BPO companies told to offer higher value

REPORT FROM BUSINESSWORLD The need to sustain the country’s edge amid increasing competition in business process outsourcing (BPO) is driving this industry to provide higher-value services. Tagged as knowledge process outsourcing (KPO), this new trend offers more value to the country’s brand as a services provider in this field. This trend is expected to widen the outsourcing service portfolio of the country, helping arrest the transfer of skills to other emerging locations, according to top industry experts during the 7th e-Services conference held late last week. Dubbed as the new buzzword in the industry, KPO is defined as the outsourcing of high-end complex tasks of client firms, tapping highly skilled professionals like doctors, lawyers, accountants and engineers. Trade Senior Undersecretary Thomas G. Aquino said KPO "offers a new way [of providing high-value opportunities to local skilled professionals without requiring them to leave their families]." Hence, the Trade department is trying to encourage existing BPO providers to move up to KPO, since emerging players like Vietnam and Sri Lanka have a competitive cost advantage over the Philippines. According to BPO advisory and equity manager Tholons, Inc. the KPO market is poised to grow to $17 billion by 2010 from last year’s $3.7 billion. India is expected to capture around 70% of the total market, while Philippines — along with China, Russia and the Czech Republic — are described as the emerging players next to India. Tholons chairman and chief executive Avinash Vashistha said the Philippines can compete well in the areas of animation, content, health care, as well as financial and legal services. "India will definitely be the dominant player, but Philippines will be distant but clear second," Mr. Vashistha said. Mr. Vashistha and Harry van Geijn, the BPO consultant of the government of the Netherlands, both agreed that Europe is a lucrative market for the Philippines to tap in the area of KPO. One of the biggest drivers of demand for Philippine-sourced KPO services is that continent’s declining population. "Population [growth] has already reached its peak and is estimated to decrease 10% year on year. But, we still remain a growing economy and offshoring is the only way to deal with this," Mr. Geijn said. "The European Union is a very high potential market. This year, you will see more KPO activities because the labor force problem is not going to be better. The same is true with the US," Mr. Vashistha said. Mr. Geijn said the European market is different from the US. "For European companies, you can’t go direct to clients. Instead, you will have to tie-up with the service providers there. And if you want to grow the business, you gradually build the relationship as you go up the value chain," he said. "Price and cost is not the only reasoncompanies will off-shore. You need to add real valueby adding analytics and specialization." KPO firms now operating in the Philippines include Manulife Business Processing Services; Deutshe Knowledge Services; SPi, Inc.; DCCD Engineering Corp.; Fluor Daniel Phils.; B&M Global Services; and IDS Philippines. — Maricel E. Estavillo/BusinessWorld