How Can Cebu’s SSCs and BPOs Remain Competitive in the Global Marketplace?

Cebu has been ranked a premium destination for shared services and business process outsourcing, emerging #8 on the Top 100 Outsourcing Destinations for 2014 list by Tholons. In fact, several of the Philippines’ biggest and best shared service centers, including Lexmark, Bombadier and Daimer have already chosen to call Cebu home. But like any new and exciting destination it won’t stay under the radar for long. With increased investment and international MNCs flocking to set-up their centers, so comes the risk of rising prices and talent shortages. In order to pre-empt these challenges we take an in-depth look at the trends affecting the industry and how Cebu’s SSCs and BPOs can move their services up the value chain in order to stay competitive. Cebu’s SSC and BPO Economic Boom Central Visayas is one of the fastest growing economic regions in the Philippines. Whilst the nation’s economy has been growing approximately seven per cent per year, the region’s gross regional product (GRP) has been remained consistently higher: Central Visayas Annual Gross Regional Product 2010 2012 2013 12.5% 9.3% 8.9% Much of this growth is due to the booming success of Cebu’s business process outsourcing (BPO) subsector, which contributes 55.8 per cent to region's economy alone. The latest statistics from the National Economic Development Authority reveal that in 2012, national IT-BPO revenues grew 18.2 per cent at $13 billion, but in Central Visayas, revenues grew an incredible 26.9 per cent at $484 million. National IT-BPO Revenue Growth Central Visayas IT-BPO Revenue Growth 2012 2012 18.2% 26.9% This is even more impressive when you consider the size of Cebu and its industry. In Cebu City, the IT and BPO sectors employ around 95,000 people today, in stark contrast to just 14 years ago, when the IT sector in Cebu employed just 1,200 workers: Number of People Employed in Cebu’s SSC and BPO Industry 2000 2014 1,200 95,000 [eventpdf] According to Cebu industry analyst Gerardo P. Sicat, "there are 96 companies that work in the BPO industry. Of these, 32 are call centers ….The five biggest locators – led by Convergys, Qualfon, Aegis PeopleSupport – account for direct employment of 24,200 workers." Mr Sicat also estimates there to be another 66 non-voice type companies. Whilst these pioneering companies have been enjoying immense growth rates, now that people have flocked to the city in search of well paid work, property values, the cost of living and business operation costs have risen, thereby eroding some (but certainly not all) of the low cost benefits of choosing Cebu over Central Manila. Growing Competition for the SSC and BPO Industry The competition to become the shared services and business outsourcing location of choice is hotly contested, not just globally but from within the Philippines as well. Demonstrating this competition, the Business Processing Association of the Philippines (BPAP) identified 10 "next wave cities" that could become the next Cebu: The Philippines 10 "next wave cities" for the SSC and BPO Industry Davao Sta. Rosa in Laguna Bacolod Iloilo Metro Cavite (Bacoor, Imus, and DasmariÃ²as) Lipa in Batangas Cagayan de Oro Malolos in Bulacan Baguio Dumaguete "While the Philippine IT-BPO industry continues to expand, it acknowledges the crucial role of next wave cities in enabling and supporting industry growth. Aside from being a rich source of untapped talent, these locations also present attractive options compared with more popular and established IT-BPO hubs," such as Metro Manila, Cebu, and Clark, said Gillian Virata, Senior Executive Director of BPAP. Whilst this is positive for the Philippines' economy as a whole, there is concern that just as Cebu’s industry sky rocketed over the past decade, a failure to stay competitive could see the market shift in favour of these alternative low cost locations. The Urgent Need for Cebu’s SSC and BPO Industry to Adapt Due to gradually rising costs and growing competition, Cebu’s SSC and BPO industry must now look inwards and optimise their services and processes in order to remain competitive in the global market place. 1. Move Services Up The Value Chain and Establish Centers Of Excellence In order to counter rival locations and rising costs, the services provided must move from being simply transactional to value adding. Another approach is to establish centers of excellence that can focus on process optimisation and analytics. Whilst this is the ideal, the issues preventing this change include difficulties in getting management buy-in and change management. But as growth in Cebu slows and competition grows, industry experts predict this is the direction things will move, but the competitiveness of the industry will depend on the speed and effectiveness this change can be implemented. 2. Improve the Recruitment of Skilled Employees and Reduce Turnover Whilst there is a large available pool of potential employees in Cebu, many lack the office skills most sought after by the BPO and SSC industry. Furthermore, many employees are reluctant to work in a SSC or BPO environment, meaning they only tend to stay with the company short term. This is particularly a challenge for small or medium enterprises, who lose out to the multi-national companies based in Cebu, who have the advantage in company branding, salary and benefits. BPAP recommends several approaches to this challenge including: Enhance company branding so to become an employer of choice Turn to recruitment consultants to assist in talent acquisition Create effective training programmes to upskill new and existing staff, in order to improve performance and reduce employee turnover. Partner with local universities to include industry specific training programmes whilst also lowering career entry requirements 3. Invest in Business Continuity Planning to Safeguard Against Natural Disasters Cebu is highly prone to natural disasters such as floods, making business continuity a key concern. Also, according to business leaders based in the region, infrastructure is still under-developed in terms of electricity and internet connectivity. To pre-empt these issues, BPAP recommends the creation of a robust business continuity plan (BCP) and even consider the establishment of a secondary BCP site in another location. However, according to some business leaders, there is resistance to this approach. Often there is the demand of seeing the ROI of the proposed BCP, which is inherently difficult to prove given that it’s an investment that will only deliver in "if" a major disaster occurs. Others have suggested that their management would rather risk dealing with crises once they occur rather than investing in advance. This mindset needs to be overcome and the benefits of BCP demonstrated, if Cebu’s SSC and BPO industry can be protected and maintained for the long-term. 4. Adopt Software Solutions that Can be Used on All Platforms and Automating Processes The benefits of standardizing the number of systems being used are well understood, but there is concern about the cost and efficacy of deployment. Business leaders express concerns around becoming overly reliant on one technology or vendor, whilst others said that they may not own all the processes required to properly implement automation themselves. Summary One additional challenge that cuts across all these issues is that, as the second city of the Philippines, many of the major vendors are not based in Cebu. This causes problems for the SCCs and BPOs when looking for the right vendor and one that can offer support. Consequently, SSCs and BPOs in Cebu need to take every opportunity to learn from best practice and engage with leading solution providers in order to progress these business priorities, sustain business growth and remain competitive in the global marketplace. [Note: if you liked this article, please use the buttons on the left side of the screen to share it across your LinkedIn groups – and contribute to this discussion by posting your thoughts in the comment section, below. Thank you for being part of SSON's community - Barbara Hodge] Sources: https://www.philstar.com/business/2012/12/11/884494/bpap-dost-tag-10-next-wave-cities-it-bpo https://www.philstar.com/business/2014/05/21/1325390/cebu-booming https://www.gmanetwork.com/news/story/306043/economy/business/cebu-city-thrives-on-tourism-services-manufacturing https://www.sunstar.com.ph/cebu/business/2013/05/16/non-voice-overtakes-voice-operation-cebu-282691

How Can Cebu’s SSCs and BPOs Remain Competitive in the Global Marketplace?

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