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Offshore: India vs. Philippines

by Tom Milligan, Executive Vice President of Sales and Marketing, Vector BPO - July 11, 2011

Offshore: India vs. Philippines
 By Tom Milligan

 Business Process Outsourcing (BPO) is a general term used to describe when one company pays another to perform a non-core function. Due to the allure of cost savings and focus on core business, BPO is one of the fastest growing industries in the world today. Outsourcing has become such a big part of our culture that we don’t even think about it anymore. There are many types of outsourcing including Legal - or LPO, Financial – FPO, IT – or ITO, and many more that form the “BPO” group.
The Indian BPO industry has its roots in the airline industry who, in the early 80’s, moved much of their backoffice work to India to take advantage of the low cost of labor. The experiment worked and they started adding additional services and saving even more money. In the late 80’s, American Express move their Asian Headquarters to India.

In the early 90’s Jack Welch's GE opened an Indian backoffice business unit which was later spun off as a separate entity now known as Genpact. This GE business unit was the first to try voice operations in India. Despite the consumer complaints of heavy accents, the proven cost savings was assumed to outweigh the obvious customer backlash. And so, the Indian call center market was born. India ruled the offshore BPO market for nearly 20 years.

Meanwhile, in 1992, Accenture set up an ITO shop in Manila, Philippines (which has since grown to more than 15,000 employees). eTelecare launched its first voice services program in the Philippines in Q3 2000 and is considered one of the founding call centers in the Philippines.

Since those early days, hundreds of call centers and other BPOs have been opened by both large multinationals and local operators.

It took nearly 20 years, but a report from IBM released in October 2010 said the Philippines had finally passed India as the global leader in business process outsourcing. This fact has been confirmed by news organizations and Government statistics.

There are many reasons so many BPO operators are abandoning India and flocking to the Philippines. I’ll cover just 3 of them in this article:

1. Cost: in the early days of outsourcing in India, low labor costs were the driving force behind the movement. The average annual salary for a US-based customer service agent is just over $32K per year. The average for India about $6K – no doubt a HUGE savings over the US. But the average Filipino call center agent earns about $3K per year – ½ of cost of an Indian agent but 90% less than their US counterparts .

2. Culture: the Philippines was a US colony from 1898 until after the end of World War II in 1946 when the Philippines became a sovereign state. The result of the nearly 50 years of Americanization is that the Philippines is very westernized.

Almost every billboard is in English. Filipinos watch American television and are HUGE NBA fans. Hollywood movies are released in the Philippines – often before they’re released in the US. The Philippines is also one of the few Christian countries in Asia. In short, the Philippines population and culture is very similar to that of the US and requires little to no training in the call center environment.

On the contrary, when visiting India, the first thing you’ll notice is the absence of English. Billboards, television, and other advertising are in Hindi. Dollywood replaces Hollywood and less than 5% of the population is Christian. The NBC comedy called “Outsourced” does a great job illustrating some of the cultural differences and challenges found in an Indian center.

3. English Language skills: As you can see on this chart, both countries currently employ about the same number of call center agents – about 400,000 in each country. What’s interesting is to note how many people in each country speak English as their first language – just under 250,000 in India and over 3.5 million in the Philippines . The Philippines is ranked 8th in the world in number of native English speakers while India is 20th.

If we do the math, you can readily see that while India has effectively used up all of their English speakers, the Philippines has another 3 million English speakers to choose from.

What this means is simple: English skills (even with a heavy accent) virtually guarantee you a job in India while Philippine BPOs can be very selective in the hiring process. This alone contributes to a much better experience for your callers.

So what’s the bottom line? If you’re going to offshore your call center, the Philippines offers a far better solution for your customers at a much lower cost than Indian centers.

Tom Milligan is the Executive Vice President of Sales & Marketing for Vector BPO (www.vectorbpo.com) - a leading American owned and managed call center outsourcing located in Cebu, Philippines and home to www.cash4callcenterreferrals.com; the only program that helps U.S.-based firms capitalize on the offshoring trend without going offshore.

 
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