India has long been the undisputed leader in the Industry of IT, BPO Outsourcing and Software Development, but while growth of this sector is stagnating in India, the Philippines is booming for the seventh year in a row, and continues its annual growth of 46%. In its 2013 ranking of the top 100 Outsourcing destinations worldwide (source), Tholons (a US-based global outsourcing advisory firm) listed the Philippine cities Manila and Cebu in the top 10, and Manila has recently displaced New Dehli from the 3rd position.
The reasons for Philippines striking growth rate, and what it means for businesses seeking the best IT Outsourcing providers
Cultural Compatibility and Excellent Knowledge of English
The Philippines has a high affinity for Western culture. The reasons for this are at least partially rooted in history: after being under Spanish rule for more than 300 years, the Philippines was governed by the USA for almost 50 years until 1946. Especially the American influence is very strong: English is the principal language for business and in schools, and the government has even considered making it the official language. According to Wikipedia, 78% of the population of the Philippines are English speakers, in contrast to India, which only has 10%. In addition to this, Western culture is very popular throughout the country, and its influence can be seen everywhere, from pop culture to the structure of the government, which is loosely based on the United States.
The minimum wage in the Philippines is $8 per day, and overall the Philippines is a low cost country compared to any Western country. The consumer price index, which measures the average cost of living compared to other countries, is almost as low in the Philippines as it is in India. Due to this low cost economy, graduates of high quality colleges can be employed with starting salaries ranging between $200 and $300 per month. Software Engineers have a higher starting salary, but this still means that IT Outsourcing projects in the Philippines can be provided at about 40% of the cost of the same work done in a Western country.
Availability of Highly Educated Workforce
The graduates of the top universities of the Philippines can compete on an international level. But because of the high population and the relatively weak local economy, many choose to go abroad to work for companies in more developed countries. However, since the birth of the Outsourcing industry, more and more prefer to stay in their own country, where they can now get good jobs using their skills for clients overseas. For the BPO companies in the Philippines this means it’s easier to hire highly qualified and motivated workers, and to motivate them to stay in the company. Thus the issue of high turnover of skilled workforce, which is faced by most Indian BPO companies, is much less problematic in the Philippines.
Favorable Economic and Political Climate
While the Philippines has suffered from political instability in the past, it has been very stable now for over a decade. Together with the fact that the government is actively supporting the Outsourcing/Offshoring Industry as one of the country’s main sources of revenue, this situation is attracting increasing numbers of foreign investors, including Indian IT Outsourcing companies that have established branches in the Philippines.
Taken together, these factors have made the Philippines one of the world’s prime Outsourcing providers, and Philippine IT Outsourcing companies are being chosen more and more often by clients all over the world. While the majority of Outsourcing clients are still US companies, offshoring to the Philippines is becoming increasingly attractive for countries like Australia and Singapore, which share the same time zone with the Philippines.