MANILA, PHILIPPINES – The Oxford Business Group has recently released a piece discussing the impact of COVID-19 to the BPO industry, and ultimately, the national economy. This is most relevant today as the government has just announced yet another extension of community quarantine in most parts of Luzon. This news is seen to further affect several industries as the quarantine period will now total to two months since it was first implemented.
As the BPO industry is among the biggest contributing sectors to the country’s GDP, how has this past couple of months either injured or empowered it? See the full article from Oxford Business Group below:
The strict lockdown measures implemented on the main island of Luzon will remain in place until at least April 30. At present, most of the island’s 57m residents are confined to their homes and local areas. Security personnel have stepped up monitoring to prevent people from travelling outside unless they are fulfilling an essential task or profession.
Similar measures are in place in other regions of the Philippines, including Cebu, which imposed a month-long lockdown in the provincial capital on March 28.
There is some evidence that the restrictions are helping to reduce the rate of infection, with the Philippines reporting 6599 Covid-19 cases and 437 deaths as of April 21. Although the testing rate remains below the global average, capacity has improved recently thanks to the procurement of almost 3m additional testing kits.
A presidential decision is widely expected this week on whether to extend the measures further or begin a phased easing of restrictions based on the geographic prevalence of infections and the economic importance of certain industries.
Stretching the leg
Like all industries, BPO has been disrupted by restrictions on the mobility of workers, as well as fluctuations in demand.
The sector is frequently described as one of the two “legs”of the Philippine economy, alongside remittances from overseas Filipino workers. As BPO revolves around international companies delegating operations to the Philippines, it has long been regarded as a vital source of foreign exchange and high-value jobs for the country’s English-speaking and digitally literate workforce.
The industry employs around 1.3m workers and contributes approximately 9% to GDP when its indirect and induced multiplier impacts are factored in.
As a result of its importance, BPO was permitted certain exemptions from the lockdown to minimise the impact on the wider economy.
When quarantine measures were first imposed across Luzon from March 17, BPO companies were allowed to continue operations if they could utilise a skeletal workforce, maintain social distancing, and provide staff with temporary accommodation or a reliable shuttle service to homes within the immediate vicinity.
Alternatively, BPO firms and other export-oriented companies were given a deadline to implement satisfactory work-from-home arrangements for employees.
While many employees welcome the flexibility and safety of working from home, BPO firms were largely unprepared for a total work-from-home model, and had to overcome challenges related to internet access, equipment transfers and clearance requirements from clients. In the latest Speedtest Global Index, released in March, the Philippines was ranked 104th out of 139 surveyed countries for average fixed broadband speeds.
“Telecommuting would be much more viable over the long term if broadband connectivity improves in terms of speed and price,” Junar Amador, managing director at Ingram Micro Philippines, told OBG.
According to Beng Coronel, president of local IT/BPO firm Pointwest, the initial work-from-home capacity of BPO companies operating in the Philippines varied significantly based on their size and the type of service they offered. Global in-house centres that form part of international companies found it easier to make the transition, as their clearance procedures were less complicated.
Pointwest itself was able to continue operating at 100% capacity upon implementing work-from-home procedures because it activated prior disaster recovery and business continuity plans, Coronel told OBG.
After solving capacity challenges, some BPO firms then had to contend with declining demand due to project deferments and cancellations.
Although a surge in flight cancellations, e-commerce orders and financial service enquiries may have temporarily boosted activity for operators with related contact centres in the Philippines, a significant proportion of the BPO work undertaken in the country is imported from the US, which is currently suffering from the world’s highest number of Covid-19 infections and record jobless claims. This highlights the need for the further diversification of BPO clients and activities to hedge against future disruption.
Upskilling and evolution
While a slowdown in US consumer activity is likely to have a negative impact on the Philippines’ BPO sector in the short term, the country can look towards building competitive advantages beyond English-language proficiency and customer service skills to position itself for the next wave of growth in the global BPO industry.
Basic call centre services are currently responsible for around 50-60% of customer contact operations in the country, but demand for such services was already under pressure from artificial intelligence-powered ‘chatbots’.
In recognition of this threat, the IT and Business Process Association of the Philippines (IBPAP) in 2016 unveiled its Roadmap 2022, which aims to prepare its members for a transition towards automated services and more technical and creative jobs.
If managed correctly through targeted investments in technology and upskilling, IBPAP forecasts that as many as 388,000 mid-skilled jobs and 309,000 high-skilled positions can be created by 2022, against the loss of 40,000 low-skilled positions.
“We see intelligent processing automation and analytics as the next drivers for growth,” Coronel told OBG. “Now is the time to prepare, in terms of capability building and developing the services that will be needed moving forward. More than ever, cost will become a major factor in any decision that a business leader makes, and this is where our country can have an advantage: innovation at competitive cost.”
Another encouraging sign is the growth of emerging segments such as health care, gaming and animation which fall under the IBPAP roadmap.
Prior to the outbreak, the Philippines had already established itself as a leading offshore/nearshore location for health care services delivery. In its November 2019 assessment, IBPAP forecast revenue growth in the segment would reach 7.3-10.8% through to 2022, as well as revenue growth of 7.3-12.3% in gaming and animation. This compares to projected revenue growth of 3.3-7.4% in contact centres over the same period.
As the Covid-19 pandemic raises global demand for health care services and home entertainment, it is reasonable to expect that growth in these segments could be even higher than previously predicted.