Why are Companies Choosing the Philippines Over India for Outsourcing Services?

Asia has been the prime destination for outsourced jobs over the last couple of years. This has happened because, in Asia, US-based companies can get the services they need at a much more cost-effective rate. Another reason is language, with customer service-related jobs that involve talking or writing English suiting some Asian nations very well.

Ultimately, the Business Process Outsourcing (BPO) sector in Asia is more or less a battle between India and the Philippines when it comes to such farmed-out tasks. These two countries are most often the top picks of outsourcing firms so they are often compared in terms of their standing in the BPO sector. So who is making it big in the BPO sector: India or the Philippines?

By looking at the demographics alone – from IndexMundi Asia – it would be difficult for the Philippines to beat India with the huge population outsourcing firms can tap in India. According to Index Mundi, there is an estimated 484 million Indians aged 25 to 54, while there are only 38 million Filipinos in the same age range. But this is not the only factor. Over the past five years, India has already lost 10 percent of its share of global, outsourced voice-related jobs. Meanwhile, the Philippines’ BPO sector is ramping up fast.

BPO’s growth in the Philippines

According to the Information Technology and Business Process Association of the Philippines (IBPAP), the Philippine information technology and business process management (IT-BPM) industry employed 776,794 people at the end of 2012, wherein it added 137,066 new jobs. This new intake reflects 21 percent growth from 2011.

President and CEO of IBPAP Jomari Mercado says that “this number keeps them on target to reach 1.3 million in employment by 2016.” What caused this to happen? He adds:

We have received impressive support from President Aquino and his teams in the executive branch and we were able to pass key legislation needed by the industry.

The key legislation Jomari mentions is the recent passage of the Data Privacy Act, which helps to protect the Philippine BPO industry. It puts in place international data privacy standards, which is beneficial especially for the multitude of sensitive information handled by the BPO sector, which could include things like banking details.

The Philippines is continuously seeing growing employment. Outsourcing firms have even expanded from Metro Manila, to Cebu and Davao to hire more employees. Last year, a local startup recognized this growth and built an online learning platform, Kalibrr, for Filipinos who want to work in the BPO industry,

Barriers for India’s BPO Growth

But why are companies opting for the Philippines over India? A manager at Indian human resources firm GNXT Recruiters, Dheeren Singh, says the problem that he sees is clear communication. He states that Indian accents when speaking English means that “people from other countries are not able to understand [them].”

India’s situation is also different from the Philippines wherein the BPO sector has support from the government. Dheeren says, “Our government is not helpful at all. Infrastructure is a problem as well.”

And in India there are people who do not want to take the jobs because they prefer a more secure day job, while BPO feels too temporary. Or a lack of qualified people leads to outsourcing companies in India losing clients.

While in the Philippines, there are employees who leave their day jobs for higher wages in BPO jobs. In addition, it is claimed, Filipinos have carried with them an affinity to American culture which leads them to having better sounding spoken English, and therefore a stronger connection to foreign customers they talk to over the phone.