The future of call centers may be shorter than we think

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Ben D. Kritz

Ben D. Kritz

THE business process outsourcing (BPO) industry is considered, and not without justification, the Philippines’ most promising economic sector.

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Growing at a rate of between 15 and 17 percent per year; by next year, according to the IT and Business Process Association of the Philippines (IBPAP), the industry will employ about 1.3 million people, with revenues topping $25 billion. Within the next two years, BPO industry revenues should exceed OFW remittances in both actual dollar amount and percentage contribution to GDP.

That rosy outlook makes it difficult to see it now, but the BPO sector may very well be going the way of the compact disc.

About this time last year, then-CEO David Thodey of the Australian telecom giant Telstra made a star-tling pronouncement in an interview with Australia’s ABC television: “These jobs will not exist in five years.” According to Thodey, the growth in mobile internet technology is driving a shift from traditional BPO jobs, particularly call centers, to web-based applications. The need for human involvement in many business processes, especially those that directly involve consumers, is being quickly eliminated; if true, this is of course very bad news for the Philippines, whose strength in the BPO sector is almost entirely built on having lots of people who speak relatively intelligible English.

In a sense, the signs were there from the very beginning of the BPO industry’s rise in the Philippines and elsewhere, because the industry was created by companies ridding themselves of their own cus-tomer service and other basic back-end functions. Eliminating the in-house call center was the first step; the next logical step in the evolution is to eliminate the need for call centers altogether.

One bit of evidence that this evolution is well underway was provided in a report from the global real estate consulting firm Cushman and Wakefield back in April: Vietnam, of all places, is for the first time this year the number one destination for foreign BPO operations (the Philippines is second). It’s not because Vietnam is a cheaper place to do business—wages are slightly lower, but property and other costs are somewhat higher—and it’s certainly not because Vietnam has better English-language skills, but rather because, having been largely bypassed by the BPO rush to countries like the Philippines and India, Vietnam put more of its efforts into software and systems development. The country is now one of the largest software exporters in the world, with more than 1,000 companies involved in the sector; already, it has surpassed India as the preferred BPO and IT outsourcing destination for Japa-nese companies, and is now second to the Philippines in that respect.

Most experts in and out of the BPO industry do see a more or less permanent role for typical ‘call cen-ter’ services – it is difficult to imagine customer service being successfully managed without any hu-man intervention whatsoever – but it is a role that will be filled by a progressively smaller, more highly-skilled and versatile workforce, because the human involvement will be increasingly relegated to ‘es-calated’ issues that automated applications and systems cannot resolve.

The IBPAP, to its credit, is not completely blind to the trend, and its industry roadmap foresees a greater emphasis on more specific IT skills between now and 2022. However, BPO development, be-cause it is so valuable to the overall economy, is as much a political issue as an economic one, and plans for the near- and medium-term future are still fundamentally based on the increasingly anachronistic presumption of employing millions of semi-skilled phone drones – kind of how the fast food industry artificially maintains a large, and largely unnecessary, workforce by employing hundreds of thousands of workers whose only real purpose is to clear away customers’ trash when they’re finished eating.
The shift is coming, probably sooner than anyone realizes, or wants to acknowledge; as one successful business leader pointed out in a casual conversation about the BPO industry the other day, these things tend to sneak up on industry sectors and policymakers; local telecommunications giant PLDT, as one example, failed to see the rapid switch from landline- to mobile-based communications in a timely way, saw the foundation of its business evaporate faster than it could replace it, and has had to play catch-up for years.

PLDT is one company, albeit a very large one; if the same thing happens to the entire BPO industry, the consequences for the Philippine economy could be unfortunate. ‘Thinking ahead’ has never been this country’s strong suit; if ever there was a time to learn how to do that, now would be it.

ben.kritz@manilatimes.net.

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5 Comments

  1. And this is why the US is rebounding in call centers: High end customer care, such as American Customer Care, Inc, or Premiere Response, LLC.

  2. victor m. hernandez on

    Scary consequences from a speed of light development in ICTechnology. I hope we can make a speedy shift to such a fast-pace development.

  3. Amnata Pundit on

    $25 Billion per year for 1.3 Million employees? Do the math, that translates to roughly P72,000 a month per employee. Really? Maybe these astronomical figures that closely rivals OFW remittances reflect the contract between the client companies like Capital One, for example, and the U.S.-based mother company of say, TelePerformance Phils. (TP). The mother company then farms this out to its Philippine subsidiary TP. THE BULK OF THIS $25 BILLION STAYS IN THE U.S. ! How much is that bulk? The average call center agent is paid an estimated P25,000 a month, and this is already a very generous estimate. TP employees are actually paid P18,000 a month. These two figures are light years away from P72,000 a month. Imagine how much money these foreign exploiters of cheap Filipino labor make. But all these money is possible only because of a natural resource that is available only in this country and India, that of an English speaking population. This is like foreigners digging up our oil and natural gas and taking off with the bulk of it, leaving us the owners of these resources with only a token, like Malampaya Gas. This is just to put things in proper perspective so that we do not give BPOs too much credit they do not deserve. I will only be too glad to be refuted if Im wrong.

  4. Thank you. More articles of this nature may possibly be a key to make Filipinos have more foresight.
    I’m sure there are other writers who prognosticate all sorts of things but they are basically parochial, if not blatantly self-serving (mostly ego-trip so they can say “I told you so”).
    Oxymoron:……………..Filipinos with foresight. I hope not.
    Impossible dream:…..Proactive Filipinos with foresight. I hope not.
    Me:……………………….I am not.