IT-BPM industry sees growth slowdown

Published November 12, 2019, 12:00 AM

by manilabulletin_admin

By Bernie Cahiles-Magkilat

Growth in the IT-business process managament (IT-BPM) industry, the country’s second largest dollar earner, in the next three years (2020-2022) is projected to grow at slower pace both in terms of revenue and manpower head.

The Everest Group presented yesterday at the opening of the 11th International Innovation Summit a new study that recalibrated the growth projections under the original IT-BPM Roadmap. The recalibrated numbers showed two scenarios.
The best scenario pointed to a growth in revenue generation of 7-7.5 percent over the next three years, which is slower than the 8-9 percent in the original ITBM Roadmap. The best scenario showed revenues reaching $32 billion by 2022 from $30 billion in 2021 and $28 billion in 2020. For 2019, the industry is expected to improve its revenue to industry revenue is expected to reach $26 billion from $23 billion last year.
The worst scenario is at a slower pace of growth at 3.5 percent where revenue generation by 2022 is expected to reach $29 billion only from $28 billion in 2021 and $27 billion in 2020.
In terms of headcount, the best scenario showed a slower 7 percent growth in full time employees (FTEs) to total industry employment of 1.57 million by 2020 or an average of almost 100,000 new hires annually in the next years. By 2020, jobs in the industry could grow to 1.33 million from 1.29 million this year. Industry employment is expected to improve to 1.7 million in 2021.
Under the worst case scenario, the industry FTEs could only reach 1.42 million by 2022 from 1.37 million in 2021 and 1.33 million in 2020. This year, the industry employs 1.29 million.
H. Karthik, partner of Everest Group Consulting, said in his presentation of the recalibrated IT-BPM roadmap study that the rate of growth in the country’s leading dollar earner and jobs provider also reflects the slowing down globally in locations including India, the world’s number one for offshore IT-BPM destination.
He said multiple factors are affecting the IT-BPM services. These include macroeconomic constraints, impact of digital and automation, talent shortage, geopolitical and regulatory challenges, rapid transformation of business models, and rising cost and margin pressures.
Karthik said growth is driven by healthcare, animation and game development sectors, which are growing faster than the overall IT-BPM industry.
Karthik noted that the growth in revenue is a lot faster than the pace of growth in manpower generation.
This could be attributed to fewer jobs requirement of about 100,000 additional hires annually over the next three year period. This also means that despite the slowdown in new hires due to the digital technology.
Benedict Hernandez, chairman of the Contact Center Association of the Philippines (CCAP) said, the best scenario reflects the industry’s aspiration.
“This means let’s go for it although it is a notch lower than the original roadmap considering several policy changes that had been made and the impact of technology. So, we subscribed to that but still we have a shot at lower at 8-9 percent,” he said.
This means, he said, the industry needs to even work harder and on infrastructure and galvanize across the 5 impact areas to “move us closer to the aspiration.”
He also noted of a clear “delink” between headcount and revenue.
“That’s one thing that we need to actually keep reaching for and push for that link because we’ve been talking about moving up the value chain, creating more revenue than we’re creating,” he said.
The disparity in jobs creation as against revenue had been there around 2017-2018 with the onset of digital technology creeping into the IT-BPM industry, but had not been highlighted. This is the first time that a third party study highlighted this disparity.
“What we want to get everybody behind is there is an upside opportunity to the 7 and 7.5 percent. It is going to be significant material impact to the Philippines and, therefore, we want to secure that,” he said as he emphasized the need to work with policy makers to craft policies that would ensure growth.
“That is what we should push for because it is impacting the value chain so we need to move further,” he said.
In terms of headcount, the contact center accounts for the bulk of employment in the entire IT-BPM industry. Hernandez, however, said CCAP has yet to come up with its own number.
IT-BPM President Rey Untal said the industry has 5 recommendations to ensure continued sustained growth.
First, he said, it is essential to continue dialogue with policy makers to ensure an environment of healthy business ecosystem and improve the country’s ease of doing business.
The industry must push for infrastructure and countryside development in coordination with local government units and city councils. This also includes areas in education.
In addition, the industry has called for a country branding to promote its competitiveness in the global marketplace. He also cited the need for growth in SMEs and startups through mentorships