- Published on Saturday, 17 November 2012 18:57
- Written by Max V. de Leon / Reporter
IT is said that “when America sneezes, the world catches a cold.” But what if somehow, during these lame-duck sessions, or at any period during President Obama’s second term, one of his previous priority bills—the Bring Jobs Home Act—earned the nod of the Republicans and became a law? Will the outsourcing world get a big headache?
For the Philippines, if the words of industry players are to be taken as a doctor’s diagnosis, there is no need to worry at all.
Both the Business Processing Association of the Philippines (BPAP) and the Contact Center Association of the Philippines (CCAP) have issued very encouraging statements that with or without the proposed law being enacted, the outsourcing industry in the country will continue to thrive.
Benedict Hernandez, president of both BPAP and CCAP, said more than just cost savings, the Philippines puts in the table more winning propositions to American companies that are outsourcing here.
He said four critical aspects would make American companies still decide to outsource some of their jobs to the Philippines, even at the risk of getting penalized by Washington as mandated by the proposed Bring Jobs Home Act.
The first, of course, is getting quality talents at less cost.
It is a given that the cost of labor here is far cheaper than in the United States. This is validated by a study made by the Everest Group and Outsource2Philippines (O2P).
In the study, which is a major component of BPAP’s 2016 Road Map, Everest and O2P noted that the direct operating cost per full-time employee (FTE) for English voice work in the United States ranges from $70,000 to $72,000 a year.
In the Philippines the cost per FTE is only $15,000 to $16,000 per annum.
Already, that’s a staggering 350-percent cost reduction. And some companies have made the calculations that the Philippine proposition is better, even if the impact of the Bring Jobs Home bill were considered.
“Some say there is still a cost advantage [here] even if the law were passed,” Hernandez told the BusinessMirror.
The next consideration after cost savings is the availability of talent. Hernandez said even the economists and experts in the US are saying that in some parts of America, there is a mismatch between the skills available and the outsourcing jobs needed. This is why in some places in the US, call-center and other outsourcing jobs could not be filled up.
In the Philippines, on the other hand, degree holders are available to take on both voice and non-voice outsourcing works.
After that, Hernandez said the cost savings that American companies are getting from the outsourced jobs can be used by the firms for other purposes, be they expansion in the US or offshore, hiring of additional employees, or trainings to enhance the competencies of their existing work force.
The fourth aspect addresses what every big company aspires for—risk management. Hernandez said by locating some of their functions in the Philippines and elsewhere, American companies are able to manage risks geographically. This means that if something bad happened in one of their locations, their operations would continue via the other sites.
“This is why we have to change our perspective on this. It is not just about cost. We offer more,” Hernandez said.
The Bring Jobs Home bill was sponsored by re-electionist Democrat Sen. Debbie Stabenow of Michigan and was pushed by President Obama as one of the priority measures to address the crisis in the US.
The bill seeks to amend the US Internal Revenue Code and mandates the grant of tax credit for up to 20 percent of expenses incurred in relocating an operation to American shores. It also removes the fiscal perks enjoyed by companies that outsourced jobs to other countries.
The bill was junked.
However, with Obama winning a second term, talks of a possible revival of the bill surfaced.
John Forbes, director and senior adviser of the American Chamber of Commerce of the Philippines, said that while indications point to the dedication of the lame-duck sessions only to measures that would address the looming “fiscal cliff” in the US, no one can tell if a surprise in the form of the Bring Jobs Home Act could spring.
Forbes said what the US Congress is now working on is a large tax bill that aims to cushion the impact of some revenue and spending laws that are due to either expire at the end of the year or take effect in January. These laws combined, including the debt limit and budget cut, are feared to put the US economy into recession.
If a deadlock ensues between the Democrats and the Republicans and there is a need for a compromise, there is a long shot that the so-called insourcing bill could be factored into the talks and placed on the negotiating table.
“But I believe that [insourcing] bill is not in the radar at this time,” Forbes said.
Then, in the new US Congress, Forbes said Filipinos need not be too concerned about the bill getting passed.
This, he said, is because the current makeup of Capitol Hill—with the Senate led by the Democrats and the Republicans dominating the House—would also be the same in the incoming Congress. Even if the bill is approved in the Senate, it is not likely to pass the House of Representatives.
Aside from that, even if the bill became a law, Forbes said the Philippines would be in good stead. “Like in any business, it’s all a matter of cost.”
Jojo Uligan, executive director of CCAP, said the industry is confident the US Congress would again junk the bill as the American lawmakers would give more weight to benefits that US firms are getting in outsourcing some of their tasks, particularly in the Philippines.
“BPOs in the Philippines are very beneficial to American companies. We deliver quality service at lower cost. We are still confident that the bill would not pass like the last time. But we would continue to monitor the moves of [President] Obama and we will act accordingly,” Uligan said.
BPAP, in a statement, congratulated Obama on his re-election to a second term despite speculation that his victory may resurrect talks on the passage of anti-outsourcing legislation in the US Senate.
“We congratulate President Barack Obama on his re-election. While there has been speculation that anti-outsourcing legislation may be revisited, the Philippine IT-BPO industry will continue to support the US economy and American businesses to help ensure they are among the most competitive in the world while freeing up resources to create more jobs in the US,” said Hernandez.
He added that “outsourcing business services to the Philippines helps make American companies more competitive and profitable. Profitable companies hire more workers, both here and in the United States.”
“Numerous studies have shown that outsourcing has little negative impact on job losses and, in fact, fosters job growth in companies that outsource business processes. Dartmouth’s Tuck School of Business economist Matthew Slaughter, in a study of the hiring practices of 2,500 US multinationals, found that for every job outsourced, nearly two new jobs are created in the US,” said Hernandez.
From a $35-billion global IT-BPO market in 2009, the industry is expected to generate at least $220 billion in revenues this year, according to a report by the Everest Group. “Demand for global IT-BPO services is huge and continues to expand at a rapid rate,” he said. “Outsourcing is a win-win proposition, and we believe that both American and Philippine companies—and American and Filipino workers—will continue to benefit from the opportunities it provides,” Hernandez said.
In 2011 the Philippines’s IT-BPO industry generated more than $11 billion in revenue and employed almost 640,000 Filipinos. By 2016, it is expected to grow to $25 billion in annual revenue and employ 1.3 million, according to an industry road map.
Posts
