Philippine call center business booms

MANILA: As India moves more up- market in outsourcing, the Philippines is fast gaining a share of the customer- contact call center business. It might be low-end and low-margin, but for the Philippines it has been an employment boon.

Evidence of that sharp growth is on display early in the evening in the lobby of the RCBC Plaza building in Makati City, the main financial district of the Philippines.
Groups of prosperous-looking young men and women, Starbucks coffees and McDonald's bags in hand, head to work at more than a dozen call centers serving the United States, just as everyone else is heading home.

On a recent trip to Hong Kong to drum up investor interest, President Gloria Macapagal Arroyo noted that there were barely 2,000 people in the so-called business process outsourcing industry when she gave her first state of the nation address in 2001.

"Today, five years later, it is 100 times bigger - we have 200,000 workers there," she said. "And every BPO company that I meet is looking to double their work force."
A study released last month by Duke University, in North Carolina, and the consulting firm Booz Allen Hamilton found that India was still the preferred destination for American companies seeking to outsource, at 42 percent.

This is at a time when U.S. companies are increasingly going abroad to source "sophisticated, mission-critical functions" because of a shortage of highly educated professionals in developed countries, the study found.

Outsourcing operations in India are thus entering better-paying types of work, like product research and development, financial analysis and handling insurance claims and payrolls. For them, there is undeniable logic to chasing higher-margin deals, especially as costs and competition rise for the call center business.

And those seeking cheaper alternatives for more basic services have discovered the Philippines. For the industry, the country's appeal, aside from lower costs, can be reduced to two factors: culture and employee loyalty.

With a long history of contact with the United States, including several decades of American colonial rule, Filipinos are more attuned to Western culture than most Asians. Call center employees not only find it easy to relate to Westerners but are also quick to adapt to a variety of accents. Most call center employees receive intensive training to acquire the accent of the country that they will be calling.

"I have relatives in California, so I am familiar with the way they speak," said Jessica Cauilan, a 37-year-old Manila native, who works overnight shifts trying to entice bank customers in the United States to make payments on late credit card bills. Her call center company, IRMC, based in New York, has several of these kinds of contracts with big consumer credit issuers.
The call center business is the fastest growing industry in the country, growing last year by 90 percent as revenue reached $1.7 billion. More than 100 centers around the country have created a new class of relatively affluent and independent young Filipinos.
But growth in the industry has put skilled employees in high demand, driving up competition and labor costs.

In India, poaching of employees is behind an increase of about 50 percent in labor costs, according to outsourcing companies, wage rates over the past five years and has piled heavy additional training expenses onto call center budgets, according to major outsourcing companies. They say that turnover of staff in some call centers in India as been as high as 200 percent in a year.

Filipino employees have displayed more loyalty, with turnover rates of 40 percent or less.
"The longer you have an employee, the higher the quality they are going to deliver," said Clint Streit, executive vice president for global operations with Convergys, an outsourcing company based in Cincinnati. "From that point, the Philippines has a clear advantage over India."
He added: "Ultimately we have to stem attrition rates in India; otherwise switch to the Philippines."

Company executives say that trend will ensure more call center operations are attracted to the Philippines, where there is still a plentiful supply of English-speakers and new graduates and average wages are about 20 percent lower.

"There are the lowest unit costs, the highest quality and the lowest attrition of any centers in the world," said Vikas Kapoor, chief executive of IRMC. "It is well placed not only to compete, but to dominate in the sector."

IRMC, which employs Cauilan, the call center worker, started its Philippine operations in February of last year. By early 2007, the company estimates it will have 1,000 employees. Likewise, Convergys has hired 9,500 people in the first three years of its operations.
"We will be doubling the size of our business over the next three to five years," said Streit, of Convergys.

Sheryl Lapuz, an IRMC employee with a degree from the University of the Philippines, said the combination of good wages and a modern workplace made it easy for call centers to attract qualified staff. "It's the 'in job' in the country right now," she said.