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Aegis PeopleSupport workers at their workstations inside the company's offices in Makati City, near Manila, Philippines, Nov. 11, 2011. Many companies have moved their customer service lines to Manila to take advantage of workers who speak American English and are familiar with American culture.

Jes Aznar, New York Times

Philippines bests India in call centers

  • Article by: THE ECONOMIST
  • June 25, 2012 - 4:57 PM

It's midnight in Manila, and the capital is slowly waking up to the start of another working day. At the Worldwide Corporate Center office block, thousands of young Filipinos are crowding into endless open-plan offices. Once seated, they quickly start answering the questions and calming the frustrations of vexed American consumers beginning their own day on the other side of the Pacific Ocean.

These Filipinos are call-center workers. To outsiders it is hardly a glamorous profession, yet -- despite the antisocial hours -- these men and women have every reason to be as well-motivated and cheerful as they seem. They are well-paid and know that they work at the heart of their country's most dynamic industry.

The rise of what is known as business-process outsourcing (BPO) in the Philippines has been nothing short of phenomenal. The very first calls weren't taken until 1997, but today the sector employs 638,000 people and enjoys revenues of $11 billion, about 5 percent of the country's GDP.

Last year the Philippines even overtook India, long the biggest call-center operator in the world, in "voice-related services." The country now employs about 400,000 people at call centers, India only 350,000.

The Southeast Asian upstart, with a population of 101 million, is unlikely ever to surpass the Indian behemoth of 1.2 billion people across the entire range of outsourcing offerings, which also include all kinds of information-technology services.

Growth expected to explode

Yet, given its extraordinary growth so far, it is hard to ignore the Philippines' projection that its BPO industry could add another 700,000 jobs by 2016 and generate revenue of $25 billion. At that point the industry would make up a tenth of the country's GDP.

As in the call-center business so far, some of these new jobs will come at the expense of India. However, India's relationship with the Philippines in back-office work is more complex than the numbers suggest.

The main reason for the success of the Philippine call centers is that workers speak English with a neutral accent and are familiar with American idioms, which is exactly what their American customers want. Of these, many have taken to complaining bitterly about Indian accents, which no amount of "voice neutralization" coaching seems to have overcome. As a result, some Indian firms have been helping to move jobs to the Philippines by setting up call centers in Manila and other parts of the country.

Infosys and Wipro, as well as scores of other Indian firms, now have substantial operations there. And they aren't drawn to Manila by cheap labor: Wages in the Philippines are slightly higher than in India, since the Filipino accent commands a premium.

It also helps that the country has a big pool of well-educated workers. The million or so Filipinos who graduate every year have few other options to choose from, besides emigrating. Working in a call center is considered a middle-class job: New recruits start at $470 a month.

The big question is whether the Philippine BPO industry, having conquered the call-center market, can now move up the value chain. To keep growing rapidly, and profitably, it needs to capture some of the more sophisticated back-office jobs, such as those processing insurance claims and conducting due diligence. In these businesses, called knowledge-process outsourcing and legal-process outsourcing, India still rules supreme.

Integreon offers a glimpse of what the future may hold. The firm occupies only a few discreet, very secure offices. It employs 300 people in Manila, 40 of them lawyers who help multinational law firms with litigation. Familiarity with America helps.

"It makes it very easy for us to do legal research for American firms," says Benjamin Romualdez, the firm's country manager.

This sort of operation is new in Manila, but Romualdez expects that he can find the skilled workers to double his workforce in the next five years. Western banks also have discovered the Philippines. JPMorgan Chase now has more than 25,000 workers on its payroll in the country, many of whom do much more than answering phones.

In short, the Philippines is set to compete with India across the BPO board.

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