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CONFERENCE ON SERVICE SCIENCE, CONFERENCE ON SERVICE SCIENCE, MANAGEMENT & ENGINEERING (SSME):MANAGEMENT & ENGINEERING (SSME):

Towards Philippine Global Competitiveness Towards Philippine Global Competitiveness In In OffshoringOffshoring & Outsourcing& Outsourcing

August 5-8, 2008

Audio-Visual Room, CICT BuildingC.P. Garcia Ave., Diliman, Quezon City

Philippine IT-enabled services and BPO industry: on the world stage

OSCAR SAŇEZCEO Business Processing Association Philippines

Business Processing Association Business Processing Association of the Philippinesof the Philippines

●

Private sector-led organization representing all sectors of the BPO and IT-Enabled Services (ITES) industry and their support industries

–

BPO •

Voice •

Non-voice (e.g.F&A, HR)–

IT services•

Software development•

System integration•

Animation–

Engineering / R&D services– Allied industries (Property, Telecom, Staffing/Training Consultants, Systems integrators

●

Created to give the Philippine BPO industry a single point of contact for the world; one-stop information and advocacy gateway

●

210 company members and 5 association members (CCAP, PSIA, MTIAPI, ACPI, GDAP).

●

Full-time management team leading the execution of all initiatives

3

OffOff--shoring and outsourcing (ITshoring and outsourcing (IT--BPO) involves IT applications, BPO) involves IT applications, business process, and design/engineering servicesbusiness process, and design/engineering services

Source:

McKinsey Global Institute; Gartner 2005 database; IDC; interviews

IT applications services (ITO) Business process services (BPO) Engineering services (ESO)

Application development and maintenance•

Application development•

AD integration and testing•

Application MaintenanceSystem Integration•

Analysis•

Design•

Development•

Integration and testing•

Package implementationIT Infrastructure Services•

Help desk•

Desktop support•

Data centre services•

Mainframe•

Network operations•

IT consultingSoftware product development•

New product development•

System testing•

Localization/Support•

Gaming

Horizontal processes•

Contact centers•

Human resources•

Finance and accounting•

Supply chain (procurement, logistics management)

Industry/vertical processes•

Banking and insurance •

Telecom •

Public sector •

Utilities •

Health care •

High-tech •

Oil & Gas •

Consumer productsKPO•

Business research, financial research•

Animation•

Data analytics•

Legal process and patent research•

Other high-end processes

Manufacturing Engineering•

Upstream product engineering–

Concept design–

Simulation–

Design engineering•

Downstream product engineering–

CAD/CAM/CAE–

Embedded software –

Localization•

Plant and process engineeringArchitecture design• Design process• Building Management models

Outsourcing and Off-shoring (O&O) Services: Three main sectors

1 2 3

4

Direct employment FTEs

Revenues USD billions

Source:

BPAP/McKiinsey

Team analysis

1.5

2004

4.9

2007

+49%

100,500

2004

299,168

2007

+45%

Philippines ITPhilippines IT--BPO industry currently has close to USD 5.0 BPO industry currently has close to USD 5.0 billion in revenuesbillion in revenues

•

Strong intrinsic skills–

English language–

Cultural affinity to US –

Large pool of talent•

Competitive factor costs –

Labor–

Real estate–

Telecom •

Best in class incentives

Philippine ITPhilippine IT--BPO: Growing all sectors at tremendous rateBPO: Growing all sectors at tremendous rate

Sector 2007 Revenues ($000,000)

Past 3 years ave

growthContact Centre 3,600 52

Back Office (non-voice bpo) 398 46

Transcription (non-voice bpo) 197 24

Animation 105 38

Software 423 35

Engineering/Design Process 152 55

TOTAL Philippine IT-BPO (export only)

4,875 50

5Source: Joint BPAP/BOI/PEZA/CICT Task Force

• All sectors growing; Contact centres is 2/3 of industry and growing 52%/yr over the past 3 years• Back-office

services primarily in F&A, HR, Legal and Health services now 15%, growing 46%/yr• Software development is 10% of industry and continues to grow at 35%/yr

6

Philippines now the third outsourcing destination Philippines now the third outsourcing destination in the world, 2in the world, 2ndnd outside of North Americaoutside of North America

Source:

Everest research

7

•

Considerable pool of generalist and specialist talent•

Strong English skills, both verbal and writtenSuitable and abundant talent

1

The foundations of the PhilippinesThe foundations of the Philippines’’ success success

Source:

BPAP/McKinsey Team analysis

LowHigh

Quality infrastructure

•

World-class telecommunications•

Abundant and low-cost real-estate in major urban areas•

Accessibility3

Conducive business environment

•

Competitive incentives (e.g., income tax holiday)•

Specialized programs addressing near-term issues (e.g., near-

hire voucher program)•

Local governments and national government supportive 4

•

Among the lowest in labor costs •

Genuine global reputation in voice with multiple signature locatorsOperational performance

2

Key buy factors Philippines’performance Key points

8

The Philippine talent value proposition: Large pool of EnglishThe Philippine talent value proposition: Large pool of English-- speaking talent speaking talent

Source:

Phils

Comon

Higher Education : CIA World Factbook

2007; *China data for unemp

and literacy is major Cities only

Suitability rates are empirically based on a total of >80 interviews with HR professionals working in each country

Number of college degree graduates

2007 Annual growth

Business & Accountancy 128,000

Engineering & Tech 55,752

IT-related courses 42,047

Architecture 3,100

Medical Sciences 31,400

Fine Arts/Humanities 7,660

TOTAL Tertiary level 454,818 3.8%

Pop Labour force Unemp

rate Literacy

World 6,602M 3,400M 6.3% 82.0%

India 1,130M 509M 7.8% 61.0%

China 1,322M 798M 4.2%* 90.9%*

Brazil 190M 96M 9.6% 88.6%

Philippines 90M 36M 7.9% 92.6%

Over 400,000 college-

degree graduates annually out of 90 million population and a 36 million size labour force with literacy rate of 92.6%

9

“Of 100 graduates with the correct degree, how many would you employ if you had demand for all?”Per cent

EngineerCountries

The Philippine talent value proposition: Quality The Philippine talent value proposition: Quality

*

Mexico is the only country where interview results (higher number) were adjusted ex-post since interview base was thinner

Source:

Interviews with HR managers; HR agencies and Heads of Global Resourcing centers; McKinsey Global Institute

Asia

Latin America

Eastern Europe

Suitability rates are empirically based on a total of >80 interviews with HR professionals working in each country

42* 35*

Finance/accounting Generalist

20

13

35

25

10

50

50

50

10

20

China

Philippines

India

Malaysia

Brazil

Mexico

Russia

Czech Republic

Poland

Hungary

30

20

40

30

50

15

15

25

13

25 11

8

20

10

30

3

30

15

20

10

10

•

Frost & Sullivan, August 2007: Philippines among top 10 shared services and outsourcing locations in the world

•

IMF, March 2007: “The Philippines has established a strong presence in voice-based BPO sectors such as call centres, and there are also signs of growth

potential in other offshore services, such as medical transcription and animation.”

•

Gartner, Dec 2007: The Philippines has become a destination for call centre and back-office finance and accounting operations; rates highly in cost, labour quality and language/cultural compatibility.

•

Nomura Securities, November 2007: “We think that the Philippines has grown into the No. 2 outsourcing base after India in call centre–based BPO fields.”

•

Everest Consulting, Apr 2008: The Philippines is now the third largest destination geography for BPO services

•

Frontier Strategy Group, September 2007: The Philippines is among seven key markets that are “above the rest”

and are the “most critical to achieving corporate growth and outperforming the competition in 2008 and beyond”

•

National Outsourcing Association (UK), October 2007: Philippines awarded Off-shoring Destination for 2007

The Philippines is viewed as a favorable location for BPOThe Philippines is viewed as a favorable location for BPO--IT IT servicesservices

11

O&O marketUSD billions

Source:

Team analysis

~45

2005

~130

2010

CAGR+24%

OffshoringOffshoring and outsourcing is a large and growing marketand outsourcing is a large and growing market

Addressable market Actual penetrated market

~450

10% ~30%

12

Global offshore BPO industry offers large Global offshore BPO industry offers large growth potentialgrowth potential

Insurance

*

25-35

35-4010-12

10-128-10

20-25 120-150

Retail Banking

*

Travel & hospitality*

Auto mfg*

Telecom* F&A/HR Total

Industries Horizontal functions

4-5

10-15

Pharma* Others*

Current offshoring

2005 penetration **

Innovation can further expand the addressable market

Estimated addressable market*** by 2010USD billion

6% 9% 3% 9% 9% 8% 9% 9% 8%

Potentially offshorableAlready offshored

*

Including call centres, procurement opportunities; excluding opportunities in horizontals, e.g., F&A, HR**

Proportion of addressable market offshored

today; India share assumed as 46% ***

Includes addressable markets in currently offshoring

industriesSource: McKinsey Business Technology Office; McKinsey Global Institute; McKinsey Outsourcing & Offshoring

practice; Gartner 2005 database; IDC; NASSCOM Strategic Review 2005

13

Defining processes that are offDefining processes that are off--shorableshorable

*

Includes checking and savings accounts, money market, CDs and other basic retail products; excludes investment management, trust

and fiduciary services**

Includes consumer loans, auto finance, other unsecured consumer credit, small business lending; excludes mortgage, credit cards and corporate lendingSource:

McKinsey Business Technology Office (BTO) practice; McKinsey Global Institute; McKinsey Outsourcing & Offshoring

practice

Partially offshorable Offshorable

RETAIL BANKING –DEPOSIT AND LENDING

•

Application processing

•

Automated credit scoring

•

Manual credit evaluation

•

Verification of credit, address and employment

•

Account approval •

New account setup

•

Customer segmentation

•

Product design•

Distribution cha-

nnel management•

Branch and agent/ broker sales

•

Direct sales (call center, web)

•

Account maintenance

•

Branch customer service

•

Inbound cus-tomer service

•

Outbound service (fraud, account overdraft)

•

Dispute resolution•

Statementing

•

Portfolio monitoring

•

Early collection calls

•

Late collections, delegation to agency

•

Account closure

•

Cash fore-casting and supply

•

ATM maintenance •

Lock box and vault operations

•

Automated check processing

•

Manual check exception processing

•

Cash letter preparation

•

Returns and overdrafts processing

•

Branch deposits and withdrawals

•

ATM transactions processing and reconciliation

•

Money orders, wire transfers, electronic bills

•

G/L account balancing

•

Interest and fee calculation

Depository activities*

•

Same as above•

Charge-offs•

Litigation•

Seizure of collateral

•

Same as above•

Promisory note •

Q&A, loan fund-

ing and booking

•

Remittance processing

•

Same as above •

Same as above•

N/A •

N/ALending activities**

Offshorable

Percent of cost base

Cost savings in offshored activities

Deposits

20-30

50-60

9

31

5-10

50-60

28

19

10

10-20

50-60

0

25

30-40

40-50

15

8

30-40

40-50

20

<5%

40-50%

10%

15%

10

<5

50-60

0Lending

Product develop-

ment, sales and marketing

Credit evaluation and account setup

Payment processing Item processing Cash

management Customer service Default management

Account/loan acquisition Transaction processing Account servicing

Addressable market ~23-25 billion

Rich opportunity to develop F&A Outsourcing capabilityRich opportunity to develop F&A Outsourcing capability

14

15

Further value creation in ITFurther value creation in IT--BPO would involve moving from BPO would involve moving from factor cost to revenue enhancementfactor cost to revenue enhancement

Source: McKinsey Global Institute, McKinsey Outsourcing & Offshoring Practice

Labour cost arbitrage

Factor cost

Process productivity

Skills arbitrage

Automation

Centralisation

Reengineering

Cost avoidance

Leakage prevention

Capital cost avoidance

Opportunity loss (time or information)

Service extensions

Data mining

Price elasticity

Revenue enhancement (existing services)

‘Below the waterline’

products for existing markets

New markets

Skills-limitedservices

Revenue enhancement (new services)

Top software provider

Value creation from O&O

•

Lowered support costs by over 60% by moving to India and Philippines

•

25% of development team in China, India, Hungary, and other offshore sites

•

£50mn/yr saved through revenue audits

•

USD20+ million HRIS capital outlay avoided by outsourcing HR

Examples

Leading financial institution

•

Live customer support for USD40 per application

•

Focused sales campaigns extended to a wider range of credit card customers

Current focus of most offshorers

Leading industrial MNC

Leading high tech company

Leading telco, and top NA bank

16

The Philippines has the intrinsics to compete in The Philippines has the intrinsics to compete in several emerging service areas, but will need to several emerging service areas, but will need to take action to capture the opportunity take action to capture the opportunity

Source:

McKinsey Global Institute; BPAP team analysis

Low

Domain expertise required

High

17

The Philippines has the intrinsics to compete in The Philippines has the intrinsics to compete in several emerging nonseveral emerging non--voice areas, but will need to voice areas, but will need to take action to capture the opportunity take action to capture the opportunity

Source:

McKinsey Global Institute; BPAP team analysis

Low

Domain expertise required

High

Must get the macro issues right to attract any/all players

More targeted “sliver”

opportunities exist across key areas: 1. Healthcare2. F&A3. HR4. ITO5. ESO

18

These five slivers could potentially represent up to These five slivers could potentially represent up to a third of the Philippines 2010 aspirationsa third of the Philippines 2010 aspirations

*

Assumes the following CAGRs: healthcare, 44%; F&A, 33%; HR, 25%; ITO, 17%; ESO 19%**

Assumes the following CAGRs: healthcare, 54%; F&A, 72%; HR, 43%; ITO, 36%; ESO 85%Source:

BPAP; team analysis

•

Maintaining our current market shares across these five slivers would triple revenues by 2010

•

Additional penetration could yield 2-3x

Philippines revenues

Healthcare

F&A

HR

ITO

ESO

Totals

70

83

40

211

48

456

22

5

5

1

<1

2005

Maintaining market share, 2010*

Growing market share, 2010**

Implied market sharePercent

Represents 30% of Philippines 2010

O&O aspirations

600

1,000

240

1,000

1,000

3,840

30Percent of 2010 aspiration

400

350

120

450

120

1,440

11

USD millions

ILLUSTRATIVE

19

Healthcare: Philippines has substantial strength in Healthcare: Philippines has substantial strength in medical servicesmedical services

•

Although the market is still in its nascent stages, India is emerging as a strong contender for offshoring healthcare services

USD millions

Medical transcription–

Dictation conversion to text–

Maintain and update electronic recordsImaging

–

Document indexing–

Conversion of legacy documentsDisease codingMedical billing

–

Payment posting, reconciliationsForms and claims processing

–

Claims entry–

Member, provider, and agent customer care

*

2005 figures; excludes ITO and ESO; market share assumes 7,000 seats at USD11,900/seatSource:

NASSCOM Strategic Review 2006; press search; McKinsey analysis

Healthcare exports from India

•

Rising healthcare costs and demand for new products/services have made outsourcing an important tool for healthcare majors

Global landscape

4 Healthcare

Global BPO*100% = USD11 bn

+67%

2006

12545

2004

80

05

•

Philippines’

share of global healthcare BPO is substantial, but at low billing rates

•

Employs ~7,000, mainly in low-value medical transcription

•

The market is highly fragmented with >100 small-sized providers (~20 seats each)

Philippines

22 Healthcare

Philippines’

market share*100% = USD320 million

•

E-Data Services•

SVI•

Medscribe Asia•

TTSI •

SPi

•

Infinit-o•

Advanced MT•

Dictation Source•

Pilipinas Data Corp

Vendors

•

Large pool of graduates in medical fields (~30k/year)

•

~15k nurses exported/year•

HIPAA and AAMT standards•

Strong industry associations

•

No providers of scale•

Data sensitivity/ data protection•

Transient role for trained medical professionals

Cost Talent suit.

Vendor lndscp

Risk profile

Infra-structure

Biz environ

Talent avail

Enablers Constraints

Growth indicator

Processes commonly offshored

UncompetitiveCompetitive

20

•

With ~7,000 seats, Philippines has captured a 4.6% market share

•

Local vendors (e.g., PeopleSupport and SPI) are considering F&A as a potential service offering

Philippines

5 F&A

Philippines’

market share*100% = USD1.8 billion

•

IBM •

Accenture•

Deutsche •

Thomson

•

Chevron •

Citibank •

P&G•

AIG•

JPMorgan

Providers Captives

•

423,000 “young pros”

(7 years experience or less) with F&A degrees;

•

~130k graduates/year•

GAAP affinity•

Strong English skills

•

Ability of local providers to capture market share

•

Less mature provider/captive landscape

F&A: Philippines has enablers in place to capture larger shareF&A: Philippines has enablers in place to capture larger share

•

F&A accounts for 16% of global BPO, and is growing at an aggressive pace due to increasing demand and a rich array of valid options

USD billions

Accounting operations–

Booking expenses, benefits, fees, etc.–

AccrualsManagement of expenditures

–

Accounts receivable–

Accounts payable–

RemittancesInvestment accounting

–

Booking of ops-related investment activitiesAccount closing/General ledger

–

Investment accounting–

Accounting consolidations

*

2005 figures; excl. ESO and ITO; Philippines market share assumes 7,000 seats at USD11,900/person billing rateSource:


•

India is the F&A market leader with 70% share; eastern Europe is proving to be an attractive location, especially for western Europe

•

Growth of F&A in a location requires a foundation of key anchor captives

Global landscape

16F&A


0.5

2003

0.8

04

1.3

05

2.2

2006

+64%

•

Summersault•

Office Tiger•

BPO International


Cost Talent suit.

Vendor lndscp

Risk profile

Infra-structure

Biz environ

Talent avail

F&A BPO exports from India


Growth indicatorUncompetitiveCompetitive

21

Human resources (HR): Strong capability in the PhilippinesHuman resources (HR): Strong capability in the Philippines

•

HR offshoring has been rather slow to take off, due to lack of process standardization and technology capability

USD millions

*

2005 figures; excludes ITO and ESO; Philippines market share assumed—to be validatedSource:


•

Increasing maturity is helping expand the scope of HR BPO beyond discrete process outsourcing

•

Few pure-play offshore vendors exist for HR BPO—the market is dominated by global players

Global landscape

7 HR


75

2004

165

05

300

2006

+100%

•

The Philippines HRO market is also dominated by global players, but has a small captive presence

•

The Philippines is perhaps best-suited to open the door to more meaningful HR offshoring, given the strong communi-

cations skills and service-minded nature

Philippines

5 HR

Philippines’


•

Henkel•

BPO International•

Accenture

•

Chevron•

Shell

Providers Captives

•

Culture is ideal for HR roles (service-oriented, Westernized legal and government systems)

•

Strong English skills•

~70k professional OFWs/year

•

HR perceived as less offshorable, requiring more “human touch”

•

Lack of locally grown providers•

Lack of large captive presence

•

Hewitt•

IBM•

Global Excel


Cost Talent suit.

Vendor lndscp

Risk profile

Infra-structure

Biz environ

Talent avail

Recruitment–

Screening–

Recruitment administration –

Candidate file managementCompensation and benefits

–

Performance management administration–

Payroll administration–

Pension/401-k administration–

Benefit administration–

Employee information managementTraining and development

–

Self-service training


HR exports from India

Growth indicatorUncompetitiveCompetitive

22

High growth potential: Information Technology offshoring (ITO)High growth potential: Information Technology offshoring (ITO)

•

The ITO industry has experienced a strong growth during the last few years and is further projected to grow

USD billions

Source:


•

However, it is facing declining margins due to the rise of transformational business processing outsourcing, which is capturing a significant amount of traditional ITO business

Global landscape

41 ITO

Global offshoring100% = USD44.5 bn

9

2001

18

2005

+21%

•

Philippines ITO is dominated by Accenture with the captive presence largely in helpdesk and technical support functions

•

Approximately 8% of the Philippines O&O efforts in ITO

Philippines

1 ITO

Philippines’

market share*100% = USD18 billion

•

Pointwest•

ADTX•

HP•

Accenture•

Headstrong

•

Sun Micro•

Intel•

Dell•

Intel

Providers Captives

•

Mature industry (20+ years)•

~100k graduates per year•

Workers perceived to be highly proficient in technical and business skills for ICT projects

•

Perception on process maturity (i.e., SEI-CMM certification)

•

Limited captive landscape•

High dependence on helpdesk

•

RCG IT•

Trend Micro•

Netsuite•

Gurango


Cost Talent suit.

Vendor lndscp

Risk profile

Infra-structure

Biz environ

Talent avail

AD&AM–

Development–

Testing–

Review–

Support–

Quality control/acceptance testingSystem integration and package implementation

–

Analysis–

Design and developmentTraditional IT (IT infrastructure)

–

Desktop and server–

Network

Global revenue pool


Growth indicator UncompetitiveCompetitive

23

Limited penetration in Engineering Services offshoring (ESO)Limited penetration in Engineering Services offshoring (ESO)

•

High tech/telecom and automotive have been the leading industries, with bulk of offshoring going to China, India, Mexico and Taiwan

USD billions

*

2005 figuresSource:

BPAP, NASSCOM Strategic Review 2006, press search, McKinsey analysis

•

Increasing provider interest in ESO indicated by large offshore providers announcing Engineering Services as separate service line

•

Driven by need for proximity to OPD facilities

Global landscape

33 ESO

Global offshoring*100% = USD44.5 bn

15

2005

35

2010

+19%

•

At 0.3%, the Philippines has very limited penetration in this large and growing sector

•

Currently only 14 engineering design companies with total revenues of USD48 million

Philippines

0.3 ESO

Philippines’


•

Fluor Daniel•

JGC Phils•

Bechtel•

Tsuneishi•

Kajima Corp

•

Hyundai Engineering•

Kellog•

Ford •

GM

Providers Captives

•

40k graduates in CAD-enabled courses per year

•

75k licensed professionals•

High level technical expertise•

CAM/CIM capabilities

•

Ability to attract demand•

Less mature eco-system (however, TI investment could trigger growth)


•

Brown and Root•

Bouygues Const.•

Parsons•

EEI Corp•

Foster WheelerDetailed design

–

Design conceptualization–

2D, 3D drafting/conversionsTesting

–

CAE simulationsPre-production

–

Production tool design–

CAE/CAM for tool production–

Design updatesBuilding Information management

Global revenue pool


Growth indicator

Cost Talent suit.

Vendor lndscp

Risk profile

Infra-structure

Biz environ

Talent avail

UncompetitiveCompetitive

Roadmap 2010 launched Oct 2007Roadmap 2010 launched Oct 2007

24

BPAP and McKinsey &Co developed the Philippine IT-

BPO “roadmap”

to achieving strong global #2 position in the world

Sec Ray Anthony Roxas-Chuaappointed as the PhilippineGovernment’s “OutsourcingCzar”

President Arroyo announced therelease of $10million worth ofScholarship grants for deservingstudents to be employed in BPO

25Source:

Team analysis

Roadmap 2010 focusing on four broad themesRoadmap 2010 focusing on four broad themes

BPAP Team 2010

Key issues

Suitable and abundant talent

Operational performance

Quality infrastructure

Conducive business environment

•

Need to recruit over one million new people into the industry to

reach 10% market share •

High percent of top talent in emerging areas outbound to other markets (e.g., nurses, engineering, accountants)

•

Mismatch in location density between providers and labor. Smaller labor pools not tapped

•

Wage pressures emerging, reflecting accelerating growth and lack

of transparency on wages•

Competitiveness relative to established players (e.g., India) and emerging players (e.g., Vietnam) at-risk

•

Wage appear to be growing faster than billing rates, creating imperatives for operational excellence, scale and migration to high value services

•

Availability emerging as major issue–

NCR rental space only available to reach 68% of revenue target–

Given market uncertainty, facilities being built only on commitment, slowing time-to-market•

Rental rates rising sharply in Makati Central Business District

•

Need to ensure that current incentive regime continues to sustain competitiveness•

Most locators concentrated in NCR; other cities may not be O&O-ready•

Under resourced industry association •

Good investor support in pre-investment phase; potential to improve in execution phase

•

Persistent issues around critical risk factors that affect outsourcing decision (e.g., IP protection, data privacy)

Risk management

Business

environment

Talent

Next wave cities

26

*

Non-traditional pools include college drop-outs with less that two years tertiary education, high school graduates who do not enroll

in college, housewives, and retirees**

PPS: Percentage pointsSource:

CHED; MGI; BPAP; NSCB; ADB Statistical Database; interviews; team analysis

5 thematic programs to draw an additional 5 thematic programs to draw an additional 290290--560 thousand recruits560 thousand recruits

Estimated impact (2007-10)Thousand FTEsThematic program

Develop comprehensive assessment and training program

•

Tertiary degree graduates•

Drop-outs with minimum two years tertiary education

Affected talent pools

Improve awareness of career opportunities in O&O

•

Tertiary degree graduates•

Drop-outs with minimum 2 years tertiary education

•

Career shifters

Tap alternative talent pools

•

Non-traditional pools*

•

Non-NCR graduates

Improve “ability to fund” •

Drop-outs with less than 2 years tertiary education

•

High school graduates who do not enroll in college

Focus on “responsive”

curriculum changes•

High school graduates

Total

Short-term Low-end FTE High-end FTE Long-term

30 100

110 210

110

10 30

150

20 40

10 30

290 560

Talent

27

BPAP initiatives to help create the right environmentBPAP initiatives to help create the right environment for industry growth for industry growth

Source:

May 9 sponsor workshop; interviews; team analysis

Three key areas for BPAPKey issues in the Philippines business environment

Lack of institu-

tional framework during set-up

1

Weak risk perception

2

Mixed messages on government support

3

Public policyProtect current incentive regimeSimplify incentive processExpedite data protection regulation

Investor support

Set-up advisor certificationBPAP portal and helpdeskOperational excellence program

Promotion Risk surveyInformation Security campaign

Position Philippines as “destination of choice”

Business

environment

28

BPAP to provide services that would encourage BPAP to provide services that would encourage development of Next Wave Citiesdevelopment of Next Wave Cities

Source:

Team analysis

City readiness•

Which cities are ready?•

What are the gaps?•

Where is specific expertise?Penetration•

Who is operating here today? •

What activities do they undertake?

•

Where are they located? •

How many FTEs?

Segment readiness•

How have various slivers fared in the Philippines?

•

Which slivers have natural fit for the Philippines, i.e., growth prospects?

Topics

•

Investors/locators•

Real estate developers•

Utility providers•

Colleges and universities

•

National government•

LGU's•

Others

Information “demands”

Information Services

BPAP Inventory

BPAP city scorecard

Case studies

Next wave cities

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Ilocos Cagayan Valley

Central Luzon

Southern Tagalog

Bicol

Western Visayas

Central Visayas

Eastern Visayas

Western Mindanao

Northern Mindanao

Southern Mindanao

Central Mindanao

Cordillera

*

Super cities have a theoretical capacity of >15k, large cities of 10-15k, mid-sized cities 5-10k; the remaining 27 cities offer a theoretical capacity of less than 5,000 FTEs (for a total theoretical capacity of ~62,000-85,000

FTEs)Source:BPAP Scorecard; O&O inventory

BPAP leading the work with ICT Councils and BPAP leading the work with ICT Councils and private sector to prepare the new sites for ITprivate sector to prepare the new sites for IT--BPOBPO

106201

68

Largecities

47104

Mid-sized cities

308

Total

158

28

Supercities*

Davao

Additional FTEs Theoretical capacity

at current yield rates

Theoretical capacity of the top 15 cities sustains an O&O

population of 200-300k FTEs

Cebu

Iloilo

ManilaQuezon

Baguio

Bacoor

Bacolod

Cagayan de Oro

Santa Rosa

Dagupan

Cabuyao

Legazpi

Zamboanga

Tacloban

Next wave cities

Roadmap 2010: Continuing ChallengesRoadmap 2010: Continuing Challenges

•

Talent development: effectiveness of multi-sectoral

interventions•

Driving operational excellence

•

Impact of worldwide recession•

Market development: exploiting untapped areas/niches

30

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