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2nd FGD On Competitiveness and Innovation - BPO Innoovation Analysis - DR - Alvin Culaba
2nd FGD On Competitiveness and Innovation - BPO Innoovation Analysis - DR - Alvin Culaba
Low savings rate, high population growth rate, and a dismally low total factor productivity (the efficiency with which inputs are combined to produce output) due to social infrastructure (norms, laws, govt policies and institutions that enforce them shaped by culture and history as conditioned by geographic, climatic, and environmental factors
(M. Alba, The Philippines Quest for Long-Term Competitiveness from the Perspective of Growth Economics, AIM Policy Center: 2007 in Macaranas,
Philippines is currently among the most cost-competitive destinations for ITBPO services
Manila NCR is Southeast Asia top outsourcing destination (Source: Tholons Survey, 2012)
Working Definitions
BPO refers to a broad range of business outsourcing activity with the end view of improving ones process BPO is the delegation of one or more ITintensive business processes to an external provider that, in turn, owns, administrates and manages the selected process based on a defined and measurable performance metrics. (Def. from Gartner Dataquest) A BPO company enters into a contract with another organization to operate and manage
Types of BPOs
On-shore BPO: When an enterprise outsources its activities to another company located in the same country Near-shore BPO: When activities are outsourced to a neighboring country Off-shore BPO: When business processes are outsourced to a remote or far off country
BPO is an IT-Enabled Services (ITES), and is one of the fastest growing segment in the industry.
When to Outsource?
Predictability of the service/process is not important Limited opportunity for the firm to be distinct competitively through a particular process or service Company not stripped of the technical know-how necessary for future innovation Limited company expertise, inefficient, or technically inferior
IT-BPO industry to increase from US$500 billion in 2009 to US$1.5 trillion in 2024 (Tholons, 2011)
IT-BPO revenues for the Philippines reached US$11 billion and 640,000 direct employees in 2011 (BPAP, 2012) Key driver of economy; fastest growing source of employment and revenue
Philippines is also relatively stable, though there are concerns around safety and labor pool sustainability
Started in 1992 Accenture Followed in 1997 Sykes Continued to 2000 eTelecare, People Support 2006 ePLDT/Ventus Unattractive BPO destination
2012)
The global offshore services market is growing at a healthy pace, and will more than double by 2016
The Philippines has established itself as a mature Tier 1 destination in a competitive global environment
1. Pre-planned phase: no research or policy made, no opportunities identified 2. Foundation phase: priority sectors/commodities identified, government supports research and policy intervention, but have limited effect on growth. 3. Expansion phase: government intervenes with projects and special programs to link actors in the innovation system DYNAMIC INNOVATION SYSTEM can be established (PPP)
(Source: World Bank, Enhancing Agricultural Innovation, 2007 in Macaranas, 2012)
For the Philippines, 2016 revenues can vary from US$15 billion to US$25 billion depending on the strength of industry effort and government support.
Sources: BPAP Data; Everest Analysis; World Bank and IMF projections
Governments and industry efforts have supported the development of the Philippines proposition
Support the Whole-ofGovernment Approach but innovations carried out by the private sector (consistent with the World Bank observation).
Malaysia Indonesia
Singapore
Thailand Brunei
Score/7
Competitiveness 4.78 3.85 4.38 5.08 4.08 5.63 4.52 4.24 Capacity for Innovation 3 2.8 3.8 4.3 2.7 4.3 3.2 3.2
This create multiple opportunities to drive the next wave of growth for the Philippines
While voice and IT ESO continue to grow, nonvoice BPO will drive market growth
What does the Road Map 2016 (PPP) target of US$ 25 billion in IT/BPO revenue mean to the Philippines?
Larger tax base with even larger multiplier effects through consumption
Professional organizations/associations (BPAP, CCAP, etc.) Private-Public Partnership (i.e., BPAPTESDA) Academe-Industry Linkage
Talent: 2016 talent requirements will reverse the current demand supply situation by 2012
Innovation
Singapore
Score/7
Availability of latest technologies 5 4.5 4.9 5.8 5.2 6.3 4.8 3.8
Innovation 68 85 36 24 108 8 54 66
To drive talent intervention programs successfully, concerted actions across six key effort areas is essential
Innovation
Brunei
Competitivenes s
Rank/142 Brunei Cambodia Indonesia Malaysia Philippines Singapore Thailand Vietnam Competitiveness Innovation 28 68 Brunei 97 85 Cambodia 46 36 Indonesia 21 24 Malaysia 75 108 Philippines 2 8 Singapore 39 54 Thailand 65 66 Vietnam
Score/7
Competitivenes s 4.78 3.85 4.38 5.08 4.08 5.63 4.52 4.24 Innovation 3.15 3 3.59 4.32 2.79 5.33 3.3 3.16
A refreshed marketing agenda will be key to support achievement of Road Map 2016 targets
Process Innovations
Remedial interventions
(weaknesses in stage 3 , opportunity-driven)
Building coherence and links between research system and the sector Support coordination bodies Strengthen or redesign existing organizations
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Philippines will need to support Next Wave Cities through initiatives in four key areas
An enabling legal regulatory environment is key to maintain competitiveness and drive growth
Summary
To summarize, achieving $25 billion by 2016 will require a much stronger PPP to drive favorable outcomes across multiple areas
Getting to US$ 15 billion and pushing to US$ 25 billion will depend on our ability to overcome systematic challenges and achieve four key objectives
Innovation
U.S. Germany Taiwan France U.K.
Rank Australia China France Germany Hong Kong India Japan Korea Malaysia Philippines Singapore Sweden Switzerland Taiwan Thailand United Kingdom United States
Innovation 22 29 17 7 25 38 4 14 24 108 8 2 1 9 54 13 5
Score Australia China France Germany Hong Kong India Japan Korea Malaysia Philippines Singapore Sweden Switzerland Taiwan Thailand United Kingdom United States
Innovation 4.48 3.92 4.72 5.39 4.18 3.58 5.59 4.89 4.32 2.79 5.33 5.76 5.77 5.27 3.3 4.94 5.57
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Going forward, BPAPs role will need to evolve to drive impact to support Road Map 2016
Source: Philippine IT-BPO Road Map 2016, Commission on Information and Communications Technology , Business Processing Association of the Philippines, Everest Global and Outsources,
Competitiveness with Inclusive Growth: Innovation in the Philippines NCC Framework Quality of Growth
HKR Capital
Financial Markets
Govt or PPP Firm Rivalry, Structure and Strategy Demand Competitivenes s Inputs
(Human)
Govt / PPP
(Physical )
(consumers)
Inputs
c. Correcting market failures hurting H and R
Inclusiv e Growth *
Govt / PPP
Welfare
(Natural)
d. Strengthening regulation
Ideas Things
* Quality Growth (WB) a.Addressing misgovernance and corruption b.Reducing distortions favoring K c.Correcting market failures hurting H and R d.Strengthening regulation Source: Adapted from Macaranas, 2012
Key Recommendations
Needs to be in leadership position Move towards higher value added services, that is, Knowledge Process Outsourcing (KPO) Innovation powered by better education (e.g., enhanced curricula, system of teaching, better teachers, quality graduates) Industry-Private-Public Partnerships (iPPP) Support for New Wave Cities (i.e., CDO, Davao, Bacolod, Iloilo, Dumaguete, Baguio, etc.) Macroeconomic measures (i.e., tax breaks,
Main References
Board of Investments (BOI) Business Processing Association of the Philippines (BPAP) Contact Center Association of the Philippines (CCAP) Department of Trade and Industry (DTI) Everest Global National Association of Software Companies (NASSCOM) Stratbase Research Institute (SRI) Tholons
Thank you.
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