Philippines: the new hotspot for IT firms

In a bid to manage costs, rising salary levels, attrition, besides extending their global footprint, Indian IT-BPO companies are now expanding to other low-cost destinations like the Philippines. In the last eight months, 12 tier I IT-BPO firms have set up shop in the country.

IT major Wipro Technologies, for instance, opened a business process outsourcing centre in Cebu, one of the Philippine islands, as a part of its strategy to build global delivery capabilities.

Wipro plans to hire more than 900 employees for its 45,000 sq ft Cebu facility, which will handle customer support processes. The company is also looking at establishing additional centres in other fast-growing cities in the Philippines.

Wipro is not the only Indian IT firm to do so. Mitchell Loscin, executive director, Business Process Association Philippines (BPAP), said: "We have helped firms like HTMT, ICICI Firstsource, 24/7, Genpact, GE Money, Sutherland, Aditya Birla Minacs (Transworks) and Infosys to set up base here. Besides, firms like HCL, EXL Services, WNS and Evalueserve have also plans to come here."

T K Kurien, president, Wipro BPO, said: "The Philippines is one of the largest English-speaking nations with a strong IT orientation and a talent pool of 29 million. This is one location that we definitely want to expand our presence in."

And it is not just Indian firms that are lining up. Global majors like IBM, Accenture and Citigroup are also present in the country.

While India has close to 40% of the business process outsourcing market, the Philippines is aiming to increase its share to 10% by 2010.

At present, the country earns about $3.3 billion from the outsourcing and offshoring (O&O) industry. Revenues from the O&O industry have grown over 48% since 2004. The industry employs about 235,000 people but to reach 10% share, the country needs at least a million additional recruits.

However, analysts and industry players believe that presence in the Philippines compliments operations of Indian IT firms. Earlier this year, investment advisory firm Tholons identified Manila among the top-five prime outsourcing destinations and Cebu as one of the leading emerging global destinations for outsourced processes.

"When it comes to scaling up operations, India is the only country, which has the numbers and talent pool," said an analyst. The only reason why Indian firms are looking at other low-cost regions is the need to diversify and client demand.

These firms already have a significant presence in countries like Latin American, Europe, and some parts of South East Asia as nearshore (close to the client) options.