IT-BPO Industry: Adapting through Adversities

by PRIME Philippines Research & Advisory Group  May 21, 2020

The Philippine real estate’s office sector has been significantly affected by the onslaught brought about by the COVID-19 pandemic. Disruptions in business operations caused major losses to the sector. Less expansion activities, lower rental rates, and delay in additional office space supply halted the office market growth and caused uncertainties for some businesses to continue operations in the future. Although most players in the office sector continue to face major hurdles to keep their businesses afloat, occupiers from the Information Technology-Business Process Outsourcing (IT-BPO) industry are seen to be the most resilient.

 

The IT-BPO industry employs more than 1.3 million workers in the country, aiding 9% of the economy’s gross domestic product when all factors are considered. To further strengthen the performance of the industry, the Information Technology and Business Process Association of the Philippines (IBPAP) created a 2022 roadmap. IBPAP made a revision last November 2019 to change its BPO target revenue from USD 38.9 million to USD 29 to 32 million, a 3.5-7.5% slash on its expected computed annual growth rate of 9% by 2022. While this can be seen as discouraging, diverse outsourcing investments continue to flourish in the country. In fact, IBPAP reported that the sector’s 2019 revenue rose by 7.1% from its original target of 5.2%, accumulating a total of USD 26.3 billion for the year. 

 

Given IT-BPO industry’s significant contribution not just to the office sector but more significantly, to the country’s economy, it is among those who have been given exemptions to persistently operate during the quarantine period. Such exemptions include implementing a skeletal workforce setup, maintaining social distancing, and providing employees with a shuttle service to their homes within the immediate vicinity to aid with the current circumstances. Most BPO firms have adapted a work-from-home setup but have met challenges relating to internet access, equipment transfers, and clearance requirements from clients. Aside from these internal problems faced within the outsourcing firms, external hindrances are likely to affect the BPO industry. There is a possibility that global corporations may either re-shore jobs or diversify their outsourcing destinations to countries with stronger internet infrastructure and better work-from-home accommodations.

 

Despite these challenges, there are emerging opportunities that can facilitate the IT-BPO sector’s growth. As mentioned by IBPAP, the industry’s growth in 2019 was driven by expansions in emerging cities including Bacolod, Cebu, Davao, Iloilo, Laguna, and Pampanga. To further push this growth and to bring the IT-BPO sector outside the already saturated Metro Manila, increasing the number of PEZA-accredited zones in emerging cities should be considered and office building developers should look into expanding to these emerging areas. 

 

In a disclosed statement, IBPAP also noted that a significant number of new investors have set up their operations in the country, catering to services in health care, finance and accounting, human resources, IT and software, and content moderation. Seeing the growth of emerging segments in the BPO industry, it can be expected that these segments can keep the industry afloat. 

 

As with all other real estate sectors, operations in the office industry have been left vulnerable in the wake of the pandemic. The office sector is anticipated to recover as early as next year if losses and damages are kept to a minimum within the end of this year. Industries like the IT-BPO industry continue to adjust to new working practices and managing shifts in demand, although the need for transition has been abrupt. Addressing all the hindrances and opportunities must be prioritized as stronger demand from global companies can be expected and the need to outsource their businesses arises during this setback. Regardless, the Philippines remains a premier investment destination for IT-BPM operations due to the country's competitive wages and mature BPO center hubs.

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