BPO ecosystem spurs business development

While contributing in a major way to growing the Philippine economy and providing over 1 million jobs, the business process outsourcing (BPO) sector has evolve into  a booster of local businesses where a BPO operation is located.

Local economies come to life and businesses flourish in such an environment, as well as employment opportunities.

“The indirect employment as a result of this could be as much as 2.5 times as many people — from drivers, sari-sari store clerks, food vendors, shop clerks, etcetera,” David Leechiu, Chief Executive Officer of Leechiu Properties Consultants (LPC), told GMA News Online.

From the construction of a BPO building alone, Leechiu noted as much as 1,000 employees may be generated, with an outsourcing firm typically spending some P25,000 to P35,000 per square meter (/sq.m).

“Then they will typically, directly hire 300 to 1,000 full-time employees being paid... P12,500 for a small provincial site to P20,000 per person per month,” he said.

Estimates by the Information Technology and Business Process Association of the Philippines (IBPAP) placed at 1.3 million the full-time equivalent (FTE) employees of the sector for the whole of 2016.

Citing data from the IBPAP, Leechiu said the National Capital Region (NCR) alone accounts for 80 percent of BPO employment, with Cebu, Mindanao, and the rest of Visayas, CALABARZON, and Central Luzon getting around 3 percent each.

In its Market Insights, LPC noted the country currently has six centers of excellence in relation to the BPO sector: Metro Manila, Metro Cebu, Metro Clark, Metro Bacolod, Metro Davao, and Metro Iloilo.

The 10 next wave cities are Baguio, Cagayan de Oro, Dagupan, Dasmariñas, Dumaguete, Lipa, Malolos, Naga, as well as Sta. Rosa in Laguna and Taytay, Rizal.

Rental rates

“The BPO will also rent space which typically ranges from P300 to P700/sq.m. depending on the location. Most BPO companies will have 6.5/sq.m. per seat so a 1,000-seat operation would occupy 6,500 sq.m of space,” Leechiu said.

This translates into monthly rental fees of P1.950 million to P4.550 million for a 1,000-seat operation.

Business environment

The environs of a BPO or "the ecosystem" usually thrive, with business establishments sprouting within the immediate vicinity on the heels of a growing BPO operations.

“They would need a convenience store, canteen, and support facilities like coffee shops, some clothing stores, groceries, etcetera,” Leechiu noted.

Property consultancy Jones Lang LaSalle (JLL) earlier said the expansion of the BPO industry is supporting the demand for office and residential space in the country.

Bandwagon effect

There has been an obvious bandwagon effect in the areas where BPOs are located, Leechiu noted.

Most companies first try to get a feel of the place before they decide to put up shop.

“If you look at Clark, Bacolod, Iloilo, few companies wanted to explore locations until the first mover came in, then others followed immediately after — like a bandwagon effect. So the first locator would usually double in size in three years and other companies will follow them,” Leechiu said.

Finance Secretary Carlos “Sonny” Dominguez III earlier said, however, that the administration of President Rodrigo Duterte is not keen on relying too much on the sector as a growth driver. He noted that in the long run technological advancements may lead to a decline in its contribution to the gross domestic product.

“We just want to make sure we are prepared if there are any breakthrough developments in new technology for artificial intelligence,” he said.

“Secretary Dominguez is raising concerns on BPO. We should not be too reliant on BPO. It might change in the future,” Budget and Management Secretary Benjamin Diokno chimed in. — VDS, GMA News