Why Do Companies Choose To Outsource Work To The Philippines
Whenever people hear of the Philippines in the context of business, they usually think of lower labor costs. This is precisely why most people choose to outsource work to the Philippines. Not only does the Philippines have lower wages, around 70% less than in the United States. Because of this, outsourcing to the Philippines can make significant cost savings for companies in developed countries like the United States, UK, and Australia.
Another reason why these English-speaking countries love to outsource work to the Philippines lies in the country’s great English communication. Did you know that the Philippines is the 3rd largest English-speaking country in the world, with 2nd best English proficiency in all of Asia?
Compared to other countries in Asia that also have competitive cost benefits, the Philippines has much better English as Filipinos have a more neutral English accent, making it easier to understand and communicate with them. English is also the medium of instruction in Philippine schools, hence majority of the population speaks English. This language advantage goes a long way in terms of communication & collaboration.
When it comes to outsourcing, skills are very important. At the end of the day, you don’t just want cost savings, you want to maintain quality of service. This is why it’s important to work with capable people. The Philippines has a large pool of skilled workers, producing over 350,000 college graduates yearly. This workforce is easily tapped by foreign companies through 788 Philippine BPO companies.
It also helps that the Philippines has a long history in outsourcing, dating back to 1900s when the first contact center was established in the country. The industry has since greatly expanded, offering many more services than call center services, and now accounting for 10-15% of the world’s outsourcing market share. This excellent track record goes a long way in building trust and encouraging businesses to outsource to the Philippines than countries who are newer to outsourcing.
With many years in the outsourcing industry, the Philippines has many BPO companies that are more than familiar with outsourcing best practices, with excellent quality control protocols, flexible engagement models that allow companies to scale on demand, providing hard-to-beat agility that helps companies stay competitive in fast-evolving markets.
Combining the cost benefits of outsourcing work to the Philippines, along with the country’s excellent communication, large pool of talent, and excellent track record, no wonder many companies continue to favor the Philippines when it comes to outsourcing work.
Who Outsources To The Philippines
Though historically, only large enterprises successfully outsourced their operations to offshore locations like the Philippines, in 2024, even SMEs, startups, and individuals are outsourcing work to the Philippines!
Outsourcing to the Philippines makes sense for companies based in countries with higher costs of living. This means countries in Northern America, Europe, Australia, and even Singapore. As wages continue to rise in these countries, businesses, especially those that are smaller and working with tighter budgets and in greater need for flexibility, outsource to the Philippines.
Some popular brands and companies that outsource work to the Philippines include IBM, Facebook, Amazon, Wells Fargo, HP, Microsoft, Nike, Google, Citi Bank, JP Morgan, United Health Group, and many more. To learn more about the impact of outsourcing on brands, check out our outsourcing case studies.
How Much Does It Cost To Outsource To The Philippines
The cost of outsourcing to the Philippines can vary a lot depending on a number of factors, such as the type of role outsourced, the work coverage, length of contract, and seniority of the staff outsourced. Not to mention, each outsourcing company has additional services or value-added services that shape their costs.
But to give a ballpark estimate, one can expect to hire one full-time employee (FTE) for around $1,700 to $2,500. This is drastically different from the average wage in the United States of $6,455 per month.
Considering that this outsourcing fee also includes hiring, training, resources, management, and benefits, the cost difference is huge!
Different Outsourcing Arrangements
When it comes to outsourcing, there are two main categories – staff-based or volume-based.
The former is the traditional outsourcing business model. Companies outsource to agencies for staff augmentation. Each staff outsourced is called an FTE, and cost is paid similar to hiring someone full-time. This set up works well because many companies outsource because they couldn’t find inhouse or onshore talent with the cost or skills they’re looking for.
However, as the world becomes increasingly digitized and many organizations undergo digital transformation, newer outsourcing models are growing in demand. With AI and automation streamlining processes and reducing the need for human intervention, certain industries have no more use for full time employees, rendering the FTE business model obsolete and giving rise to volume-based business models.
The two most common examples of volume-based business models are project-based and retainer models. With project-based outsourcing, a company only outsources the support they need for a fixed period of time. This means only getting the help they need when they need it. Meanwhile, retainer based models work with those who have regular work but fluctuating volume. As the demands change, it’s helpful to have someone on call to do the work. However, since the work volume isn’t constant, it isn’t practical to keep them as full-time staff.
These volume-based work allows companies to enjoy more flexibility, which lowers both the cost and risk of outsourcing. This development in outsourcing is making waves and rendering outsourcing a more attractive prospect for businesses.
How Do You Outsource Work To The Philippines
To outsource work to the Philippines, one can follow the below steps.
Step 1: Assess your current operations.
Outsourcing may be a low-cost and low-risk business strategy compared tow hiring inhouse, however, it’s still a commitment. You have to find out if outsourcing is a right fit for your business, and you can do this by assessing your current operations. Identify the needs or areas of improvement that you’d need outsourcing to address. Then, identify which roles you need to outsource.
Step 2: Know who you want to outsource to.
With a clear idea of what you want to outsource and what you want to come out of it, the next step is to find an outsourcing partner who can provide what you need. To do this, you need to conduct some research. First, consider the pros and cons of outsourcing to the Philippines before coming to a decision.
If you’ve decided to outsource to the Philippines, the next step is to choose the company. Look for a company with:
- Specific roles you’re interested in outsourcing
- Track record supporting companies in your industry
- Clients of similar size to your brand
- Case studies or portfolios related to the service you’re interested in
- At least 5 years operations to indicate stability
- Robust technical resources and redundant WIFI and electricity
- Excellent communication from initial contact
- Clear compensation structure, indicating potential added costs
This quick checklist will help you find a company that can support your requirements and has the expertise in your type of business to ensure a successful outsourcing experience!
Step 3: Know what happens once you outsource.
Once you’ve selected the company you want to work with, you should get a clear understanding of what happens when you outsource. A good outsourcing partner will give you a clear timeline, with all the events calendared to set your expectations.
This calendar should include important events such as hiring, training, onboarding, and go live. You should also know how much you’re going to pay and when you will start making payments. Are you allowed to have overtime work? What happens when there’s downtime? What if there are interruptions to production? How will performance be measured?
Find out the answer to these questions, and make sure you have them in writing before signing that contract.
Step 4: Outsource!
With a clear objective in mind, a reliable outsourcing partner, and a contract, you’re ready to enjoy your outsourced work. Focus on more important things while your outsourcing partner takes care of your operations. Receive regular reports and feedback on how you’re operations are going, and let your partner know your objectives so they will help you reach them. Then, watch your business grow!
Outsource Work To The Philippines
Outsourcing to the Philippines can be overwhelming, especially if you’re doing it for the first time. With over 800 BPO companies in the Philippines, how do you know who to work with?
At KDCI Outsourcing, we take the guesswork out of outsourcing. With our commitment-free exploratory call, we’ll help you identify whether outsourcing is for you and whether we’re the right partner to fulfill your requirements.
Discover how to outsource work to the Philippines fuss-free. Contact us today!
