it-bpm and gic road map 2012-2016

8/13/2019 It-bpm and Gic Road Map 2012-2016

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Publishers

Department of Science and Technology-Information and Communications Technology OfficeHon. Mario G. MontejoSecretary, DOST

Undersecretary Louis Napoleon C. CasambreExecutive Director, ICTO

Alejandro P. Melchor IIIDeputy Executive Director, ICTO

Patricia May M. AbejoDirector, ICTO

Information Technology andBusiness Process Association of the Philippines

Alfredo I. AyalaChairman

Benedict C. HernandezPresident and Chief Executive Officer

Gillian Joyce G. VirataSenior Executive Director

Editorial Team

Gillian Joyce VirataPatricia May M. Abejo

Atty. Allen Liberato-EspinoMichael Alan Hamlin

Jerni May CamposanoTrizzy Jennifer OrozcoKaren AzupardoDesigners

Walter John Gonzalez IILiagi Ann Jezreel RamiloPatrick De JesusRaymond SeeMaria Gracia Romero

Contributors

Indu BadlaniAntonette ConsueloCarolyn Echavez

Juanloz BotorJeanette CarrilloGrace Dimaranan

Alvin JubanMichael LimMyla Reyes

Nora TerradoJojo UliganJoie VillanuevaJeff Williams

Special Thanks to:

Everest Group

IT-BPM and GIC Road Map 20122016Copyright 2012 Business Processing Association of the Philippinesand TeamAsia

Published byDepartment of Science and TechnologyInformation and Communications Technology OfficeICTO BuildingCarlos P. Garcia AvenueDiliman, Quezon City

PhilippinesWeb: www.icto.dost.gov.ph

Information Technology andBusiness Process Association of the Philippines5th Floor C2 BuildingBonifacio High Street, 30th Street corner 7th AvenueBonifacio Global City, Taguig CityPhilippinesTel No.: +632 817 2727Fax No.: +632 817 8141Web: www.bpap.org

and with the support ofTeamAsia (Hamlin-Iturralde Corporation)Unit 308 Bldg. B, The Plaz@, Northgate Cyberzone,Filinvest Corporate City

Alabang, Muntinlupa City, PhilippinesTel No: +632 757 3500Web: www.teamasia.com

All rights reserved. No part of this publication may be reproduced,stored in a retrieval system or transmitted, in any form or byany means, electronic, mechanical, photocopying, recording orotherwise, without the prior permission of the publishers. Thepublishers have used their best efforts in preparing this report anddisclaim liability arising directly and indirectly from the use andapplication of this report. Any omissions or errors are unintentionaland will, if brought to the attention of the publishers, be corrected infuture editions.


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AcronymsAcronyms

ACPI

ADB

AdEPT

AIM

ANZ

APAC

APEC

ARRA

BEST

BOI

CAGR

CCAP

CHED

CM

CRM

DOSTICTO

DTI

EMEA

ER&D

EU

F&A

FTEs

GDAP

GDP

GIC

HEI

HIM

HIMOAP

HIMOSC

HR

IBPAP

ICCCE

ICD

ICT

IPPPs

IT-BPM

ITO

I-TWSP

KPO

LCUs

MSMEs

NWCs

O2P

OFWs

PDP

PEZA

PPP

PSIA

PSTD

SMB

SMP

SPrInG.PH

SUCs

Animation Council of the Philippines, Inc.

Asian Development Bank

Advanced English Pre-employment Training

Asian Institute of Management

Australia and New Zealand

Asia Pacific

Asia Pacific Economic Cooperation

American Recovery and Reinvestment Act

Basic English Skills Training

Board of Investments

compound annual growth rate

Contact Center Association of the Philippines

Commission on Higher Education

customer management

customer relationship management

Department of Science and TechnologyInformation andCommunications Technology Office

Department of Trade and Industry

Europe, Middle East and Africa

engineering research and development

European Union

finance and accounting

full-time employees

Game Developers Association of the Philippines

gross domestic product

global in-house center

higher education institutions

healthcare information management

Healthcare Information Management Outsourcing

Association of the Philippines

Healthcare Information Management Outsourcing Services Congress

human resources

Information Technology and Business Process Association of the Philippines

International Contact Center Conference and Expo

International Classification of Diseases

information and communications technology

industry public-private partnerships

information technology and business process management

information technology outsourcing

Industry-based Training for Work Scholarship Program

knowledge process outsourcing

local colleges and universities

micro, small and medium enterprisesNext Wave CitiesTM

Outsource2Philippines

overseas Filipino workers

Philippine Development Plan

Philippine Economic Zone Authority

public-private partnerships

Philippine Software Industry Association

Philippine Society for Training and Development

small and medium businesses

Service Management Program

Software Products Incubation Group of the Philippines

state universities and colleges


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Road Map 20122016 VII

Acronyms

T3

TESDA

TM 1

TM Plus

Train the Trainers

Technical Education and Skills Development Authority

Trainers Methodology 1

Trainers Methodology Plus

ContentsSnapshot

Executive Summary

Chapter 1The Philippine IT-BPM and GIC Industry:Current State and Positioning

Chapter 2The Global Market:The Role of the Philippines

Chapter 3The Role of IBPAP

Chapter 4Next Steps

Chapter 5The Voice BPM Sector

Chapter 6The Software Developmentand IT Outsourcing Sector

Chapter 7The Animation and Game Development Sector

Chapter 8The Healthcare Information ManagementOutsourcing Sector

Chapter 9The Role of the Government:Transforming Public-Private Partnership

Conclusion

Annex

References

About the Publishers

01

03

07

19

23

33

37

43

51

57

63

71

74

76

79


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Road Map 20122016 Road Map 201220162 3

Executive Summary

The information technology and business process management (IT-BPM) and global in-housecenter (GIC) industry in the Philippines has grown at an annual rate of 30 percent over a decade,faster than the growth of the global offshore services market. As it has grown, the industryhas diversified significantly in breadth, scale, and maturity of services. An ambitious forecastembodied in an industry road map of revenues of US$25 billion and 1.3 million direct employees

by 2016 appears to be within reach.

If these targets are reached, the Philippine IT-BPM and GIC industry will have consolidated over10 percent of the global IT-BPM market. This share will be maintained at least until 2016, whenglobal market is expected to be between US$240 billion and US$250 billion (Everest Globalestimate as of 2012).

Number one in voice, number two in non-voice

In 2010, the Philippines emerged as the number one provider of voice BPM services in the world, and in the ensuingperiod its leadership in this segment has been broadly acknowledged. Though there has been less visibility for thePhilippines non-voice, complex services capability, and the contribution of global in-house centers (GICs), they haveaccounted for almost 15 percent of industry revenues in 2011 and are growing faster than traditional voice services.

Non-voice services are delivered in a wide range of functional and vertical area s which include engineering, healthcare, legal, financial, creative, and software servicesamong many othersfor the energy, banking, investment,insurance, shipping, media, and other industries.

Collectively, the industry provides services for a wide range of prominent Fortune 1000 firms in North America,Asia, and European Union. IT-BPMs and GICs include small firms with less than 500 employees (80 percent), mid-size companies with up to 9,000 employees (18 percent), and large to very large multinationals with 10,000 tomore than 30,000 full-time agents and knowledge workers (2 percent, Figure 2). In 2011, the industry employedapproximately 638,000 Filipinos and was expected to expand by at least 20 percent in 2012. The Philippines shareof the global IT-BPM and GIC market is e stimated at approximately 9.5 percent.

Table 1. IT-BPM Market Five-Year Compound Annual Growth Rate (CAGR)by Process Domain Segment

Key drivers for outsourcing in emerging economies within Asia Pacific are the opportunity to adopt new services(such as social customer relationship management and mobile services for customer management BPM), scalability,the infusion of best-of-breed processes and technology, faster time to market, and improved quality of administrativeservice to both internal and external clients.

Process Domain Segment

Administration Services 5.5

5.0

4.1

4.9

7.7

4.6

Customer Management

Finance and Accounting

Human Resources

Operations

Supply Management

:

CAGR (%) 2011-2016

Source: Gartner (August 2012)

FTEs = full-time employees

Percentage split by number of FTEs

No. of IT-BPM firms in the Philippines: 795

100%: 525 companies surveyed by IBPAP

2011

30%

3%

14%

15%

35%

> 10,000

5,001-10,000

2,501-5,000

501-2,500

251-500

51-250

< 50

2% 1%

Figure 2. Size distribution of the Philippines IT-BPM industry FTEs

Sources: IBPAP, EverestGroup, and Outsource2Philippines(2011)


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Road Map 20122016 Road Map 201220164 5

The IT-BPM and GIC industry is an important generator of jobs for skilled Filipinos. Its contribution to gross domesticproduct (GDP) was approximately five percent in 2011, and it is the Philippines third-largest net foreign exchangeearner after tourism and remittances from an estimated 10 million overseas workers. Its contribution to economicdevelopment is centered in the nations National Capital Regionreferred to as Metro Manilaand in other highlyurbanized areas throughout the country, or Next Wave Cities TM. Employment in these cities was estimated at150,000 at the end of 2011 (F igure 3).

Globally, the Philippines is competitively positioned in terms of talent, costs, and risks relative to established andemerging offshore destinations. This augurs well for broad-based growth for the IT-BPM and GIC industry, andprovides opportunities for the Philippines to continue its expansion outside established services segments (Graph1). More precisely, the Philippines is poised for growth in the value-driven non-voice, complex services segmentsof the industry. The Philippines is a Top-3 location for talent according to analysts, both at the aggregate graduate

pool level as well as among professionals in the finance and accounting areas and in other non-voice, complexservices. From a cost perspective, the Philippines is competitively placed to provide the required arbitrage that newand mature buyers of IT-BPM services require. The industry also benefits from an enabling policy environment withimpressive government and private-sector support for investors.

Distribution of FTEs by delivery location

Percentage, FTEs; 2007: ~297K; 2011: ~638K FTEs

~246K (83%)

2007

2011

~489K (77%)

~16K

~41K

~7K

~16K

~3K

~16K

~4K

~11K

~22K

~57K

* Others includes inter-alia cities of Metro Cavite, Baguio, Cagayan de Oro, Davao, Dumaguete, Iloilo, Lipa and Malolos

Metro Manila

Metro Cebu

Metro Clark

Bacolod

Sta Rosa

Others*

Key takeaways

Expansion into Next Wave Cities

and towns has increased with

~150,000 FTEs spread across

Tier-2/3 towns across the

country

Rapid growth in employability

across Next Wave Cities has

increased pool of talent supply

in the Philippines

TM

TM

Sources: IBPAP, EverestGroup analysis(2011)

Figure 3. Industry expansion beyond National Capital Region

Philippine IT-BPM industry size

2006-2011; US$ billionYoY Growth

2006

#FTEs(~000)

3.2

4.8

240 300 370 423 525 638

Globalshare 5% 6% 6% 7% 8% 9.5%

7.1

11.0

8.9

6.1

2007 2008 2009 2010 2011

Impact over 6 years

-50%

~26%

~17%

x%

~25% ~24%

Employment

generation

Contribution to

GDP

Foreign

exchange

earnings

Next Wave

Cities

4-5% of annualGDP

Largest private-sector, new-jobcreator

Significant exportimpact

Catalyzed growth of10+ Next WaveCities adding over150,000 jobs

Third-largestexport earnerbased on netvalue added

448, 000 directFrom 1.0 millionto 1.4 millionindirect jobs

TM

TM

In an industry road map commissioned by the Information Technology and Business Process Association of thePhilippines under the auspices of the f ormer Commission on Information and Communications Technology (CICT),now reorganized as the Information and Communications Technology Office (ICTO) under the Department of

Science and Technology (DOST), and developed by Everest Group and TeamAsia, IT-BPM industry growth wasforecast to reach up to US$25 billion in revenue and direct employment of 1.3 million in 2016. However, Road Map2011-2016 stipulated that a number of conditions should be met to achieve this target. These include governmentsupport, particularly in the area of remedial training and educational reform at all levels, granting of investorincentives, and providing visibility for the industry internationally as well as locally.

Two years following the development of the road map, the Philippine IT-BPM industry continues to expand at arobust rate. The industry grew 25 percent in 2010 and 24 percent in 2011.

The Philippine government, through the Technical Education and Skills Development Authority (TESDA), hasprovided substantial funding for remedial training for applicants to the industry in many key sectors, includinganimation, customer relationship management, software development, healthcare information management,and game development. Funding for skills development has also enabled special remedial training for trainersthroughout the Philippines.

A number of schools a lready offer animation courses. The Animation Council of the Philippines, Inc. (ACPI) hasalready established linkages with educational institutions and helped formulate an industry-based curriculum.

Meanwhile, the Game Developers Association of the Philippines (GDAP) designed three courses for the technicaland vocational education.

Although talent supply remains a critical concern among industry executivesaccelerating substantially from a toppriority for 23 percent of respondents in a 2009 survey to 49 percent in a 2012 surveythese efforts appear to havecontributed to at least some amelioration in forecast talent shortages.

Investor incentives have remained consistent and professionally administered by the Philippine Export ZoneAuthority and the Board of Investments, both promotional a nd regulatory agencies with authority to facilitateinvestment. These agencies operate under the Department of Trade and Industry.

The Department of Science a nd Technology-Information and Communications Technology Office (DOST-ICTO) hasprovided broad-based support for the industry. DOST-ICTO supports a comprehensive range of programs coveringindustry development, human resource development, countryside development, research, marketing, amongothers, with the aim of leveraging the benefits of ICT use for national development.

Graph 1. Rapid Growth of the Philippine IT-BPM industry

Sources: EverestGroup and Outsource2Philippines(2012)


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Road Map 201220166

Chapter 1The Philippine IT-BPM and GIC Industry:

Current State and Positioning

The information technology and business process management (IT-BPM) and global in-housecenter (GIC) industry in the Philippines is characterized by its strong voice sector; rapidly

expanding non-voice, complex services sectors; a large and talented English-speaking laborpool; and strong affinity with Western culture and business processes.

Sectors

Over 20 voice and non-voice, complex services sectors comprise the Philippine IT-BPM and GIC industry accordingto the results of quarterly industry surveys conducted by the Information Technology and Business Process

Association of the Philippines (IBPAP), formerly the Business Processing Association of the Philippines (BPAP), andOutsource2Philippines (O2P). The surveys, conducted between December 2009 and September 2012, providesnapshots of the expanding range of IT-BPM and GIC services delivered from the Philippines.

Still leading in Voice Services

The voice sector posted 21-percent growth in 2011. For 2012, employment is expected to grow from 416,000 in2011 to 493,000. Its large pool of talented workforce helped the voice sector increase its revenues from US$7.4

billion in 2011 to a projected US$9 billion in 2012. In 2013, employment is expected to increase to 567,000 andrevenues to US$10 billion.

Figures provided by the Contact Center Association of the Philippines (CCAP) showed that the contact centerindustry is still the largest sector within the Philippine IT-BPM industry. It makes up 64 percent of the industrys totalnumber of direct employees and over 67 percent of total revenues.

Growing Non-Voice Sector

Results of the BPAP and O2P surveys in September 2009 and August 2012 confirm early but encouraging signsof a maturing shift identified in the IT-BPM Road Map 20112016 from rapid growth primarily in voice servicesinwhich the Philippines is the acknowledged number one provider globallyto faster growth in non-voice, complexservices (Graph 2).

The more rapid development of non-voice, complex services is in response to a number of factors, includingsatisfaction with the quality of voice services, market demand as firms worldwide seek to outsource a range ofprocesses to increase competitiveness, and the overall attractiveness of the Philippine labor pool.

The O2P-BPAP surveys also show consistent confidence among existing IT-BPM services providers and GICs in termsof prospects for growth. An industry-wide survey conducted in July 2011 revealed that 85 percent of respondentsexpected to increase their workforce within a year from the survey, with the majority anticipating growth between6 percent and 50 percent. High confidence levels were apparent among executives in both very large (10,000+)and smaller firms.


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Road Map 20122016 Road Map 201220168 9

Considered one of the most promising sectors of the IT-BPM industry, the healthcare information management(HIM) sector posted a 172 percent growth in 2011. In 2012, its projected revenue is at US$433 million, employingabout 43,000 Filipinos. The HIM sector also aims to reach employment of around 100,000 by 2016, according to theHealthcare Information Management Outsourcing Association of the Philippines (HIMOAP).

Knowledge process outsourcing (analytics, business intelligence, financial services, human resources, logistics,others) was the third-fastest growing segment. It grew by 24 percent in revenues from US$1.7 billion in 2010 toUS$2 billion in 2011. It also increased by the same rate in employment: from about 104,000 employees in 2010 toabout129,000 in 2011 in both third-party providers and GICs.

The Game Developers Association of the Philippines (GDAP) reported that the countrys game development sectoris still in its infancy, with only about 60 firms as of December 2011. Despite this, the local gaming sector aims to geta big slice of the industry and increase its 0.2 percent share in the global game development market. In 2011, theindustry had less than 3,000 employees and ea rned US$12 million in revenues, an increase of 13 percent from 2010.With advancements in the PC and game consoles industry, the industrys revenue is expected to hit US$72 millionby the end of 2012.

Engineering services provided by third-party providers and in-house groups serving global offices and customerswere estimated to have grown by about 5 percent in 2011 from US$163 million in 2010 to US$172 million. Thesegment also added about 4,000 jobs in the same period. This reflects a slowdown from a high 23 percent growthrate in 2010, a year of recovery from negative growth in 2009.

Because of tight competition with China and India, the Animation Council of the Philippines, Inc. (ACPI) reported in2011 a decline of 10 percent, posting US$128 million in revenues. The animation industry, however, maintained itsheadcount of more than 8,000 employees in the same period.

Meanwhile, the Philippine Software Industry Association (PSIA) posted a revenue growth of 37 percent growthor US$993 million with employment of about 49,908 for 2011. By 2013, PSIA projects industry revenues to reachUS$1.5 billion and aims to e mploy around 80,000 Filipinos.

Projected Growth

The Philippine IT-BPM workforce grew at an average of 21 percent annually between 2007 and 2011 (Graph 3). In2009, the growth rate dropped from 24 percent to 14 percent in the wake of the global financial crisis but quicklyrecovered in 2010 back up to 24 percent. The number of employees in the industry has more than doubled, fromabout 298,953 in 2007 to about 638,319 in 2011.

Advertisin

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Anim

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Back-offic

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Back-offic

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ContactCenter

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ContactCenter

Outbound

ContactCenterIn

-&Ou

tbound

Custom

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ranscription

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45%

40%

35%

30%

25%

20%

15%

10%

5%

0%

Se pte mbe r 20 0 9 Augus t 2 0 12

ProductSupport

Graph 2. Growing Non-Voice Sector

Source: O2P-BPAPPeriodicSurvey (August2012)

In the same O2P and BPAP surveys of 2009 and 2012, 92 percent of respondents (companies of different sizes andportfolio offerings) said they planned to increase their employee base; with most planning to increase by under 5percent to as much as 50 percent (Graph 4).

92% of respondents expect to increase employee base between 0-5% and more than 200%63% of respondents expect to increase employee base between 6% and 50%

25%

20%

15%

10%

5%

0%

-11%

ormore

-610% -15% No change 05% 610% 1115% 1625% 2650% 5175% 76100% 101200%

September2009 August 2012

Graph 4. Projected growth over 12-month period*

* As of September 2012Source: O2P-BPAP Periodic Survey (August 2012)

Source: IBPAP (2012)

Graph 3. Growth of IT-BPM workforce over past five years

2011201020092008200720112010200920082007

638,319

525,182

422,940

371,965

298,953

Growth rates FTEs: 2007-2011

14%24% 24%

22%

27%

10%

20%

30%

40%

50%

R d M 2012 2016 R d M 2012 201610 11


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Road Map 20122016 Road Map 2012201610 11

Sources: IBPAP data; IBPAP, Everest Group, and Outsource2Philippines analysis; World Bank and IMF projections for GDP (2012)

1.3M 2.3MIndirect

employment 600K 1.1M 3.2M

% of GDP 4.5% 6.2%4.2% 7.8%

525K 900KDirect

employment 240K 423K 1.3M

1.6M

4.9%

638K

2.0M

5.6%

772K

7.1

8.9

11.0

13.4

20.0

25.0

US$ Billions

20102009 AcceleratedCase 2016

Base

Case 20162011 2012e

3.2

2006

2.6%

IPPP

CAGR:

19%

CAGR:

22%

CAGR:

11%

CAGR:

17%

CAGR:

29%

Graph 5. Philippines' IT-BPM and GIC Industry Revenue Targets for 2016

In 2011, the Philippine IT-BPM and GIC industry earned US$11 billion in revenues and employed about 638,000Filipinos. IBPAP estimates that by the end of 2012, revenues would have grown by 22 percent to US$13.4 billionand employment would reach around 772,000. If this level is achieved, the industry would surpass the original LowCase 2016 scenario and to reach the Base Case 2016 scenario, it would have to grow by an average of 11 percenta year. To reach the Accelerated Case 2016 target of US$25 billion, the industry would have to grow by an averageof 17 percent from 2013 to 2016.

The non-voice segment presents greater opportunities for IT-BPM growth. To take advantage of these opportunities,the Philippine IT-BPM industry needs to reposition itself to highlight its capability in non-voice BPM.

The country's voice BPM industry also needs to increase its market share to maintain Philippine dominance in thissector.

For continued growth, Philippine IT-BPM must diversify its market by expanding in the UK, Europe, Australia, NewZealand, and the Asia Pacific (APAC) region. IT services, specifically, can be offered to more APAC-based companies.Philippine IT-BPM companies can also target the vast small- and medium-enterprise market in the US.

The 2010 version of Road Map 2016 projected that the Philippine IT-BPM and GIC industry could grow an averageof 14.5 percent a year to US$20 billion by 2016 if conditions remained basically unchanged from what they werein 2010 (Base Case 2016) (Graph 5). If conditions worsened (incentives were removed or th e environment becamemore rigid and less business friendly, for example), a Low Case 2016 scenarioslowing to 9 percent annual averagegrowthwas projected. The Accelerated Case 2016 projected a high average annual growth rat e of 19 percent onthe condition that the industry (private sector) and government strengthen their partnership in supporting industrydevelopment and growth. With this strengthened public-private partnership, it is envisioned that the industry wouldearn US$25 billion in revenues and employ 1.3 million and 3.2 million Filipinos directly and indirectly. At this size, theindustry could account for about 8 percent of Philippine GDP.

People

Top executives of global companies with recognizable brands consistently commend the availability of highlyprofessional experts in the Philippines. They also remark on the great ease of working with these professionals, avery positive experience they find unique to the Philippines. Many of these global executives have overseen thegrowth of their companies in the past decade and bear witness to the rapid growth of the Philippine IT-BPM andGIC industry as a whole.

High regard for the Filipino workforce would matter little to investors, however, if they were in short supply.

Fortunately for the Philippines and investors alike, the Philippines has a large, highly educated, English-speakingworkforce. Data provided in the IT-BPO Road Map 20112016 shows the Philippines has the third-largest talentavailability among the worlds top IT-BPM service centers, after India and China, a nd leading Poland, Mexico, Egypt,and Malaysia in annual tertiary graduates (Graph 6).

For specialized segments such as animation or software development, for example, decades-long experience inproviding services and products for global clients has established Filipino talent to be at par or better in creat ive andtechnical work than their counterparts in other countries. The large young skilled labor pool that allows hiring atsignificant scale at competitive costs has sustained these specialized sectors over two to three decades.

Culture

A talent index developed by O2P and Everest Group for the IT-BPO Road Map 20112016 shows that the Philippinesis well-positioned among global IT-BPM services providers in four key human resource indicators: scalability,experienced talent pool, quality of English accent (and cultural affinity with the US), and size of graduate pool (Graph7). Among these indicators, the Philippines is number one globally in terms of quality of English and cultural affinitywith the United States. This result can be explained in part from the historical and cultural ties and close economicrelations between the US and the Philippines for over a century. Affinity between Filipinos and other cultures hasalso deepened and broadened in more recent years as Filipinos embraced the Internet and social networking. ThePhilippines, according to socialbakers (www.socialbakers.com), is Facebook's eighth-largest market.

The positive attributes, available and renewable supply, and proven capabilities of the Filipino IT-BPM and GICworkforce have resulted in a near tripling of its size from 236,000 direct employees in 2006 to 638,000 in 2011.

Annual tertiary graduate

pool 2010, 000s

India

China

Philippines

Poland

Mexico

Egypt

Malaysia

2,000

3,500

~500

~500

371

330

131

Annual supply of F&A/

business graduates

2010, 000s

India

China

Philippines

Poland

Mexico

Egypt

Romania

560

127

107

68

107

66

33

Annual supply of

technical talent for IT

2010, 000s

China

India

Philippines

Malaysia

Poland

Mexico

Egypt

634

510

85

68

53

50

39

F&A = finance and accounting

Sources: Commission

on Higher Education;global industry data;

Everest Group analysis(2011)

Graph 6.Annual talentpool, selectglobal IT-BPMlocations

Road Map 2012 2016 Road Map 2012 201612 13


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Road Map 20122016 Road Map 2012201612 13

Professional and business practices are closely aligned with best practice in the United States. As a r esult, voice andnon-voice IT-BPM services providers and GIC workers seamlessly integrate with Western project and developmentteams without the hurdles normally associated with cross-cultural management. When a North American clientscustomer makes a reference to the New York Knicks, Lady Gaga, or upcoming federal elections, the Filipinoknowledge worker always relates.

Even in highly specialized fields, such as health care, Filipino professionals are valued for their cultural alignmentwith the United States and their familiarity with medical terms and procedures used in the American healthcaresystem.

The Next Wave CitiesTM

To achieve its US$25 billion revenue target by 2016, the Philippine IT-BPM and GIC industry must develop andsustain a workforce of 1.3 million. In the first wave of growth of the Philippine IT-BPM industry, from the late 1990sto 2010, three major hubs emerged: Metro Manila, Metro Cebu, and Metro Clark. It is clear, however, that the nextwave of growth must necessa rily involve alter native locations. The best of such locations, or what IBPAP andDOST-ICTO call Next Wave Cities (NWC), for 20102011 are, by rank: Davao City, Santa Rosa City (Laguna),Bacolod City, Iloilo City, Metro Cavite (Bacoor, Dasmarias City, Imus), Lipa City (Batangas), Cagayan de Oro City,Malolos City (Bulacan) , Baguio City, and Dumaguete City (Figure 4).

3.05

2.20

1.56 1.461.30

0.950.75

0.64

India Philippines China Egypt Malaysia Mexico Poland Romania

Scalability

Experiencedtalent pool

Quality of English

accent (cultural

affinity with U.S.)

Size of graduate

pool

Key takeaways for the Philippines

Top-3 global location in graduate pool size

Third-largest talent pool in delivery of voice, finance and accounting, and IT services

Among the largest experienced talent pools globally

Graph 7. Cumulative Talent Competitiveness Index for IT-BPM

Sources: IBPAP and Everest Group analysis (2010)

Higher scores implygreater competitiveness

METRO CEBU

METRO CLARK

Malolos

Baguio City

Metro CaviteSanta Rosa

Lipa City

Davao City

Cagayan De Oro City

Iloilo CityBacolod City

Dumaguete City

METRO MANILA

Figure 4. Locations of thePhilippines' Top 10 NextWave CitiesTM20102011and Established IT-BPMHubs

*Established Metroareas arein boldSources: IBPAP; DOST-ICTO (2011)

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Road Map 2012 2016 Road Map 2012 201614 15

Competitiveness

The Philippines is a competitive destination for the IT-BPM and GIC industry because of attributes related to its scalableeducated talent pool, distinctive Filipino workforce characteristics, cost competitiveness, excellent infrastructure,government support and public-private partnership, and proven track record (Table 2).

Talent pool.The IT-BPM and GIC industry is undertaking a series of visibility initiatives to highlight the rewardingcareer opportunities available to Filipinos. As the industry has grown rapidly, so has the demand for a skilledworkforce. IBPAP is working with industry and government partners to address the skills-and-jobs mismatch as wellas to develop and sustain the talent pool. Leading outsourcing firms operating in the Philippines offer multi-servicedelivery in consulting, IT and engineering, financial, manufacturing, customer engagement, public services andhealth care, facility management, security, real estate, and support services, among others.

Because of the nature and complexity of these services, the Filipino talent pool must be equipped with top skillsneeded in the IT-BPM and GIC industry, including leadership, strategic thinking, and English-language skills. IBPAPhas developed to date about 13 certification, training, and HR development programs with partner associationsproviding components for specialized skills. It works closely with government training and e ducation departments,local governments, and private organizations and institutions to plan, design, and implement these wide-rangingprograms to transform the country's supply of e mployable talent.

Table 2. Why the Philippines is a Top Offshore IT-BPM Location

Scalable Educated

Talent Pool

Cost

Competitiveness

Filipino

Workforce

Excellent

Infrastructure

GovernmentSupport & Public-

Private Partnership

Proven TrackRecord

- 3rd-largest English-speaking country, 12th-most populous country

- 90+ million population, 39+ million workforce

- 500,000+ college graduates per year; 93% literacy rate

- Western-based legal and accounting curriculum and certification

- Service Culture

- Adaptability

- Compassionate and caring by nature

- Loyalty

- Labor costs for English-speaking professionals among lowest in the world

- All-in costs among lowest in the world

- Predictable and manageable inflation

- Abundant low-cost and high-quality real estate in several urban areas

- Reliable, redundant, low-cost telco infrastructure

- Reliable power and building 100% - 200% back-up as a standard

- Available 24/7 low-cost transportation

- Government support in education (TESDA, CHED), locator support (PEZA,

BOI), industry development (ICTO)

- Income tax holiday (4-8 years), 5% tax on gross income post holiday, VAT

exemption

- Comprehensive Industry Road Map 2016 to achieve 20% YOY growth

- No. 1 in Voice: customer care, tech, financial services, sales, collections

- Mature/growing industry-specific and cross-industry capability: IT, F&A,

HR, Healthcare BPM, Procurement, Banking, Utilities, Telco, Media

- Primary English-based services plus other Asian and European languages

- Analytics & KPO capabilities


Cost competitiveness.The Philippines remains one of the mostand close to the mostcost-competitive locationsin the world for voice (Graph 8) and non-voice BPM as well as information technology outsourcing (ITO). In eachof these sectors, the Philippines is generally at parity with India, and more cost-effective than other global serviceslocations, despite the high quality of talent pool available. However, the appreciation of the Philippine peso in 2012coupled with the depreciation of the Indian rupee widened the gap somewhat between these global leaders inIT-BPM (Graph 9).

29-32

26-28 26-28

20-22

15-1612-14

70-72

US Tier-2 Mexico City Krakow Kuala Lumpur Cairo Metro Manila Delhi/NCR

2012; US$ 000 per annum per FTEMARKET AVERAGES

Reflective of market averages. Range could

vary depending upon

Tier-1 vs. Tier-2 cities Suppliers vs. Captives Scaled operations vs. mid-size operations

Philippines is one of the lowest cost destinations for English voice work and comparable to India

Ongoing costs only; excludes margins/mark-ups, centralized corporate overheads, initial investment, set-up costs, and travel costs

Note: Exchange rates for local currencies with respect to the U.S. Dollar have been averaged for 18 months from 1-Jan-2011 to

30-July-2012

1

Graph 8. Direct operating cost1per full-time employee for English voice work(average exchange rate)

Sources: Everest Group and Outsource2Philippines (2012)

29-32

25-27 26-28

19-21

15-1711-13

70-72

US Tier-2 Mexico City Krakow Kuala Lumpur Cairo Metro Manila Delhi/NCR

2012; US$ 000 per annum per FTE

MARKET AVERAGES

Philippines is one of the lowest cost destinations for English voice work and comparable to India

Slightdecrease

in cost

Slight de

in cost

Ongoing costs only; excludes margins/mark-ups, centralized corporate overheads, initial investment, set-up costs, and travel costs

Note: Exchange rates for local currencies with respect to the U.S. Dollar have been taken as of December 11, 2012

1

Graph 9. Direct operating cost1per full-time employee for English voice work(current exchange rate)


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p p16 17

The ITO sector grew 37 percent in 2011 to almost US$1 billion in revenues and employed close to 50,000 Filipinos.Although the Philippines is not generally viewed as a leading ITO location particularly when compared with Indiaand China, the reality of investment in the sector since 2010 is that investors increasingly recognize the attributes ofthe Philippines as a reliable, high-quality provider of ITO services.

As IT-BPM and GIC services providers expand outside Metro Manila to Next Wave CitiesTMand other suitable locationsoffering large, stable talent supplies, this cost advantage increases (Graph 10). It is notable that since 2010, Davaoin particular has become an increasingly attractive and popular location for IT-BPM investors as a result of a soundand strong business-friendly environment, adequate educational infrastructure, and increasing leisure and lifestyle

opportunities.

Excellent infrastructure. The IT-BPM and GIC industry is primarily served directly by two major domestictelecommunications firms, PLDT and Globe Telecom, ensuring business continuity. These firms offer independent,nationwide data networks, and have announced significant new investments in infrastructure to support domesticdemandprimarily mobile voice and data servicesas well as commercial requirements.

Telecom infrastructure is available throughout the archipelago. The high-speed networks maintained by PLDT andGlobe (and a smaller third-party provider, Bayan) are illustrated in the succeeding page, along with landing stationsfor international submarine cables (Figure 5). The infrastructure has connections to Asia, Europe, North America,and Australia.

Several urban areas across the Philippines also offer a wide array of low-cost and high-quality real estate, includinga number of high-rise buildings with residential and commercial spaces.

While most investors typically turn to bigger cities for their investments, the re are other ideal locations for real estateinvestment. These locations are comparatively less crowded and offer a better quality of life for people living there.The Next Wave Cities report lists down 10 cities that investors may benchmark when they plan to invest outsidethe metro cities.

Power and transportation are also key considerations in doing business in the Philippines. Majority of metro citieshave a reliable power supply and provide backup in case of power interruptions. Accessibility is not an issue sincemost outsourcing hubs have low-cost public transportation available 24/7.

Monthly Average

Power Rate

(/1,000 kwh)

6,180

Monthly Non-Agriculture

Minimum Wage

()

(as of January 2009)

Monthly Average

Rental Rate

(/10 sq m)

Metro Cebu Metro Manila Davao City

5,874

8,404

5,000

6,500

7,560

5,380

4,250

5,390

Sources: IBPAP and TeamAsia (2012), Next Wave Cities (2010-2011)

Graph 10. Cost of business among major Philippine hubsLAOAG

VIGAN

BALLASTEROS

TUGUEGARAO

CAUAYAN

SOLANOBAGUIO

URDANETADAGUPAN

TARLAC CABANATUAN

SUBIC

CANERO

AURORA

MAKATI

TGN-IA

AAG

EAC

APCN2

SeaMeWe 3

C2C

SJC(JUNE 2013)

ASE

SFLU

MASBATE

SORSOGON

CALBAYOG

BANATE

TALISAY

DONSOL

TACLOBAN

TAGBILARAN

ORMOC

BACOLOD

TALISAY

LILOAN

DUERO

MARIBOJOC

LAHUG

SAN REMIGIOILOILO

DAUIN

ROXAS

CAD

MAASIN

CABADBARAN

BUTUAN

DAVAO

COTABATO

MANTICAO

CDO

ZAMBOANGA

GEN. SANTOS

ILIGAN

PAGADIAN

BACOOR

ERMITA

SAMPALOC

BATANGAS

NAGA

PAGBILAOPILI

LEGASPI

NASUGBU

MAMBURAO

SAN JOSE

AAG:Asia-America Gateway

APCN2:Asia-Pacific Cable Network 2

C2C: City-to-City

TGN-IA: Tata Global Network-Intra Asia

ASE:Asia Submarine-Cable Express

EAC: East Asia Crossing

SJC: South-East Asia Japan Cable

SeaMeWe3:South East Asia MiddleEast Western Europe 3

DAET

Figure 5. State-of-the-artvoice and data infrastructure

throughout the Philippinearchipelago

Sources: Industry data (2012), www.submarinecablemap.com

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Government support. This industry enjoys the support of the Philippine government, from no less than PresidentBenigno S. Aquino III. In October 2011, President Aquino announced that the government was allocating 500million (about US$12 million) in funding for training of potential employees ("near hires") in multiple sectors of thePhilippine IT-BPM industry through TESDA. Another 125 million was allocated by CHED to integrate industry-developed courses into degree programs and to develop the capability of faculty in state universities and collegesand private higher education institutions to teach these courses. Significant scale has been achieved according toIBPAP, which oversees administration of the grants and develops training and certification programs. By mid-2013,more than 65,000 prospective employees will have received remedial training, with approximately 70 percentexpected to be employed as a result. More than 8,000 trainers have a lso benefitted from the programs.

TESDA has allocated 900 vouchers amounting to 18 million for Trainers Methodology (TM) Plus, the first trainerstraining program for IT-BPM offered by the skills development agency. TM Plus was jointly developed by TESDAand IBPAP. In addition, a budget of 7.2 million for 804 vouchers will be used for Trainers Methodology 1, a first-generation version of the TESDA course also intended to enhance training skills.

At present, the TESDA programs cover training of potential employees for call centers, programming, transcription,game development, and animation or trainers for courses in these segments. Industry leaders have acknowledgedthat these programs help to address the high demand for skilled workers in all these fields. There are plans todevelop more courses to cover skills in more fields such as finance and accounting, and human resources for IT-BPMs.

The DOST-ICTO, as part of its mandate to ensure the sustained growth and competitiveness of the ICT industry,has undertaken with its stakeholders including industry the implementation of key programs, such as TalentDevelopment, Stepping Up the Value Chain, Next Wave Cities TM, Smarter Countryside, Domestic ICT IndustryDevelopment, ICT-Enabled Creative Industries, and ICT Industry Marketing and Research.

Proven track record.The Philippines overtook India in voice BPM in 2010 in both employment and industryrevenue. Non-voice services have gained increasing traction and interest in recent years and now account forsubstantial revenues and employment. Growth in non-voice services is expected to outpace growth in voiceBPM, sometimes by very significant margins, such as in the case of ITO and healthcare information managementoutsourcing. Largely as a result, most IT-BPM and GIC executives view the Philippines as a less-risky location for theprovision of IT-BPM and GIC services (Graph 11).

56% of Respondents say the Philippines is less

risky or much less risky than India

45%

40%

35%

30%

25%

20%

15%

10%

5%

0%

September 2009

Much More Risky M or e R is ky A bo ut Th e S am e Much Less RiskyLess Risky

August 2012

Graph 11. O2P and BPAP survey respondents comparative risk rating of Philippines and India

Source: O2P-BPAP Periodic Survey (August 2012)

Chapter 2The Global Market: The Role of the Philippines

By 2016, the Philippine information technology and business process management (IT-BPM) andglobal in-house center (GIC) industry can grow to US$25 billion in revenue, employing more

than 1.3 million Filipinos directly, and contributing about 8 percent of GDP.

Global industry

The global offshore services market is growing at a healthy pace, despite the lingering impact of the globalfinancial crisis that began in 2009. Demand for IT-BPM and GIC services is expected to more than double by 2016to approximately US$245 billion of which about US$122 billion is demand for BPM alone. As the marke t grows, thecomposition of the BPM market is expected to evolve dramatically, with non-voice, complex services as the fastest-developing segments (Graph 12).

As non-voice, complex BPM service assumes the role of principal engine of growth for the industry, demand forindustry-specific services is expected to increase. When it does, industry-specific services will grow into a largerpercentage of the non-voice BPM market by 2016. Prominent industry verticals will include banking and financialservices, insurance, health care, media, engineering, and creative services.

The Philippine forecast

According to Everest , the Philippines is a ma ture location for IT-BPM s ervices (Figure 6). If the global fore cast forthe industry holds true, accompanied by a nurturing investment environment in the Philippines and improved

48% 42%

52% 58%

2011 2016E

Industry-specific services are expected to

constitute a larger percentage of the non-voice BPM

market by 2016Global offshore opportunity in non-voice BPM

2016; US$ billion

100% = 70-73

Horizontal(F&A, HR, KPO,

Procurement)~27-29

35-40%

60-65%

Industry-specific~ 42-44

Voice BPM work is likely to grow; however non-voice is likely to become increasingly significant

Within non-voice BPM, the opportunity is likely to shift towards more complex and vertical-specific

work (e.g., insurance claims processing, credit underwriting)

44-48 120-124100% =

Voice BPM

Non-voiceBPM

Graph 12. Global offshore market size for business process management (BPM) services(excluding information technology)


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Number one in voice; number two in non-voice, complex services

IBPAP is aware that non-voice is where the value is being created, and supports all efforts in promoting thePhilippines capabilities in this area.

As the growth of non-voice, complex services outpaces growth in voice services, the Philippines will build a morevisible presence in emerging segments. In fact, the IT-BPM and GIC industry first sprang up as a non-voice industrywhen large accounting firms and other multinational firms such as Caltex, Shell, and Fluor Daniels set up facilities inthe Philippines to deliver services to their global operations. Software development, animation, medical transcription,and data processing for global (mostly American) clients have been delivered from the Philippines over the lastthree decades or more.

Fluor Philippines for example, a company that provides detail and process engineering, logistics, procurement,maintenance, project management, and construction, began operations in the Philippines in 1987 or a quartercentury ago, and in 2012 employed more than 2,200 Filipinos. According to executives of the firm, the Philippinefacility is one of the fastest-growing in its global network. The Philippine company was founded as a global executioncenter that provided support services to Fluor facilities around the world. Today, the Philippine operations providea high-value array of ser vices, including engineering, global procurement, construction management, and projectmanagement services.

Fluor's Philippine operations remain global and are no longer limited to supporting the company's projects. Instead,it conceptualizes, develops, and manages engagements in regions such as Middle East and South America, as wellas countries such as Australia, Malaysia, Singapore, China, and the Philippines.

In recent years, the impressive growth in voice services has captured the attention of both industry executivesand analysts. But throughout the impressive voice growth of the last decade, non-voice services segments inindustry-specific verticals have grown steadily in the banking, shipping, civil engineering, software, media, and legalindustries. Executives in one multinational bank with more than 10,000 employees in the Philippines serving globaloperations have said that 90 percent of their work is non-voice. The industry has also started to diversify its servicesfocus and geographic base (Figure 7).

Egypt, Morocco, andSouth Africa:Significant gvernment-backed push to target UKand Europe

Mexico, Brazil,Columbia, Chile,and Argentina:Evolving rapidly asnear-shore base todrive penetration inNorth America

1-2 key offshore locations from each regionidentified for competitive benchmarking asrelevant

Mature Credible Emerging

Eastern Europe:Established near-shore destination

China:Domestic and APAC centricscale and capabilities

India:Industry leading scale andcapabilitiesVoice: 400K+ FTEsNon-voice BPM: ~1.6M FTEs

Philippines:#1 in voice BPM416K FTEs#2 in non-voice BPM220K+ FTEs

Figure 6. Philippinesamong mature globalIT-BPM locations (2011)

Source: Everest Group analysis (2011)

educational support from the Philippine government as well as the private sector, the Philippine IT-BPM and GICindustry can expand to US$25 billion in annual revenues. If that goal is attained, the industry will employ morethan 1.3 million direct employees, and contribute about eight percent of GDP, becoming the second-largestsource of foreign exchange for the country.

Full-Time Employees

1,391

8

Revenue (US$M)

TOTAL FTEs Non-VoiceBPM/KPO

Information Technology

Outsourcing

Healthcare InformationManagement

EngineeringServices

Game

Development

Animation

Voice BPM

638,319

11,036

8,640

128

9,030

172

24,700

277

49,908

993

128,650

2,058

416,000

7,400

Figure 7.Range ofIT-BPMservicesin thePhilippines


Twenty-three percent of 2011 industry revenues were generated by non-voice services, which accounted for35 percent of industry employment.

The O2P-BPAP surveys also revealed that about 65 percent of respondents have clients in North America, a levelthat remained constant between two survey periods: 2009 and 2012 (Graph 13). While fewer respondents had cli-ents in the EU, Asia, and other locations, the rise in the percent of those with clients in these areas over three yearswas evident. This indicates that the market of Philippine IT-BPM and GIC services is diversifying geographically, whilemaintaining significant presence in North America (primarily the United States).

.

70%

60%

50%

40%

30%

20%

10%

0

North America EU Asia Others

September 2009 August 2012

Respondents

Graph 13.Clients bygeographiclocation

Source: O2P-BPAP Periodic Survey (August 2012)

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Chapter 3The Role of IBPAP

The Information Technology and Business Process Association of the Philippines (IBPAP), formerlythe Business Processing Association of the Philippines (BPAP), is the enabling association for theinformation technology and business process management (IT-BPM) and global in-house center(GIC) industry in the Philippines. IBPAP serves as the one-stop information and advocacy gatewayfor the industry. With approximately 300 industry and support-industry members, includingfive associationsthe Animation Council of the Philippines, Inc., Contact Center Associationof the Philippines, Game Developers Association of the Philippines, Healthcare InformationManagement Outsourcing Association of the Philippines, and the Philippine Software Industry

AssociationIBPAP plays a pivotal role in sustaining rapid growth of the IT-BPM and GIC industryby working to ensure an enduring supply of high-quality labor, supporting service innovation,and providing country visibility. IBPAP assists investors in setting up operations easily and quicklyin the Philippines. Relevant research, introductions to key government and industry officials, anda series of briefings at each step of the investment procedure ensure a seamless developmentprocess. Ongoing support is provided through a wide variety of initiatives, including programsfor HR development, business development, and ongoing knowledge sharing and networking.

Achieving the US$25 billion goal requires IBPAP to drive favorable outcomes across multiple areas,including: addressing lack of human capital through public-private partnerships; strengthening

the Philippines attractiveness as an investment destination; building and promoting the countrybrand; leading cross-sectoral efforts; and introducing innovation (Figure 8).

Talent: Efforts, results, and goals

Although the Philippines enjoys an attractive talent pool, the industry hires just five to 10 percent of all applicants,generally as a result of inadequate education and training suitable to a car eer in the IT-BPM and GIC industry. Fromthe more than 500,000 college graduates produced by the countrys formal tertiary institutions, only 20 percentare capable or qualified to assume jobs in the industry. Perhaps most alarming is that while only 30 percent of ourtertiary graduates consider a career in the industry, the relatively huge proportion (70 percent) of the graduatesand those who are deemed to have great influence on their career decisions may not be fully aware of the careeropportunities in IT-BPM and GICs in the country. The industry and government are moving to address these issues,which is the subject of a subsequent section of this report.

Country

Branding

EcosystemTalent

Thought

Leadership

Innovation

Figure 8. Areas whereIBPAP plays a role

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The Road Map laid down the need for an integrated talent development approach with objectives that progressivelylead to growing the talent and addressing the talent supply gap (Figures 9 and 10).

IT-BPM thousand full-time employees

Total talent demand (Accelerated Case)

Effective addressable talent supply (as is)

Actual and projected supply with industry and

government talent programs

Source: IBPAP and Everest Group analysis (2012)

8483

87

103

88

137

155

105

184

213

194

215

243

Effective addressable supply

80K-105K

@2.5% growth rate

2006 2007 2008 2009 2010 2011 2012f 2013f 2014f 2015f 2016f

Graph 14. Demand and supplyprojections of entry-level industrytalent in the Philippines, 20062016

Achieving the US$25 billion Accelerated Case target by 2016 requires increasing the talent pool to 1.3 million FTEs.This translates to total talent demand of over 1 million hired (for expansion and to re place attrited employees) overthe next five years (Graph 14). With the estimated annual ta lent supply of 80,000 to 105,000 qualified and willingnew hires every year, this would leave a gap in the talent supply of over 500,000 between 2012 and 2016.

Grow talent

base

Improve

relevance of

education

Impart

employability

skills

Imperatives

Desired outcomes

Attractmore to

the sector

Up-skill& retain

Increase installed in

higher education

Increase throughput

from secondary

Minimize drop-outs

from tertiary systems

Tap alternative talent

pools

Up-skillingexperienced staff

on all aspects of

managerial

development

Impart domain skills

Increase propensityof graduates/school

leavers to consider

IT-BPM

Reduce migration

out of the country

Attract students to

invest in educating

themselves to take

up jobs in the sector

Encourage reverse

migration

Increase yield oftrainable pool into

the workforce

Bridge gap between

college and industry

by imparting work

readiness

Increase enrolment in

IT-BPM relevant

streams in tertiary

institutions

Identify and impart

remedial measures for

university students

Figure 10. Imperatives and desired outcomes


Demand

Others

SMP

Career Marketing

GCAT

I-TWSP

Supply

2011 2012 2013 2014 2015 2016

Figure 9. Address the Supply Gap s chematic


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Marketing

Country, Career, IBPAP, Programs

FundingAccelerates development & scaling up of

programs to become mainstream

Assessment

GCAT: GlobalCompetitivenessAssessment Tool

Voice Assessment

Teacher/Trainer

Certification

Future: Skills

Certification

Intervention

Industry-basedTraining for Work

Scholarship Program (I-TWSP) Basic English Skills Training (BEST),

electronic Advanced English Pre- employment Training (eAdEPT),

Expanded Learning on IT-Enabled

Services (ELITES) Service Management

Program (SMP) Train the Trainers (T3) Emerging Services Executive Development Lean/6-Sigma, Analytics, Knowledge Process

Outsourcing (KPO)

Career Education

and Job Placement

GCAT Information

Bank

IBPAP Career

Portal (Work

Abroad,

Live Here)

Practicum

Job Fairs

Academes-

Company-

IBPAP MOAs

Figure 11. Talent development initiatives

Source: BPAP (2012)

To address this challenge, IBPAP and its partner associations set out to attract over 1 million people to join the IT-BPM and GIC workforce within five years through an end-to-end approach to talent development.

Historically, talent supply has exceeded demand. But since 2010, demand has consistently risen faster than supply.Public-private partnerships (PPPs) for talent development and recruitment have to be intensified to help close thegap.

PPPs are important cata lysts in achieving the US$25 billion reve nue goal by 2016. By 2012, PPP talent developmentinitiatives (Figure 11) resulted in concrete gains (Table 3). The Philippine government, through the Departmentof Budget and Management, infused about US$12 million for the Industry-based Training for Work ScholarshipProgram (I-TWSP) led by the Technical Education and Skills Development Authority (TESDA). The program offersscholarships for industry-approved courses on animation, software development, medical transcription and voice.I-TWSP is expected to add 250,000 people to the talent pool over five years. Studies show that seven out of 10I-TWSP scholars get employed.

As of October 2012, 41,000 had been trained and 20,000 employed under the I-TWSP. Trainers' training has alsobeen expanded under the program.

Table 3.Other industry programs: 2013 targets

Emerging Services

Service ManagementProgram K to 12

Service TechnologyManagement

Complete development planning for the following: Corporate Services: finance and accounting, human resources,

procurement, logistics Engineering services, information technology outsourcing,

health care, cloud processed outsourcing Lean/Six Sigma, analytics, knowledge process outsourcing

Grades 11 & 12 content in K to12 curriculum Modelling with schools starting school year 2013-2014 (June 2013)

Complete development planning Initial curriculum developed with University of the Philippines-Information

Technology Development Center (UP-ITDC)

Program Target 2013

ExecutiveDevelopment

IndustryStandard Voice

Career Marketing

Assessment

ElectronicLearning

Complete Executive Development program

Similar to Global Competitiveness Assessment Tool, complete study ofvoice assessment standard

Multi-media campaign across initiatives Career Caravans / Conventions with state universities and colleges

Complete development planning Initial curriculum developed with UP-ITDC

Complement teacher-led interventions with eLearning solutions toachieve better scale, reach and standardized delivery of instruction


Existing training and educational programs have also been scaled up to benefit over 100,000 students, over 8,000teachers and trainers who, after certification, can further teach over 50,000 students annually. IBPAP is working tohave 70 percent of the present I-TWSP scholars to be employed by the industry after the program. To sustain these

initial gains, IBPAP identified the need to continue investing to scale up these PPPs in the following ways:

Additional 60,000+ scholars to yield over 40,000 employable talent, with additional funding for marketing,and systems and capability development.

Additional 15 SUCs to be industry-enabled to teach IBPAPs programs and yield 5,500 more trained teacherswho, in turn, can teach over 50,000 students annually.

15 public high schools to introduce industry training programs during Grades 11 and 12, to yield 5,500trained K to 12 teachers who, in turn, can teach over 50,000 students annually.

The Commission on Higher Education (CHED) has already approved the 21-unit Service Management Program(SMP) course jointly developed by the IT-BPM industry and academe. Four schools and 46 industry practitioners arealready part of the program. In 2013, the industry expects to receive funding from the Asian Development Bank(ADB) and CHED to train teachers from identified state universities and colleges (SUCs). The ADB-funded project willbe managed by IBPAP in partnership with the University of the Philippines Open University and the Asian Instituteof Management (AIM).

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For Basic English Skills Training (BEST) and Advanced English Pre-employment Training (AdEPT), the TESDA Trainthe Trainers (T3) run in 2012 includes two higher education institutions (HEIs) in Metro Manila and four SUCs a ndlocal colleges and universities (LCUs) in Quezon Province. Eleven schools identified by the Department of Scienceand Technology-Science Education Institute, and 13 SUCs and HEIs that signified interest will be included in the T3run for BEST and AdEPT in 2013.

New talent development programs will be rolled out in 2013, including the Service Technology Managementdesigned for team leaders and managers. IBPAP and its partner associations also aim to design programs for financeand accounting outsourcing and healthcare information, and more programs for information technology. Otherinitiatives are an industry-relevant program for Grades 11 and 12, an executive development program, and industry-standard voice BPM assessment.

IBPAP has also been working to spread better awareness among fresh graduates and career shifters of the goodcareers that can be ha d in the IT-BPM and GIC industry. Career marketing activities have revolved around the themeof "Work Abroad, Live Here" to position IT-BPM and GIC careers as a good alternative to overseas employment. Theprogram is supported with a strategic media campaign for print, online, and other media funded by IBPAP andcovering all industry sectors.

An online portal, www.workabroadlivehere.com, was set up as a repository of information on careers in the industryand as a resource hub with links to other online career websites. The portal is supported by a Facebook page andTwitter accountalso called Work Abroad. Live Here." Aside from the brand visibility campaign, IBPAP, membercompanies, and government agencies are undertaking a number of initiatives to increase the size of the labor pool.

The program, managed by TeamAsia, is a campaign to acquaint graduates and professionals for them to considera career shift with the Philippines vibrant IT-BPM and GIC industry, which spans more than 20 different functionaland vertical segments.

IBPAP has also forged a partnership with TESDA t o launch a trainers training program conceived to support talentdevelopment in the IT-BPM and GIC industry. TM Plus is one in a series of educational programs developed underthe500-million funding for I-TWSP. The entire program is divided into two parts: the first covers IT-BPM orientationand instruction through classroom and e-learning sessions; and the next is allotted for internship, where traineesco-facilitate TM Plus in an IT-BPM facility. Trainees are assessed using tools developed by the Philippine Society forTraining and Development (PSTD) as well as TESDAs TM 1 National Assessment and are certified when a ssessed asqualified.

IBPAP aims to add 200,000 full-time employees to the talent supply over the next five years through its higher-educationbased interventions including its Global Competitiveness Assessment Tool (GCAT, an online assessmenttest to measure the skill gaps and areas of improvement which guides schools and companies in designingappropriate interventions); SMP, a CHED-mandated and IBPAP-developed 21-unit specialization track for businessadministration and IT college students intending to go into the IT-BPM and GIC industry; AdEPT, a two-week crashcourse on improving English proficiency for university students and individuals already in the industry; EmergingServices, an upcoming program to develop courses for corporate ser vices and other specialized fields; and e-Learningprograms.

Core IdentityLow-cost structures

Scalable English-

speaking talent pool

Low-risk profile

High Quality

Alignment with global

best practices

Extended Identity

Cultural Affinity

with U.S.

LoyaltyService culture

People andExpertise

High

productivity

Instruction-

taking mindset

Exotic leisure

opportunities

Work Abroad,Live here

Superior

quality of life

Low inflation

Language Skills

Philippines Country

Brand

Its more fun in the

Philippines

Source: Adapted by TeamAsia from Dr. David A. Aaker

Figure 12. Philippine IT-BPM industrys core and extended identities

Building and promoting a country brand

Industry associations, companies, and government agencies have joint and separate initiatives to promote thecountry as an IT-BPM and GIC destination. Annual events with foreign speakers and participants, trade missions toevents in market locations, speaking engagements, working with international analysts and research firms, onlinemarketing, and some public relations releases have been used to some effect. Some of these e fforts are discussed inmore detail in succeeding chapters on the specific sectors in this report.

As a first step to developing a strategic external marketing strategy, IBPAP led a brand identity workshop to map out

the Philippine IT-BPM and GIC industrys core and extended identities (Figure 12). The output will serve as basis fordeveloping the value proposition, key messages, and external strategic marketing strategy.

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The marketing strategy will involve multiple channels and activities (F igure 13).

Participation inOutsourcing Events

Sourcing focused events intarget countries

Continue and strengthen broad-based efforts to educate the market

Relevance and outcomes may vary by channel

Major industry conference

Articles and Features

Website, blogs, social media

Newsletters

Print/TV and social media

Research reports showcasing

capabilities

IT-BPM leaders at keyresearching and consumingfirms

News coverage

Hosted events in sourcemarkets

Hosted Events

PR/Mass Media

Online Media/Newsletter

Advertisements

ThoughtLeadership

Analysts

Ambassadors

Events

Channels Type Examples

Media

Indirectchannels

Prominent Filipinos in sourcemarkets

Helps raise awareness in target markets

and generates leads

Involves coordination across multipleassociations to ensure appropriaterepresentation

Ensures ability to measureeffectiveness/ROI

Helps create awareness and raiseprofile

Requires a pragmatic approach andorchestration in communication

Important to move investors fromevaluation to decision making

Essential to drive focused investmentsby identifying platforms to own

Figure 13. Channels to educate and engage the market

Strengthening the ecosystem

IBPAP has also led efforts to strengthen the ecosystem for IT-BPM and GIC investors, from pushing for the passageof favorable laws to expressing industry support for continued tax incentives.

In August 2012, Republic Act No. 10173 (Data Privacy Act) was enacted into law. The law, which had beenpending for years, is based on standards set by the European Parliament and aligned with the Asia Pacific EconomicCooperation (APEC) Privacy Framework. Among others, it criminalizes breaches of confidential personal data andprovides stiff penalties for these acts. It is IBPAP's view that the law will increase confidence among internationalinvestors and companies that outsource business processes to the country because it brings the Philippines tointernational standards of privacy protection.

In September 2012, Republic Act No. 10175, known as the Cybercrime Prevention Act of 2012, was signed into law.It is meant to provide the resources and legal framework to identify, prevent, and impose punishment for Internet-based crimes and safeguard users online information from unauthorized data collectors. Because IT-BPM firmsuse the Internet and computer technology as the principal channel for communication processes, the industry willbenefit from provisions covering system and data protection, device security, and penalties for computer-relatedoffenses.

The anti-cybercrime law will aid the industry in sustaining growth and global leadership. This new law validatesthe strong partnership the industry continues to build with the public sector as well as recognizes the industryssignificant contribution to the economy.

In addition to this, the Congress of the Philippines also passed an amendment to the Labor Code provisions on nightwork. As it stands, the law now allows night work, especially for women, subject to the establishment of mandatoryfacilities and workplace programs. The Department of Labor and Employment (DOLE) considered the changes in the


Sources: IBPAP and Everest Group (2012)

context of increasing globalization and liberalization, advanced information and communication technology, andthe Constitutional mandate for equal employment opportunities and protection against employment discrimination.

In terms of tax and regulatory incentives, the Philippines remains to be an attr active destination with a comparable,if not compelling, incentives package.

Local governmentsespecially those of Next Wave Citiesare also offering additional incentives to f urther promotetheir cities as alternative destinations.

Road Map 2016 showed how the government incentive schemes have resulted in returns from corporate andpersonal taxes collected that are four to five times the amount of the foregone ta xes from the incentives from 2005to 2011 (Graph 15). Government granted about a total of US$1.1 billion to US$1.4 billion in incentives to IT-BPMsand GICs in those years . In that same period, a total of 540,000 direct jobs a nd between 1.1 million and 1.6 millionindirect jobs were added to the Philippine workforce by this industry.

During this period, companies that were set up or expanded as a result of the growing IT-BPM and GIC industry thatwere not under a financial-incentive scheme paid US$1.1 billion to US$1.4 billion in corporate taxes to the Philippinegovernment. In addition, direct and indirect employees had taxes withheld from their paychecks in the amount ofUS$1.7 billion to US$2.1 billion and VAT collected from increased consumption totalled US$1.6 billion to US$1.9billion. Total tax revenues to the government from the growth of the IT-BPM and GIC industry therefore werebetween US$4.4 billion to US$5.4 billion, or four to five times the amount of incentives granted to IT-BPMs and GICs.

1 x amount of direct revenue in IT-BPM industry leads to 1.63x indirect revenue for the economy (ERD Working paper by Asian Development Bank)

2 For every direct job in the IT-BPM industry, 2-3 indirect jobs created

3 Considers tax revenue loss of 5% post tax holiday in the industry assuming all companies in the industry are under PEZA; considers

corporate tax revenue of 30% from indirect employment

4 20% on employee salaries across all industries

5 12% VAT rate assumed with -50% of consumption from direct employment contributed by the industry

Incremental jobs created

2005

2006

2007

2008

2009

Total ~538,000

~63,000

~73,000

~63,000

~73,000

~51,000

(in millions)Impact assessment (2005-2011)

Di re ct I nd ir ect1

Corporate taxrevenue (US$)3

Number ofadditional jobs2

Personal taxrevenue (US$)4

VAT revenue (US$)5

Resultant total taxrevenue (US$)

~0.5 1.1 - 1.6

1,100 - 1,400

900 - 1,100800 - 1,000

1,200 -1,400

3,200 - 3,900

400 - 500

1,200 -1,500

Total incentives

provided on new jobs:

US$1,100 million -US$1,400 million

4X return on incentives

2010 ~102,000

2011 ~113,000

Graph 15. Philippine incentives, ROI for economy

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Industry thought leadership

Industry stakeholders have emphasized the importance of thought leadership as part of a strategic, IBPAP-ledcountry branding and marketing initiative. To establish the country as a global thought leader for IT-BPMs and GICs,IBPAP and the government, through the DOST-ICTO, have invested heavily in research products:

Quarterly industry surveys and CEO briefings, which tackle timely industry issues Annual International Outsourcing Summit, which brings international focus to the Philippines as a premier

IT-BPM hub

Next Wave CitiesTM

, an annual publication that rates alternate and emerging IT-BPM hubs all over thePhilippines based on talent availability, cost, infrastructure and business environment and risk management. Investor Primer, which summarizes the Philippines value proposition for investors (http://www.bpap.org/

publications/research/investorprimer2012) The IT-BPM and GIC Road Map 2016, which sets the Philippines goals and strategies for meeting these

objectives

IBPAPs partner associations have also invested in talent-related initiatives and annual events to market to potentialclients and investors (not exhaustive):

ACPI holds Animahenasyon, an annual animation competition with learning sessions and promotions CCAP holds the International Contact Center Conference and Expo (ICCCE) every year, the largest contact

center event in the world with over 8,000 participants GDAP holds the Philippine Game Development Festival every year which features competitions, learning

events, and promotions HIMOAP organizes the Healthcare Information Management Outsourcing Services Congress (HIMOSC) every

year to galvanize the sector as it evolves and prepares for rapid growth PSIA organizes targeted marketing missions and has launched a program to gain global recognition for

Philippine software development capability through a focused campaign to develop and market originalsoftware products

Innovation

According to a Corbett and Associates study, outsourcers view innovation rather than cost as a key strategic benefitof outsourcing. Companies are looking for ways to reduce costs; hence, they outsource. But outsourcing is morethan just a response to shrinking budgets. Organizations have shifted their focus from merely reducing cost toimproving research and development to create better products and services. The Warwick Business School hasdevised a framework made up of six steps to guide executives in their quest for innovation in outsourcing.

The Warwick Business School says outsourcing companies need to consider these key steps: strategize innovation,design measurement instruments, assess vendors innovative capability, design a contract for innovation, buildrelationships, and measure innovation.

To support and enhance the countrys value proposition, the sectors of the IT-BPM and GIC industry are exerting

efforts to be consistently on top of their respective industries by being more agile a nd capable of responding to therapidly changing needs of their markets.

The voice sector has been looking into diversifying its services from customer service management to areas such astechnical support, back-office processing support, and IT help desk. The healthcare outsourcing sector maintains itsimpressive growth by participating in international conferences to keep abreast of trends in the industry. Stalwartsin animation and game development, on the other hand, are pushing for the creation of original content. Thesoftware sector has programmed the discovery and development of original software products that can be marketedglobally.

Chapter 4Next Steps

Going forward, the Information Technology and Business Process Association of the Philippines(IBPAP), formerly the Business Processing Association of the Philippines (BPAP), as an organizationshould continue evolving to drive stakeholder support for programs designed to reach industrygoals. Stakeholders such as the government and the private sector, including vendors and

enablers, should set their priorities from a range of ongoing initiatives.

Figure 14 presents the convergence of stakeholders per objective.

Talent

One of the most important drivers for growth in the global outsourcing industry is talent. The Philippines hasrisen aggressively to claim a strong position on the global offshore services mapand the IT-BPM and GIC industryrealizes that a large part of this success is because of its talent pool.

To grow the talent pool, the industry and the government need to actively collaborate by focusing on key priorities(Figure 15). These priorities should include: 1) expanding employability by setting industry standards to createhiring pull-through; and 2) increasing available talent pool through internal marketing to potential employeesand their influencers.

Widen and deepen human capital by scalingindustry public-private partnerships (IPPPs)

Attract and train 1.1 million talent base over 5 years

Scale talent development programs

Make IT-BPM careers aspirational

Strengthen Philippine attractiveness as aninvestment destination through advocacyactivities

Build PHL IT-BPM brand globallythrough marketing programs

Achieve Road Map 2016 goals byleading cross-sectoral efforts

Harness, lead, and harmonize

cross-sector involvement and investment in

Road Map 2016 programs

Lead design and program management of IPPPs

Official credible voice of the industry

Favorable legislative and regulatory

environment

Competitive and predictable fiscal

incentive regime

Competitive cost structure

CRM strengthen market leadership,

attain leadership in UK, EU, ANZ markets

HIM, F&A, HR, CP

IT, Multilingual global market,

Engineering Services: double market share

Talent

Road Map2016

Role of

IBPAP

MarketingandBranding

Ecosystem

Figure 14. Stakeholder objectives

Sources: IBPAP, Everest Group, and Outsource2Philippines (20102012)

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To make sure it achieves its target for 2016, the IT-BPM and GIC industry, led by IBPAP, should continue to createsynergies through industry public-private partnerships (IPPPs). The following short-term goals should happen by2013:

Training for another batch of at least 60,000 scholars and trainers under the I-TWSP, with resources allocatedfor marketing, systems, and capability development. This will yield employment for at least 40,000 individuals.

15 more public high schools to introduce industry training programs during Grades 11 and 12. This will yield5,500 K to 12 teachers trained and an annual run rate student throughput of more than 50,000.

Widen and deepen human capital by scaling industry public-private partnerships (IPPPs) through:

Attracting and training 1.1 million talent base over 5 years Scaling talent development programs Making IT-BPM careers aspirational

The IT-BPM industry should also continue to intensify nationwide awareness campaign to drive interest in IT-BPMtraining and education programs for potential employees, students, teachers, and trainers. Other priorities fortalent development in the industry, together with other stakeholders such as government and academe, should

include, among others:

Direct and introduce training programs for alternat e pools (e.g., nurses, accountants, engineers, careershifters)

Enhance capacity in tertiary education Introduce campaigns to attract overseas Filipino workers (OFWs) to the industry Scale industry-academia research partnerships

IBPAP/IndustryTalent Government

Academia/other enablersPPP

Scale key talent initiativesIntroduce IT-BPM-focused short-term training and scholarship programs

Scale management and specialist training for experienced talentBuild talent capacity in high-end/niche skills through training

Enhance capacity in tertiary education (open n ew universities, increase sealsin existing ones, introduce new courses for industry)

Introduce campaigns to attract overseas Filipino workers to the industry

Scale industry-academia research partnerships

Expedite K to12 initiatives

Direct and introduce training programs for alternate pools (e.g. underprivileged

home-makers, differently-abled)

Introduce industry-recognized

standards and accreditations

Undertake internal marketing toraise awareness and dispelmyths

Enable structural changes (e.g.-greater autonomy in curriculumdesign) to rollout talentinterventions

Testing for students

Quality accreditations for

teachers and training providers

Create hiring prioritization for

accredited talent

IBPAP National assessment tool

Training for work scholarship

Immediate priorities Other priorities

Figure 15. Stakeholder priorities - Talent

Sources: EverestGroup and Outsource2Philippines(2010)

Marketing

Because of the limited resources for external marketing, IBPAP has had to prioritize participation in foreign expositionsto those that deliver results in terms of business acquisition. At a recent focus group discussion participated in bySMEs, major vendors, captives, and IBPAP representatives, participants raised the need to build a country brand anddevelop an international marketing strategy to support this, in addition to business acquisition initiatives.

A representative from a major U.S. bank with presence in the Philippines said that unlike vendors, captives do notbenefit from trade missions. However, a marketing strategy that intensively communicates the countrys IT-BPMvalue proposition will convince headquarters to outsource more processes to the Philippines, as well asattract other captives to set up local operations.

As the inputs from the focus group discussion suggested, IBPAP should lead a multi-stakeholder initiative to builda distinctive IT-BPM brand for the Philippines. IBPAP has been able to develop a clear, consistent channel strategyto communicate propositions by:

Aggressively promoting the Philippines proposition in new service lines and geographies, such a s

it-bpm and gic road map 2012-2016

Documents