Results Of The 2012 Survey Of Information Technology

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GLOBAL IT-BPO SERVICES INDUSTRY TRENDS The global business Despite the volatile economic environment in 2012, global spending on process outsourcing technology and related services sector amounted to US$1.9 trillion,1 or industry continues a 4.8 percent increment over that of the previous year. In particular, to exhibit vibrant global spending on information technology (IT) and business process growth in 2012. management (BPM) services grew by 3.3 percent and 4.9 percent, respectively. In line with the expansion in global technology and related services expenditures, the global sourcing market also rose to US$124-130 billion, registering a 9 percent growth during the year.2
IT-BPM, now the “highest impact” sector for India, accounted for 52 percent of the global sourcing market in 2012.3,4 The Philippines and India remained the global leaders in the voice and non-voice sectors, respectively.5 According to Tholons, the Philippines remained as the global leader in voice services, at the same time expanding into other sectors like software development, IT, animation and game development, and health care information management.6 Although the Philippines and India have the dominant share of the global market, China has emerged as a new competitor. China has been exerting efforts to improve the quality of education in the country, encourage
1 Comprised of IT services (US$625 billion), BPM services (US$160 billion), software products (US$319 billion) and hardware (US$797 billion). (Source: Angel BrokingTM, IT Sector – Indian IT Long term growth outlook intact, 20 March 2013, [accessed 16 February 2014].
2 Nasscom, The IT-BPM Sector in India – Strategic Review 2013, [accessed 16 February 2014].
3 According to Nasscom, India renamed its business process outsourcing (BPO) industry as business process management (BPM) as the acronym BPO does not reflect the industry as it stands today. BPO involved shifting the delivery of business processes from high-cost destinations to low-cost ones, which was enabled by advancements in information and communication technologies. The model worked on labour cost arbitrage, and brought significant savings for clients. Rebranding it to BPM is more appropriate given the industry’s current level of maturity. The industry has gone up the value chain, managing entire businesses processes of clients and not merely outsourcing them. As the industry has matured and understood its clients' businesses better, it has increasingly done complex work and taken responsibility for the business outcomes of its services. The services are no longer delivered from low-cost destinations but from different geographies, depending on the clients' requirements and the skills of people in those geographies. It no longer matters whether services provided are outsourced, shared, managed, collocated or captive.
4 Indian IT-BPM covers both IT and BPM services industries. 5 The Philippine Star, IT-BPM: Gearing up to sustain global leadership, 5 August 2013,
[accessed 16 February 2014]. 6, Manila is world's 3rd top BPO destination: survey, 01 January 2013, [accessed 12 February 2014].
Department of Economic Statistics

Results of the Survey of IT-BPO Services, 2012
investments in infrastructure and increase the number of English speakers in the talent pool.5


Local IT-BPO industry sustains
double-digit growth in 2012.

Revenues from the country’s IT-BPO industry continued to register double-digit growth in 2012, albeit at a decelerated rate of 11.4 percent compared to the 20.1 percent increase posted in 2011. Total revenues of the industry rose to US$13.5 billion from US$12.1 billion in the previous year.

The industry’s sustained growth was a result of the increasing demand for non-voice, complex services and the local IT-BPO companies’ strengthening service delivery in the financial services, insurance, human resources, logistics, engineering, software, media, healthcare, IT and legal industries.7

Everest Group, an international business advisor and research firm, dubbed the country’s healthcare information management (HIM) industry as a "hidden jewel" of the Philippines.8 It cited in its report entitled "Healthcare BPO Is a 'Hidden Jewel' For the Philippines' Global Services Industry" that the country’s healthcare BPO is one of the fastest-growing sectors in the IT-BPO industry as its revenues grew fourfold from US$102 million in 2010 to US$430 million in 2012. The increase in demand for HIM services was driven by healthcare-related legislation in the United States and Europe that prompted the need to maintain exhaustive electronic medical records with complete information on billing and payment transfers. Among the country’s competitive advantage in the HIM sector are the availability of large talent pool and familiarity with U.S. medical practices as nursing education in the Philippines is largely patterned after U.S. standards.9

7 The Philippine Star, BPAP bullish on non-voice IT-BPO business, 13 August 2012, [accessed 10 February 2014].
8 The Philippine HIM industry had evolved to provide services in all aspects of healthcare information management, including clinical data management, disease management, revenue cycle management, pharmacy benefits management, electronic medical records, medical claims recovery, patient education, insurance processing, and quality assurance.
9 Information Technology and Business Process Association of the Philippines (IBPAP) Media Room, Everest study: Healthcare BPO “a hidden jewel” for PHL, 27 February 2013, [accessed 12 February 2014].
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Results of the Survey of IT-BPO Services, 2012
Figure 1. Revenue, by Category, 2004-2012 (in US$ million)

Contact Centers continue to account for more than half of
total industry revenues in 2012.

The positive growth trend in revenues generated was sustained across the industry’s sub-sectors. Transcription grew fastest at the rate of 63.3 percent, followed by Software Development with a growth rate of 15.4 percent. Animation and Contact Centers also realized double-digit growth rates in revenues at 11.7 and 11.3 percent, respectively.

Contact Centers continued to contribute more than half of the industry’s total receipts (56.4 percent share or US$7.6 billion). Software Development and Other BPOs were also primary contributors to the
industry’s total revenues, accounting for 21.2 percent share (or US$2.8 billion) and 20.3 percent share (or US$2.7 billion), respectively.10

Contact Centers were also the key driver of the IT-BPO industry, contributing 6.4 percentage points to the total 11.4 percent growth in revenues of the industry. This was followed by Software Development (3.1 percentage points) and Other BPOs (1.2 percentage points). Transcription and Animation sub-sectors combined accounted for the remaining 0.7 percentage point contribution to growth.

10 The “Other BPOs” category include backroom operations, data processing, data base activities and online distribution of electronic content, and the more value-added chain activities—shared financial and accounting services, outsourcing for research and public opinion polling, outsourcing for business and management consultancy activities, hardware consultancy and outsourcing for architectural and engineering services. See Annex A for definition of terms. `Page 3 of 13

Results of the Survey of IT-BPO Services, 2012 Table 1. Revenue, by Category, 2010-2012

Exports Share of exports to total industry
revenues moderately improves in 2012.

Export receipts of the IT-BPO industry reached US$12.5 billion, expanding by 12 percent from the previous year’s level of US$11.2 billion. The export-to-revenue ratio of the industry slightly increased to 93 percent from 92.4 percent in 2011. Increases in export-to-revenue ratios were observed in Contact Centers (from 90.4 percent to 93.1 percent) and Animation (from 83.1 percent to 86.3 percent) from 2011 to 2012. Meanwhile, Software Development posted a lower export-to-revenue ratio of 91.7 percent in 2012 compared to 96.4 percent in 2011. Transcription and Other BPOs recorded marginal declines in their export-to-revenue ratios.

Figure 2. Export-to-Revenue Ratio, 2009-2012 (in percent)

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Results of the Survey of IT-BPO Services, 2012
All the industry sub-sectors recorded increases in exports. Transcription posted the highest growth at 63.1 percent, from US$122 million in 2011 to US$198 million in 2012. This was followed by Animation (15.9 percent), Contact Centers (14.5 percent), Software Development (9.8 percent) and Other BPOs (5.3 percent).
Figure 3. Exports, by Category, 2004-2012 (in US$ million)

Contact Centers remain the leading
export earner.

More than half of the industry’s total export receipts continued to be captured by Contact Centers, at 56.5 percent (or US$7.1 billion). This was an increase from the 55.3 percent share registered by the sub-sector a year earlier. Other industry sub-sectors which accounted for a big fraction of the industry’s total exports were Software Development (20.9 percent) and Other BPOs (20.5 percent).

In terms of contribution to the 12 percent growth in exports, Contact Centers accounted for the biggest share at 8 percentage points. Software Development contributed 2.1 percentage points and Other BPOs shared 1.2 percentage points to total growth.

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Results of the Survey of IT-BPO Services, 2012
Figure 4. Exports, by Category, 2011-2012 (percent share to industry total, levels in US$million)

The US continues to be the local IT-BPO
industry’s largest export destination.

The United States remained the biggest export market, accounting for a substantial 75.3 percent share (or US$9.4 billion) of the industry’s total exports. Its share, however, to total exports for the year was slightly lower than that of the previous year’s 76.4 percent share. Other major export markets were Europe (9.9 percent or US$1.2 billion), Japan (8.5 percent or US$1 billion) and Australia-New Zealand (3 percent or US$369 million).

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Results of the Survey of IT-BPO Services, 2012 Figure 5. Exports, by Country of Destination, 2011-2012 (percent share to industry total, levels in US$million)
Total Equity and Foreign Investments Equity capital Equity capital investments in the local IT-BPO industry in end-2012
investments in the reached US$7.3 billion, higher by 27.5 percent than the year-ago level industry increases. of US$5.7 billion. According to Tholons, in 2012, the IT-BPO industry in
the Philippines was stimulated by increased new investments from large and mid-sized foreign providers as well as expansions of locators and captives across many of the country’s established delivery locations. The country continued to attract large, western providers, not only as an offshore delivery location, but also as a potential rich market for IT services. During the same year, Manila claimed the third spot, overtaking Delhi, India, in Tholon’s annual ranking of the 100 leading global outsourcing destinations. The top two spots in the list were occupied by Bangalore and Mumbai of India.11,12 Equity capital infusion from foreign sources accounted for 95 percent of the industry’s total equity capital investments in end-2012, slightly higher than the 93.2 percent share in the previous year. All the industry
11 The Philippine cities included in Tholon’s 2013 Top 100 Outsourcing Destinations with their corresponding rankings were: (1) Manila - 3rd, (2) Cebu City – 8th, (3) Davao City – 70th, (4) Sta. Rosa, Laguna – 84th, (5) Iloilo City – 93rd, (6) Bacolod City – 94th, and (10) Baguio City – 99th.
12 Tholons, 2013 Top 100 Outsourcing Destination, January 2013, [accessed 10 January 2014]. `Page 7 of 13

Results of the Survey of IT-BPO Services, 2012
sub-sectors registered higher foreign-to-total equity ratios compared to those in the previous year. Foreign direct investments in the industry in end-2012 reached US$7.0 billion, representing a 30 percent increment from the previous year’s level of US$5.4 billion.
Among the key investments and expansions in the country’s IT-BPO industry in 2012 include Teleperformance’s establishment of another delivery center in Mandaluyong City, Convergy’s opening of its 18th call center also in Mandaluyong City and UnitedHealth’s establishment of back-office operations for healthcare in Taguig City in response to the demand created by the U.S. Patient Protection and Affordable Care Act.13 As part of the company’s global growth strategy, Accenture Philippines opened its 15th and 16th sites in Cebu and Manila.14 Stream Global Services launched its recruitment hub called Stream J Centre Recruiting in Mandaue City.15 Cognizant opened a 1,000-seat delivery center in Pasig City to serve its American and European clients in the financial services, healthcare, manufacturing and logistics, retail, hospitality, telecommunications, and consumer goods industries.16 A significant investment was made by IBM Software, a division of IBM, through the establishment of a new facility in Quezon City to handle support for its “social business” software offers to its North American clients.17
Contact Centers accounted for almost half of total foreign equity investments at 48 percent (or US$3.3 billion). This was followed by Software Development and Other BPOs at 28 percent (US$1.9 billion) and 21.7 percent (US$1.5 billion), respectively. In terms of contribution to growth, Software Development was the main driver, accounting for 13.4 percentage points of the total 27.5 percent growth of the industry’s equity capital investments.
13 Tholons, 2013 Top 100 Outsourcing Destination, January 2013, [accessed 10 January 2014].
14, BPO firm opens new site in Cebu, 8 November 2012, [accessed 15 January 2014].
15 Sun Star Cebu, BPO opens Mandaue mall outlet, 23 October 2012, [accessed 16 January 2014].
16 Manila Bulletin, Cognizant Expands BPO Operations Here, 31 July 2012, [accessed 16 January 2014].
17, IBM expands in PH, puts up BPO facility for North American clients, 18 October 2012, [accessed 15 January 2014].
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Results of the Survey of IT-BPO Services, 2012
Figure 6. Share of FDI to Total Equity Investments, 2009-2012 (in US$ million and percent share)

Europe is the top foreign direct investor in the industry.

Europe continued to account for the bulk of foreign equity capital investments in the local IT-BPO services industry as of end-2012. The share of Europe, however, dropped moderately to 41.2 percent (US$2.9 billion) in 2012 from 46.2 percent (US$2.5 billion) a year ago. The U.S. accounted for 37.3 percent (US$2.6 billion) of the industry’s total foreign equity capital infusion in 2012, also a decline from its 38.5 percent share (US$2.1 billion) in 2011. Meanwhile, Japan increased its share to total foreign equity capital investments at 10.1 percent (US$705 million) in 2012 from 9 percent share in the previous year. Equity capital infused by investors from India more than tripled in 2012 to reach US$262 million from US$79 million posted a year ago.

Table 2. Foreign Investments in IT-BPO Industry, by Country of Investor, 2010-2012

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Results of the Survey of IT-BPO Services, 2012
Employment and Compensation Employment in the Employment in the country’s IT-BPO industry totalled 769,932, a
local IT-BPO industry 13.3 percent increment over the 679,494 level posted a year ago. The continues to rise. increase in employment was fueled by the initiatives taken by the government and the private sector to develop employees with skills necessary to meet the increasing labor demand in the industry. Close to P1 billion of the 2012 national budget, which came from the Commission on Higher Education (CHED), the Department of Science and Technology (DOST) and the Technical Skills Development Authority (TESDA), was allocated for talent development in IT-BPO.18 The Commission on Higher Education (CHED) Memorandum Order (CMO) No. 6 Series of 2012 on Service Management was signed allowing higher education institutes (HEIs) with existing business administration and business management courses to include the Service Management Specialization Track (SMST) along with the courses’ electives.19,20 The Technical Education and Skills Development Authority (TESDA) and the Information Technology and Business Process Association of the Philippines (IBPAP) jointly developed TM Plus, a trainers’ training program intended to support talent development in the IT-BPO industry. The program will help ensure the availability of highly competent IT-BPO trainers. TESDA allocated 900 vouchers worth P18 million for the project. An additional budget of P7.2 million for 804 vouchers was used for TM 1, a first-generation version of the TESDA course which is also aimed at enhancing training skills.21 To facilitate employment in the country’s IT-BPO industry, IBPAP launched a career portal called “Work Abroad. Live Here.” It is supported by a Facebook page and Twitter account named also as “Work Abroad. Live Here.” The portal is intended for students, fresh graduates, young professionals, and experienced workers aspiring to work for worldrenowned IT-BPO companies.22
18 Senate of the Philippines, Angara Seeks More Funding for Skills Training to Sustain IT-BPO Sector Growth, 18 September 2012, [accessed 15 January 2014].
19 The track is a 21-unit minor program linking knowledge-sharing and experiential learning for students considering to pursue a career in global services industries such as business processes and services, finance, healthcare, human resources, tourism, consumer retail, and hotel and restaurant management. Components of the track include a semester-long internship to ensure that the students will acquire actual work experience in a globally competitive environment and the faculty development component structured to enable the industry and the academe to benefit from each other’s best practices.
20 IBPAP Media Room, CHED Allows HEIs to Offer Specialization Course in Service Management Starting SY2012–2013, 2 April 2012, [accessed 12 February 2014].
21 TESDA, P25.2-M "Train the Trainers” program for IT-BPO launched, 3 October 2012, [accessed 12 February 2014].
22 IBPAP Media Room, BPAP launches “Work Abroad. Live Here.” career portal, 3 April 2012, `Page 10 of 13

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Results Of The 2012 Survey Of Information Technology