Outsourcing has become a strategic tool for companies today. Whether they are looking for an easy way to scale their business for the future or looking at going global or even just positioning themselves to be more competitive and efficient, they all look to outsourcing as one of the top options for them to achieve their operational goals. Almost every Fortune 500 company outsources, and the industry is growing at a breakneck speed. This outlook is developing into a gold mine for countries with a relatively deep pool of talent like the Philippines.
From a very obscure start in the Philippines in the 90s, the local business process outsourcing industry has grown into a major contributor to the Philippine economy. As highlighted in an earlier Tech4GOOD column, IBPAP recently announced that revenue for the sector rose 10.6 percent to $29.9 billion in 2021 with total full-time employment reaching 1.44 million growing by 9.1 percent. But the Philippines is just barely scratching the surface in terms of the global addressable market which Statista puts at $300 billion in 2021. By 2025, Statista projects the global market to grow to about $400 billion by 2025 at an expected growth rate of 6.69 percent. The potential for the Philippines is tremendous.
Outsourcing is a complex industry; therefore, it is easily misunderstood. Two weeks ago, my good friend Derek Gallimore of Outsource Accelerators launched his book, Inside Outsourcing, which to my mind is the first book in 20 years to shine a light on outsourcing and the seismic shift toward remote work, offshoring, and global employment. The book takes a deep dive into the origin of outsourcing, its current state, the likely future, and the potential for the Philippines. More importantly, it talks about how the sector is driving economic activities in the country. If you are interested in really understanding what the sector is all about, I strongly recommend that you get a copy of the book.
Several reasons are driving the mainstreaming of outsourcing. These would include the push for globalization, major advances in digital infrastructure, the global pool of untapped talent, cost and efficiency considerations, and the global “great resignation” phenomenon. As companies explore more opportunities and set bigger roles for themselves, outsourcing as a source of talent will always be attractive.
We are also starting to see an emerging trend in outsourcing where work engagements are beginning to evolve. The more traditional form is to engage the services of a BPO company to handle specific business processes like customer support and collection services. The service provider would take care of hiring, compensating, and managing the workers. The current 1.44 million workers in the Philippines would fall under these arrangements.
Then we have the online freelancers who would usually take on work, mostly short-termed, and are commonly paid on a per-project basis. Examples would be web developers, content writers, and copy editors. The project owners and the gig workers would usually transact business using job platforms. Workers are usually paid per project with earnings ranging from a few hundred to thousands of dollars. I have seen estimates that say the Philippines today has about three million online freelancers scattered all over the country. They are earning decent wages but without the usual benefits and because the project owners do not deduct taxes, the workers will have to handle the required tax payments themselves. Well, hopefully.
The newest form of work arrangement is global employment. The most fundamental difference is that, instead of a locally based employer, the worker would usually be working directly for a foreign employer. It’s almost like being an OFW without having to leave the country and the usual social complexities of working abroad. The employer most often acquires the services of a local agency to take care of all the regulatory aspects of the work arrangement.
Recruiting global employees is becoming to be an attractive option for foreign companies. They have more options to choose the best people from and can harness the same levels of competent workforce at a relatively lower budget. With Covid-induced work arrangements like WFH, access to the latest technology tools, and broad adoption of digital platforms, global employment is quickly transitioning from obscure to mainstream.
Traditionally, outsourcing used to be the exclusive domain of big companies but today, it has become an option even for small and medium-sized businesses. Most attractive for them would be the global employment arrangements.
Employment is going borderless. The move towards online work renders borders irrelevant. With the Philippines being one of the world’s top exporters of talent, global employment would help address the usual social challenges involved when workers have to be away with their families. This trend has only just begun and will offer tremendous opportunities for Filipino talents. What we need to ensure, however, is that we are able to provide them with the right digital infrastructure and upskilling programs.
(The author is the lead convenor of the Alliance for Technology Innovators for the Nation (ATIN), vice president of the Analytics Association of the Philippines, and vice president, of the UP System Information Technology Foundation.)