WE CAN'T DEVELOP ICT IN A VACUUM

MANILA, May 25, 2004  (STAR) By Alma Buelva  -  By 2009, the Philippines will have captured half of the worldís call center and business process outsourcing business, says Trade and Industry Secretary Cesar Purisima.

In the last six months since he was appointed DTI secretary, the former chairman of the Sycip, Gorres and Velayo (SGV) accounting firm has pushed to further develop the IT services sector, mainly due to its potential for creating more jobs and income for the country.

In 2003, the countryís IT investments posted an impressive 23 percent growth equivalent to P6.42 billion. About 69 percent of these investments (P4.46 billion) came from about 60 call centers that operate mostly in Metro Manila, Clark and Cebu. It is no surprise then that the development of the IT services sector became one of the DTIís five key investment and export promotion goals for the first half of 2004. In fact, ICT remains among the preferred activities in this yearís Investment Priority Plan (IPP), and ventures in this field are eligible for incentives from the Board of Investments (BOI).

By yearís end, the Philippines is projected to have 40,000 call center seats. Capacity is set to double in the next year. By continuously intensifying the countryís trade promotion and skills training programs, Purisima bets these targets are achievable, just like his goal to make the country the worldís call center capital in five years.

To sustain the sectorís growth, Purisima told NetWorks that new foreign markets outside the United States must be tapped and that emerging IT service areas must be explored. He also said the industry must open up and encourage more foreign BPO and call center investments even from India, the countryís top rival in e-services, to accelerate its development.

Excerpts of Secretary Purisimaís exclusive interview with NetWorks follow:

India In Our Midst

NetWorks: How can the presence of foreign call centers that also operate off India advance the countryís bid to win more markets against its key competitors abroad?

Purisima: I donít look at India as competition. I think our strategy should be what I call "India + X," that we will be the second leading player in the IT space after India. I donít think one country can have 100 percent market share simply because companies that outsource their backroom operations want to spread their eggs, so to speak, in several baskets. The Philippines is ideally positioned to be that second basket to India. There are Indian companies that have set up operations in the Philippines because their customers demand geographic diversity. The Philippines compares favorably to Indian call centers. In fact, customers that outsource to the Philippines and India say the customer satisfaction ratings for the Philippines are quite good compared to India. Contact center is an area where weíve done very well and itís growing again 100 percent this year and hopefully, another 100 percent next year.

The other area Iím really very hopeful about is BPO (business process outsourcing), principally in finance and human resource areas because of our depth in these fields. We have over a hundred thousand accountants, which is very close to that of India.

NetWorks: What assurances can you give to some local players that are concerned about seeing their rival Indian companies operating in the country?

Purisima: Thereís fair competition and (weíre in) a global environment. Itís good for us that these Indian companies operate in the Philippines. We need their skills and networks. The fact is we have a lot of college graduates (every year) Ė over 400,000 Ė and we need to create opportunities for them. By having competition we become better. The best example of the good thing that competition does is in telecommunications. In 1992, Lee Kuan Yew of Singapore said in a speech that 90 percent of Filipinos were waiting for phone lines and 10 percent were waiting for dial tones. That spurred us to act and now we are among the leaders in the telecommunications space. For me, we cannot develop our ICT sector in a vacuum. We accelerate our development by opening it up so that we learn from the others and by making better use of our natural competitive advantages such as the fact that we are the third largest English-speaking country in the world and we have a very young population.

Software Installation

NetWorks: Is there a reason to believe other types of IT services are getting less attention from the government compared to contact centers and BPO?

Purisima: Thatís not really true as we are also trying to push the others. We believe there are stages of development. As we build our base in contact centers we will go to BPO. As we develop BPO the support for software development and others will also come. We are also heavily into engineering design and weíve had animation for the longest time. Ultimately, we canít just grow in one area. We have to build a strong base of skills that can be used in all the six IT service areas (including legal and medical transcription). As you know, some of these businesses might merge. For example, our success in mobile telecommunications is spurring our software industry to develop mobile applications and weíre now leaders in that area. In medical and legal transcription, we need to develop software that will make it easier for doctors and lawyers abroad to use the transcripts we send over.

NetWorks: What would you say to those who argue that thereís no beating India in software development and itís easier to train call center agents than software developers, anyway?

Purisima: Obviously, you win in areas where your competitive advantages are very clear and right now our competitive advantage is very clear in the contact center and BPO space. But as we grow and tie up with partners from India, we will catch up. In fact, some of our companies are putting up operations in India. We continue to globalize. Pretty soon, there will be Indian talents working here and developing our people. To say letís quit on something is not the right approach. The right approach is to continue nurturing our skills inventory and marketing areas that are already ripe.

Give Me Five

NetWorks: What will be our major market sources for IT services aside from the US in the next five years and how actively are we pursuing these other markets now?

Purisima: Europe and Japan are emerging markets. We are working closely with Japan to help our people pass the JITSE examinations and build our Japanese language capability. There are now over 50 Japanese software companies in the Philippines and some of our call centers have Japanese-speaking staff. One of our major call centers is bidding for major BPO work in Japan and they will probably get it. As we negotiate our EPA (Economic Partnership Agreement) with Japan, it will make it easier for us to tap the Japanese market. Japan is the second largest economy in the world with a rapidly aging population and high cost of services. There are thousands of Filipinos in Japan who make a very good base of Japanese-speaking Filipinos.

Europe is also rapidly agingÖ My point is the market opportunity is so big that we just get one percent here and there and get our act together and before we know it we will have a very big industry thatís growing rapidly.

NetWorks: Can the IT outsourced service boom stem the tide of Filipinos migrating to work or live abroad in the next five years?

Purisima: My hope and my dream is that there would be fewer Filipinos who have to travel abroad to find opportunities. The challenge is to bring a lot of opportunities here so that our countrymen donít need to work abroad. In a more global environment people will really have to travel, but we should have the option to stay. I see this happening in the future, if we get our act together and focus on what I see as our three competitive advantages: people and demography, location and natural endowments.

As Iíve said, weíre the third largest English-speaking country in the world with a population that averages 25 years old. Our good location is also something that no one can take from us. We are right smack in the middle of Asia; three to five hours from any of the Asian capitals. We should use it as basis to make us more competitive not just in the area of logistics but also to serve as gateway to the Pacific and Asia so trading nations will go through us. Iím really bullish because everything is in our favor in these areas.

NetWorks: Do you see the IT outsource industry growth reaching a plateau after five years?

Purisima: It will not grow 100 percent every year but it will continue to grow. We havenít really tapped everything in the marketplace. Someone made an estimate that if you just tap five percent of the backroom operations for BPO in the US, it would have about 800,000 seats.

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As more US players locate their operations in the Philippines, the BOI estimates that 70 percent of the sectorís forecast growth would come from existing players while 30 percent would come from new ones.

"Over the past four years, the contact center industry has been growing phenomenally from practically zero seat to around 20,000 seats today," Purisima said during the recent opening of the Pacific Hub Corp., a call center located in Pasig City. He added that the country already captured 20 percent of the present global market.

Meanwhile, the DTI secretary chose to dismiss the bad press that outsourcing is getting especially in the US, saying, "The Sober Academics have said that outsourcing actually helped the US economy as the lower-paying jobs go to other countries and the high-paying jobs stay there. In fact, the US is the beneficiary of a global economy; $45 billion a week goes to the US. I think it is (anti-outsourcing) just nice for political rhetoric."

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To reach the author, send e-mail to ajbuelva@gmail.com.


Reported by: Sol Jose Vanzi

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