Financial Daily from THE HINDU group of publications
Monday, Jun 09, 2003
`We are ideal mirror site for Indian cos' Mr Ralf Ellspermann, CEO, Philippine IT Offshore Network
BANGALORE, June 8
RANKED among the world's top four outsourcing destinations (by Gartner) and the best alternative to India (by Giga), the Philippines is pitching itself as an alternative to India in the ITES-BPO sector. Even as it conceded India's leading position, it wants a slice of the pie.
The Philippine IT Offshore Network, Inc (PITON), offshore networking and consulting firm in the Philippines, represents the country's top 20 IT offshore vendors, including software development firms and call centres, with an overall workforce of more than 3,000 IT professionals. Business Line spoke to Mr Ralf Ellspermann, CEO, PITON, on a host of issues.
Considering the resistance in the western markets to `exporting' jobs to places such as India and the Philippines, will the momentum behind outsourcing slow down?
Considering the prevailing global economic downturn and the weak economic outlook for the rest of fiscal 2003, lowering overhead costs has become a mission critical for corporations in North America, Europe and Asia-Pacific. Indian and Philippine service providers catering to this demand are, however, in for a lot of negotiations as price is a major factor, especially for the US companies. The Indian and Philippine service providers should heavily invest in building relationships with western prospects. In my opinion, the momentum behind the ITES-BPO offshore outsourcing business will not experience any slowdown if efforts are furthered. On the contrary, there may be an increase in offshore business process outsourcing over the next three to five years.
What does your Government offer for companies planning to set up operations there?
The Philippines offers a highly competitive offshore environment for corporations planning to establish a presence in the country. Some of the key advantages we have over other offshore destinations are our close cultural affinity towards the US, English language proficiency, highly educated and skilled workforce, highly reliable telecommunications infrastructure, and very competitive labour rates. The official language spoken is `American' English unlike the `British' English in India or IrelandThe Philippines is considered as the `best offshore alternative to India' by industry expert Giga Information Group (now belonging to Forrester Research).
I agree with the prediction of the leading industry analyst group, Gartner Research, that offshore business process outsourcing will grow from $25 billion in 2001 to $62 billion by the end of 2008. I foresee that the Philippines would capture at least five to six per cent market share over the next three to five years.
What role does the Government play in encouraging the ITES-BPO sector in your country?
Though late, the Philippines Government has placed Information and Communication Technology (ICT) in the forefront of its initiatives. Efforts are on to promote five key offshore outsourcing services call centre, data conversion and entry, multimedia and animation, application development, and medical transcription. IT-related policies and laws have been passed and attractive incentives are made available to IT and BPO enterprisesThese incentives include up to six years income-tax holiday, capital equipment incentives, and additional deduction equivalent to 50 per cent of training expenses, among others. Entry of foreign investments into the Philippines has been liberalised by allowing 100 per cent foreign ownership in all IT- and BPO-related sectors.
What dynamics do you see between India and the Philippines in the ITES space?
India is and will remain as the undisputed leader in offshore outsourcing considering the county's vast pool of human resources and the high number of IT and BPO service providers already operating in the country. China and Russia could possibly compete with India in terms of number of available human resources, but India has successfully managed to leverage the `first-mover advantage' and established a reputation as the `IT powerhouse of the world'.
The Philippines, unfortunately, did not market itself 10 years ago when India did. As I said earlier, the Philippines has key competitive advantages over other offshore destinations including India. Over the last couple of years, it has gained massive ground against other leading offshore contenders such as Ireland and Israel and ranks today among the top three offshore outsourcing destinations for US corporations. You spoke of collaborative possibilities between Indian and Philippine companies... .
Due to similar competitive advantages, India and the Philippines have been regarded as strict rivals. Despite this, there are multiple collaboration possibilities between them. Instead of competing against each other, both countries should be co-operating with each other.
Growing concerns for business continuity and disaster recovery now abound. Western clients are requiring ITES-BPO service providers to have provisions for such measures by setting up redundant or alternative sites outside their respective countries. Unforeseeable geo-political tensions and natural disasters such as earthquakes are fuelling this demand.
Owing to numerous similarities between the two , the Philippines is ideal for Indian companies to set up second operation sites. As an alternative location, it is ideal because of the relatively lower electricity and telecommunication rates compared to India.
Mergers and acquisitions between Indian and Philippine companies can also take place by the time IT-enabled services and business process outsourcing markets reach maturity.
Lastly, the two countries can also look at possible joint venture and investment opportunities.
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