conference on service science, … on service science, management & engineering (ssme): ......
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CONFERENCE ON SERVICE SCIENCE, MANAGEMENT & ENGINEERING (SSME):
Towards Philippine Global Competitiveness In Offshoring & Outsourcing
August 5-8, 2008
Audio-Visual Room, CICT Building
C.P. Garcia Ave., Diliman, Quezon City
The Philippine Talent PropositionThe Philippine Talent Proposition
Conference onSERVICE SCIENCE, MANAGEMENT & ENGINEERING:
TOWARDS PHILIPPINE GLOBAL COMPETITIVENESS IN OFFSHORING & OUTSOURCING
August 5 to 8, 2008CICT Building
Atty. Ma. Jamea S. GarciaExecutive Director, Talent Development
BPA/P
Business Processing Association of the Business Processing Association of the PhilippinesPhilippines
●
Private sector-led organization representing all sectors of the BPO and IT-Enabled Service (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
4
OffshoringOffshoring and outsourcing (ITand outsourcing (IT--BPO) involves BPO) involves IT applications, business process, and design/engineering servicIT applications, business process, and design/engineering serviceses
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 Offshoring
(IT -
BPO): Three main sectors
1 2 3
5Source:
BPAP/CICT/BOI Task Force
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 revenues and 300,000 employeesbillion in revenues and 300,000 employees
•
Strong intrinsic skills–
English language–
Cultural affinity to US –
Large pool of talent•
Competitive factor costs –
Labor–
Real estate–
Telecom •
Best in class incentives
• 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 in the Philippines now the third outsourcing destination in the world, 2world, 2ndnd outside of North Americaoutside of North America
Source:
Everest research
Philippine IT Philippine IT -- BPO: Growing In All SectorsBPO: Growing In All Sectors
Sector 2007 Revenues ($000,000)
Past 3 years ave growth
Contact Centre 3,600 52
Back Office (non-voice bpo) 398 46
Transcription (non-voice bpo) 197 24
Animation 105 38
Software 423 35
Engineering Svcs 152 55
TOTAL Philippine O&O (export)
4,875 50
7
Source: Joint BPAP/BOI/PEZA/CICT Task Force
Philippine IT Philippine IT -- BPO: Growing in All SectorsBPO: Growing in All Sectors
Sector 2007 employment (FTEs)
% ch vs. YA
Contact Center 198,000 24
Back Office (non-voice BPO) 40,156 9
Transcription (non-voice BPO) 16,824 44
Animation 7,000 8
Software 29,188 82
Engineering Services 8,000 82
TOTAL PHILIPPINE O&O(export)
299,168 27
Source:
Joint BPAP/BOI/PEZA/CICT Task Force
A STRATEGIC INDUSTRYA STRATEGIC INDUSTRY
●●
The BPO/ITES industry currently accounts for 4% of Philippine GDThe BPO/ITES industry currently accounts for 4% of Philippine GDP from 0.075% in P from 0.075% in year 2000 and will account for 8% in 2010 (Per BOIyear 2000 and will account for 8% in 2010 (Per BOI--CICTCICT--BPAP)BPAP)
●●
The industry directly contributes PhP1.84 billion in payroll The industry directly contributes PhP1.84 billion in payroll taxes and other government taxes and other government remittances (SSS, remittances (SSS, PagPag--ibigibig, , PhilhealthPhilhealth)*)*
●●
It is estimated that every 1 direct job in the industry geneIt is estimated that every 1 direct job in the industry generates at least 2 indirect jobs rates at least 2 indirect jobs in other related industries (construction, transportation, commuin other related industries (construction, transportation, communication, food, nication, food, entertainment, hotels, retail, etc.)entertainment, hotels, retail, etc.)
●●
Government (cited in an ADB study) projects that 10% of all Government (cited in an ADB study) projects that 10% of all new jobs through 2010 new jobs through 2010 would be generated by this industrywould be generated by this industry
●●
The steady growth of the industry increases the demand for moThe steady growth of the industry increases the demand for more office space. A re office space. A requirement of 2.5 million sq meters of office space is estimaterequirement of 2.5 million sq meters of office space is estimated between 2008 and 2010.d between 2008 and 2010.
●● The industry will be 2The industry will be 2ndnd
to electronics and same size as OFW remittances by 2010to electronics and same size as OFW remittances by 2010
●● Industry minimizes flight of Industry minimizes flight of OFWsOFWs
thus reduces social cost and adverse impact thus reduces social cost and adverse impact
●●
The Philippines ranks 2The Philippines ranks 2ndnd
in the Global Delivery Index list of top BPO destinations in in the Global Delivery Index list of top BPO destinations in Asia PacificAsia Pacific
*Based on average salary of PhP15,000/month and published tax, Pag-ibig, and SSS rates for that salary level.
10
Industry is supply driven, no visible demand constraints Industry is supply driven, no visible demand constraints leading to a unique opportunity for the Philippines leading to a unique opportunity for the Philippines
Demand:
•
Only 15% of global addressable market currently captured
•
Offshoring
and outsourcing concept understood and accepted with firms
•
Offshoring
moving away from labor arbitrage to tapping global talent
•
Organizations are looking for new processes / services to offshore (e.g., engineering services, R&D) and multi-
locations for offshoring
•
New source markets are emerging (e.g., North Asia)
Supply:
•
India already facing tremendous pressure on talent and infrastructure –
Rising salaries and attrition levels –
Quality issues in “Voice”
services –
Infrastructure bottlenecks
•
Competitors still way behind India in BPO and IT services–
China, Vietnam way behind in English skills
–
South Africa not very cost competitive compared to Asia so focusing on Europe and UK
–
Philippines has a distinct advantage in English and several fast growth, high skill based slivers (e.g., F&A, Animation)
Philippines in a sweet spot to play a bigger role in IT-BPO space
AN EMPLOYEEAN EMPLOYEE’’S MARKET S MARKET –– high demand for BPO workershigh demand for BPO workers
●
Around 600,000 BPO/ITES professionals will be needed in the nextAround 600,000 BPO/ITES professionals will be needed in the next
3 years3 years
●●
Difficult to hire with right skills and high level of English prDifficult to hire with right skills and high level of English proficiency. To increase the oficiency. To increase the hiring rate, companies conduct hiring rate, companies conduct ““NearNear--Hire TrainingHire Training””
and other TESDA accredited and other TESDA accredited apprenticeship development programsapprenticeship development programs
●●
Complex types of work in the field of engineering, IT, legal, meComplex types of work in the field of engineering, IT, legal, medical and accounting dical and accounting are outsourced to the Philippinesare outsourced to the Philippines
●●
Philippines competes with other countries for talent qualityPhilippines competes with other countries for talent quality
●●
Upgraded managerial and technical skills to meet demands of the industry
●●
40% –
60% switch jobs: Employees however move and choose to stay within the industry due to the professional opportunities and financial rewards provided by the Industry
●
Industry competes with jobs abroad -
18% leave the industry with 9% working abroad
12
Talent scenarios, 2007-10 (Thousands)
*
Assumes continued decline in hiring rates from ~6% currently to ~4%**
Assumes current hiring rate and recruitment performance are maintained; assumes current mix from various sources is maintained
Source:
BPAP; team analysis
235
2006
~240630
Baseline growth*
~280840
“Hold share”**
~340
10% by 2010
AttritionProjected employment
1,240
RevenueUSD billionSharePercent
3.3 ~6 ~8 ~13
~5 ~4 ~6 ~10
The supply of talent will determine the level of growth The supply of talent will determine the level of growth the industry will experiencethe industry will experience
~390 ~560~900
1 million
ESTIMATES
““Roadmap 2010Roadmap 2010”” launched Oct 2007 launched Oct 2007
13
BPAP 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
14
Roadmap 2010 lays out action program in four areasRoadmap 2010 lays out action program in four areas
Core elements•
5 thematic programs to draw additional 290K to 560K employees to
industry
•
Talent Management Partnerships program between industry and educators to pilot and share new ideas nationwide
Talent
•
Co-create public policy program with gov’t
leaders --
incentives, incentives efficiency, data protection, education
•
End-to-end investor support•
Address underlying issues and perceptions of risk
Business Environs
•
Fact-based tools to support investors –
including the BPAP City Scorecard™
–
in identifying and selecting locations•
“Active agent”
and developmental support to cities to get them “BPO-
ready”
and to manage their growth over time
Next Wave Cities
•
Expanded service line –
industry talent development, research, regulation, marketing --
to support industry growth•
Expanded professional team operating full-time with specific expertise and performance goals
BPAP Team 2010
15Source:
Interviews; Department of Education (Dep
Ed); Commission on Higher Education (CHED); McKinsey Global Institute (MGI); Business Processing Association of the Philippines (BPAP); team analysis
Factors affecting the supply of employees Factors affecting the supply of employees
Suitability•
Applicants’
skill levels do not meet work requirements•
Insufficient English proficiency for work with MNCs•
Yields in 6-10%
Willingness •
There is a negative perception of IT-BPO industry employment as only “call center”
work
Availability
•
Lack of funding and perceived low pay-out on education are resulting in high fall-out rates–
Only 40% of all students entering grade one complete high school–
Only 60% of high school grads enroll
in college, only 60% graduate
Accessibility
•
Most players are in Metro Manila and recruitment has mostly been
in NCR•
Metro Manila (MM) has 42% of graduates, but 82% of BPO employment•
Around 40% of graduates in MM are recruited to the industry, compared with only ~6% of graduates outside MM
Stickiness•
There is a high exit rate in the industry (~18% annually)•
Lack of “stickiness”
due to absence of clear career growth path
Description
Comprehensive assessment and training program
Promote awareness on career
opportunities in O&O
Tap alternative talent pools
Improve “ability to fund”
“Responsive”
curriculum change
1
3
4
2
5
16
290 560Total Impact Total Impact
30 100
110 210
120 180
40
3010
20
Estimated Impact (2007-10)
30
Low Range High RangeIn Thousand FTEs
5 Thematic Programs5 Thematic Programsto draw an additional 290 to draw an additional 290 –– 560 thousand employees 560 thousand employees
17
Talent Management Partnerships program to pilot Talent Management Partnerships program to pilot and scale educational initiativesand scale educational initiatives
•
Test educational/ training initiatives
•
Distribute development costs
•
Vehicle for scaling up
•
Funding vehicle
•
Model for other industries
Value added
I1 I2 I3 I4 I5 In
Industry
E1 E2 E3 E4 E5 En
Educators
Talent working group
1818
Work with BPAP on the Talent Development initiatives
•
Support the Talent Management Programs to pilot and scale up education initiatives
•
Development of Post-graduate courses for middle management
•
Development of standard assessment tools (students, teachers, schools, O&O players)
•
Career fairs, road shows and other media campaigns to drive “willingness”
Where we need your help…Where we need your helpWhere we need your help……
www.bpap.org
Atty. Ma. Jamea
GarciaExecutive Director –
Talent [email protected]
For more information