SECTOR REPORT: THE CHALLENGE OF LASTING COMPETITIVE BENEFIT IN PHILIPPINE CALL CENTERS Aileen S i9000. Alava* Facing high objectives as the latest “sunshine industry”, the call centre industry in the Philippines seems to have dimmer prospects in the coming years. Having experienced rapid growth by 2000 to 2003, the industry skilled a slowdown in progress from 2004 to 2006, raising the question of how sustainable the country’s competitive benefits is against neighboring opponents such as India and China. This newspaper uses Porter’s Diamond Model to analyze the factors resulting in competitive benefit between international locations, and provides sector player and market information concerning the Filipino call center sector, as well as changes on how the industry’s individuals are seeking to cope with the industry’s challenges.

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I. INTRODUCTION The call center industry is usually heralded while the newest sun industry near your vicinity, earning around US$1. almost 8 billion in 2005 by itself, with earnings forecasted to get to US$5. a few billion by year 2010. Employment with this sector recieve more than doubled every year, via 2, 400 agents in 2000 to 150, 500 in 2006, and is expected to reach 300, 500 full-time utilized agents in 2010.

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The Philippines is probably the top spots in the world for outsourced contact centers. An SGV sector report says that in 2005, the Philippines’ share of the global call center companies are 3% and 31% pertaining to the Asia Pacific market. By 2010, industry commanders target 6% global business and 51% Asia Pacific market share.

II. FRAMEWORK AND METHODOLOGY

What is going to give Filipino call centers an advantage more than call centers in other countries, including those in India, China, Malaysia, Singapore? Michael Porter’s Diamond Style defines competitive advantage among nations since the outcome of 4 interlinked elements: 1) company strategy, structure and competition; 2) require conditions; 3) related promoting industries; and 4) conditions affecting the main element factors of production inside the nations. This kind of paper should discuss the competitiveness from the Philippines using this

structure. Desk research was executed to obtain secondary industry info on regional and global call centers, while selection interviews _________________________________

with call center managers provided information on options and challenges within the market. The position of government will also be discussed through this paper. Sector developments present government procedures such as duty incentives and relaxation of property laws contributed to the industry’s development. Strengthening of presidency support to get primary education is crucial towards the sustainability in the Philippines’ competitive position. Deficiency in principal education is definitely threatening the Philippine benefits as community players face difficulty getting together with global require with local supply of qualified call center agents.

* Associate Professor info Systems Management, College of Business Supervision, University with the Philippine-Diliman.

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INDUSTRY RECORD: THE PROBLEM OF SUSTAINABLE COMPETITIVE ADVANTAGE IN PHILIPPINE CALL CENTERS

III. CALL CENTER OUTSOURCING TECHNIQUES A local agent is a business operation controlling multiple types of customer-oriented functions just like marketing, advertising and servicing, through multiple channels of customer interaction such as e-mail, the World Wide Web, digital messaging, tone messaging, fernkopie messaging, and traditional email. Call centers serve numerous stakeholders of your organization: via prospects to customers, suppliers to competitors, as well as marketers, partners, and employees. The word “call center” is used as being a collective term to refer to these operations because the primary method of contact facilitated by these businesses are telephone calls. Call centers are categorized as Business Process Outsourced workers companies or perhaps BPOs. BPOs also include medical transcription, THIS support, animation, software creation, financial accounting and payroll processing companies. Outsourcing inside the Philippines arrived at the pumps of good

deregulation in the telecoms industry. Intense competition spurred massive expenditure in technology and skill among Philippine telecommunications businesses, leading to creativity, quality improvement, and cost competitiveness in services. The Philippines is not a stranger to foreign agreements of this kind. The semiconductor industry, one of the main export industries in the country, started in much the same approach. From the early 1970’s to mid 1980’s this sector experienced remarkable expansion, growing at an total annual average charge of 53%. International elements also impelled growth by means of transnational companies from the developed economies (e. g., ALL OF US, Europe, Japan) locating overseas plants in developing countries (e. g., Philippines, Vietnam, Singapore) for labor-intensive levels of semiconductor manufacturing. Much like the call centre sector, the Philippines’ primary advantage in semiconductors is affordable and well written labor. Authorities response to further more incite export activity in semiconductors is comparable to regulatory mechanisms implemented inside the call center market today, like the establishment of freeport areas, the leisure of tariffs and duties on imported technologies, and the permission to employ foreign nationals. Agreements in the semiconductor sector during its period of rapid growth had been covered by subcontracting arrangements. Today’s global tendency for “off-shoring”, or overseas outsourcing, has very little difference with subcontracting. Offshoring may be the arrangement by which one organization contracts with service providers located outside the nation for providers that could also be or normally have been offered inhouse. Freelancing business operations to distant locations was made possible by advancements in the telecoms sector inside the outsourcer countries. Low labor cost and improved on-line resulting from technological advancement and deregulation inside the telecommunications sector in the repairing countries (e. g., India, China, Malaysia, the Philippines) have made offshore outsourcing eye-catching from an economical standpoint. The expenses of functioning a customer service in the Thailand, for example , can be reportedly 40% lower than in the usa (55% cost benefits from labor less 15% incremental price from travel around and telecoms requirements). Just offshore outsourcing on the whole brings in about 25% to 50% in cost savings. Globalization and its societal effects have made manageable the challenges of crosscultural interaction: many offshore destinations

have a Western historical past and almost all are exposed to Western culture – pop traditions, even – through the net, cable television, and other entertainment press, e. g., movies, literature. The difference in time zones between the servicing as well as the served countries (e. g., the United States, the United Kingdom) are resolved through various six- to eight-hour adjustments in the working day, enabling phone centers to keep 24-hour assistance agent availableness. While pregressive costs are incurred pertaining to perfunctory risikomanagement expenses, electronic. g.

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threat pay, and so forth, the total cost of operating a call center away of India or the Thailand are still

decrease compared to the cost of operating out from the US or the UK.

IV. THE PHILIPPINE CALL CENTER SECTOR An IT-Enabled Services raconter from the Plank of Investments in 2007 declares that there are nearly 146 customer service companies in the Philippines. Local agent companies ought to be distinguished coming from call center sites. A “site” is a center housing a call center procedure and a call center “company” may work multiple sites. Sykes Asia, for example runs five sites in the Thailand while Persons Support operates four. You will find three types of call center corporations:  Foreign-owned call centers with Philippine subsidiaries. These are generally call centers owned by simply foreign companies, usually in the United States, which have branched to be able to offshore outsourcing techniques. Insourced call up centers of enormous multinational corporations. These are operations that are committed to the parent companies and whose target is to take competitive advantage by modifying an erstwhile internal backoffice function into one that is revenuegenerating. Filipino-owned contact centers. These call centers are wholly owned by simply Filipino internet marketers or organizations (e. g. Smart, PLDT, Globe, etc . ) that seek buyers from the Us, Europe and Asia, particularly from The japanese and Singapore.

Estimates through the Board of Investments (BOI), the Percentage on Info and Communications Technology (CICT) and the Business Process Association with the Philippines (BPAP) report the need for phone centers to achieve anywhere from among 30, 000-50, 000 new agents appointed in the Israel per year via 2007-2010.

Physique 1 Career in Contact Centers

350000 301, 000 300000 262, 000 250000 218, 500 200000 168, 000 150000 112, 1000 100000 50000 0 2004 2005 2006 2007 2008 2009 2010 *2006-2010 via BOI/CICT/BPAP Prediction 64, 500 331, 1000

Source: Board of Assets, BPAP

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INDUSTRY SURVEY: THE PROBLEM OF SUSTAINABLE COMPETITIVE ADVANTAGE IN PHILIPPINE CALL CENTERS

The achievements of call centers worldwide is definitely attributable to the expansion of outsourcing as a rewarding business model. The BOI estimates that 2006 revenues in corporate process freelancing (which includes other THIS enabled services such as medical transcriptions, cartoon, and again office deals processing) amounted to US$3. 67 billion dollars, and

tasks revenues to jump in excess 40% to succeed in US$4. seventy nine billion this season. Joint forecasts from the BOI, BPAP and CICT forecast that it will have 343, 000 new freelancing jobs this coming year (of which in turn 64% or perhaps 218, 000 will be in call centers), a 40% increase from the number of new outsourcing jobs in 2006 of approximately 244, 500 (of which will 69% or 168, 500 were in call centers).

Figure a couple of Annual Employment (2004-2010)

a million 900000 800000

668, 1 dua puluh enam

920, 764

700000 600000

479, 51 being unfaithful

500000 400000

244, 675 343, 01 three or more 262, 500 21 almost 8, 000 1 68, 000 99, three hundred 64, 1000 1 a couple of, 000 you 301, 500 331, 500

300000 200000 100000 0 2004

one particular 62, two hundred fifity

2005

06\

2007

2008

2009

2010

BPO Sector

Contact Centers

Source: Table of Opportunities, BPAP

The Philippine call center industry can be estimated to have earned US$2. 7 billion in income in 2006, a growth of fifty percent from 2005’s earnings of US$1. 7 billion. The Department of

Trade and Industry needs actual 2007 returns to become close to US$3. 5 billion, a further growth of 30%.

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Number 3 Twelve-monthly Revenues of Contact Centers (in US$M)

Source: Board of Investments, BPAP

It can be interesting to make note of that support income of ten in the top call up centers1 in the area (Ambergris, Convergys, Cyber City Teleservices, Sitel, E-Telecare, iContacts

Corporation, InfoNXX, Parlance, PeopleSupport, and Sykes Asia) jointly account for a lot more than 20% of the total revenues of the whole sector.

Physique 4 Relative Annual Revenues of 148 Call Centers vs . Five Top Call up Centers (2004-2005)

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SECTOR REPORT: THE CHALLENGE OF ECO FRIENDLY COMPETITIVE BENEFIT IN FILIPINO CALL CENTERS

Activity in the industry is seemingly dependent for the most part on a small number of big players. The BOI in its IT-Enabled services briefer (2007 release) states which it expects upwards momentum to keep until 2010. Sources of expansion have been referred to as follows: a) Expansion from

proven call centers such as PeopleSupport, Sykes, eTelecare, PLDT, ClientLogic, InfoNXX, Citibank, Ambergris, Accenture, IBM, Caltex and HORSEPOWER b) Entry and consequent expansion, we. e. addition of new sites, etc . of worldwide players just like Dell, HSBC, JP Morgan, AIG, Convergys, TeleTech, Sutherland, Deutsche Financial institution, and NetSuite.

c) Following wave of entrants such as Accor Booking, MiSYS, Siemens, Ericson, Alsbridge, Virgin Ocean, Philips, Emerson, Capital IQ, DDC and Kanbar. Expansion in the sector follows expansion the procedures of big players. In the last 2 yrs, both Sykes Asia and People Support have established new call center sites although still others have added new assignments and accounts. These actions and the increase of new players have triggered revenues steadily growing right up until 2006 and expectations for more expansion till 2010. Whilst growth can be continuous, however , a slow down in the rate of growth is expected starting 2005.

Figure 5 Annual Earnings Growth Charge of Speak to Centers

220. 0%

166. 7% 133. 3% 114. 3%

seventy five. 0% 60. 0% up to 29. 8% 20. 2% 18. 9% 15. 0%

2001

2002

the year 2003

2004

june 2006

2006

2007

2008

2009

2010

*2006-2010 forecasted simply by BOI/CICT/BPAP

Resource: Board of Investments, BPAP

Slowing expansion in the last 2 years after the high increases of 2003 to 2004 implies that the local agent industry in the Philippines is now approaching maturity. Sales and earnings growth of the previous years come from the

Philippines’ cost benefits over different countries. The passage of your time, however , may erode this advantage as China and also other Southeast Parts of asia threaten to have into the Philippines’ market share with better expense or top quality

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offerings. The challenge for the industry is usually to extend development by enhancing the competitive dimensions where Philippines is definitely weak or perhaps by altering industry focuses on to create new competitive positive aspects. The Global Market The Asia Pacific place outperforms additional regions such as Eastern European countries, South America

and Africa. Japan and To the south Korea are noticed to increase nearshore outsourcing investments in low-cost, labor-rich neighboring Chinese suppliers while Southeast Asian

countries reap the benefits of close-toWestern civilizations, open economies, and advanced technologies for the similar cost advantage. In 2005, Ice and Sullivan forecasted that call centers in Asia will expand from twenty one, 360 in 2004 to 39, 248 call centers in 2011, by a compound annual progress rate of 9. 1%

Figure 6 Forecast Regarding Call Centers in Asia Pacific

*at a Substance Annual Progress Rate of 9. 1%, as predicted by Frost and Sullivan.

More recent research predict quicker growth rates. A 2006 Asian Get in touch with Center Sector Benchmarking Report assessed the industry to become in a period of strong progress. The study carried out on 747 contact centers in the Thailand, India, Singapore, China, Malaysia and Asia estimates that by 2007, the total 576, 000 chairs in the countries studied could increase to 704, 500, a growth charge of 23%. Among the countries in the analyze, the Israel has the highest forecasted growth rate. Simply by 2007, it truly is expected to expand by 33%, Singapore and Malaysia simply by 32%, Chinese suppliers at 22% and India by 16%. Of the Oriental destinations, India is the best choice, with other nations including the

Philippines, Malaysia, Singapore, and China pursuing closely. The Philippines, having an American-influenced culture, a proficiency in English corresponding to India with no heavy highlight, and a skilled labor force, was considered the very best threat to Indian dominance, superiority in this sector. However , recent years’ innovations in other competitor countries such as China, Malaysia, Thailand and Indonesia coupled with a strong peso and a reduction in the local supply of qualified local agent agents have got weakened the Philippines’ advantage. The A. T. Kearney Global Providers Location Index in 2007, a review conducted to measure the comparative attractiveness of offshore spots with regard to economical structure (40%), people

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INDUSTRY STATEMENT: THE PROBLEM OF SUSTAINABLE COMPETITIVE ADVANTAGE IN

FILIPINO CALL CENTERS

skills and availability (30%), and business environment (30%), has ranked the Korea the 9th most attractive country for offshoring in

3 years ago. The top makes countries happen to be as follows:

Number 7

Source: AT Kearney 2007 Global Services Site Index

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The 2007 research saw the Philippines decrease from its fourth rank via AT Kearney’s last GLSI

survey which has been conducted in 2005. The best twenty five locations then had been as follows:

Figure 8

Origin: AT Kearney 2005Global Companies Location Index

The Philippines’ drop in the AT Kearney rankings is usually attributed to the appreciation with the peso and growth inside the call center market which has powered up labor costs when it comes to the US money, by as much as thirty percent, according to AT Kearney’s GSLI 2007 highlights. In other areas of performance, the country increased slightly

specifically in system, industry size and english language proficiency. In contrast, Malaysia, Thailand, and Indonesia possess either stored their ranks or relocated up the index. Slower market growth costs in these countries have reinforced the effects of inflation on labor costs.

12 INDUSTRY REPORT: THE PROBLEM OF SUSTAINABLE COMPETITIVE ADVANTAGE IN PHILIPPINE CALL UP CENTERS

Number 9 Philippines’ Offshore Elegance, 2005 & 2007 A. T. Kearney Findings

six 5 4 3 two 1 zero Financial Framework Business Environment People and Skills Availability

2005 3 years ago 3. 6th 3. 3

2005 2007 1 . 2 1 . 0

2005 1 ) 0

3 years ago 1 . several

Ratio of Categories – 40: 31: 30

Philippines’ Score 2007 2005 Monetary Structure Compensation Cost (8) Infrastructure Price (1) Tax and Regulating Cost (1) 7. 1 7. six 0. 7 0. almost eight 0. a few 0. a few 8. 12 9. 00 Philippines’ Report 2007 2006

Business Environment Country risk / Financial and Politics Environment (6) Country Facilities (2) Ethnical Adaptability (1) Security of Intellectual Home (1)

1 ) 9 1 . 2 zero. 7 zero. 3 5. 1

1 . 8 zero. 7 zero. 8 zero. 2 a few. 5

Philippines’ Score 2007 2005 Persons Skills and Availability Relevant experience / IT BPO Industry size/quality (4) Size and accessibility to labor force (2) Education (1. 5) Dialect (1. 5) Attrition risk (1)

1 ) 2 zero. 7 zero. 9 1 . 2 0. 2 5. 2

zero. 9 0. 7 0. 9 0. 7 0. 6 3. 8

Origin: AT Kearney 2005 and 2007 Global Services Position Index

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India Among the top contenders for overseas locations, India is the nation with the the majority of experience. The emergence of call centers as an opportunity for countrywide growth discovered deregulation in the telecommunications sector in the mid-1990’s, much like the Philippine experience. The outsourcing sector, the 1st participants which were medical transcription services companies then simply followed by data management and customer support providers, began to take root back in the 1990’s. As in the Philippines, the initial operations consisted of support subsidiaries of multinational companies repairing the parent company. Cheap and highly-skilled labor, significant improvements in IT infrastructure, and a positive business environment spurred by simply industry organizations such as the Countrywide Association of Software and Companies Companies (NASSCOM) propelled dramatical growth for the market in the years to follow. The NASSCOM estimates yearly regarding 37% to get the outsourced workers segment together with the call center market leading the sector. Call centers comprised 46% with the total US$4. 6billion income the outsourcing sector earned in june 2006. India may be the strongest pelear in the sector and is generally tagged because the world’s first-choice in offshore outsourcing. In 2006, it has 8% global

business and 68% market share in AsiaPacific. The Philippines’ very best advantage over India is language skill. American British being the dominant stato franca in sales and support orders coursed through call centers, the Philippines has a lifestyle that is nearer to the Western and a language tongue which is easiest to understand in the whole of Asia

to some extent to contact with American television and take culture, as well as English being the channel of teaching in all education levels. It is often observed that India’s pool of expertise has the advantage in specialized, specialized occupational skills while the Philippines’ skills is in tolerante arts, which offers more public knowledge as well as capacities needed for back-office processing, e. g., communication skills, and cultural flexibility. Increased global competition in the call center sector has led to initiatives to increase the profile of companies of the Of india IT-enabled companies sector. NASSCOM reports that the last 3 to 4 years in India have been a period of diversification. India’s BPO firms have extended to higher-value processes through vertical integration towards non-voice-based services such as back-office control and articles development. In 2005, customer support services comprised 34% of total BPO revenues in India, compared to 69% in the Philippines.

12 INDUSTRY STATEMENT: THE PROBLEM OF SUSTAINABLE COMPETITIVE ADVANTAGE IN PHILIPPINE PHONE CENTERS

Physique 10. one particular

Figure 10. 2

Options: DTI (Philippines), PriceWaterhouseCoopers (India)

China China is the preferred decision as a local agent location for companies aimed towards South Korea (attracted simply by ethnic Koreans living in China) with which they have the closest cultural jewelry. China

is definitely the only various other country on the globe that poses a menace to India as far as size and expense of labor supply is concerned. The yearly expense of operating a call center seats in China is the lowest in Asia.

Desk 1 Comparative Annual and Hourly Costs per Customer service Seat in China, India, Malaysia, the Philippines, Singapore and Thailand in UNITED STATES DOLLAR ($) Annual Cost per Hourly Cost Seat every Seat 13, 543. 00 3. sixty two 15, 872. 00 four. 24 34, 779. 00

9. 29 18, 086. 00 4. 83 66, 998. 00 18. 46 18, 527. 00 4. ninety five

China India Malaysia The Philippines Singapore Thailand

Origin: callcentres. net

China’s expense advantage, however , is muffled by its deficiencies in Englishspeaking manpower. Regarding this, China cannot as of yet remain competitive head-on with India as well as the Philippines inside the global outsourcing techniques market. University enrolments nevertheless have grown 25%

in recent years which will increased the country’s probability of compete. China’s entry towards the World Transact Organization has spurred the inflow of capital as well as Traditional western influence and analysts foresee that in due time the labor supply in China

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will be comparable to India in size along with skill. Singapore Despite high labor costs, Singapore loves a comparison advantage from dependable bureaucracy, good technical infrastructure, superior educational systems, personal and cost-effective stability, and stringent enforcement of intellectual property laws and regulations for information and data security. Singapore outsourcers provide high-value services differentiated from lowvalue, back-end operations provided by various other Asian countries. To take advantage of this market market, Singapore freelancers market advanced offshore functions such as preliminary research, robotics, health care and medical diagnostics. Singapore companies in return outsource lower-value operations to India and China to find cost benefit. Malaysia What Malaysia does not have in time (its populace is significantly smaller than India or Chinese suppliers and thus cannot meet the same economies of scale) it makes up for in advanced infrastructure. Malaysia is second only to Singapore in IT competitiveness ranks between countries in Southeast Asia. Solid government support is

apparent in efforts such as the Multimedia Extremely Corridor job, which includes the introduction of infrastructure in what they have called “intelligent cities” such as Cyberjaya and Penang Cybercity, wherever major THIS leaders such as IBM and Motorola have already located their very own regional offshore service centers. Latin American Countries Latina American countries such as Brazil, Chile and Mexico take advantage of the advantage of staying

“near-shore” spots, or just offshore servicing countries close to the offered country, this kind of being america. Near-shore locations are inside the same time-zone as most consumers, thereby reducing the need to organize multiple 8-hour shifts inside the day as well as the need to buy additional expenses for threat pay, protection insurance and the like. The A. T. Kearney study identified Brazil provides the best labor skills in the region, Argentina has the cost benefits, while Chile has the ideal business environment (e. g. it has, as an example, supplemented negotiating with US and European corporations with IP infringement penalty clauses). non-etheless, perhaps the principal advantage of the location in general may be the vast supply and extraordinaire quality of its bilingual (English and Spanish) call up centers, very much in demand in the usa. Eastern European Countries Eastern Europe such as the Czech Republic, Especially, Romania and Hungary happen to be possible choices for Western European countries as a near-shore destination. Asian European call up centers present cost, language skill, and time-zone positive aspects. Multilingual call up centers for the multi-lingual European industry can be easily and effectively set up in Far eastern Europe much more than in Latin America or perhaps Asia. Buyers from Philippines and the British isles moreover may possibly prefer Asian European call centers most particularly for the bilingual staff: citizens in many Eastern European countries can speak both A language like german and English language. Reportedly, nevertheless , Eastern Europe, most specifically Russia, ought to upgrade telecommunications infrastructure to compete with the other locations as well as to comply with European Union requirements.

14 MARKET REPORT: THE PROBLEM OF LASTING COMPETITIVE ADVANTAGE IN FILIPINO CALL CENTERS

V. SUMMARY The elements affecting firm strategy, composition and rivalry involve the skills offered by local firms, and just how competitive in your area provided services are against those furnished by other countries. Primarily, this requires why the Philippines is definitely chosen simply by call center businesses when making the decision center area decision. The factors involving demand conditions involve the evolving demands of the global market intended for call center solutions, ranging from the standard service of answering inquiries based on predetermined scripts for the more complex service of featuring technical assistance and support. The adequacy of related supporting sectors will involve your local language schools, real estate, vehicles and retail sectors and how these groups contribute to preserve the growth with the local customer service industry. Finally the conditions affecting the key factors of creation, such as local skilled labor and mission-critical technology, is likewise discussed. Company Strategy, Structure and Competition Figure 14 Factors Impacting the Call Middle Location Decision

As mentioned before, the initially factor influencing competitiveness is usually firm technique, structure and rivalry, which will primarily leads to why the Philippines is definitely chosen simply by call center corporations when making the phone call center site decision. The offshore position decision can be influenced with a number of factors and it is against these standards that India, China, the Philippines and other countries will be evaluated. That follows that it can be in these attributes that the Korea should perform for a distinctive competitive edge over the others. These elements include the next: quality and cost of labor (including technical competency and terminology skills), on-line (i. electronic., telecommunications bandwidth) cost and reliability, fully developed business, regulatory and scientific environments to get outsourcing procedures, political stability, and ethnic alignment between offshore outsourcer, the freelancing company, plus the customers to become served by call center.

Decision Criteria in Selecting an Offshore Customer service

Political Stability

Reliability and Cost of Connectivity Quality and Cost of Labor

Ethnical Alignment

Adult Business Environment

Among these kinds of success elements, the Israel competes strongest in (1) quality and cost of labor, and (2) ethnic alignment. It truly is in these two factors that exponential growth in 2003 and

2004 can be ascribed. The challenge of sustaining the Philippines’ advantage in the industry may be discussed via two advantage points: initially from the perspective of creating a distinct

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competitive benefit and second from the watch of ensuring the distinct benefit created is impervious to erosion. Threats arise from deliberate attempts by rivalling entities to undermine this and by developments in call center operations and technology that will switch the angles of competition. The benefit of lower cost is the Philippines’ most significant value supplying to customer service investors and customers. The results from the AT Kearney survey show that while elements are also significant, the global competition in the call center sector remains driven by cost at the present: it continues to be to be the most important factor in the perception of the “attractiveness” of an freelancing location. On this factor, the country’s low system and settlement costs, plus the provision of special taxes concessions inside specific areas and specific zones have led significantly to making the country a preferred choice among shareholders. In addition , the results in the study likewise emphasized that in the Philippines, call centers were given most emphasis among the outsourcing sectors and likewise featured the efforts of the government to promote these kinds of services by establishing special economic zones that provide buyers with freeport privileges, tax shields and holidays. Among the list of participants inside the global call center industry, India outperforms all other countries having a combination of positive aspects: low-cost labor as well as a modern educational system ensuring a consistent supply of highly-skilled employees, reliable low-cost infrastructure, supportive organization government, and a wealth of managing experience inside the call center sector, as well as in various other outsourcing providers. The Thailand directly competes against India by providing labor and facilities at comparable rates and furthermore provides the good thing about a Westernized culture and better performance in conversational English language to appeal to US-and UKbased clients. Singapore gets the highest settlement rates nevertheless has the good thing about good federal government reflected in lower costs of bureaucracy and corruption. China’s major

advantage is it is massive pool area of available lowcost talent—only China can directly compete with India in size of available labor—however labor skills remain limited in language effectiveness and supervision experience in the market. What makes India a success history is the combination of multiple options for advantage available to the call middle investor. The Philippines’ current competitive advantage meanwhile with the combination of low compensation expense and substantial English effectiveness, and while this advantage continually bring extra revenues and employment towards the sector, expansion rates are also observed to get decreasing, evidently due to two observable tendencies: low acknowledgement rates and high regret rates. Equally low popularity and high attrition threaten the advantages of labor availableness, cost and quality of Philippine contact centers. The main advantage of cost more than other factors, i actually. e., people and environment, affecting the offshore position decision is non-etheless not only a perpetual one. The leveling of technological competency between the different countries through globalization and concurrence of solutions as well as the homogenization of social conditions between different economies may impact the importance of price as a success factor. The ubiquity of information available through advanced mass media and telecoms have also caused less ethnical heterogeneity between the countries contending as call center locations. The main advantage of cultural alignment is as a result not exclusive to the

Philippines and, further, can be one that erodes with the passage of time and the availability of communications technology. Demand Conditions Despite the low-cost labor edge offered by overseas call centers, companies carry on and look for ways to gain more cost savings, in the event that not by a more successful and thereby cheaper staff, then by automation technology. Meta Group’s technology exploration services group reported progressively more clients

of sixteen INDUSTRY SURVEY: THE PROBLEM OF SUSTAINABLE COMPETITIVE ADVANTAGE IN PHILIPPINE CALL CENTERS

selecting to implement voice-automation technology systems to deal with standard, routine inquiries, electronic. g., bank account balances, product and service, payment offices, etc ., rather than contracting confer with an freelancer in a low-cost country or establishing their particular call center operations offshore. The eventual end result of this expansion is that, with the existence of automation technology, only buyer calls necessitating more complicated assistance will be routed to overseas call centers, perhaps from the Philippines or perhaps India. This effort means that buyers will have larger expectations by call center real estate agents in overseas countries. Agents will no longer be able to rely on simplified question-and-answer recommendations or “scripts” to answer more complicated questions that will be asked them. Industry analysts observe that, away of 75 applicants, simply three to five happen to be hired provided existing skill requirements. Support services for further complex requests, perhaps needing technical information or training, will therefore require higher technical competency, as well as all that you need communication and problem-resolution skills. Should this sort of requirements come in necessary, it really is expected the fact that hiring level will be lower in the years to come, except if initiatives are implemented to improve the skills and capabilities of existing as well as future staff in this sector. Sufficiency of Related Industries The Philippines’ weakness in information technology facilities threatens the power of the country to compete where value-added services require a higher telecommunications bandwidth. Despite being one of the best offshore location choices on the globe, the Philippines ranks, and has often ranked badly in network readiness online surveys, seen simply by most investors as measures of the competitiveness of a region in i . t. In both 2004 and 2005 Network Readiness Index (NRI) listing compiled by the World Economic Community forum (WEF), the Philippines positioned in the reduced levels: 67th in a number of 100 in 2004 and in many cases

lower in 2006 (70th place). Other outsourcing techniques destinations fare similarly: India, the top location for just offshore outsourcing is at 40th place while Chinese suppliers, 2nd in the AT Kearney Index, is in 50th place. The WEF NRI can be described as measure of comparable performance in the following areas: a) areas of the environment of the given land for creation in details and telecoms technology (ICT) including the regulatory regime and legal framework for ICT, plus the available infrastructure; b) network readiness of individuals, businesses and governments; and c) ICT usage by individuals, businesses and governments. The obvious inconsistency between networked preparedness and other THAT competency scores for the Philippines as well as the remarkable growth of IT-based solutions, made basic by documents of expenditure, revenue, and employment truly generated by sector, is usually attributed by industry experts to the statement that indices and search positions comparing countries with each other consider all the areas in the country, from the most advanced areas to the undeveloped ones. Produced countries such as the United States, The japanese, and Indonesia have progressed to a point where the accessibility to telecommunications solutions and other related services inside the less urbanized regions will be virtually at par recover of the most developing areas. Growing countries will be characterized by a marked big difference in system and economical activity involving the centers of business as well as the rural, home areas. These kinds of is the case of India, China as well as the Philippines the place that the small portion of the population living and working in the centers of organization enjoy advanced technology while the others have very limited access to your most basic processing technology, electronic. g., access to the internet, if at all get is given these people. non-etheless, call up centers in developing countries choose to locate only inside the industrialized

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technology-enabled centers of business. Therefore, they are able to employ, and at an expense advantage, the network facilities, hardware products, software and consulting services at a comparable scientific level to prospects used by call centers much more developed countries. While it is valid that network-readiness online surveys include venues in the Korea which call up centers are not considering to locate in, which these phone centers are eventually established in the developing, technology-enabled centers of business, it is continue to worthwhile considering that this shortcoming significantly restrictions the range of options for call center sites in the Philippines. Low facilities development in areas exterior Metro Manila also jeopardize the cost advantage as contact centers are constrained with only a few areas to locate all their operations since the location choices are limited, the cost of real-estate in these areas increases. During the one palm the rise in real estate rates is seen as contributing to the trickle-effects of revenue growth in the call center groups, on the other hand it could be seen as a threat to the country’s cost advantage as far as real estate and facilities costs have concerns. Factor Circumstances The 06\ Asian Speak to Center Sector Benchmarketing Report ranks human resource management, particularly the parts of recruitment and agent yield, as the highest challenge confronted by Hard anodized cookware contact centers. In the Korea, the regularity of availability of qualified local agent personnel is definitely threatened—as reflected in a very low 3% acknowledgement rate—by apparent degradation of the quality of primary and secondary education in both private and public educational institutions. Although it has been reported that the average 10-year-and-above literacy price in the Israel is over 93%, literacy is too few to ensure a position for a call center

applicant. Basic English proficiency, for that matter, is regarded as a minimum requirement, enough intended for the agent to be considered for a situation, but still too little to match the bigger levels of conversational and even colloquial proficiency required for hiring. Although low cost labor still works to the country’s advantage, labor on the average making up 46% of the total budget of operating call centers, such an advantage will never be sustainable in case the country is not able to supply just as much as is needed simply by steadily developing demand. Whilst hiring is starting to become more and more exacting, English skills in the formative levels of education remains substandard. English language skills tend to reduce over time, since shown by simply statistics through the Division of Education, e. g., Grade some public university students present national average of 42% in English, while kids show thirty percent. As The english language and conversation subjects will be required less in college, it can be expected the level of effectiveness will degrade more inside the tertiary degrees of education. Even though English is still widely used in business, in government (at least in the excessive levels), in addition to school, programs in local mass media and entertainment are dominated simply by Tagalog films, making mastery of English language a more trial for the regular call center applicant. The current express is reflected in the low acceptance level among candidates in call up centers and other BPO firms. Out of every 90 new college graduates making use of, only 3 are chosen. High regret rates and the increase in “poaching” and “piracy” of agents on the other hand endanger the low cost of labor while companies purchase benefits and compensation deals to ensure agents will not proceed to a competitor. In 2006, the labor attrition rate inside the Philippines is definitely reported to become 18% intended for full-time brokers and 24% for or perhaps agents. India has substantially higher attrition rates, as follows:

18 MARKET REPORT: THE PROBLEM OF ENVIRONMENTALLY FRIENDLY COMPETITIVE BENEFIT IN PHILIPPINE CALL CENTERS

Table two Comparative Suggest Attrition Percentage for A lot of the time and Part-Time Call Center Brokers in Cina, India, Malaysia, the Israel, Singapore and Thailand Suggest Attrition (FullTime) 17% 38% 18% 18% 16% 15%

China India Malaysia The Philippines Singapore

Mean Regret (Part-Time) 29% 32% 24% 24% 21%

16%

Thailand Resource: callcentres. net

At this price, a job in a call center is considered as a profession in the Thailand, and not looked upon as merely a “temp” placement as in the us. Yet, “poaching” or “pirating” of personnel between phone centers has already been observed due to limited skill pool. Call up centers will be challenged to implement guidelines in minimizing employee regret in the local agent industry for instance a flexible and conducive environment, high incentives, and training schemes, and more importantly, a job path creation plan to encourage college participants that like a call center agent is not really a “dead-end” sort of job. The process of Moving Forward The question remains as to who will bear the expense of improvements needed to strengthen almost all factors important to ensure the sustainability with the Philippines’ competitive advantage in the call center sector. Some contact centers have got shouldered the cost themselves, supplying free inhouse training for fresh hires. Still others established joint work with existing universities as well as the Technical Education and Abilities Development Power (TESDA) to include call center-oriented training requirements in their curricula and training. Call centers have established workers development endeavours, e. g., in-house training and evaluation, to enhance skill, and settlement and rewards initiatives, e. g., bigger allowances, all-expense paid vacations and holidays, career expansion

planning, etc ., to curb attrition costs, ensure higher stability in the workforce size, and minimize the “poaching” of customer service agents. More call centers are also leading to the development of the countryside, more specifically the places outside City Manila just like Laguna, Baguio, La Union, Cebu, Davao, Cagayan sobre Oro, Iloilo, etc . Physical diversification, i. e., increasing call center functions to provinces, will provide even more labor supply, and living room to answer towards the intense scrambling for office space in Community Manila. Call center operations will even encourage infrastructure development consist of metro metropolitan areas, with the probability of replicating the expansion in the metropolitan areas of City Manila in infrastructure and skill for the countryside areas. Another opportunity available to the sector is value diversity. India’s push towards building up non-voice services was not shed on Filipino ears. In the

prediction towards 2010, the Section of Transact and Industry (DTI) indicated its target to increase the share of other BPO services inside the total BPO revenue quiche while reducing dependence on phone centers, that might now be exhibiting signs of drop. The semiconductor industry in the peak of growth throughout the mid-1980’s as well prompted recommendations toward variation towards higher-value processes. During the time, the sector primarily contains low-level technologysupported processes, mainly automated basic assembly of semiconductor devices and product testing. Even now, industry activity in high-level

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technology-supported actions such as wafer production and device design and style are still but to reach the growth stage. The Philippines’ competitive advantage in the call center industry may be endured through the improvement of source conditions, strengthening of related industries, and geographical variation. Whether these efforts will continue to work will be determined by two developments industry individuals should take proper care to observe on the close in the year: first, how the marketplace will respond to the industry’s efforts, i actually. e., whether or not the growth sought after will be suffered by continuous inflow of new contracts and whether predicted increases in employment, center expansion and investment will probably be attained or perhaps exceeded; second, how the sector will answer the demands with the market

i actually. e., whether or not the total operational capacity (as to labor supply, connection, technology, facility and real estate) with the call center sector will be sufficient to respond for the rise in require. These developments will suggest whether the local agent industry can easily reverse the tide and halt approaching decline. Yet , the market should be prepared should the slow down in development rates persist in the arriving years, indicating that the country’s advantage have been weakened by supply durability of additional countries including India or perhaps China. In this instance, a prudent response that call centers should consider is to diversify into other BPO sectors

such as high-value, non-voice-based providers to compensate for the effects of drop in the customer service industry.

REFERRALS

A. To. Kearney (2007 & 2005). Global companies location index. Balfour, Farrenheit. (2003, Feb 3). How, way back workplace. Business Week. Bharadwaj, G., Varadarajan, G. & Fahy, J. (1993). Sustainable competitive advantage in service industries: a conceptual unit and analysis propositions. Diary of Marketing, 57(4), p. 83. Business Procedure Association of the Philippines, http://bpap.com.ph Board of Investments, http://boi.gov.ph Call Center Listing, http://callcenterdirectory.net Callcentres. net. 06\ Asian speak to center market benchmarking survey. Contact Center World. http://contactcenterworld.com Cruz, Dennis H. (1981, October) A review of international subcontracting arrangements in the Philippine consumer electronics (semiconductor) sector, October 1981. Department of Trade and Industry. http://dti.gov.pg Domingo, G. (2005, 04 11). BOI, BPAP, CICT: What roles they enjoy. Computer Community. Domingo, G. (2005, Drive 7). For what reason we level poorly in technology in global competitive surveys. Pc World.

20 INDUSTRY RECORD: THE PROBLEM OF SUSTAINABLE COMPETITIVE ADVANTAGE IN PHILIPPINE CALL UP CENTERS

Ice & Sullivan (2005, January 20). Examination of the Asia Pacific speak to center markets. Hookway, M. (2004, October 7). The assistance spin-off. Asian Economic Assessment. IBON Databank Phil, Incorporation. (1990). The semiconductor sector. Institute intended for Developmental and Econometric Examination, Inc. Local agent industry and the Philippine overall economy. Lecture sent at the UP School of Economics. 03 2006. Intercontinental Customer Administration Institute. http://www.incoming.com IT Things. http://itmatters.com.ph McDougall, P. (2004, January 26). Automation requires toll about offshore personnel. Information Week.

NOTES

one particular

Selection of the ten best call center businesses is irrelavent and not depending on an objective ranking of financial efficiency. The subset was designed to illustrate market concentration: what sort of small community of five call centers have offered significantly more income to the sector than the other 138.

you

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