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Staff Virtual White Paper On Outsourcing Companies in The Philippines
Staff Virtual White Paper On Outsourcing Companies in The Philippines
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OUTSOURCING TO THE PHILIPPINES FOR COMPETITIVE ADVANTAGE - AN OVERVIEW
A white paper by Ike Stranathan, Founder of Staff Virtual December, 2011
Table of Contents
Introduction .......................................................................................................................... 3 Outsourcing - Embracing the New Reality ................................ 4 What is Exactly is Outsourcing? What are the benefits? ......................................................................................... 5 What Do In-house Employees REALLY cost? ......................... 5 Why are Organizations Outsourcing? ................................................ 6 The Philippines - An Overview ................................................................... 8 10 Reasons why Outsourcing is Booming in the Philippines?......................................................................................................... 9 The Future of Outsourcing and Virtual Staff Leasing in the Philippines ............................................................................ 13 Conclusion ......................................................................................................................... 14 About the Author ....................................................................................................... 15 Conclusion ......................................................................................................................... 16
Introduction
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It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is
This white paper will provide an overview of outsourcing and its many benefits, and why the business process outsourcing (BPO) industry in the Philippines is experiencing rapid growth. In todays global economy, companies cannot afford for outsourcing not to be included in their strategic plans. Outsourcing works, and its an attractive option for many companies. Most outsourcing providers are located offshore, in other countries where wages are less than that back home. The Philippines is one such country. Labor rates in the Philippines are extremely attractive to entrepreneurs, as is their large, college educated, English speaking workforce. Outsourcing to the Philippines is increasing in frequency and scope. The BPO industry is the fastest growing sector of the Filipino economy, already employing approximately 600,000 professionals. Revenues are projected to
increase sharply in the coming years as companies outsource more complex and creative business processes. According to the Business Processing Association of the Philippines, the Philippine BPO industry is expecting 2010 revenues of approximately $9 billion, and total BPO revenues could increase to a staggering $25 billion by 2016. In the current uncertain economic environment brought on by the global financial crisis, companies of all sizes and in all industries must adapt and innovate to become more efficient and cost conscious. Strategic partnerships with quality outsourcing providers are more important than ever. Outsourcing can improve operational efficiencies and give a competitive advantage while reducing labor costs.
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Jack Welch, the legendary retired CEO of General Electric, recently responded to a question about outsourcing in his weekly column, Winning. The question was: How can we change things in the United States so we dont have to outsource to India and other countries anymore? His response was simple: we cant, and we shouldnt. Welch went on to explain that the real question should be, How do we use outsourcing to enhance competitiveness in what is, and forever will be, a global marketplace? Welch acknowledges that outsourcing has caused its share of pain with the resulting layoffs in certain markets, but believes that it is ultimately good for the economy. Driven by consumer demands for low prices and high quality, companies have had to look around the world for cost advantages, which has led to offshore outsourcing. Welch points to the 20% growth in the U.S. economy since mid-2003 as evidence that the outsourcing trend has been positive overall for the United States. Both outsourcing and virtual staff leasing are driven by the need to cut costs. For these reasons, the outsourcing of services is gaining popularity worldwide for businesses of all sizes and types. In todays global economy, companies cannot afford for outsourcing not to be included in their strategic plans. Outsourcing is effective, and its an attractive option for many
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companies. The ability to achieve cost-savings and improved efficiencies by going offshore is now so widely recognized and accepted that even Time Magazine has run stories about the phenomenon, along with many other general-interest magazines and newspapers. This phenomenon is not just limited to large multinationals and their offshore call centers or customer support operations. Small- and medium-sized businesses who are looking to expand their workforces also are benefiting greatly by outsourcing and leasing employees from quality providers who are headquartered in the United States, but whose main offices are located outside the United States, such as Staff Virtual. According to some studies, companies are already outsourcing more business functions during the current recession. The quantity and quality of highly educated, technical, and available business talent in emerging markets such as Philippines, South Africa, India and South America, have grown significantly over the past decade. Technological improvements have also improved dramatically during this time, shrinking, connecting, and flattening the world. Today, wherever there is a high-speed Internet connection, high-quality professional services can be delivered. Globalization and outsourcing are two phenomena that are here to stay.
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that outsourcing providers are able to do the same work for STAFFV SV considerably less money than their in-house counterparts, a savings which they pass along to their customers. For example, accountants and human-resource managers can often be eliminated, greatly reducing payroll costs. The staff-leasing agency charges a fee along with the employees wages, much like temporary employment agencies. This fee is often less than the cost of hiring human-resource experts and payroll accountants. Because workers are not considered employees of the company in a legal sense, personal injury and workers compensation claims become the responsibility of the virtual staff leasing agency.
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and drive the errors out of processes, achieving quality SV STAFFV improvements to a service or system. Creating Leisure Time Individuals may wish to outsource their work to virtual assistants to optimize their work-life balance, or improve the quality of their work life. Individuals, as well as business, can outsource many time-consuming, repetitive jobs to virtual assistant companies to improve their quality of life and create more leisure time. In todays hectic and demanding world, where there never seem to be enough hours in the day, this ability is more important than it has ever been. Best Practices Virtual staff can provide qualified access to operational best practices that would be too difficult, expensive or time consuming to develop in-house. Best practices often result in significant and measurable effects to cost, quality, performance and security. Risk Management Risk in providing the service is borne by the outsourcing provider or virtual-assistant company, not in-house. Outsourcing companies offer their services through
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engineers no longer means a company can control its SV fate STAFFV alone. Instead, many progressive companies have become adept at using the creativity and skills of workers around the world. This can reduce new product-development time and time to market. Enhanced Flexibility Outsourcing providers are prepared to manage a temporary or permanent increase or decrease in personnel, often due to business cycles or seasonal variation. Outsourcing services makes a business more flexible. Also, companies can often scale faster when they have access to workers who are much less expensive. Improved Customer Service In todays turbulent economic environment, customer service is more important than ever. Outsourcing can drastically improve the ability to deliver a better customer experience, consistently aligned around customer needs, while reducing overhead costs. In turn, loyal customers have a demonstrable effect on the top line, by buying more and referring other customers.
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The Republic of the Philippines, also known affectionately as The Pearl of the Orient, is a country in South East Asia located in the western Pacific Ocean. An archipelago comprising 7,107 tropical islands, it has a population of approximately 93 million people, making it the twelfth most populated country in the world. Most people are unaware that the Philippines has the third largest English speaking population in the world! According to the 1987 Philippine Constitution, Filipino and English are the two official languages, however, English is the language of business, commerce, and the government. More than 90% of the population are Christians, 80% being Roman Catholic while 10% belong to other Christian denominations. The National Statistics Office reports a simple literacy rate of 93.4%, and a fast growing IT literacy rate of approximately 7%. Every year. 20,000 Mathematics and Information Technology graduates join the workforce. As a newly industrialized country, the Philippines has been transitioning rapidly from an economy based primarily on
agriculture to one based more on manufacturing and services. Despite the global financial crisis, the economy has remained robust over the last 12 months, with 6.7% GDP growth reported in Q3 2010 and 7.7% growth year-on-year (National Economic and Development Authority). Record setting remittances, a young and highly educated population, and one of the best performing stock markets in Asia for 2010 (up over 38% YTD) are boosting confidence in this rapidly developing Asian Tiger economy. The Philippines has a proven track record of delivering lowcost and high-quality outsourcing services. Over 620,000 Filipinos work in the outsourcing industry. That figure is expected to grow to over a million within a few years. Hundreds of companies are setting up offshore operations there every month to tap into the vast, technologically savvy, English speaking talent pool that exists there to become more efficient and cut costs.
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States for nearly 50 years. Filipinos learn American English in the first grade, and watch TV shows like Friends long before they step foot inside a call center. Filipino culture is a combination of Eastern and Western cultures, and its strength as an outsourcing hub lies in its close affinity with the US. The Filipino legal, education and political systems are in large part based on American systems. Over one million Filipinos live in the US, and almost every extended Filipino family has someone living or working in the US. This fact is very much reflected in their society, fashion, food and lifestyle. Even the malls and the cinemas are full of American brands and movies. The similarities in culture make Filipinos easy to train. Also, they readily adopt the US accent compared to other locations where accents are much harsher and difficult to neutralize, such as in India. Having such a close cultural link helps mitigate many of the problems that result from hiring, training, and managing teams across international borders. 3. Hospitality Filipino hospitality is legendary. The Filipino people are generally warm and extremely friendly, they are also very family- and relationship-oriented. Although Filipinos
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5. PEZA PEZA, short for Philippine Economic Zone Authority, which is a part of the Department of Trade and Industry, is the Philippine government agency that promotes foreign direct investment, extends assistance, grant incentives to and facilitates the business operations of investors in export-oriented manufacturing and service facilities inside selected areas throughout the country. BPO companies in the Philippines may opt to register with PEZA, which entitles them to many benefits, including an income tax holiday for three to eight years. After that, PEZA-registered BPO companies are subject to only a 5% tax on gross income, in lieu of all local and national taxes. PEZA is just one of the many ways in which the Philippine government encourages economic growth in the BPO industry by enacting favorable tax and regulatory policies designed to encourage direct foreign investment. 6. IT Infrastructure The Philippines enjoys high Internet penetration, with some estimates placing the number of Internet users as high as 24 million people. The country has a sophisticated cellular phone industry with a high concentration of users. Text-messaging is extremely common in Philippines, where approximately 2 billion text messages are sent each day. The Philippines has good international radiotelephone and submarine cable services, along with a domestic satellite system with 11 earth stations. Cellular communications are also robust, and include a combined fixed-line and mobilecellular telephone density of about 80 telephones per 100 persons. A series of submarine cables provides connectivity to the US, Europe, the Middle East, and Asia, powered by multiple international gateways. With the greater availability of online facilities, DSL, broadband and satellite service, and new cable Internet Service Providers (ISPs) in the Philippines, it is projected that the total number of Internet users in the Philippines will increase by over one million every year into the foreseeable future.
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and four hours to Tokyo and Seoul. It takes around nine hours to fly to Australia. It is also relatively close to the United States, with only a 12-hour flight from Los Angeles to Manila. Manila is a central hub of international shipping in the region, and is a critical entry point to over 500 million people in the Association of Southeast Asian Nations (ASEAN). ASEAN economies are beginning to integrate into the ASEAN Free Trade Agreement, making the Philippines an excellent strategic location for firms
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still uninhabited, the Philippines offers world-class vacation destinations for tourists, as well as for the thousands of professionals who choose to live and work in the Philippines or do business there. The Philippines is the only English-speaking country in Asia; hence, communication, conducting business, and socializing are relatively easy there compared to any other Asian countries. Because the Philippines is an enjoyable place to work and live, people want to set up shop here, and live here, thereby growing the economy and BPO industry. 10. Proven Track Record Many multinationals, as well as small and medium sized businesses, when faced with the important decision of where to outsource, and for whom to partner with, try to avoid investing in countries which are too risky, or lack a proven track record. Over the last ten years, Filipino outsourcing companies have proven to be world leaders in many segments of the BPO industry. The Philippines has a proven track record of success. Numerous Fortune 500 companies are already taking advantage of the unique benefits available from outsourcing to the Philippines, including:
Outsourcing
American Express Maersk Siemens Nestle HSBC Lufthansa Shell IBM Telus Aegis Warner Brothers
IT Outsourcing
Dell Deutsche Bank Morgan Stanley American Express Accenture Fujitsu Ford Intel eBay Pixar Disney
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The administration of newly elected President Benigno Noynoy S. Aquino III has clearly identified the BPO industry as a key business sector which his future administration will be looking into as a continuing source of new jobs.
Expect 2012 to be another banner year for the Filipino economy, with increasing levels of foreign direct investment, booming eco-tourism, a thriving property market, and a rapidly growing outsourcing industry that continues to grow in both size and complexity of services offered. Multinational companies continue to open offices in the Philippines, and foreign direct investment continues to pour in. According to Deloitte Research in the 2010 Asia Pacific Economic Outlook report, foreign direct investment into the Philippines increased by 26% last year even as the global economy was in recession. Much of this direct foreign investment was poured into the outsourcing industry. India, where offshore call centers first exploded, fields as many as 350,000 call center agents, according to some industry estimates. The Philippines, which has a population one-tenth as big as Indias, overtook India this year. As the newly crowned king of the hill when it comes to call centers, look for the Filipino outsourcing industry to continually evolve
to accommodate more specialized outsourced solutions, often referred to as knowledge-process outsourcing, or KPO. After BPO, KPO is the next stage in the evolution of the outsourcing market. The Philippines is already one of the top destinations for KPO, and many foreign companies are already outsourcing many processes that require much higher levels of skill and expertise. Strong growth is expected for knowledge-based services in the years to come, especially in the areas of finance, accounting, and legal services. Look for these KPO services, and the companies that provide them, to continually increase in size and complexity in the coming years. While the Philippines has long been one of the worlds best destinations for call centers and voice-based BPO services, as well as KPO, industry leaders are now pushing for the country to be recognized as a world leader in creative process outsourcing (CPO) as well, due to Filipinos exceptional talented in several disciplines of art and design. CPO activities such as 3D animation, video game development, music- and sound-
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To meet this pent-up demand, and to continue to succeed in a competitive global marketplace for outsourced services, the outsourcing community of the Philippines, in cooperation with the Filipino Government, must continually strive to promote the industry, so that the Philippines can continue to develop a more highly skilled workforce that can deliver world-class BPO, KPO, and CPO services in the decades to come.
Conclusion
The Filipino outsourcing industry is growing rapidly. This growth is taking place for a number of reasons, including low labor costs, a highly Westernized culture, the hospitality of the people, strong government support, PEZA and other tax incentives, a robust IT infrastructure, an abundant highly skilled and trainable workforce, its strategic location between East and West, an expat-friendly lifestyle, and a proven track record of delivering low-cost and high-quality business support services. Pressure to cut costs, improve efficiencies, and enhance customer service is enormous, and has never been more important as a survival strategy. For these reasons, many companies of all sizes and across virtually every industry have hired Filipino outsourcing companies to outsource business processes, knowledge based solutions, and creative tasks. This trend will continue as long as it is cost effective, enabling companies to become more efficient, productive, and profitable.
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Ike Stranathan is the Founder and President of Staff Virtual, an American SV STAFFV outsourcing and virtual staff leasing company with offices in Makati City, Manila, Philippines. Mr. Stranathan manages operations in the Philippines for Staff Virtual, and does business development for the rapidly growing company. Mr. Stranathan enjoys helping clients become more efficient, productive and profitable by tapping into the vast English speaking talent pool that exists in the Philippines, where he resides. Mr. Stranathan grew up in Shawnee Mission, Kansas, and attended the University of Kansas where he received a Bachelor of Arts with Honors in Environmental Policy. He also lived ten years in Hermosa Beach, California, working in the biotechnology, pharmaceutical, entertainment, and real estate industries. Mr. Stranathan is also a nonprofit entrepreneur. In 2006, he co-founded Netting Nations, Inc., an American 501(c)3 nonprofit organization that supplies free mosquito nets in Africa to prevent malaria. To date Netting Nations has distributed approximately 20,000 nets in five different African nations. Mr. Stranathan graduated from the University of Kansas with honors and with a degree in Environmental Policy. He also attended the University of Alicante, Spain. Mr. Stranathan is a proud American, yet thoroughly enjoys living as a self-described Expatpreneur in the Philippines.
Mr. Stranathan can be reached at: M: +63 917 543 7185 O: +1 323 704 4599 E: ike.stranathan@staffvirtual.com Skype: ikestran1
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Staff Virtual is an American owned and managed outsourcing and virtual staff leasing company that delivers our services SV from STAFFV our modern offices in Makati City, Manila, Philippines. We provide professional, high-touch and cost-effective services that enable our clients to improve work-flow processes and to become more productive, while cutting payroll costs. Staff Virtual provides a variety of front and back-office outsourcing services to our clients including: Administrative Support Data Entry Research Customer Support Technical Support Social Media Internet Marketing Writing / Content Generation Search Engine Optimization Personal Virtual Assistants (VAs)
Staff Virtual can quickly find individuals with specific skills, or build an entire offshore team so that an entire department or business processes can be outsourced. Staff Virtuals services are customizable, and can work with any type of organization, from small and medium-sized businesses (SMEs) to large corporations. Staff Virtual is built on principals of integrity, trust, accountability and pride in our work. Our corporate culture is best described through our company Manifesto and Integrity Pledge displaying our standards of excellence and values. We believe in green initiatives and developing our staff both personally and professionally while embracing the strong family values of the Filipino Culture.
Contact Us
For more information about out how Staff Virtual can help your organization become more efficient, scalable, and profitable please contact us: +1 310 483 5671 (Los Angeles) +63 2 798 2724 (Manila) +44 121 604 8484 (London) Email: info@staffvirtual.com Website: www.staffvirtual.com California 636 Manhattan Avenue, #B Hermosa Beach, CA 90254 Delaware PMB 6890, 2711 Centerville Rd., Suite 120 Wilmington, DE 19808 The Philippines 40th Floor PB Com Tower Makati City, Manila, Philippines
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