In BPONovember 19th, 2013

Philippines vs. India: Outsourcing Rivals in the Modern Age

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

Doing business has been one of mankind’s oldest human traditions. Evidence of selling and trading can be traced to ancient civilizations. But as the course of human history soldiered on, doing business stayed as a major human practice. As the time went by, the business landscape experienced its own evolution. Corporations extended their reach on a global scale, which led to the creations of more responsibilities, more work, and more departments.

Management structures pile up, one over the other. It was not too long until top honchos perched atop the corporate ladders realized they need to address the issues that come with business growth. Focusing on core business areas became a tad harder as more and more complex work sprouted from the sides. Business strategists quickly found a way to help top management focus on immediate priorities without losing sight (and hold) of their other non-core business operations – outsourcing.

Outsourcing has been an established practice in the business and industrial landscape but has not been recognized as its own industry until the late 80s. Back then, most outsourcing firms were anchored by the era’s most advanced technologies in communications – phones and fax machines. Today, the Internet, along with the thingamajigs that came along with it, is now redefining the outsourcing industry and visibly takes all involved parties to a whole new level of doing business.

In the modern arena of outsourcing, two countries have significantly established themselves as prime outsource services providers – India and the Philippines. Both countries have gained the preference of the world’s most leading institutions as their outsourcing destination of choice. In a survey launched by THOLONS in early January this year, key cities from India and the Philippines have been cited as the outsourcing industry’s leading hubs for outsourced work from the business processing and technology sector. India managed to field six cities in the top 10, whereas Philippines nabbed two spots. The other two slots were grabbed by two European nations.

But what is interesting in the results of the said survey is that India, which has been the perched atop the rankings for so many years now, is now suddenly losing grasp of its outsourcing market share. Manila, the Philippines’ capital, now ranks third, pushing India’s Delhi to the #4 spot. Cebu City, located in central Philippines, managed to scale a notch higher to the #8 spot, which pushed Dublin, Ireland, to #9. Bangalore, India, remains to be the top city for outsourcing but with the recent waves the Philippines is making, it won’t be surprising if the next survey results show more Philippine cities added to the list.

The Rise (and Slide) of India in the Outsourcing Business

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The prominence of India as a top outsourcing destination stemmed from the country’s vast population, which represents a huge work force, and its people’s impressive competence in the field of science, engineering, software development, and information technology among others. Manufacturing is still China’s game. However, when it comes to outsourcing services, India tops all countries in Asia.

When the call center industry was just in its early phase, India has been tapped to provide the manpower and skills for a huge number of US and Europe-based corporations that are in need of outsourcing services. By mid 90s to early 2000s, India managed to almost control the outsourcing industry in Asia. While the outsourcing business started in India in the 80ss, it was not until the middle of the 90s that India became a top outsourcing destination for many companies, mainly due to the introduction of the latest technology at the time.

Back then, India’s rates for its outsourcing services were astronomically low, which also encouraged many business firm in the US to outsource their operations to the Indian outsourcing players. Now, India remains to be a favorite outsourcing hub for many clients, particularly in the technology, engineering, and computer development sector.

According to an official of Tata Consultancy Services (TCS), an Indian outsourcing firm, India parades a horde of engineers who can cater to almost, if not all, outsourcing requirements. One of TCS’ leading clients is an automobile maker based in Detroit, Michigan. Initially, TCS only provided basic work for the said car manufacturer, such as providing materials for engine parts and accessories. But with the rise and the impressive performances of the engineering manpower in India, TCS now give its client advanced auto engineering services, which includes systems analysis, computer simulations of crash and acceleration mechanisms, car system design, and car components testing.

In an article posted by The Economist early this year, TCS’ infrastructure, as far as the car engineering services division is concerned, has improved exponentially and is now one TCS’s gems as a major outsourcing entity. The Economist describes the scene in the TCS engineering location as a busy hub where top minds in the field of auto-making and engineering tinker to provide high quality output to their clients.

In one room sit rows of young men working on computer simulations of crashing and accelerating cars. Next door is a laboratory full of engines and parts from TCS’s client, a big Detroit carmaker. It is festooned with garlands of bright orange marigolds to celebrate Dussehra, a Hindu festival. Next to one car engine is a shrine to Durga, a many-armed goddess.

– The Economist

Another factor why TCS Engineering has made huge success with their work is because of their culture. Engineers working in the TCS car projects are very much devoted to their works as much as to their deities. Such devotion is contagious to say the least and is evidenced by several engineers who include cars parts and engines in their religious practices.

One particular TCS engineer routinely takes pictures of car engines displayed side by side with Indian gods and laid with garlands of bright orange marigolds. More often than not, said engineers sends the images to their American superiors, who says they appreciate the gestures.

We worship the car engines,

declares of the TCS engineers involved with the automobile contract.

Such devotion is really hard to come by, according to many business observers. And such devotion can be seen in many Indian employees across multiple industries. But even with such trait, India’s big hold on the outsourcing pie has loosened dramatically in the last few years due to several factors.

For one, rates in India’s outsourcing have soared high in the past years and are now among the highest from Asia’s top outsourcing countries. It has become increasingly expensive to get Indian employees for outsourcing work. That said, their rates are still cost effective compared to US-based professionals who have the same qualifications and expertise.

Two, companies who outsource their work to India and other countries in general will run out of jobs they would want to send out. Pralay Das says that many American and European banks and financial institutions have already offshored an estimated 80 per cent of the jobs they can possibly outsource to India and other nationalities. Das is a financial analyst with Elara Capital in Mumbai.

Three, many outsource clients complain of the heavy accent present when Indians speak in English. Despite their competence in various fields, notably in science, information processing, and engineering, many Indian professionals struggle to overcome the language barrier because many of their US-based customers say they have a hard time when it comes to communication with Indian outsourcing professionals.

People from other countries are not able to understand them,

says Dheeren Singh. Singh is a manager at Indian human resources firm GNXT Recruiters.

But perhaps the most critical factor why India’s hold in the outsourcing market is slipping is the emergence of a new outsourcing power – the Philippines.

The Philippines: Outsourcing Industry’s Go-To Country

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While India still has the outsourcing crown, the Philippines is clearly making a move for it. The outsourcing business landed in the Philippine around the mid-90s but it wasn‘t until the early 2000s when call centers and IT hubs started popping that the outsourcing industry became noticeable in the country. Since then, the Philippines has evolved from a fledgling character in the outsourcing market into a very formidable powerhouse of IT professionals, call center agents, and technical support specialists.

In an information bulletin released by the Information Technology and Business Process Association of the Philippines (IBPAP), the country’s outsourcing sector has produced 137,066 new jobs by the end of 2012 and the outsourcing demographics in the Philippines are now comprised by 776,794 professionals. The figure represents an overall growth of 21 per cent in the BPO and IT industry. President and CEO of IBPAP Jomari Mercado says he is confident that the number will grow to 1.3 million by 2016.

On top of that, outsourcing in the Philippines is currently experiencing a shift in so many dimensions with the introduction of new information and communication technologies. Novel mobile applications and internet tools, such as Skype, Hootsuite, and Base Kamp, have not only equipped Filipino professionals with innovations they could use to better their lives, but enabled them to alter the outsourcing landscape in the Philippines by becoming independent service contractors.

Many Filipinos are now switching from their respective industries and now selling and practicing their craft for offshore clients who require their experience and expertise. In fact, the Philippines is one of the leading nations apart from the United States to provide virtual assistants to small and medium sized entrepreneurs anchored in the United States, Canada, and Australia. Aside from virtual assistants, many Filipinos are now finding home-based work as content writers, video editors, medical transcriptionists, accountants and bookkeepers to name a few.

As mentioned earlier, India’s place as outsourcers’ prime destination for offshore work is currently being assailed by the Philippines. While India remains rooted in the top, it won’t be surprising to see the Philippines getting most of India’s share of the outsourcing pie in the future. Here are some of the reasons why.

India may be affordable, but the Philippines is far more cost effective

Among the recent developments and movements in the outsourcing market in Asia is India’s increase in its outsourcing rates. While the figures India-based outsourcing firms offer are still significantly low compared to the salary rates mandated in the United States, the rates in the Philippines are much lower compared to India’s. If this was a contest of who could provide a more competent workforce, India may win the nod in the areas of engineering, software development, and science. But at the end of the day, many US-based corporations aim to cut costs and channel more funds to other pending matters. And they are likely to choose the Philippines in the finance matter alone.

The Philippines offers an array of competent and very qualified professionals in other fields

India has been topping the technology and engineering areas but the Philippines is now making waves as IT specialists particularly in the fields of website development, content and database systems, accounting, and information management. Also, most companies that outsource voice-related support jobs, such as product support, customer and technical services prefer Filipino workers to get the job mainly because…

Filipino professionals have better accent than Indians

Many American employers are very keen on the communication process with their associates, immediate subordinates, down to the rank and file employees. Many business analysts who have been studying the outsourcing trends in Asia says Philippines is getting the most voice-related work because of their fluency and mastery of the English language, which allows them to excel in any form of communications with their customers, colleagues, and superiors. Being able to speak and understand English enables Filipino professionals to understand their clients, their needs and wants. Such understanding leads to better job performance from Filipinos and customer satisfaction from the customers.

Many Filipinos find cultural affinity with their American employers, which is also a good reason why Filipinos are easily adaptable to the American corporate culture. Being culturally linked allows both employers and employees to find common ground, whether if it’s work-related or not.

Find out why you should outsource to the Philippines instead of India here.

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