In BPO, ITNovember 19th, 2013

Outsourcing IT Work to the Philippines

Posted by on November 19th, 2013 | No Comments »

The information technology (IT) sector in the Philippines continues to grow by leaps and bounds. According to a survey conducted by research firm IDC, approximately 70 percent of the IT players in the archipelago are expected to increase their spending on IT infrastructures and technologies as they aim to improve their IT products and services. Also, consumers in the Philippines are seen to increase their spending on IT and telecommunications products and services by 10 per cent. Most of the consumers interviewed say they are targeting IT hardware as top of their list (i.e. laptops, PC monitors, smart phones, hard drives, etc.)

Cost and Skill Wise, Filipinos Can Compete

With such increase of expenditures from both investors and consumers, things are indeed looking good for the Filipino IT professional. In a poll administered by ZDNet Asia, a leading technology and communications review firm in the world, IT executives who are tasked with more complex work such as project management are provided with healthier pay checks compared to most types of IT workers in the country.

In terms of experience, IT professionals who have spent 10 years or more in the IT industry rake in an average pay of US$19,879 a year. Those whose professional experience total to between 5 and 10 years get an approximate salary rate of US$9,836 per annum. That average annual income for the vast majority of IT practitioners in the Philippine islands is rated around US$10,730.

In the United States, the average figures for those working in the IT and computer sector are far higher compared to their Filipino counterparts. According to the US Bureau of Labor Statistics, computer programmers earn an average salary of $78,260 a year; software developers net an annual income of $102,550; and database administrators rake up an average pay of $79,120 per annum.

Looking at the salary figures from the Philippines and United States, one can easily deduce why many small and medium-sized IT companies based in the US prefer to outsource IT work to the Philippines. The vast differences in the average pay rates will surely save American IT companies thousands of dollars. By opting to get Filipino IT professionals to perform the grunt work, many IT companies effective free up significant amount of money that they can use to fund other business endeavors and fuel other aspects of their corporate strategies.

But more than just presenting a cost-effective solution to foreign IT businesses, the Philippines also boast of highly skilled IT personnel that can match most of their Asian counterparts, specifically India, Hong Kong, China, and Indonesia.

In an interview with ZDNet Asia, Roselle Reig, general manager of Global Knowledge Associates, a Philippines-based IT training provider, said that more and more Filipino IT workers are now getting certified. Certifications from IT products and services providers and manufacturers are seen as positive indicators of a worker’s expertise and knowledge about a particular product, software, or service.

The Philippines is one of the Asian countries with a high number of certified professionals,

Reig said in an e-mail to ZDNet Asia.

This is the reason why most of the Filipinos were recruited outside of the Philippines,

Reig added.

They are technically competent and they have all the certifications to back it up. We have a lot of overseas Filipino workers in the IT field.

Most IT professionals who graduated from reputable universities and colleges gained their IT certifications prior to graduation. Academic institutions in the country have partnered with the big players of the communications and IT industry to fully equip their students with the necessary skills and knowledge they need to perform and excel in the IT field. Among certification courses offered in many universities and colleges are Microsoft Certified Professional, Sun Certified Programmer for Java 2 and Cisco Certified Network Associate.

But IT certification is not given to those who have finished college and earned a degree. Reig’s company, Global Knowledge Associates, has provided IT training to those who are willing to acquire IT certification from the industry’s top players. Being certified has been a very successful launching platform for IT professionals who do not have a college degree yet have the skills and the experience to compensate for it.

According to Reig, a Microsoft certification exam in the Philippines is priced around US$80, while a certification from Cisco is said to cost around US$150 and Certified Ethical Hacker (CEH) certification is rated at US$250. While these rates may seem expensive to the average Filipino, Reig says that costs is not an obstacle for many Filipinos to attain certification, a notion shared by Michael Mudd, director of public policy for Comptia Asia-Pacific.

According to the Technical Education and Skills Development Authority (TESDA), the Philippines is among the top providers of topnotch IT professionals and IT-related workers, particularly:

  • Website design/development/assessment
  •  E-commerce solutions
  • E-business consulting/planning
  • System Analysts/Programmers
  • Data center
  • Call Center services
  • PC technicians
  • Network technicians
  • Linemen
  • Telephone/Cell phone technicians

TESDA offers IT-related vocational courses to Filipinos who cannot afford college education. In partnership with leading IT schools and companies, TESDA has managed to produce hundreds of very competent and highly skilled IT workers. Just recently, TESDA has launched its own training hub for digital arts and automation. TESDA head Joel Villanueva has mentioned that the new training center is just a testament of the government’s dedication to equip Filipinos with the necessary IT skills to keep abreast with the rapid progress of technology.

In a survey launched by ZDNet Asia to determine the IT trends in the Philippines, out of 401 respondents, 63% are working or have prior experience in the applications development area; 57% in desktop and software development; 46% in operating systems; 44% in servers and networking management; and 44% in database management.

IT fields that have the lowest number of Filipino IT practitioners are: storage systems (16%); wireless and mobile telecommunications (17%); data center (19%); infrastructure management (19%); and web services (21%).

Filipino IT workers are also found working in the following IT-related areas: web development, systems administration, enterprise applications, and IT security.

In terms of IT certifications, the ZDNet Asia survey revealed that 26% of the respondents from the Philippines have at least one certification. Out of all IT-certified workers who took part in the survey, 21% are bona fide Microsoft Certified Professional (MCP), 18.1% are Suns Certified Programmers for Java 2, 11.4% hold the Cisco Certified Network Associate (CCNA) certification, 9.5% have the IBM Certification, and 7.6% are certified by Dell Computers.

Why Not India and China?

In terms of population, no country can match the overwhelming number of IT professionals China and India possess. Both nations boast of the top two largest populations in the world and both countries are far more technologically advanced than the Philippines, which clearly suggest that each country’s IT workforce is more skilled and highly qualified to Filipinos. However, many small and medium IT enterprises in the United States still favor to have their work outsourced to the Philippines.

The big question is “why?”

Most business observers say that the main reason why Philippines gets the most nod for outsourcing work, not just from employers in the IT field but also include business process outsourcing (BPO) players as well, is the Filipinos’ exceptional ability to communicate well in English. Communication is an essential factor in keeping a business running on all cylinders and Filipino workers, particularly in the IT industry, are good communicators.

Unlike India and China, the Philippines employs English as one of its official language and has incorporated English in almost all aspects in its structure as seen in the government, education, business, society, and entertainment. For instance, Hollywood movies shown in Philippine cinemas do not require sub titles. In contrast, movie productions from neighboring China, Japan, and Hong Kong are shown with sub titles when played in the Philippines. Another example is the Philippine Constitution, which is patterned from that of the United States.

This fluency of Filipinos in the English language has made it easy for most US-based IT employers to choose Filipino IT professionals, despite the large numbers and technical competence possessed by India and China’s workforce. Communication skills are as important as IT skills, said Michael Garrison of Dell Computers.

“The empathy, the real ability to connect with the American consumer is something that is very unique in the Philippines, so it’s been a great base for us to talk to American customers,” said Garrison, who helped set up Dell’s operations in the Philippines.

Other IT employers from the US also said that cultural compatibilities between the Philippines and the United States is also a critical variable in why many companies prefer to outsource IT work the Philippines. It is important to point out that the United States once governed the Philippine archipelago, from 1899 to 1946. The fusion between two cultures allow American employers and Filipino workers to share multiple common grounds, which often leads to better understanding, strong camaraderie, and better productivity rates.

This concept is strongly supported by Mitch Locsin, a spokesman for the IT industry in the Philippines.

“We are very U.S. centric,” says Locsin. “We have the same general accepted accounting principles; we have the same engineering standards, the same laws, the same medical standards, so basically we have a very strong affinity with the U.S.”

Significant Growth of the IT Sector in the Philippines

On top of cost-effective salary rates and a very talented and English-speaking workforce, many US-based IT investors choose Philippines as their prime outsourcing destination because of the booming growth of the IT, as well as the BPO industries. Joe Doyle of Call Centre UK writes in his article that the Philippines’ positive economic surge fueled by the BPO and IT sectors is a key indicator of the direction the industry is going.

Since the emergence of call centers and IT hubs in the Philippines a decade ago, the Philippine economy experienced significant boost despite economic meltdowns occurring in other parts of the globe. It has been projected that the IT and BPO industry will bolster the country’s economic figures in the future. So far, the revenue has gone up for the IT and BPO industry for the past decade, which now numbers to more than $10 billion and is expected to grow to over $50 million in the coming years.

Support from the Philippine government is also evident. Aside from establishing IT and call center parks in the country, dubbed as economic zones, IT and BPO investors are also given tax exemptions and other incentives to further attract them to spend further. Also, the Government has identified several cities outside Manila as critical IT and BPO hubs, namely Cebu, Pampanga, Bacolod, and Davao.

IT Start-ups Now Proliferating in the Philippine Islands

As the IT industry grows in the Philippines and more Filipinos getting attracted to work in the IT field, Scott Bales predict that Filipino-owned and operated IT enterprises will soon become the norm in Asia. Bales is one of the creator of the very popular financial and credit card app Moven and also one of the architects of the Lean Startup Machine, a three-day workshop designed to train IT professionals, project managers, and entrepreneurs in creating viable ideas and concepts that can evolve into usable and commercially viable products and service.

While start-ups in the Philippines have not yet peaked, the growing use of smart phones in the country are now driving the market to that phase. Filipino IT professionals and computer engineers, Bales said, will soon have the ideal base from which they can develop technology ideas into actual products and services, such as mobile phone applications, computer software and programs.

As the number of Filipinos gaining access to smart phones increases, Bales sees such widespread use will fuel e-commerce, which in turn contribute to the demand of apps. As consumers cry for more effective usable apps, there will also be a great demand for IT professionals, specifically from the local market. As local business becomes mobile, they must also find ways to interact with their consumers using apps created locally.

To learn more about the Philippine IT Industry in the 21st century, visit the Philippine National Information Technology Council (NEDA) today.

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