BPO Presentation

INTEGRATING GLOBAL PROCESSES
THE PHILIPPINE OUTSOURCING ADVANTAGE
1
The Philippine IT & BPO Industry
Philippine IT-BPO industry size
2006–2009; US$ billion
Leading the Outsourcing Evolution
VOICE
• Established leader for voice services
• 30% share of U.S. and 15-20% of APAC
• $5.70 billion revenues in 2010, higher than
India’s projected $5.58 billion
9.0
7.2
6.1
4.8
Non-voice
• Credible 10% share that is rapidly growing
• Large industry-specific opportunity (e.g.
BFSI, healthcare, media, HR, KPO
• Evolving value-propositions - tools, process
improvement, end-to-end accountability
3.2
2006
IT/ESO
• Highly penetrated applications market
• Emerging opportunities to penetrate
ASEAN, innovate for the U.S.
• Third largest pool of engineers after India
and China in APAC
Source: Everest analysis
~19%
~25%
~50%
~26%
2007
2008
2009
2010E
440
530
7%
8%
# FTEs
(~„000)
240
300
370
Global
share1
5%
6%
6%
FTEs = full-time employees, YoY = year on year
1 Philippines IT-BPO market as percentage of global offshore
services market, in revenue terms
Sources: BPAP; Everest analysis
Courtesy of the Business Processing Association of the Philippines
2
Primed for Leadership
Cost competitive, almost as much as India, across service segments
 One of the lowest cost destinations for English work, and for nonvoice and IT services work
 Relatively minimal inflation and currency volatility indicate
continued cost competitiveness in future
Costs
Large, scalable talent
pool—next only to
India, China
 Top-3 global location in
graduate pool size
 Third-largest talent pool in
delivery of voice
BPO, F&A, and IT services
 Amongst the largest
experienced talent pools
Source: Everest experience
Courtesy of the Business Processing Association of the Philippines
Relatively minimal risk
perception, primarily directed
at geopolitical concerns
 High-quality physical and
social infrastructure
 Favorable investment
climate
 Limited risks to talent
scalability
 Natural disasters in certain
regions and sporadic
political incidents are key
albeit manageable
concerns
3
Next Wave of Growth for the Philippines
Market dynamics
 Maturing market
Voice BPO
 Philippines a strong global leader
 30% share in U.S.; 15%‒20% in UK/APAC
 Near-shore competition for U.S., UK, EU
 Large industry-specific opportunity
(e.g., banking, health care, media, KPO)
Non-voice
BPO
 Credible Philippine share (~10%). Effective
alternative to India in several non-voice areas
 Evolving value expectations: tools, process
improvement, end-to-end accountability
 Highly penetrated applications market
IT-ESO
Growth Opportunities
 Extend impact in the U.S.
across services
 Leverage credibility in
healthcare, banking, teleco
m and media to drive
rapid, non-voice growth
 Capture select
opportunities outside of the
U.S.
 Voice and non-voice in
the UK
 IT-ESO and regional
shared services for APAC
 Limited market share (~1%) in a large and
growing, yet highly competitive market
 Emerging opportunities to penetrate
ASEAN, innovate for the U.S.
ASEAN = Association of Southeast Asian Nations, KPO = knowledge process outsourcing
4
Hallmarks of Our Value Proposition
Scalable Talent Pool
• 3rd largest English speaking country, 12th most populous country
• 90+ million population, 36+ million work force
• Goldman Sachs N-11
Solid Western-based
Educational System
• 400,000 college graduates per year (28% Business and
Accountancy, 21% Engineering and IT)
• Western based legal and accounting curriculum and certification
• 93% Literacy Rate
Cultural Affinity
with the West
Service Orientation
Excellent
Communication Skills
• Only sizeable colony of the US, 1898-1946
• Western pop culture pervasive (“They get it”)
• Warm and patient (“They answer the phone with a smile”)
• Highly empathetic, eager to please and not to disappoint
• Cultural bias against conflict
• Neutral accent, acceptable to American and British customers
• Familiar with Western slang and accents
• Natural rapport building skills
Slide courtesy of Stream Global BPO
5
Hallmarks of Our Value Proposition
Cost
Competitiveness
Relatively Low
Attrition
Plentiful Quality
Office Space
Attractive
Investments
packages
Global Reputation
• One of the lowest labor-cost providers, with total labor costs at a small
percentage of the cost of equivalent jobs in the U.S. or U.K.
• All-in costs amongst lowest in the world
• Unlike India, few other growth sectors competing for talent
• Positive perception of BPO careers (not just for fresh graduates)
• Abundant and low-cost real estate in several urban areas
• Renters‟ market today, 1.1 million sq. m. in new supply 2009-2010 of
which less than 10% is committed
• 4 to 8 year Income Tax Holiday
• Approximately 15% tax rate after lapse of holiday
• Catching up with India rapidly; now #1 for voice BPO
• Outsourcing Destination of the Year – NOA UK
• Positive experiences of captives JPMorgan, Citigroup, P&G, Deutsche
Bank, Nestle AOA, HSBC, Shell, etc.,
Slide courtesy of Stream Global BPO
6
Hallmarks of Our Value Proposition
Strategic Location in
Asia
• One of the lowest labor-cost providers, with total labor costs at a small
percentage of the cost of equivalent jobs in the U.S. or U.K.
• All-in costs amongst lowest in the world
Excellent Telecom
Infrastructure
• Began deregulating early in the mid-90s
• Cost of bandwidth has dropped over 85% in last 5 years (from $14K in
2001 to < $1.5K per month for E1 lines to US)
Reliable
Infrastructure
Support
Top Choice for
Quality of Living
Strong Government –
Private Sector
Partnership
• Privately-owned companies providing energy sources such as
renewable, geothermal, hydro, solar and wind
• 9 international airports, 12 roll-on roll-off ports,
• Economic zones and IT parks
• Accessible and affordable luxuries – value-for-money housing, modern
recreational facilities, first-rate educational institutions adopting
international standards, business centers, hospitals, etc.
• Top ten in World Economic Forum‟s Gender Gap Index
• Comprehensive Everest-O2P-BPAP (Business Processing Association of
the Philippines) Roadmap 2016 to achieve $25+ Billion revenues, 1+
million employees
7
Development Path of IT / BPO Locations
Next Wave Cities
Increasing Location Attractiveness
Centers of
Excellence
Manila-NCR
Cebu
Clark
Top 10
Next Wave
Cities
Davao
Santa Rosa
Bacolod
Iloilo
Metro Cavite
Lipa
Cagayan de
Oro
Malolos
Baguio
Dumaguete
Cities in
Waiting
Cabanatuan
Cainta
Dagupan
General Santos
Legaspi
Naga
Rizal
South Bulacan
Subic
Tuguegarao
Urdaneta
Aspirants
Centers of Excellence
Next Wave Cities
Balanga
La Union
Tagbilaran
Tarlac
Absorptive Capacity
Potential IT-BPO support
 Super cities >15,000
 Large cities = 10,000–15,000
 Mid-sized cities = 5,000–10,000
 20+ cities = <5,000 each
 Eases concerns on salary and rental costs, talent availability
 About 15% of 442,000 FTEs and 22% of BPO in 2009 activities
were in NWCs (BPAP)
Notes: National Capital Region (NCR) includes Makati , Fort
Bonifacio, Pasig, Quezon
City, Alabang, Manila, Mandaluyong
Wide Range of Verticals
Wide range of industry-verticals serviced
Captives of 60+ Fortune 1000 firms
Supplier presence across industry verticals1
Banking and financial services
# FTEs servicing (’000s)
# Firms
75+
50+
MDR and healthcare
40+
40+
Telecom, travel, energy, and media
25+
15+
25+
BFSI = banking, financial services, insurance; MDR = manufacturing, distribution, retail
1 Per Everest-O2P survey of ~200 firms across the Philippines IT-BPO industry
Sources: BPAP database; survey results
9
Established Mature Tier-1 Destination
Mature
Eastern Europe:
Established nearshore destination
Mexico, Brazil, Columbia,
Chile, and Argentina:
Evolving rapidly as nearshore base to drive
penetration in North
America
Credible
Emerging
China:
Domestic and APAC centric
scale and capabilities
Philippines:
Reaching #1 in voice
BPO (330K+ FTEs)
#2 in non-voice/IT-BPO
(200K+ FTEs)
Egypt, Morocco, and
South Africa:
Significant governmentbacked push to target
UK and Europe
India:
Industry leading scale and
capabilities
Voice: 350K+ FTEs
Non-voice IT-BPO: 1.4M+ FTEs)
Source: Everest analysis
Proprietary & Confidential. Copyright © 2010 BPAP, Everest Global, & Outsource2Philippines
10
Risk Index for English BPO*
Relatively stable, though there are concerns around safety and labor pool sustainability
1.75
1. 76
1.81
1.87
1.87
2.01
2.15
2.19
Skilled Englishspeaking talent
availability
Safety and
security
Investment
climate
Physical and
social
infrastructur
e
India
Philippines
Poland
Malaysia
Egypt
Romania
China
Mexico
*(Higher Score Implies Higher Risk)
Proprietary & Confidential. Copyright © 2010 BPAP, Everest Global, & Outsource2Philippines
11
Undisputed English Proficiency
Philippine Benchmarking and E-volution Study
(PhilBEST) - Tholons 2009
Versant
Philippines is #1 in English proficiency
with a score of 61.84
Spoken English Test
4
Pearson Talent Assessment
English (July 2010)
Latin America and East Europe follow
with a score of 58; India is at third
with 55.62 followed by Korea and
China
3.5
3
2.5
2
One of the most widely used tests for
spoken English competency
1.5
1
0.5
2.71
3.96
3.99
2.87
3.04
2.15
2.55
2.28
0
Voice Clarity
Accent Neutrality
Philippines
Fluency
Grammar
India
Courtesy of the Business Processing Association of the Philippines and Tholons Southeast Asia
12
Lowest Cost Non-Voice BPO Location
Direct operating cost1 per FTE for F&A transactional work
2010; US$ ’000s a year per FTE
MARKET AVERAGES
FAO EXAMPLE
64‒66
35‒37
22‒24
Dublin
Krakow
Kuala Lumpur
19‒21
Cairo
18‒20
Metro Manila
15‒17
Delhi/NCR
1 Ongoing costs only; excludes margins/mark-ups, centralized corporate overheads, initial investment, set-up
costs, and travel costs
Note: Exchange rates for local currencies with respect to the U.S. dollar have been averaged for 12 months from Oct.
1, 2009, to Sept. 30, 2010
Source: Everest analysis
13
…and for IT services
Direct operating cost1 per FTE for IT Applications Development and Maintenance (ADM)
2010; US$ „000s per annum per FTE
47‒49
MARKET AVERAGES
44‒46
ADM EXAMPLE
32‒34
30‒32
23‒25
Mexico City
Krakow
Kuala Lumpur
Beijing
Cairo
20‒22
Metro Manila
19‒21
Delhi/NCR
1 Ongoing costs only; excludes margins/mark-ups, centralized corporate overheads, initial investment, set-up costs, and travel costs
Note: Exchange rates for local currencies with respect to the U.S. dollar have been averaged for 12 months from Oct. 1, 2009, to Sept. 30, 2010
Source:
Everest analysis
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Cost-Competitive Location – Voice BPO
MARKET AVERAGES
Direct operating cost1 per FTE for English voice work
2010; US$ ’000 per annum per FTE
ENGLISH-LANGUAGE VOICE EXAMPLE
70-72
Reflective of market averages.
Range could vary depending upon
 Tier-1 vs. Tier-2 cities
 Suppliers vs. captives
 Scaled operations vs. mid-size
operations
29-32
24-26
19-20
US Tier-2
1
Note:
Source:
Mexico City
Krakow
Kuala Lumpur
16-17
15-16
Cairo
Metro Manila
14-15
Delhi/NCR
Ongoing costs only; excludes margins/mark-ups, centralized corporate overheads, initial investment, set-up costs, and travel costs
Exchange rates for local currencies with respect to the U.S. dollar have been averaged for 12 months from Oct. 1, 2009 to Sept. 30, 2010
Everest analysis
Proprietary & Confidential. Copyright © 2010 BPAP, Everest Global, & Outsource2Philippines
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Awards and Distinctions
Offshoring Destination of the Year (2007, 2009, 2010)
World leader for voice-based customer support and sales
Top ranking destination by estimated jobs in business support
services (October 2010)
Top 10 Outsourcing Cities in APAC: #3 Manila
Top 10 Established Outsourcing Cities: #4 Manila & #9Cebu
Top Emerging Cities: Davao, Santa Rosa and Bacolod
31 New Emerging Destinations: Davao & Iloilo
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Client Testimonials
"Many centres in Metro Manila and Cebu City are experiencing growth of over
40% in sales and headcount. HSBC, JP Morgan, Accenture and IBM, all large
firms, are witnessing tremendous growth."
- Nikhil Rajpal, Principal, Everest Research Institute
“To me Philippines is not a threat, it is a treat, because it is a great delivery
destination, customers like it and we are very much present there. There is an
economic advantage that comes to us as an enterprise”
- Aparup Sengupta, Global CEO, AEGIS BPO
“It is clear by our continued growth in the country that Convergys employees in
the Philippines share our steadfast commitment to provide our clients with the
highest level of customer service in the industry,”
- Jeff Fox, Convergys Corporation President and CEO
“With the growth of our business in Asia Pacific, it makes sense for us to open
an operations hub in the Philippines. It is one of the world’s leading business
processing destinations and builds on our existing presence in the Philippines.
“The Manila hub will allow us to tap into Manila’s large, well-educated workforce
to help support our continuing growth in the region. It will also provide greater
geographic diversity for our operation support functions.”
- Alex Thursby, CEO of ANZ Asia Pacific, Europe and America
17
Client Testimonials
“Our new BPO center in the Philippines strengthens our Global Network
Delivery Model and allows us to enhance our delivery capability to our clients
across Asia Pacific and the rest of the world. We’re very excited about the
talent pool available in the Philippines for our new BPO centre and look
forward to leveraging our best practices and technology excellence from
around the world to further develop talent in the region.”
-Vish Iyer, TCS Head, Asia Pacific
"US-based clients ask for the Philippines as a destination. However, the
processes that get outsourced to the Philippines are now not just limited to
voice but other high-end processes spread across domain-specific back
office, medical, legal and financial accounting work."
- Rohit Kapoor, President and CEO, EXL Service
“Work ethic here is just phenomenal. When [typhoon] Ondoy hit, we
registered no missed calls despite the heavy impact of that storm on Metro
Manila and our personnel. This dedication to the job and the Filipino’s natural
warmth triggered generosity from our clients and our employees at other
sites.”
- Mike Ettling, CEO, NorthgateArinso
“Currently, we offer only customer services in the Philippines, which we are
planning to expand into areas like legal, financial and accounting
outsourcing. Philippines offers a market of quality talent pool in these areas”
- Ritesh Idnani, CEO, Infosys,
(from The Financial Express, September 2010)
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Who Are With Us
Voice – Based Services Suppliers
Banking, Financial Services and Insurance
NASSCOM’S Top BPOs
Homegrown Suppliers
IT and Software Services
Shared Service Centers / Captives
19
Who Are With Us
Engineering Services Outsourcing
HR Outsourcing
Creative Services Outsourcing
Medical Services Outsourcing
Clinical Research Outsourcing
Legal Process Outsourcing
Maintenance, Repair, Overhaul Services
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Contact Information :
Assistant Secretary FELICITAS AGONCILLO-REYES
Investments Promotion Group
Board of Investments
385 Gil Puyat Avenue, Makati City 1200
Philippines
Tel: (632) 896 9212
Fax: (632) 897-2181
Email: FAgoncilloReyes@boi.gov.ph
Website: www.boi.gov.ph
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