Philippines is part of the process, even for India

The business outsourcing industry has always been synonymous with one particular country. But another Asian nation is making inroads at a much faster pace.

Call centre agents in the Philippines attend to US clients at a new branch of Advance Contact Solutions in Quezon city.

India's dominance in the outsourcing industry is well known and not just in business circles. Words such as "being Bangalored" as a verb for employees in developed economies being retrenched in favour of some cheaper employee in India have entered popular culture.

But it is not India that has the fastest-growing business process outsourcing (BPO) industry. The Philippine BPO industry, estimated to be worth about US$7 billion (Dh25.71bn) last year, is now growing at about 35 per cent, or twice the rate of India. It is true that India still represents about 70 per cent of the world BPO market while the Philippines accounts for only about 15 per cent, but taking into account that the Philippines has less than 10 per cent of India's population, it is an impressive record.

It should not be surprising that the Philippines serves as an alternative to India in the global BPO landscape, since it is the other country in Asia with a large English-language presence and low wages. While English is widely spoken in Malaysia and Singapore, wages there are high. But low wages are not the only attraction in the Philippines. The cultural compatibility that Filipinos have with their former imperial power, the US - which is the largest source for BPO services - is an important factor.

Let us take a specific example cited to me by an operator of medical transcription services. Medical transcription is the transcribing of digital voice notes made by US-based doctors in India or Philippines. In this case, the patient goes to the doctor in the US and complains of stomach problems and the doctor asks the patient where his last meal was. The patient replies "Taco Bell". The Indian transcriber is confused as fast food is not common in India and even McDonald's has been forced to go largely vegetarian there. While the Indian is thinking about temple bells, the Filipino, whose country is dotted with every imaginable brand of fast food from the US, immediately knows what the patient is referring to when he says "Taco Bell".

Call centre managers also say that Filipinos are more patient and polite than their Indian counterparts. This may be a subjective judgement but it is undoubtedly true that if you know the culture intuitively, it is easier to come across as being polite and helpful, no matter what your private thoughts might be, whereas it is easy enough to cause offence without intending to in a culture you do not understand well.

Since the industry in the Philippines is young and its engineering talent pool is not as deep as that of India, many of the Philippines-based companies are recruiting higher level Indian managers to come and work in the Philippines with attractive salary packages. Almost all the major Indian BPO companies, as well as the major US corporations such as American Express, Cisco and HP, have opened branches in the Philippines now to provide their global clients with services in both India and the Philippines. Cisco, which has a large presence in India and does research and development in sophisticated engineering services there, also bases call centres in the Philippines for household customers seeking help with its home-based wireless routers.

There is no real danger of the Philippines overtaking India in the foreseeable future. India produces about 3.5 million graduates a year and a substantial portion of themm are engineers. The Philippines produces only about 10 per cent of India's total and not even enough engineers to meet its own needs fully. Wages in the Philippines are also higher than in India for even the lower positions, and substantially higher for the higher positions, which is why there are a lot of Indian expatriates in Manila now.

However it is not a zero sum game. The business process industry is expected to reach the trillion-dollar mark soon and out of this only 3 per cent is currently being outsourced to countries such as India and the Philippines. Estimates say that in the coming decades about 70 per cent of all business processes will be outsourced compared with the current 2 per cent. That means there is plenty of opportunity still left for both these Asian countries.