The stratospheric growth of the BPO industry in the Philippines over the last 20 years was largely driven by Fortune 500 corporations migrating much of their business processes from the U.S. to the Philippines. This unrelenting expansion, however, is probably a thing of the past. There are a few reasons for this, but the biggest game changer has been the COVID-19 pandemic, which has impacted the global outsourcing industry and will likely continue to do so for the foreseeable future.
One of the primary ways that COVID-19 impacted BPO companies in the Philippines is through the same channel that the industry experienced most of its growth: large multinational and globally operating corporations. Initially, as a cost-containment strategy, companies like Microsoft and Verizon took advantage of the low-cost and talented workforce in the Philippines. Due to the quality of work and lower cost, these large organizations gladly outsourced a majority of their BPO requirements to the Philippines.
“The global pandemic caused a shift in this strategy, as country-wide lockdowns have contributed to all kinds of issues with deliverables from IT to CX. Now, faced with the knowledge that pandemics can happen, many of these industry giants have incorporated a more diversified outsourcing strategy. This includes keeping more jobs onshore and in-house,” says Ralf Ellspermann, CEO of PITON-Global, an award-winning, mid-sized BPO in the Philippines.
The majority of the BPO contracts for large-scale program implementations, often requiring several thousand agents, have been coming from Fortune 500 corporations. These organizations typically require company representatives to travel to the Philippines to assist with the agent training and program implementation. However, ongoing uncertainties related to COVID-19, including travel restrictions and quarantine requirements, have made it much harder for these companies to implement new, large-scale support programs in the country. “With new COVID-19 variants, such as Omicron, that keep emerging throughout the world, this will probably remain to be the case for the foreseeable future,” explains Ellspermann.
To make matters even more challenging, many multinational organizations, especially in the financial services and healthcare industries, are simply not comfortable with work-from-home arrangements offered by BPO companies in the Philippines. In most cases, these outsourcing vendors have no choice but to have employees work remotely and are simply trying to continue to provide services and support. Many companies, however, have reasons for concern with these arrangements, such as data security and service quality.
Another issue facing the outsourcing industry in the Philippines is the impact Artificial Intelligence (AI) will continue to have as this technology continues to evolve. AI may transform parts of outsourcing as it increases efficiency through automation, in addition to reducing costs for companies even further. “Like any other industry, the BPO sector is not immune from technological advances and disruptions such as AI. BPOs in the Philippines will need to demonstrate how they can deliver comprehensive, enterprise-level strategies that incorporate cutting-edge technologies at a reduced cost,” says Ellspermann.
In contrast, certain industries have benefitted from the COVID-19 pandemic and have increased their outsourcing volumes to the Philippines. This shift in demand has resulted in an increase in BPO contracts coming from E-commerce, Healthcare (especially e-health), Financial Services (primarily Fintechs), and On-Demand services (such as food delivery services). As demand for these services increased because of the pandemic, so too did the need for additional support.
Although the increases in outsourced business from some of these industries are encouraging, it certainly is no match for the amount of business and number of jobs that have been lost to the COVID-19 pandemic. “The reality is a significant amount of this business that has been lost might never return, either because organizations went out of business, experienced reduced demand for support services due to slowed growth, or because support programs have been re-shored,” says Ellspermann.
The fact that multinational and globally operating organizations will mitigate future risks by making use of a more diversified outsourcing strategy, by keeping more jobs onshore and inhouse, plus the accelerated use and adaptation of AI, will very likely lead to a flattened growth curve in the future. COVID-19 has been a game changer that created the new reality that the BPO industry in the Philippines is now faced with.