The Philippines' next step in the BPO ladder

i.t. matters
Monday April 03, 2006 | MANILA, PHILIPPINES

News

Procurement, knowledge outsourcing

The Philippines' next step in the BPO ladder

After the call center boom, Philippines is poised to reap a windfall from providing higher end services, particularly: global procurement and knowledge process outsourcing.

Procurement outsourcing -- by which companies tap other firms to handle the analysis, sourcing and actual procurement for them -- is projected to have a market worth $7 billion by 2008, according to a study done by research firm Frost & Sullivan.

Unlike in the call center industry with 105 current players, the Philippines is considered as a new entrant with only two providers engaged in procurement outsourcing, namely: TransProcure Corp. and the consortium-led BayanTrade.

Ravi Kumaraswami, Asia Pacific managing director of leading spend management solution provider Ariba, said an increasing number of companies are now starting to tap procurement outsourcing to save on costs, increase margin and improve market competitiveness.

For one, Mr. Kumaraswami said there is Tata Motors, a Tata Group company, considered as India's largest private sector group with stakes in over 93 companies in various sectors. He said Tata Motors recently approached Ariba when it decided to develop a low-cost $12,000 car.

"With this cost, we looked out and began to source materials from various locations, including the Phillippines. By doing this, we were able to help Tata meet their desired price tag and margin," Mr. Kumaraswami said.

Charlie P. Villasenor, president and chief executive of TransProcure, said the outsourcing procurement service offers more value for the company. TransProcure offers procurement consulting and technology application, particularly Ariba, to better manage the procurement process of its clients.

"Being in the Philippines has worked to our advantage. We have been able to work hand-in-hand with customers and partners in Asia because of our existing network and convenient time zones. The same is true for Europe and America," Mr. Villasenor said.

At the same time, the Trade department is urging firms involved in business process outsourcing (BPOs) to move up the value chain and consider the opportunities in knowledge process outsourcing (KPO).

Trade Secretary Peter B. Favila said there the KPO sector presents huge opportunities since it requires more specialized skills.

In a study conducted by business research firm Evalueserve, KPO revenues are projected to grow by 46% to $17 billion by 2010.

"It will be good for [firms] to consider moving up the value chain and explore the opportunities in the KPO sector," said Mr. Favila.

Professional services that command higher fees are usually required in the KPO sector. Among the professional services that can now be outsourced include legal research, basic land development and designing, and medical research.

The government is banking on BPO to generate more jobs, especially for new graduates that strain the country's labor pool each year.

But Mr. Favila admits much needs to be done to meet BPO firms' manpower requirements. He said President Gloria Macapagal-Arroyo plans to meet with university officials during her provincial sorties to tell them about the opportunities in the BPO sector and urge them to upgrade the English skills of their students.

The Philippines is one of the preferred destinations for outsourced services due to the English proficiency of its workers. But BPO firms have already started complaining that it has become harder to tap English-proficient workers, citing that only one out of six applicants are hired by call centers.

Meanwhile, Mr. Favila disclosed that Morgan Stanley has plans to expand its call center perations here in the Philippines. "They gave me a courtesy call to disclose their expansion plans," said Mr. Favila, who did not give any other details about the firm's expansion plans. -- M. E. Estavillo and J. A. Ng

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