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The Philippines as the Top Knowledge Process Outsourcing Destination
Globalization has made the seamless delivery of information technology (IT) and business process (BP) services across countries possible. The increasing demand for IT and business process outsourcing (BPO) services has opened the doors for emerging IT and BPO destinations such as India, the Philippines, China, and Russia and was estimated to reach as high as US$180 billion in 2010. The Philippines, in particular, has emerged from a call center outsourcing destination to a competitive and top knowledge process outsource (KPO) destination catering to higher-end services such as accounting, e-commerce, web marketing, web development, software development, legal services, and others. Not only that clients reduce and control their operating costs but also, maximize productivity and get high quality and reliable services. Some factors to be considered in choosing a KPO destination are the quality of human capital, location, infrastructures, and costs.
Quality of Human Capital
Labor force has been one of the Philippines’ advantages in their region. As reported by a reliable and reputable international investment consulting firm, the Meta Group, the Philippines ranked 1st in terms of knowledge-based and skilled workers availability. In addition, as reported by the Philippine EcoZones Association, the Philippines is the largest English-speaking population in Asia and 3rd in the world, offering a large pool of educated and computer-literate manpower that can provide world-class financial, legal, accounting, and other support services. Aside from English proficiency, literacy, and educational background, the Philippines’ notable cultural affinity to the US makes it easier for both parties to conduct businesses.
Strategic Location
The Philippines is strategically located in the heart of Asia and is at the crossroads of eastern and western businesses, giving critical entry point to more than 500 million people in the ASEAN market. In addition, to being physically strategically located, the Philippines has been considered the best outsourcing location because of it’s powerful and reliable ICT infrastructure, availability of relatively cheap prime commercial real estate locations, and low capital cost of qualified personnel.
Infrastructure
According to the Asia-Pacific Development Information Programme, “Internet-wise, the Philippines is part of the US Internet at the end of a very long string across the ocean.” This statement is based on the observation that foreign traffic, mostly from US, makes of almost 90% of the consumer’s consumption. In addition, the Global New e-Economy Index released in 2001 reveal that the Philippines ranked 4th worldwide in terms of ICT competencies. Though dial-up connection is the commonly used mode of Internet-connection, the Philippines provide both fixed and wireless broadband capabilities.
Costs
One of the main reasons why businesses outsource is to save on operating costs without sacrificing the productivity and quality of output. Outsourcing companies reveal that businesses who operate on-shore usually achieve cost savings of only 5-10% while businesses who operate offshore, in the Philippines, through KPO providers achieve cost savings of 40-60% due to the relatively cheap cost of labor. Through strategic operation, premium human capital development, and the best technology platforms, BPR’s production facilities in the Philippines will deliver superior work outputs to provide a solid impact on our clients’ revenue and business equity.
Reason to Outsource Accounting Services
Since 2005, some businesses have begun outsourcing accounting services at a more strategic level not just to reduce costs in non-core processes but to improve business performance as well. This is being driven by a number of factors:
Key Developments in Finance and Accounting Outsourcing
Initially, outsourcing was focused on reducing cost through wage arbitrage by using cheaper labor abroad. This approach made the relationship with the BPO service provider adversarial from the outset and often led to disputes and even litigation. In addition, the scale of the change programme and the level of project management resources required were often underestimated.
Finance and accounting outsourcing (FAO) has undergone major transformation over the last ten years. The need to ensure business systems were Sarbanes-Oxley compliant encouraged many US corporations to outsource. BPO service providers gained expertise and credibility in meeting this need.
Some companies are consolidating their outsourcing work, citing reduction in complexity, streamlining operations and increased efficiency as benefits, while others are still taking a multi-sourcing route based on particular provider expertise. A further development is the growing convergence between the procurement and FAO markets.
Globalization opened up new opportunities for companies to outsource finance activities to service providers worldwide. Companies that choose to outsource one or more finance or business processes continue to benefit from global disparity in wages as they access new talent and expertise, such as in systems implementation and process improvement, to create further competitive advantages.
According to the Chartered Institute of Management Accountants (CIMA), outsourced service providers have more expertise in negotiating deals than their clients, so they should engage expert consultants at this stage to help starting with identifying the right provider and getting the right contract. Also, measuring the performance in outsourcing contracts and determining the appropriate reward systems and pricing of outsourcing contracts, paying attention to more risk and reward sharing agreements, should be considered in outsourcing services.
Recently, companies who intend to outsource accounting services favor collaborative partnership where benefits of business process improvements or new systems implementation are shared between the company and the provider which appears to be yielding more satisfactory results and experiences.
Benefits of Outsourcing
The Chartered Institute of Management Accountants recently released a Finance and Accounting Outsourcing report discussing the pros and cons of outsourcing services for this field. The report mentioned and elaborated on the following benefits of outsourcing services as a whole.
Cost Reduction
Outsourcing can deliver significant economies of scale by using standardised processes and leading-edge technology. Suppliers can perform finance and administration functions far more cheaply and efficiently than companies working on their own. Companies can reduce working capital, improve tax efficiency and avoid capital expenditure by outsourcing some or all of their operations.
Radical Transformation
As a strategic move, outsourcing can enable broad structural change which creates value while supporting corporate objectives.
Access to Superior Capabilities and Expertise of the Provider
Businesses can develop long term strategic relationships or partnerships with their providers. They can benefit from superior capabilities, best practice expertise and new investment in resources that a specialist provider can bring to their business.
Release of Capacity for Remaining Finance Function to Provide Business Partnering
Outsourcing of finance processes to providers with greater expertise and economies of scale can deliver large efficiency gains to the overall performance of the finance function. This allows the retained finance function to concentrate on their role as business partners, working more closely with the business to improve decision making.
Increased Innovation
Low value, non-core processes and activities are moved to an external provider. Companies can release internal resources to focus on more strategic activities – a key source of competitive advantage. Businesses that deploy an outsourcing model can shift internal resources from operations to innovation.
Outsourcing in the Philippines
The Philippines as the Top Knowledge Process Outsourcing Destination
Globalization has made the seamless delivery of information technology (IT) and business process (BP) services across countries possible. The increasing demand for IT and business process outsourcing (BPO) services has opened the doors for emerging IT and BPO destinations such as India, the Philippines, China, and Russia and was estimated to reach as high as US$180 billion in 2010.
The Philippines, in particular, has emerged from a call center outsourcing destination to a competitive and top knowledge process outsource (KPO) destination catering to higher-end services such as accounting, e-commerce, web marketing, web development, software development, legal services, and others. Not only that clients reduce and control their operating costs but also, maximize productivity and get high quality and reliable services. Some factors to be considered in choosing a KPO destination are the quality of human capital, location, infrastructures, and costs.
Quality of Human Capital
Labor force has been one of the Philippines’ advantages in their region. As reported by a reliable and reputable international investment consulting firm, the Meta Group, the Philippines ranked 1st in terms of knowledge-based and skilled workers availability. In addition, as reported by the Philippine EcoZones Association, the Philippines is the largest English-speaking population in Asia and 3rd in the world, offering a large pool of educated and computer-literate manpower that can provide world-class financial, legal, accounting, and other support services. Aside from English proficiency, literacy, and educational background, the Philippines’ notable cultural affinity to the US makes it easier for both parties to conduct businesses.
Strategic Location
The Philippines is strategically located in the heart of Asia and is at the crossroads of eastern and western businesses, giving critical entry point to more than 500 million people in the ASEAN market. In addition, to being physically strategically located, the Philippines has been considered the best outsourcing location because of it’s powerful and reliable ICT infrastructure, availability of relatively cheap prime commercial real estate locations, and low capital cost of qualified personnel.
Infrastructure
According to the Asia-Pacific Development Information Programme, “Internet-wise, the Philippines is part of the US Internet at the end of a very long string across the ocean.” This statement is based on the observation that foreign traffic, mostly from US, makes of almost 90% of the consumer’s consumption. In addition, the Global New e-Economy Index released in 2001 reveal that the Philippines ranked 4th worldwide in terms of ICT competencies. Though dial-up connection is the commonly used mode of Internet-connection, the Philippines provide both fixed and wireless broadband capabilities.
Costs
One of the main reasons why businesses outsource is to save on operating costs without sacrificing the productivity and quality of output. Outsourcing companies reveal that businesses who operate on-shore usually achieve cost savings of only 5-10% while businesses who operate offshore, in the Philippines, through KPO providers achieve cost savings of 40-60% due to the relatively cheap cost of labor.
Through strategic operation, premium human capital development, and the best technology platforms, OP’s production facilities in the Philippines will deliver superior work outputs to provide a solid impact on our clients’ revenue and business equity.