Certainly, you've heard how the Philippines became the world's call center capital and why it is the most preferred country to outsource to. But have you ever thought of looking into the history of outsourcing in the Philippines?
If you want to feed your curiosity, this is the right place to do that. In this article, we put together all the important events to chronicle the early stages of outsourcing in the Philippine BPO industry. But let's find out first where outsourcing originated and how it was introduced to the world of business.
Evolution and History of Outsourcing: Where Did Outsourcing Originate?
The concept and history of outsourcing can be traced back to the 1700s Industrial Revolution when companies began shifting production to countries with lower labor costs. However, it was not viewed as a business strategy at that time.
Large corporations were not completely self-sufficient in the 1970s, so they looked for ways to focus more on their core competencies to improve their performance. Moreover, many companies were hampered by a lack of agility caused by bloated management structures.
Many large corporations developed a new strategy of focusing on their core business. This strategy is what we know today as outsourcing. Through this new approach, companies can identify critical processes and decide which could be outsourced to increase their flexibility and creativity.
Outsourcing was officially recognized as a business strategy when Eastman Kodak announced in 1989 that it was outsourcing its information systems to companies such as IBM, DEC, and Businessland. After the inception, many companies followed to focus on forging strategic partnerships and less on ownership.
At present, outsourcing is seen as a new way for businesses to increase their market share, reduce risk, and improve their value proposition. Over the last few years, more and more companies have been rethinking and rearranging their outsourcing contracts.
A Brief History of Outsourcing in the Philippines
We've created a timeline on the history of outsourcing in the Philippines. Take a look at how the Philippine BPO industry has evolved from a single contact center to the world's leading outsourcing hub it is today.
1990s: A Decade of Where It All Began
1992: Outsourcing began in the Philippines when Frank Holz founded the country's very first contact center, Accenture Global Resource Center. The first few contact centers provided basic services such as email response and service management.
1995: The Philippine Economic Zone Authority (PEZA) was instituted during the presidency of former President Fidel V. Ramos. The agency focuses on assisting foreign investors in facilitating their business operations in some regions of the country.
1997: Sykes Asia established itself as the first multinational BPO company in the Philippines.
1999: Former employees of a multinational management consulting firm, Jim Franke and Derek Holley founded eTelecare, better known as the country's first call center.
2000s: A Decade of Growth and Development
2000: A total of 0.075% of the country's GDP was contributed by the BPO industry.
2001: The Contact Center of the Philippines was established by former Trade Secretary Mar Roxas. The organization's objective was to raise awareness and encourage members of the contact center industry to share ideas.
2003: Convergys Corp. has opened two call centers in the country. As part of the company's global expansion and revenue generation plan, the Philippines and India were chosen by the company's then-president, Jack Freker.
2005: The Philippine BPO industry increased its share of the global BPO market to 3%, accounting for 2.4% of the country's GDP.
2006: The Philippine BPO industry began to grow at a rate of 46% per year.
2010s: A Decade of Taking the Lead
2010: The Philippines was named the world's BPO capital after it employed 525,000 people and generated $8.9 billion in revenue.
2011: The Philippine BPO industry has employed a total of 638,000 Filipinos, with 400,000 of them working in call centers, making it the largest and fastest-growing private-sector job market in the country. In addition, the industry contributed 4.9 percent of the country's total GDP and generated $11 billion in revenue.
2012: The Philippine BPO industry's revenue accounted for 5.4 percent of the country's total GDP. Over 700,000 Filipinos were employed in the BPO sector at that time.
2013: The industry's generated revenue rises to $15.5 billion, and 900,000 Filipinos are employed full-time.
2016: The Philippine BPO industry was expected to generate 1.3 million jobs and grow at a 17% annual rate.
2017: The annual growth rate of the BPO industry decreased. The battle of Marawi, which took place in Mindanao, terrified a lot of foreign investors in placing their investments in the country.
2018: BPO companies in the Philippines added 70000 jobs and generated $1 billion in revenue. After a slight slowdown in 2017, the industry has recovered.
2019: According to the World Bank, the Philippines rose from 124th to 95th place and improved its score from 60.9 to 62.9 out of 190 countries ranked for ease of doing business.
2020s: A Decade of Transformation
2020: According to data from the IT and Business Process Association of the Philippines (IBPAP), the Philippine BPO industry saw revenues rise 1.4 percent in 2020, even though the health pandemic had a significant impact on the economy.
2021: This was a watershed moment in the Philippine BPO industry. It now employs 1.3 million people and generates $30 billion in revenue for the economy.
2022: There was a global move towards digital transformation and remote work, and Philippine outsourcing began these adaptations in IT, software development, and digital marketing. They also started investing in AI and automation, marking a year of significant adaptation and innovation.
2023: The Philippine BPO sector focused on sustainability and inclusivity. Outsourcing companies began integrating green technologies and sustainable practices into their operations. They also placed a greater emphasis on inclusive hiring, aiming for broader demographic participation.
The Future of Outsourcing in the Philippines
Despite the economic contraction caused by the pandemic, the Philippine BPO industry's steady growth trajectory continues to attract many foreign investors looking to set up or expand their operations in the country.
According to the US analytics firm IHS Global Insight, the Philippines' economy will be worth $1 trillion by 2030. Rajiv Biswas, IHS's Asia-Pacific chief economist, predicts that the Philippines will be a $695 billion economy by 2025 and a $1 trillion economy by 2030, thanks to a growing IT-BPO (information technology and business process outsourcing) sector and strong OFW remittances.
In the coming years, experts expect to see an increase in the use of outsourced services. For starters, companies that have previously outsourced plans to increase their efforts, especially in IT services, to increase their efforts.
More services are expected to increase demand, such as:
Design and marketing services
Designing and marketing strategies have seen a massive increase in the last decade. An update on the design industry and the trends that drive it was recently published by Forrester.
According to Forrester, the global design industry is estimated to be worth $162 billion, and the use of design is expected to grow by more than 20% in the next five years.
Accounting services
With a focus on billing services, accounts payables, and accounts receivables, there is a growing demand for outsourced accounting services in the country.
Meanwhile, between 2017 and 2022, the accounting services industry in the United States grew at a rate of 1.3 percent per year on average.
Ecommerce and customer support services
During the pandemic, eCommerce and customer support outsourcing have become more popular. People are more likely to go online due to the lockdown and quarantine measures, which increased demand for outsourced eCommerce and customer support services. In May 2020, eCommerce transactions totaled $82.5 billion, up from $77 billion in 2019.
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