in the universe for outsourced call centres. An SGV industry study states that in 2005. the Philippines’ portion of the planetary call centre market is 3 % and 31 % for the Asia Pacific market. By 2010. industry leaders target 6 % planetary market portion and 51 % Asia Pacific market portion.
II. FRAMEWORK AND METHODOLOGY
What will give Philippine call centres an advantage over call centres in other states. such as those in India. China. Malaysia. Singapore? Michael Porter‘s Diamond Model defines competitory advantage between states as the result of four interlinked factors: 1 ) house scheme. construction and competition ; 2 ) demand conditions ; 3 ) related back uping industries ; and 4 ) conditions impacting the cardinal factors of production within the states. This paper aims to discourse the fight of the Philippines utilizing this
model. Desk research was conducted to obtain secondary industry informations on local and planetary call centres. while interviews _________________________________
with call centre directors provided penetration on chances and challenges within the industry. The function of authorities will besides be discussed in this paper. Industry developments show authorities policies such as revenue enhancement inducements and relaxation of belongings Torahs contributed to the industry’s growing. Strengthening of authorities support for primary instruction is important to the sustainability of the Philippines’ competitory place. Insufficiency in primary instruction is endangering the Filipino advantage as local participants face trouble meeting planetary demand with local supply of qualified call centre agents.
* Assistant Professor of Information Systems Management. College of Business Administration. University of the Philippine-Diliman.
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INDUSTRY REPORT: THE PROBLEM OF SUSTAINABLE COMPETITIVE ADVANTAGE IN PHILIPPINE CALL CENTERS
III. CALL CENTER OUTSOURCING A call centre is a concern operation managing multiple types of customer-oriented maps such as selling. merchandising and service. through multiple channels of client interaction such as electronic mail. the World Wide Web. electronic messaging. voice messaging. facsimile messaging. and traditional mail. Call centres serve assorted stakeholders of an organisation: from chances to clients. providers to rivals. every bit good as distributers. spouses. and employees. The term “call center” is used as a corporate term to mention to these operations for the ground that the primary agencies of contact facilitated by these concerns are telephone calls. Call centres are categorized as Business Process Outsourcing companies or BPOs. BPOs besides include medical written text. IT support. life. package development. fiscal accounting and paysheet processing companies. Outsourcing in the Philippines arrived at the heels of successful
deregulating in the telecommunications industry. Intense competition spurred monolithic investing in engineering and accomplishment among Filipino telecommunications companies. taking to invention. quality betterment. and monetary value fight in services. The Philippines is no alien to foreign agreements of this sort. The semiconducting material industry. one of the taking export sectors in the state. started in much the same manner. From the early 1970’s to mid 1980’s this sector experienced dramatic enlargement. turning at an one-year mean rate of 53 % . International factors besides impelled growing in the signifier of multinational companies from the developed economic systems ( e. g. . US. Europe. Japan ) turn uping offshore workss in developing states ( e. g. . Philippines. Vietnam. Singapore ) for the most labour-intensive stages of semiconducting material fabrication. As with the call centre sector. the Philippines’ chief advantage in semiconducting materials is inexpensive and literate labour. Government response to further incite export activity in semiconducting materials is similar to regulative mechanisms implemented in the call centre industry today. such as the constitution of freeport zones. the relaxation of duties and responsibilities on imported engineerings. and the permission to use foreign subjects. Agreements in the semiconducting material industry during its period of rapid growing were covered by farm outing agreements. Today’s planetary tendency for “off-shoring” . or offshore outsourcing. has really small difference with farm outing. Offshoring is the agreement by which one company contracts with service suppliers located outside the state for services that could besides be or normally have been provided inhouse. Outsourcing concern procedures to remote locations is made possible by promotions in the telecommunications sector in the outsourcer states. Low labour cost and improved connectivity ensuing from technological promotion and deregulating in the telecommunications sector in the service states ( e. g. . India. China. Malaysia. the Philippines ) have made offshore outsourcing attractive from an economical point of view. The costs of runing a call centre in the Philippines. for illustration. is reportedly 40 % lower than in the United States ( 55 % cost nest eggs from labour less 15 % incremental cost from travel and telecommunications demands ) . Offshore outsourcing in general brings in around 25 % to 50 % in cost nest eggs. Globalization and its social effects have made manageable the challenges of crosscultural communicating: many offshore finishs
hold a Western heritage and about all are exposed to Western civilization – dad civilization. even – through the cyberspace. overseas telegram telecasting. and other amusement media. e. g. . films. books. The difference in clip zones between the service and the served states ( e. g. . the United States. the United Kingdom ) are addressed through alternate six- to eight-hour displacements in the twenty-four hours. enabling call centres to keep 24-hour service agent handiness. While incremental costs are incurred for perfunctory hazard direction disbursals. e. g. .
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hazard wage. etc. . the entire cost of runing a call centre out of India or the Philippines are still
lower compared to the cost of runing out of the US or the UK.
IV. THE PHILIPPINE CALL CENTER INDUSTRY An IT-Enabled Servicess briefer from the Board of Investments in 2007 provinces that there are an estimated 146 call centre companies in the Philippines. Call centre companies should be distinguished from call centre sites. A “site” is a installation lodging a call centre operation and a call centre “company” may run multiple sites. Sykes Asia. for illustration operates five sites in the Philippines while Peoples Support operates four. There are three classs of call centre companies: ? Foreign-owned call centres with Philippine subordinates. These are call centres owned by foreign companies. normally from the United States. that have branched out to offshore outsourcing. Insourced call centres of big transnational corporations. These are operations that are dedicated to the parent companies and whose aim is to convey competitory advantage by transforming an former internal backoffice map into 1 that is revenuegenerating. Filipino-owned call centres. These call centres are entirely owned by Filipino enterprisers or corporations ( e. g. Smart. PLDT. Globe. etc. ) that seek clients from the United States. Europe and Asia. peculiarly from Japan and Singapore.
?
?
Estimates from the Board of Investments ( BOI ) . the Commission on Information and Communications Technology ( CICT ) and the Business Process Association of the Philippines ( BPAP ) report the demand for call centres to make anyplace from between 30. 000-50. 000 new agents hired in the Philippines per twelvemonth from 2007-2010.
Figure 1 Employment in Contact Centers
350000 301. 000 300000 262. 000 250000 218. 000 200000 168. 000 150000 112. 000 100000 50000 0 2004 2005 2006 2007 2008 2009 2010 *2006-2010 from BOI/CICT/BPAP Forecast 64. 000 331. 000
Beginning: Board of Investments. BPAP
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INDUSTRY REPORT: THE PROBLEM OF SUSTAINABLE COMPETITIVE ADVANTAGE IN PHILIPPINE CALL CENTERS
The success of call centres worldwide is attributable to the growing of outsourcing as a profitable concern theoretical account. The BOI estimates that 2006 grosss in concern procedure outsourcing ( which includes other IT enabled services such as medical written texts. life. and back office minutess treating ) amounted to US $ 3. 67 billion. and
undertakings grosss to leap upwards 40 % to make US $ 4. 79 billion this twelvemonth. Joint prognosiss from the BOI. BPAP and CICT predict that there will be 343. 000 new outsourcing occupations this twelvemonth ( of which 64 % or 218. 000 will be in call centres ) . a 40 % addition from the figure of new outsourcing occupations in 2006 of approximately 244. 000 ( of which 69 % or 168. 000 were in call centres ) .
Figure 2 Annual Employment ( 2004-2010 )
1000000 900000 800000
668. 1 26
920. 764
700000 600000
479. 51 9
500000 400000
244. 675 343. 01 3 262. 000 21 8. 000 1 68. 000 99. 300 64. 000 1 2. 000 1 301. 000 331. 000
300000 200000 100000 0 2004
1 62. 250
2005
2006
2007
2008
2009
2010
BPO Industry
Contact Centers
Beginning: Board of Investments. BPAP
The Philippine call centre industry is estimated to hold earned US $ 2. 7 billion in grosss in 2006. a growing of 50 % from 2005’s net incomes of US $ 1. 7 billion. The Department of
Trade and Industry expects existent 2007 returns to be near to US $ 3. 5 billion. a farther growing of 30 % .
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Figure 3 Annual Revenues of Contact Centers ( in US $ M )
Beginning: Board of Investments. BPAP
It is interesting to observe that service income of 10 of the top call centers1 in the state ( Ambergris. Convergys. Cyber City Teleservices. Sitel. E-Telecare. iContacts
Corporation. InfoNXX. Parlance. PeopleSupport. and Sykes Asia ) together history for more than 20 % of the entire grosss of the full sector.
Figure 4 Comparative Annual Revenues of 148 Call Centers V. Ten Top Call Centers ( 2004-2005 )
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INDUSTRY REPORT: THE PROBLEM OF SUSTAINABLE COMPETITIVE ADVANTAGE IN PHILIPPINE CALL CENTERS
Activity in the industry is seemingly dependent for the most portion on a little figure of large participants. The BOI in its IT-Enabled services briefer ( 2007 release ) states that it expects upward impulse to go on until 2010. Beginnings of growing have been identified as follows: a ) Expansion from
established call centres such as PeopleSupport. Sykes. eTelecare. PLDT. ClientLogic. InfoNXX. Citibank. Ambergris. Accenture. IBM. Caltex and HP B ) Entry and attendant enlargement. i. e. add-on of new sites. etc. of planetary participants such as Dell. HSBC. JP Morgan. AIG. Convergys. TeleTech. Sutherland. Deutsche Bank. and NetSuite.
degree Celsius ) Next moving ridge of entrants such as Accor Reservation. MiSYS. Siemens. Ericson. Alsbridge. Virgin Atlantic. Philips. Emerson. Capital IQ. DDC and Kanbar. Growth in the sector follows enlargement the operations of large participants. In the last two old ages. both Sykes Asia and People Support have established new call centre sites while still others have added new undertakings and histories. These activities and the inflow of new participants have resulted in grosss steadily turning until 2006 and outlooks for farther enlargement until 2010. While growing is uninterrupted. nevertheless. a lag in the rate of growing is expected get downing 2005.
Figure 5 Annual Revenue Growth Rate of Contact Centers
220. 0 %
166. 7 % 133. 3 % 114. 3 %
75. 0 % 50. 0 % 29. 8 % 20. 2 % 14. 9 % 10. 0 %
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
*2006-2010 forecasted by BOI/CICT/BPAP
Beginning: Board of Investments. BPAP
Decelerating growing in the last two old ages after the steep additions of 2003 to 2004 indicates that the call centre industry in the Philippines is now nearing adulthood. Gross saless and net incomes enlargements of the past old ages resulted from the
Philippines’ cost advantage over other states. The transition of clip. nevertheless. may gnaw this advantage as China and other Southeast Asiatic states threaten to eat into the Philippines’ market portion with better cost or quality
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offerings. The challenge for the industry is to widen growing by bettering the competitory dimensions where the Philippines is weak or by seting industry marks to make new competitory advantages. The Global Arena The Asia Pacific part outperforms other parts such as Eastern Europe. South America
and Africa. Japan and South Korea are seen to increase nearshore outsourcing investings in low-priced. labor-rich adjacent China while Southeast Asiatic
states benefit from close-toWestern civilizations. unfastened economic systems. and advanced engineerings for a similar cost advantage. In 2005. Frost and Sullivan forecasted that call centres in Asia will turn from 21. 360 in 2004 to 39. 248 call centres in 2011. at a compound one-year growing rate of 9. 1 %
Figure 6 Forecast Growth of Call Centers in Asia Pacific
*at a Compound Annual Growth Rate of 9. 1 % . as forecasted by Frost and Sullivan.
More recent surveies predict faster growing rates. A 2006 Asiatic Contact Center Industry Benchmarking Report assessed the industry to be in a period of strong growing. The survey conducted on 747 contact centres in the Philippines. India. Singapore. China. Malaysia and Thailand estimations that by 2007. the entire 576. 000 seats in the states studied would increase to 704. 500. a growing rate of 23 % . Among the states in the survey. the Philippines has the highest forecasted growing rate. By 2007. it is expected to turn by 33 % . Singapore and Malaysia by 32 % . China at 22 % and India by 16 % . Of the Asiatic finishs. India is the top pick. with other states such as the
Philippines. Malaysia. Singapore. and China following closely. The Philippines. holding an American-influenced civilization. a proficiency in English comparable to India without the heavy speech pattern. and a skilled labour force. was considered the greatest menace to Indian domination in this sector. However. recent years’ developments in other rival states such as China. Malaysia. Thailand and Indonesia coupled with a strong peso and lacks in the local supply of qualified call centre agents have weakened the Philippines’ advantage. The A. T. Kearney Global Services Location Index in 2007. a study conducted to mensurate the comparative attraction of seaward locations with respect to fiscal construction ( 40 % ) . people
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INDUSTRY REPORT: THE PROBLEM OF SUSTAINABLE COMPETITIVE ADVANTAGE IN
PHILIPPINE CALL CENTERS
accomplishments and handiness ( 30 % ) . and concern environment ( 30 % ) . has ranked the Philippines the 8th most attractive state for offshoring in
2007. The top 25 states are as follows:
Figure 7
Beginning: AT Kearney 2007 Global Services Location Index
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The 2007 survey saw the Philippines diminution from its 4th rank from AT Kearney’s last GLSI
study which was conducted in 2005. The top 20 five locations so were as follows:
Figure 8
Beginning: AT Kearney 2005Global Services Location Index
The Philippines’ bead in the AT Kearney rankings is attributed to the grasp of the peso and growing in the call centre industry which has driven up labour costs in footings of the US dollar. by every bit much as 30 % . harmonizing to AT Kearney’s GSLI 2007 high spots. In other countries of public presentation. the state improved somewhat.
peculiarly in substructure. industry size and linguistic communication accomplishments. In contrast. Malaysia. Thailand. and Indonesia have either retained their rankings or moved up the index. Slower industry growing rates in these states have tempered the effects of rising prices on labour costs.
10 INDUSTRY REPORT: THE PROBLEM OF SUSTAINABLE COMPETITIVE ADVANTAGE IN PHILIPPINE CALL CENTERS
Figure 9 Philippines’ Offshore Attractiveness. 2005 & A ; 2007 A. T. Kearney Findingss
6 5 4 3 2 1 0 Fiscal Structure Business Environment People and Skills Availability
2005 2007 3. 6 3. 3
2005 2007 1. 2 1. 0
2005 1. 0
2007 1. 3
Ratio of Categories – 40:30:30
Philippines’ Score 2007 2005 Financial Structure Compensation Cost ( 8 ) Infrastructure Cost ( 1 ) Tax and Regulatory Cost ( 1 ) 7. 1 7. 7 0. 7 0. 8 0. 3 0. 5 8. 10 9. 00 Philippines’ Mark 2007 2005
Business Environment Country hazard / Economic and Political Environment ( 6 ) State Infrastructure ( 2 ) Cultural Adaptability ( 1 ) Security of Intellectual Property ( 1 )
1. 9 1. 2 0. 7 0. 3 4. 1
1. 8 0. 7 0. 8 0. 2 3. 5
Philippines’ Score 2007 2005 People Skills and Availability Relevant experience / IT BPO Industry size/quality ( 4 ) Size and handiness of labour force ( 2 ) Education ( 1. 5 ) Language ( 1. 5 ) Abrasion hazard ( 1 )
1. 2 0. 7 0. 9 1. 2 0. 2 4. 2
0. 9 0. 7 0. 9 0. 7 0. 6 3. 8
Beginning: AT Kearney 2005 and 2007 Global Services Location Index
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India Among the top rivals for seaward locations. India is the state with the most experience. The outgrowth of call centres as an chance for national growing came upon deregulating in the telecommunications industry in the mid-1990’s. much like the Filipino experience. The outsourcing sector. the first participants of which were medical written text service companies so followed by informations direction and client support suppliers. began to take root in the late 1990’s. As in the Philippines. the first operations consisted of support subordinates of transnational companies serving the parent company. Low-cost and highly-skilled labour. important betterments in IT substructure. and a positive concern environment spurred by industry organisations such as the National Association of Software and Services Companies ( NASSCOM ) propelled exponential growing for the industry in the old ages to follow. The NASSCOM estimates annually growing of 37 % for the outsourcing section with the call centre industry taking the sector. Call centres comprised 46 % of the entire US $ 4. 6billion gross the outsourcing sector earned in 2005. India is the strongest rival in the sector and is frequently tagged as the world’s first-choice in offshore outsourcing. In 2005. it has 8 % planetary
market portion and 68 % market portion in AsiaPacific. The Philippines’ greatest advantage over India is in linguistic communication accomplishment. American English being the dominant tongue franca in gross revenues and support minutess coursed through call centres. the Philippines has a civilization that is closer to the West and an English lingua that is the easiest to understand in the whole of Asia.
partially to exposure to American telecasting and pop civilization. every bit good as English being the medium of direction in all instruction degrees. It has been observed that India’s pool of endowment has the advantage in proficient. specialized occupational accomplishments while the Philippines’ competency is in broad humanistic disciplines. which provides more general cognition every bit good as capablenesss needed for back-office processing. e. g. . communicating accomplishments. and cultural adaptability. Increased planetary competition in the call centre sector has led to attempts to spread out the portfolio of services of the Indian IT-enabled services sector. NASSCOM studies that the last three to four old ages in India have been a period of variegation. India’s BPO companies have expanded to higher-value procedures through perpendicular integrating towards non-voice-based services such as back-office processing and content development. In 2005. client attention services comprised 34 % of entire BPO grosss in India. compared to 69 % in the Philippines.
12 INDUSTRY REPORT: THE PROBLEM OF SUSTAINABLE COMPETITIVE ADVANTAGE IN PHILIPPINE CALL CENTERS
Figure 10. 1
Figure 10. 2
Beginnings: DTI ( Philippines ) . PriceWaterhouseCoopers ( India )
China China is the preferable pick as a call centre location for companies aiming South Korea ( attracted by cultural Koreans life in China ) with which it has the closest cultural ties. China
is the merely other state in the universe that poses a menace to India every bit far as size and cost of labour supply is concerned. The annual cost of runing a call centre place in China is the lowest in Asia.
Table 1 Comparative Annual and Hourly Costs per Call Center Seat in China. India. Malaysia. the Philippines. Singapore and Thailand in USD ( $ ) Annual Cost per Hourly Cost Seat per Seat 13. 543. 00 3. 62 15. 872. 00 4. 24 34. 779. 00
9. 29 18. 086. 00 4. 83 66. 998. 00 18. 46 18. 527. 00 4. 95
China India Malaysia The Philippines Singapore Thailand
Beginning: callcentres. cyberspace
China’s cost advantage. nevertheless. is dampened by its lacks in Englishspeaking work force. In this respect. China can non as of yet compete head-on with India and the Philippines in the planetary outsourcing market. University enrolments nevertheless have grown 25 %
in recent old ages which increased the country’s potency to vie. China’s entry to the World Trade Organization has spurred the influx of capital every bit good as Western influence and analysts predict that in due clip the labour supply in China
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will be comparable to India in size every bit good as in accomplishment. Singapore Despite high labour costs. Singapore enjoys a comparative advantage from dependable bureaucratism. first-class proficient substructure. superior educational systems. political and economical stableness. and rigorous enforcement of rational belongings Torahs for information and information security. Singapore outsourcers provide high-value services differentiated from lowvalue. back-end procedures provided by other Asiatic states. To take advantage of this market niche. Singapore outsourcers market advanced offshore maps such as basic research. robotics. health care and medical nosologies. Singapore companies in bend outsource lower-value operations to India and China to derive cost advantage. Malaysia What Malaysia lacks in work force ( its population is significantly smaller than India or China and thereby can non run into the same economic systems of graduated table ) it makes up for in advanced substructure. Malaysia is 2nd merely to Singapore in IT fight rankings between states in Southeast Asia. Strong authorities support is
apparent in attempts such as the Multimedia Super Corridor undertaking. which includes the development of substructure in what they have called “intelligent cities” such as Cyberjaya and Penang Cybercity. where major IT leaders such as IBM and Motorola have already located their regional offshore service centres. Latin American Countries Latin American states such as Brazil. Chile and Mexico enjoy the advantage of being
“near-shore” finishs. or offshore servicing states near to the served state. this being the United States. Near-shore finishs are in the same time-zone as most clients. thereby decreasing the demand to set up multiple 8-hour displacements in the twenty-four hours every bit good as the demand to put in extra disbursals for hazard wage. safety insurance and the similar. The A. T. Kearney survey found Brazil has the best labour accomplishments in the part. Argentina has the cost advantage. while Chile has the best concern environment ( e. g. it has. for case. supplemented understandings with US and European companies with IP violation punishment clauses ) . Nonetheless. possibly the primary advantage of the part in general is the huge handiness and uncomparable quality of its bilingual ( English and Spanish ) call centres. much in demand in the United States. Eastern European Countries Eastern European states such as the Czech Republic. Poland. Romania and Hungary are possible picks for Western European states as a near-shore finish. Eastern European call centres provide cost. linguistic communication accomplishment. and time-zone advantages. Multilingual call centres for the multilingual European market can be easy and expeditiously set up in Eastern Europe more so than in Latin America or Asia. Customers from Germany and the United Kingdom moreover may prefer Eastern European call centres most peculiarly for its bilingual work force: citizens in most Eastern European states can talk both German and English. Reportedly. nevertheless. Eastern European states. most peculiarly Russia. demand to upgrade telecommunications substructure to vie with the other parts every bit good as to follow with European Union demands.
14 INDUSTRY REPORT: THE PROBLEM OF SUSTAINABLE COMPETITIVE ADVANTAGE IN PHILIPPINE CALL CENTERS
V. CONCLUSION The factors impacting house scheme. construction and competition involve the services offered by local houses. and how competitory locally provided services are against those provided by other states. Chiefly. this involves why the Philippines is chosen by call centre companies when doing the call centre location determination. The factors affecting demand conditions involve the germinating demands of the planetary market for call centre services. runing from the basic service of replying enquiries based on predefined books to the more complex service of supplying proficient aid and support. The sufficiency of related back uping industries will affect the province of local educational establishments. existent estate. transit and retail sectors and how these sectors contribute to prolong the growing of the local call centre industry. Finally the conditions impacting the cardinal factors of production. such as local skilled labour and mission-critical engineering. will besides be discussed. Firm Strategy. Structure and Rivalry Figure 11 Factors Affecting the Call Center Location Decision
As before mentioned. the first factor impacting fight is steadfast scheme. construction and competition. which chiefly contributes to why the Philippines is chosen by call centre companies when doing the call centre location determination. The offshore location determination is influenced by a figure of factors and it is against these standards that India. China. the Philippines and other states are evaluated. It follows that it is in these properties that the Philippines should execute for a distinguishable competitory advantage over the others. These factors include the undermentioned: quality and cost of labour ( including proficient competence and linguistic communication accomplishments ) . connectivity ( i. e. . telecommunications bandwidth ) cost and dependability. mature concern. regulative and technological environments for outsourcing operations. political stableness. and cultural alliance between the offshore outsourcer. the outsourcing company. and the clients to be served by the call centre.
Decision Criteria in Choosing an Offshore Call Center
Political Stability
Reliability and Cost of Connectivity Quality and Cost of Labor
Cultural Alignment
Mature Business Environment
Among these success factors. the Philippines competes strongest in ( 1 ) quality and cost of labour. and ( 2 ) cultural alliance. It is in these two factors that exponential growing in 2003 and
2004 can be attributed. The challenge of prolonging the Philippines’ advantage in the industry can be discussed from two vantage points: foremost from the position of making a distinct
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competitory advantage and second from the position of guaranting the distinguishable advantage created is imperviable to eroding. Menaces arise from deliberate efforts by viing entities to sabotage it and from developments in call centre operations and engineering that will switch the bases of competition. The benefit of lower cost is the Philippines’ most significant value offering to name centre investors and clients. The consequences of the AT Kearney study have shown that while other factors are besides important. the planetary competition in the call centre sector continues to be driven by cost at the present: it remains to be the most of import factor in the perceptual experience of the “attractiveness” of an outsourcing location. In this respect. the country’s low substructure and compensation costs. every bit good as the proviso of particular revenue enhancement grants within specific zones have contributed significantly to doing the state a preferable pick among investors. In add-on. the consequences of the survey besides emphasized that in the Philippines. call centres were given most accent among the outsourcing sectors and similarly highlighted the attempts of the authorities to advance these services by set uping particular economic zones that provide investors with freeport privileges. revenue enhancement shields and vacations. Among the participants in the planetary call centre industry. India outperforms all other states with a combination of advantages: low-priced labour every bit good as a progressive educational system guaranting a uninterrupted supply of highly-skilled employees. dependable low-priced substructure. supportive concern authorities. and a wealth of direction experience in the call centre industry. every bit good as in other outsourcing services. The Philippines straight competes against India by supplying labour and substructure at comparable rates and moreover provides the advantage of a Westernized civilization and better public presentation in colloquial English to appeal to US-and UKbased clients. Singapore has the highest compensation rates but has the advantage of good authorities reflected in lower costs of bureaucratism and corruptness. China’s major
advantage is its monolithic pool of available lowcost talent—only China can straight vie with India in size of available labor—however labour accomplishments are still limited in linguistic communication proficiency and direction experience in the industry. What makes India a success narrative is the combination of multiple beginnings of advantage available to the call centre investor. The Philippines’ current competitory advantage interim is in the combination of low compensation cost and high English proficiency. and while this advantage continues to convey extra grosss and employment to the sector. growing rates have besides been observed to be diminishing. seemingly due to two discernible tendencies: low credence rates and high abrasion rates. Both low credence and high abrasion threaten the advantages of labour handiness. cost and quality of Philippine call centres. The advantage of cost over other factors. i. e. . people and environment. impacting the offshore location determination is however non a ageless 1. The grading of proficient competence between the different states through globalisation and convergence of engineerings every bit good as the homogenisation of societal conditions between different economic systems may impact the importance of cost as a success factor. The ubiquitousness of information available through advanced mass media and telecommunications have besides brought approximately less cultural heterogeneousness between the states viing as call centre locations. The advantage of cultural alliance is hence non sole to the
Philippines and. farther. is one that erodes with the transition of clip and the handiness of communications engineering. Demand Conditions Despite the low-priced labour advantage offered by offshore call centres. companies continue to look for ways to derive even more cost nest eggs. if non from a more efficient and thereby cheaper work force. so from mechanization engineering. Meta Group’s engineering research services group reported an increasing figure of clients
16 INDUSTRY REPORT: THE PROBLEM OF SUSTAINABLE COMPETITIVE ADVANTAGE IN PHILIPPINE CALL CENTERS
taking to implement voice-automation engineering systems to manage criterion. everyday enquiries. e. g. . history balances. merchandise and service. payment offices. etc. . alternatively of undertaking the services of an outsourcer in a low-priced state or set uping their ain call centre operations offshore. The eventual result of this development is that. with the being of mechanization engineering. merely client calls necessitating more complicated aid will be routed to offshore call centres. possibly from the Philippines or India. This way means that clients will hold higher outlooks from call centre agents in seaward states. Agents will no longer be able to trust on simplified question-and-answer instructions or “scripts” to reply more complex inquiries that will be asked them. Industry analysts observe that. out of 100 appliers. merely three to five are hired given bing accomplishment demands. Support services for more complex enquiries. possibly necessitating proficient information or direction. will accordingly necessitate higher proficient competence. every bit good as more than equal communicating and problem-resolution accomplishments. Should such demands be made necessary. it is expected that the hiring rate will be lower in the old ages to come. unless enterprises are implemented to heighten the accomplishments and capablenesss of bing every bit good as future workers in this sector. Sufficiency of Related Industries The Philippines’ failing in information engineering substructure threatens the ability of the state to vie where value-added services require a higher telecommunications bandwidth. Despite being one of the top offshore location picks in the universe. the Philippines ranks. and has ever ranked ill in web preparedness studies. seen by most investors as steps of the fight of a state in information engineering. In both the 2004 and 2005 Network Readiness Index ( NRI ) listing compiled by the World Economic Forum ( WEF ) . the Philippines ranked in the lower degrees: 67th in a group of 100 in 2004 and even
lower in 2005 ( seventieth topographic point ) . Other outsourcing finishs fare likewise: India. the top location for offshore outsourcing is at fortieth topographic point while China. 2nd in the AT Kearney Index. is at fiftieth topographic point. The WEF NRI is a step of comparative public presentation in the undermentioned countries: a ) facets of the environment of a given state for development in information and communications engineering ( ICT ) such as the regulative government and legal model for ICT. and the available substructure ; B ) networked preparedness of persons. concerns and authoritiess ; and c ) ICT use by persons. concerns and authoritiess. The evident incompatibility between networked preparedness and other IT competence evaluations for the Philippines and the singular growing of IT-based services. made field by records of investing. gross. and employment really generated by the sector. is attributed by industry analysts to the observation that indices and rankings comparing states with each other consider all the parts in the state. from the most advanced countries to the undeveloped 1s. Developed states such as the United States. Japan. and Germany have progressed to a point where the handiness of telecommunications engineerings and other related services in the less urbanised parts are virtually at par with that of the most industrialised countries. Developing states are characterized by a pronounced difference in substructure and economic activity between the centres of concern and the rural. residential countries. Such is the instance of India. China and the Philippines where the little part of the population life and working in the centres of concern enjoy advanced engineering while the remainder have really limited entree to even the most basic calculating engineering. e. g. . internet entree. if at all entree is given them. However. call centres in developing states choose to turn up merely in the industrialized.
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technology-enabled centres of concern. Therefore. they are able to use. and at a cost advantage. the web substructure. hardware equipment. package and consulting services at a comparable technological degree to those used by call centres in more developed states. While it is valid that network-readiness studies include venues in the Philippines which call centres are non sing to turn up in. and that these call centres are finally established in the industrialised. technology-enabled centres of concern. it is still worthwhile sing that this shortcoming significantly limits the scope of options for call centre sites in the Philippines. Low substructure development in countries outside Metro Manila besides threaten the cost advantage as call centres are constrained with merely a few topographic points to turn up their operations since the location options are limited. the cost of existent estate in these countries additions. While on the one manus the rise in existent estate monetary values is seen as lending to the trickle-effects of gross growing in the call centre sectors. on the other manus it can be seen as a menace to the country’s cost advantage every bit far as existent estate and substructure costs are concerned. Factor Conditions The 2006 Asian Contact Center Industry Benchmarketing Report ranks human resource direction. peculiarly the countries of enlisting and agent turnover. as the greatest challenge faced by Asiatic contact centres. In the Philippines. the consistence of supply of qualified call centre force is threatened—as reflected in a really low 3 % credence rate—by evident debasement of the quality of primary and secondary instruction in both private and public schools. Although it has been reported that the mean 10-year-and-above literacy rate in the Philippines is above 93 % . literacy is non plenty to guarantee a place for a call centre
applier. Basic English proficiency. for that affair. is considered a minimal demand. sufficiency for the agent to be considered for a place. but still deficient to fit the higher degrees of conversational and even conversational proficiency required for engaging. While low cost labour still works to the country’s advantage. labour on the norm doing up 46 % of the entire budget of runing call centres. such an advantage will non be sustainable if the state is non able to provide every bit much as is needed by steadily turning demand. While engaging is going more and more rigorous. English proficiency in the formative degrees of instruction remains below norm. English linguistic communication accomplishments tend to decrease over clip. as shown by statistics reported by the Department of Education. e. g. . Rate 4 public school pupils show national norm of 42 % in English. while high school pupils show 30 % . As English and communicating topics are required less in college. it may be expected that the degree of proficiency will deteriorate more in the third degrees of instruction. Although English continues to be widely used in concern. in authorities ( at least in the high degrees ) . and in school. plans in local mass media and amusement are dominated by Tagalog movies. doing command of English a more hard undertaking for the mean call centre applier. The current province is reflected in the low credence rate among appliers in call centres and other BPO companies. Out of every 100 new college alumnuss using. merely three are hired. High abrasion rates and the addition in “poaching” and “piracy” of agents on the other manus endanger the low cost of labour as companies invest in benefits and compensation bundles to guarantee agents will non travel to a rival. In 2006. the labour abrasion rate in the Philippines is reported to be 18 % for full-time agents and 24 % for parttime agents. India has significantly higher abrasion rates. as follows:
18 INDUSTRY REPORT: THE PROBLEM OF SUSTAINABLE COMPETITIVE ADVANTAGE IN PHILIPPINE CALL CENTERS
Table 2 Comparative Mean Attrition Percentage for Full-Time and Part-Time Call Center Agents in China. India. Malaysia. the Philippines. Singapore and Thailand Mean Attrition ( FullTime ) 17 % 38 % 18 % 18 % 16 % 15 %
China India Malaysia The Philippines Singapore
Average Attrition ( Part-Time ) 29 % 32 % 24 % 24 % 21 %
16 %
Thailand Source: callcentres. cyberspace
At this rate. a occupation in a call centre is already considered as a calling in the Philippines. and non looked upon as simply a “temp” place as in the United States. Nonetheless. “poaching” or “pirating” of employees between call centres has already been observed because of the limited endowment pool. Call centres are challenged to implement best patterns in controling employee abrasion in the call centre industry such as a flexible and contributing environment. high inducements. and developing strategies. and more significantly. a calling way development program to convert college alumnuss that being a call centre agent is non a “dead-end” type of occupation. The Challenge of Moving Forward The inquiry remains as to who will bear the cost of betterments required to beef up all factors necessary to guarantee the sustainability of the Philippines’ competitory advantage in the call centre industry. Some call centres have shouldered the cost themselves. offering free inhouse preparation for new hires. Still others have established joint attempts with bing universities and the Technical Education and Skills Development Authority ( TESDA ) to integrate call center-oriented preparation demands in their course of study and classs. Call centres have established forces development enterprises. e. g. . in-house preparation and rating. to heighten accomplishment. and compensation and benefits enterprises. e. g. . higher allowances. all-expense paid vacations and holidaies. calling development
planning. etc. . to control abrasion rates. guarantee greater stableness of the work force size. and lessen the “poaching” of call centre agents. More call centres are besides lending to the development of the countryside. more specifically the locations outside Metro Manila such as Laguna. Baguio. La Union. Cebu. Davao. Cagayan de Oro. Iloilo. etc. Geographic variegation. i. e. . spread outing call centre operations to states. will supply more labour supply. and take a breathing room to reply to the intense scrambling for office infinite in Metro Manila. Call centre operations will besides promote substructure development in other metro metropoliss. with the possibility of retroflexing the development in the metropoliss of Metro Manila in substructure and accomplishment to the countryside countries. Another chance available to the sector is value variegation. India’s move towards beef uping non-voice services was non lost on Philippine ears. In its
prognosis towards 2010. the Department of Trade and Industry ( DTI ) expressed its mark to increase the portion of other BPO services in the entire BPO gross pie while diminishing dependance on call centres. which might now be demoing marks of diminution. The semiconducting material industry in its extremum of growing during the mid-1980’s besides prompted recommendations toward variegation towards higher-value procedures. At the clip. the sector chiefly consisted of low-level technologysupported procedures. chiefly automated simple assembly of semiconducting material devices and merchandise testing. Even now. industry activity in high-level
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technology-supported activities such as wafer production and device design are still yet to make the growing phase. The Philippines’ competitory advantage in the call centre industry may be sustained through the sweetening of supply conditions. strengthening of related industries. and geographical variegation. Whether these attempts will work will be determined by two developments industry participants should take attention to detect at the stopping point of the twelvemonth: foremost. how the market will react to the industry’s attempts. i. e. . whether the growing in demand will be sustained by uninterrupted influx of new contracts and whether forecasted additions in employment. installation enlargement and investing will be attained or exceeded ; 2nd. how the industry will reply the demands of the market.
i. e. . whether the entire operational capacity ( as to labour supply. connectivity. engineering. installation and existent estate ) of the call centre sector will be sufficient to react to the rise in demand. These developments will bespeak whether the call centre industry can change by reversal the tide and arrest impending diminution. However. the industry should be prepared should the lag in growing rates persist in the coming old ages. bespeaking that the country’s advantage has been weakened by the supply strength of other states such as India or China. In this instance. a prudent response that call centres should see is to diversify into other BPO sectors
such as high-value. non-voice-based services to counterbalance for the effects of diminution in the call centre industry.
Mentions
A. T. Kearney ( 2007 & A ; 2005 ) . Global services location index. Balfour. F. ( 2003. February 3 ) . The manner. manner back office. Business Week. Bharadwaj. G. . Varadarajan. P. & A ; Fahy. J. ( 1993 ) . Sustainable competitory advantage in service industries: a conceptual theoretical account and research propositions. Journal of Marketing. 57 ( 4 ) . p. 83. Business Process Association of the Philippines. hypertext transfer protocol: //bpap. com. ph Board of Investments. hypertext transfer protocol: //boi. gov. ph Call Center Directory. hypertext transfer protocol: //callcenterdirectory. net Callcentres. cyberspace. 2006 Asiatic contact centre industry benchmarking study. Contact Center World. hypertext transfer protocol: //contactcenterworld. com Cruz. Dennis H. ( 1981. October ) A reappraisal of international farm outing agreements in the Filipino electronics ( semiconducting material ) industry. October 1981. Department of Trade and Industry. hypertext transfer protocol: //dti. gov. pg Domingo. G. ( 2005. April 11 ) . BOI. BPAP. CICT: What roles they play. Computer World. Domingo. G. ( 2005. March 7 ) . Why we rate ill in engineering in planetary competitory studies. Computer World.
20 INDUSTRY REPORT: THE PROBLEM OF SUSTAINABLE COMPETITIVE ADVANTAGE IN PHILIPPINE CALL CENTERS
Frost & A ; Sullivan ( 2005. December 20 ) . Appraisal of the Asia Pacific contact centre markets. Hookway. J. ( 2004. October 7 ) . The services by-product. Far Eastern Economic Review. IBON Databank Phil. Inc. ( 1990 ) . The semiconducting material industry. Institute for Developmental and Econometric Analysis. Inc. Call centre industry and the Filipino economic system. Lecture delivered at the UP School of Economics. March 2006. International Customer Management Institute. hypertext transfer protocol: //www. entrance. com IT Matters. hypertext transfer protocol: //itmatters. com. ph McDougall. P. ( 2004. January 26 ) . Automation takes toll on seaward workers. Information Week.
Notes
1
Choice of the 10 top call centre companies is arbitrary and non based on an nonsubjective ranking of fiscal public presentation. The subset was intended to exemplify industry concentration: how a little minority of 10 call centres have contributed significantly more grosss to the sector than the other 138.
