Global Outsourcing - The Philippine Human Resource Agenda

Recently we celebrated the fact that Cebu City ranked number four in the Top 50 Global Outsourcing Destinations as reported by Tholons (investment advisory firm) and Global Services (leading magazine for global sourcing of IT and BPO Services). The study indicated that outsourcers consider the competencies, costs of operation as well as maturity of the services in a location as primary metrics in the ranking system.

While we celebrate this achievement, this does not highlight the bigger picture of the study: in the Top 15 destinations, India has 5, China has 3, Vietnam has 2, Sri Lanka, Egypt, Argentina, Brazil and Philippines only logged a single city each.

The Top 50 revealed a further interesting result: India (6), China (5), Philippines (3) and Vietnam (2). Other destinations in North/South America and Europe are included in the list but the emerging trend shows that China and Vietnam are fast catching up to the Philippines as a regional competitor in the global outsourcing industry.

The primary issue noted is the widening demand-supply gap of required manpower and the talent available to fill in this requirement. The numbers are not complete but the initial projections for the Philippines indicate that we are short of 49.8% in achieving our human resource targets for 2007 or roughly 40,000 jobs that we were not able to fill in. That represents roughly USD 640M or PHP 26.2B in lost revenue.

What makes China and potentially Vietnam a threat to the Philippines? Understandably, Vietnam is a relatively untapped market with a strong French and English background to help establish it as a destination. On the other hand, China is an aggressive competitor with strong government policies and initiatives designed to attract outsourcers with incentives.

The best incentives can be overshadowed by one single factor: availability of human resource. This is the opportunity and challenge that the Philippines need to address.
Do we really lack the human resource? In terms of numbers we can meet the projections beyond 2010. On the other hand, it is not a matter of resource but the quality of resources that can fulfill the jobs being outsourced. The Cebu Development Fund for IT (CEDFIT) reports that only 20% of the IT graduates are considered employable by the IT industry whereas the Call Center Subsector indicate that only 5% are considered employable (fresh graduates or existing applicant pool). This is a sensitive debate between industry and academe and an opportunity that CEDFIT is trying to bridge via dialogue and strong collaboration of the parties together with the local Cebu government.

One of the planned initiatives includes developing competency standards for Technical Support (TS) in partnership with the industry and academe. TS is a subset of the Call Center sub-sector and is strongly associated with entry level IT and IT Enabled Services (IT/ITES) type of jobs. TS jobs require the candidate 2 years of college, excellent competency in written and spoken English as well as a subset of the COMPTIA A+ knowledge base. For 2008 alone, an approximate IT/ITES 41,800 jobs need to be filled in with about 8,800 reserved for TS alone whereas the graduates for IT and Engineering Related courses number at about 101,000.

If no interventions are put into place we can only expect about 20,000 graduates to be taken up for IT/ITES jobs. It is technically impossible to fill in the gap from other channels of human resource. In this regard, CEDFIT’s initiatives will help establish the groundwork for developing a baseline standard for assessing Technical Support competencies and the creation of appropriate training that is co-developed by both academe and the industry to fill in this demand-supply gap.

This can only happen if the industry and academe continue to strengthen ties. These are the times when I find myself wishfully thinking that if we are a communist country like China we can simply dictate a whole city or region as English speaking only. That is the rumor of how China landed 3 slots in the Top 15 Global Outsourcing Destination – they simply designated a whole city to speak English. Wishful thinking indeed.


this is an article for publication with the CEDFIT Quarterly Industry Updates. Reposting it here...


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