Tuesday, August 11

What does the Covid-19 outbreak mean for the Philippines’ BPO sector?

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As much of the Philippines remains under “enhanced community quarantine” due to Covid-19, the country’s vital business process outsourcing (BPO) industry has adjusted to new working practices and shifts in demand.

The strict lockdown measures implemented on the main island of Luzon remained in place until May 15. At present, most of the island’s 57 million residents are confined to their homes and local areas. Security personnel have stepped up monitoring to prevent people from travelling outside unless they are fulfilling an essential task or profession.

Similar measures are in place in other regions of the Philippines, including the city of Cebu, which imposed a month-long enhanced community quarantine on March 28.

There is some evidence that the restrictions are helping to reduce the rate of infection, with the Philippines reporting 6,600 Covid-19 cases and 437 deaths as of April 21. Although the testing rate remains below the global average, capacity has improved recently thanks to the procurement of almost three million additional testing kits.

A presidential decision is widely expected on whether to extend the measures further or begin a phased easing of restrictions based on the geographical prevalence of infections and the economic importance of certain industries.

Stretching the leg

Like all industries, the BPO sector has been disrupted by restrictions on the mobility of workers, as well as fluctuations in demand.

The BPO sector is frequently described as one of the two “legs” of the Philippine economy, alongside remittances from overseas Filipino workers. As it revolves around international companies delegating operations to the Philippines, the sector has long been regarded as a vital source of foreign exchange and high-value jobs for the country’s English-speaking and digitally literate workforce.

The industry employs around 1.3 million workers and contributes approximately nine per cent to GDP when its indirect and induced multiplier impacts are factored in.

As a result of its importance, pandemic-related disruptions to BPO activity have implications for the wider economy. When lockdown measures were first imposed across Luzon from March 17, BPO companies were allowed to continue operations if they could utilise a skeletal workforce, maintain social distancing, and provide staff with temporary accommodation or a reliable shuttle service to homes within the immediate vicinity.

Alternatively, BPO firms and other export-oriented companies have been permitted to implement satisfactory work-from-home arrangements for employees.

While many employees welcome the flexibility and safety of working from home, BPO firms were largely unprepared for a total work-from-home model, and had to overcome challenges related to internet access, equipment transfers and clearance requirements from clients.

“Telecommuting would be much more viable over the long term if broadband connectivity improves in terms of speed and price,” Junar Amador, managing director at Ingram Micro Philippines, told OBG.

According to Beng Coronel, president of local BPO firm Pointwest, the work-from-home capacity of BPO companies operating in the Philippines ranged from 25 to 75 per cent based on their size and the type of service they offered.

Global in-house centres that form part of international companies found it easier to make the transition as their clearance procedures were less complicated.

“The next issue to contend with is declining demand due to project deferments and cancellations. This is a challenge that has been more difficult to handle,” Coronel told OBG.

Although a surge in flight cancellations, e-commerce orders and financial service enquiries may have temporarily boosted activity for some BPO firms with call centres in the Philippines, a significant proportion of the BPO work undertaken in the country is imported from the US, which is currently suffering from the world’s highest number of Covid-19 infections and record jobless claims.

Upskilling and evolution

While a slowdown in US consumer activity is likely to have a negative impact on the Philippine BPO sector in the short term, the country can look towards building competitive advantages beyond English-language proficiency and customer service skills to position itself for the next wave of growth in the global BPO industry.

Basic call centre services are currently responsible for around 50 to 60 per cent of customer contact operations in the country, but such services were already under threat from artificial intelligence-powered ‘chatbots’.

In recognition of this, the IT and Business Process Association of the Philippines (IBPAP) in 2016 unveiled its Roadmap 2022, which aims to prepare its members for a transition towards automated services and more technical and creative jobs.

If managed correctly through targeted investments in technology and upskilling, IBPAP forecasts that as many as 388,000 mid-skilled jobs and 309,000 high-skilled positions can be created by 2022, against the loss of 40,000 low-skilled positions.

“We see intelligent processing automation and analytics as the next drivers for growth,” Coronel told OBG.

“Now is the time to prepare in terms of capability building and developing the services that will be needed moving forward.

“More than ever, cost will become a major factor in any decision that a business leader makes, and this is where our country can have an advantage: innovation at competitive cost.”

This Philippines column was produced by the Oxford Business Group.