Posted on 11 February 2014.
By Jason Thurwanger.
The BPO industry in the Philippines has experienced what can easily be termed as meteoric growth over the past 10+ years. With close to 1 million Filipinos now employed within the industry it is very easy to understand the major economic and societal impacts that BPO has imprinted on the local landscape here.
High English literacy rates abound, a large portion of the workforce has a college degree in hand, and large programs/centres are staffed up very quickly with regularity in order to meet the call/chat/email customer volumes that clients forecast.
A few months ago, estimates were released and published that show the BPO industry in the Philippines is on track to continue to build to $25 billion in the year 2016 (up from an estimated $16 billion in 2013). It is easy to see where the persistently spoken of bright outlook for the industry in the Philippines is coming from based on that level of growth.
I have been a very vocal supporter of the BPO industry in the Philippines for several years now, and I have worked closely with a number of clients in order to ease their concerns with offshoring and to ultimately place a number of programs here.
With that being said, however, the fundamentals that determine the long-term health/viability of the industry to continue to experience such robust growth are not singing a chorus that is in sync with all of the “pie in the sky” prognostications for the industry’s outlook here in the Philippines.
The truth is that without a “hard turn” taking place within the industry in the Philippines, the $25 billion projected for revenue in 2016 will never be more than an estimate.
Since the earlier days of the BPO boom here in the Philippines, the investment in the industry’s infrastructure has regressively waned rather than having progressively grown. Communication & Cultural Training (CCT) periods have been cut in half in many instances (i.e. many CCT programs that used to run 4 weeks now run 1-2 weeks).
The “old days” of only 4-5 applicants out of every 100 being approved are long gone as the quality focus that used to be so prevalent in the intensive vetting an on-boarding processes have given way to recruiting/on-boarding approaches that more closely resemble quantitative “cattle calls”.
With regularity when staffing discussions are held within the industry, there are few references to the type of candidates being sought. Instead the focus is on needing “x” number of “heads”. The prevailing wisdom states that once there are enough “heads” to handle the volumes, then a more concerted effort can go into training, coaching, and development.
The ignorance of such “wisdom” is manifested in rising attrition rates fuelled in part by people “washing out” that were ill-equipped to perform the roles for which they were hired, that fuel the persistent need for more training classes that are also filled by the right number of “heads” with the wrong set of credentials. Investments in technology, HR, WFM, and Reporting continue to be vibrant while the very Operations those support units are intended to strengthen continue to receive minimal to no material investment.
Clients that have up to this point been willing to be satisfied with the cost savings of having their customers serviced in the Philippines are under increasing pressure from their customer bases to improve the customer experience. While English literacy has remained high in the Philippines, the same strength is not evident in the arena of conversational coherency, to say nothing of cultural misunderstandings.
Those clients that have become more discerning/sceptical are beginning to ask BPO’s headquartered in the West why they are expected to have faith in the offshore operations that the executives of the BPO’s themselves do not possess. For example, a regular refrain in many sales pitches to try and encourage clients to have their customers serviced offshore is that they should be comforted by knowing that the offshoring location is led closely by the on-shore apparatus within the originating country.
In other words, on one hand clients are being sold on the capabilities of the offshore locations, while on the other hand, the sales pitch is indirectly telling them that the real operational strength of the organization lies in the West.
The goal is to assuage the clients’ concerns by reassuring them that the West will be leading all the “important/strategic” decisions and moves, thereby inadvertently insinuating that the offshore resources are insufficient to handle such “important & strategic” matters.
Having worked with organizations/teams/individuals in the Philippines extensively for many years, I can tell you that this location in many ways can be the ideal spot for the BPO industry. The workforce is talented and driven.
At the same time, however, while I would say that the Philippines “can” be the ideal spot, I have to also acknowledge that presently a thorough and critical assessment of the industry’s fundamentals highlights the truth that this amazing nation is not presently the ideal spot for servicing customers around the globe. The workforce being talented and driven is only a resounding positive if that same workforce is adequately developed, and that is largely not the case here.
The good news is that if the industry experiences a strong “correction” resulting in the aforementioned need areas (among others) being addressed, the Philippines can set itself apart as being firmly entrenched as the contact centre capital of the world. That would make the projected $25 billion in revenue in 2016 a challenging but achievable reality.
Anything short of that type of correction, however, will quite possibly lead to 2014 being the plateau year for the industry prior to a very sharp regression being experienced. If you doubt that, I would invite you to become a student of the history of the BPO industry. Start with India and work your way backwards. While India maintains a significant BPO presence, it pales in comparison to what it would have been on track for before the contact centre bubble burst there.
Revenue will only be robust for so long without the presence of corresponding performance. Ultimately, when performance lags over the long-term revenue has nowhere to go but downwards in order to correlate with the performance being achieved. The patience of clients to continually invest in an underperforming proposition becomes exhausted when the Voice of the Customer (VOC) begins to express its dissonance with the customer experience with unmistakable clarity further accentuate by decreasing % of wallet share combined with increased customer churn.
The BPO industry needs to sustain its “boom” through significant and sustained investment in the industry’s fundamentals before it experiences an historic “bust” brought on by a lack of investment made in its own future. 2014 will reveal the probability of whether the Philippines will truly be the long-term player in the BPO industry that it has been presented time and again to be.
Jason Thurwanger is a freelance Operations Consultant with 20 years of experience in the contact centre/BPO workspace, including extensive experience in customer care/CRM, customer intelligence/market research, and sales (both inbound & outbound). Driving the customer experience and improving operational efficiency make up the centrepiece of Jason’s consulting engagements. firstname.lastname@example.org