Monday, April 25, 2005

Outsourcing to overtake telecoms as top moneymaker in five years

Outsourcing to overtake telecoms as top moneymaker in five years


The outsourcing business is poised to dislodge telecommunications as the Philippines’ top moneymaker over the next five years with the economic impact of call centers and data encoding expected to grow by nearly twice that of mobile phones and prepaid call and text cards.

This was based on a study by BNP Paribas Peregrine Securities Inc. which says that call centers such as Advanced Contact Solutions, Inc. (ACS), the wholly-owned call center of publicly-listed Fil Hispano Holdings Corp. (FHC), that are quick in providing quality service will have the edge in the fast-rising industry.

In its study, BNP Paribas said the outsourcing business is projected to contribute 6.5 percent of the Philippine gross domestic product (GDP) by 2010 or at par with the impact of the telecommunications and transport sectors combined.

"Outsourcing in general is expected to turn into a $200-billion global industry by 2010. For the Philippines, this would translate into a 20-fold increase in revenues from around $500 million in 2004 to $10 billion, assuming the country is able to capture its target market share of 5 percent,’’ BNP Paribas said.

Competition in the global outsourcing business is understandably tightening up with India still the dominant player and China with its cheap labor advantage surfacing as a major player.

But BNP Paribas said that the Philippines would "hold its own against the competition" in view of its large pool of English-speaking college graduates preferred by American companies.

The Philippines is becoming the choice site of Americans for voice-enabled services with India cornering the non-voice demand.

‘The Philippines has already emerged as an alternative site to India, particularly in the call center segment mainly because American clients are forcing service providers to set up back-up operations elsewhere as a safety measure," said BNP Paribas.

This should explain why some Indian outsourcing firms like WiPro Spectramind and ICICI OneSource were on the hunt for opportunities in the Philippines.

With demand for call center services on the rise, BNP Paribas said the main challenge of the industry is not bringing in revenues because there are plenty to go around but providing customer service agents ahead of the competition.

"Poaching is intense particularly among mid-level officers with some degree of experience in the business," BNP Paribas said.

BNP Paribas cited ACS as one of the best among independent providers or is it entire industry in making the "quick ramp up which is crucial in securing new contracts.’’

ACS has grown more than ten times its capacity of 252 seats in 2002 to 2,700 this year making it the fourth-biggest call center in the country.

It has around 750 candidates waiting on the sidelines which allow it to deploy as many seats in just 45 days, including training and fitting of new office space.

BNP Paribas said ACS’s strategy of building long-term relationships with its agents by giving them a clear career path and make their work environment as comfortable as possible.

ACS has an average attrition rate of below 37 percent of substantially below the industry rate of 55 percent.

It has also been innovative in scouring the pool of college graduates by forging alliance by going outside the normal route.

ACS has tied up with premier schools such as the Ateneo Graduate School to help train potential agents; put up the country’s first call center institute; and tied up with the North Luzon Growth Commission in herding state-owned universities in Northern Luzon to send their students to the firm’s exclusive job fairs.

The company has shunned the "shotgun approach" favored by the industry in recruiting agents.

"We target only those who are proficient in English so that further training will involve mostly skills specific to a particular service. As a result, it accepts as much as 90 to 95 percent of all those who pass the preliminary screening,’’ BNP Paribas said.

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