Beshouri discussed McKinsey’s recent study on business process outsourcing involving 16 countries and Senator Roxas cited the economic benefits of the outsourcing industry to the country, the challenges facing the different sectors of the industry, and presented some strategies to further improve the country’s edge as an outsourcing destination.

The large-scale McKinsey study, which included 16 countries were a mix of high, medium, and low wage countries with adequate representation from all regions and involved countries with high global outsourcing potential.   Some of these countries were: Canada, US, Mexico, Brazil, UK, Ireland, Russia, China, India, Malaysia, Japan, and the Philippines.

The countries were surveyed using several dimensions: vendor landscape (employees in IT, share of services, exports, ITO & BPO market size), market potential (GDP, growth of GDP, access to nearby markets), risk profile (disruptive events; risks like security, regulation, country investment, data protection), and environment (gov’t support, business and living environment, convenience of doing business).

Key findings for the country were:
• The country is in an advantage to shape BPO & offshoring and to capture an unfair share of the market
• The country’s strength include a leading cost position, a competitive labor force that is superior to China in six out of six categories and to India in five of six categories.
• Labor suitability in the country is higher than Russia and China and of 100 graduates with a correct degree, firms will employ 20% of the country’s graduates if there was a demand for all positions.
• The constraint to growth is scarcity of middle managers.

For the country to be great in a highly competitive market, the study identified risk profile and business environment as key areas for development and for it to capture an unfair share of the BPO and offshoring market, the country needs a clear strategy and program to addresses the weakneeses and an aggressive marketing campaign to overcome perception and reality.

Of the 8 dimensions to location attractiveness, the Philippines earned a gold in labor cost making us the most attractive country in terms of cost, silver in suitability & quality of labor, and a bronze for quantity of labor, telecom, real estate and transportation, and quality of infrastructure.  On the other hand, the country ranked low in vendor landscape, market potential, and risk profile.

Among the study’s recommendations were:
• To develop a clear strategy to attract investment from offshoring companies that would market the Philippines for its strength, to focus on non-voice BPO, and to develop existing effective vendors.
• To continue attracting flagship clients.
• To enhance suitable labor supply by encouraging improvements in language education, tackling the shortage of management capacity, and attracting overseas Filipinos back into the country.
• To use incentives sparingly while focusing on closing a deal.
• To tackle infrastructure weaknesses by developing cyberhubs with world class networks, extending capacity and lowering cost of operation, and providing enhanced security tasks.
• And, to establish a strong industry association.

Sen. Roxas recounted how the BPO industry developed under his watch at the DTI and how the different sectors of the industry were able to address the different components needed to spur their growth.  He also listed some challenges the industry needs to address: improve the student English proficiency to raise the current take-up rate of applicants from 3% to 4-5%; lower vacancy rates of buildings; and come up with labor laws that will address the technicalities of the industry.

In order to address these challenges, he suggested a new plan that will take the industry forward.  First is to develop small and medium scale enterprises particularly on software development.  Second is to triangulate larger markets including Taipei, Hong Kong, and China.  Third is to expand the current skill sets.  Fourth is for the private sector to join hands with the government in efforts to improve competencies and to provide training and incentives.  And last, to formalize the sub-sectors to facilitate implementation of laws relevant to their sector.
The country’s BPO industry is thriving and expanding to the provinces.  Currently, regional IT hubs favorable to BPO and offshoring can be found in Bacolod, Bataan, Bohol, Bulacan, Cagayan de Oro, Cebu, Gen. Santos, Leyte, Naga, Pangasinan, and Zamboanga.

In a related development, the Philippine Software Industry Association has identified niche markets that will boost software exports: mobile/wireless applications, gaming, and animation.
Kudos to CITEM for a successful ESP and here’s looking forward to a bigger ESP in 2007.

(For feedback, comments, suggestions email me at openingpagemb@yahoo.com)