Let's not confuse the two very different market dynamics “outsourcing” and “offshoring”. A growing trend appears to be confusing these two business functions and placing them into the same basket with negative connotations coming up when you mention the word "outsourcing". People tend to think "outsourcing" means sending jobs offshore, while it can and does, outsourcing is not always about jobs.

“Outsourcing” is a function a business takes when it cannot or perhaps would rather not do a specific business requirement or function “in-house”. A good example of this at a small business is, a Cleaning Service; while the company secretary or even the boss may very well be able to empty the trash cans, dust the desks down and give the office a vacuum, this function is outsourced to a specialist that operates in a competitive market. This outsourced business function is serviced professionally, diligently and importantly cost effectively. No jobs are lost at the business, in fact jobs are created by the business requiring a service function that is outsourced to a professional. The business is able to focus its time and efforts on the core business functions that inevitably generate more revenue. When a business outsources they generally hire a professional who is experienced in a particular field, who offers the business the most cost effective method to achieving the desired outcome for that service.

“Offshoring” on the other hand, is a function of businesses sending jobs offshore or out of the country they operate in. Offshoring staffing solutions is a growing trend in the ever changing global economy, providing entrepreneurs and business owners with real cost advantages along with the opportunity to secure highly experienced or specialised staff. A few positive ways of looking at offshoring, is the fact that the start up business owner generally can not afford the onshore staffing costs to start a new business. By staffing general administration or other non-core business functions the entrepreneurs and small business owners can efficiently manage their costs to grow a new business. The startup ultimately can then provide a valuable market place service, pay themselves a little money, and of course pay taxes in the country where they do business. All win, win, win along with the added benefit for the consumer who receives, a better service or access to products that likely has even more positive benefits to the economy as a whole. 

Interestingly, Australia and New Zealand are listed as preferred "offshoring" countries for call centre and other business services by the US, Canada and the UK. While currencies in these economies remain strong against the Aussie and Kiwi dollars, when combining that with general costs for setup, the Australian and New Zealand economies are finding jobs are being created as an offshoring destination.

On the global front two clear powerhouses presently dominate the landscape with India and the Philippines holding the bulk of the market share. With India capturing 8 of the top 10 outsourcing destinations and the Philippines 2. 

Global outsourcing revenues were estimated by Plunket Research at US $507 bn pa in 2014. This trend looks set to continue with record growth expected in 2015. Will these trends continue and which country offers emerging small businesses with opportunities with the clearest advantage to help them succeed? 

The rise in the offshoring trend resulted initially from a down turn of the US economy in the early 80s when companies were seeking ways to survive and then later the Y2K phenomenon that had half the globe worrying about computer crashes and bank accounts disappearing offered opportunities for Indian based entrepreneurs claiming they could solve the problem. The result was explosive growth.

With the continued rise of the internet and the breaking down of international boarders, BPO has now become a virtual necessity for small and medium businesses owners. The reality is that hiring offshore staff no longer comes with the challenges of setting up operations in foreign countries and in many cases the freelance market is offering even more opportunities to find talented staff.

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The Current State of Outsourcing via offshoring

Outsourcing via offshoring is a booming market, with growth figures for many of the largest sectors topping 30% over the next few years. Based on a report by the Wall Street Journal, despite an unemployment rate of over 8%, big US companies still prefer to add more jobs overseas than at home.

Who's joining in? Well, almost every country is seeking offshoring solutions in some capacity with Australia leading the way across the South East Asia region. This trend looks set to continue as banks in the region look to reduce further the cost-to-income ratios, along with the bulk of the contact centre solutions already offshore. 

Which countries are leading the way

In the world of outsourcing and offshoring, there are currently two countries that appear to be leading the way and in a position to meet the standards and requirements of both enterprise corporations along with the new growing requirements of the small to medium or emerging business markets. The two countries that have focused and invested heavily in outsourcing and offshoring are India and The Philippines. 

It's mostly always a win-win situation for companies and for the industries as a whole as they seek the outsourcing services of Filipinos and Indians. More importantly, these two countries welcome these opportunities with open arms. According to the US-based firm Tholons, the Indian Cities of Bangalore and Mumbai Ranked 1st and 2nd respectively, while Manila and Cebu ranked 3rd and 8th respectively. 

Notable other countries amongst the top 30 destinations as outlined by Tholons 2013 Top 100 outsourcing destinations include: China, Vietnam, Malaysia, Costa Rica, Poland, Ireland, South Africa and the South American countries of Chile, Brazil and Argentina. 

Tholons, 2013 Outsourcing Top100 Cities 

It's not only the United States that are investing in offshoring, many leading Australian technology firms and banks such as Telstra and Westpac have already made the move offshore, along with hundreds if not thousands of start-up businesses joining this outsourcing via offshoring economic trend. Australians hire Indians and Filipinos not only for their customer care representatives in the BPO, but also for the rich, untapped talent that professionals in these countries can offer. The talent pool is seemingly endless for different fields like technical and digital services, creative design work, writing and content creation, web design and other online related services, logistics management and more. 

The Two Giants in the Business Processes Outsourcing Industry

Business operations have never been the same since the outsourcing and offshoring industries took hold of the world. Information technology, financial services, medical transcriptions, consumer goods and other core business functions employ the services of different international BPO companies. Skilled individuals who can offer creative outsourcing services. All of these are very much present and active in both India and the Philippines.

India

India is a country with a massive population, 1.2 bn people - 2nd only to China, and is full of skilled people. As Asia’s clear leader in information technology and with the capability of speaking good English, there is no doubt why BPO companies have easily attracted multi-million dollar corporations to outsource to India.

Philippines

The Philippines, with a population of just over 100 million (12th), has slowly and steadily made its way to higher grounds in the BPO Industry as well. It has become India's serious and biggest competition to date. Its central location in the region and American/Spanish roots are offering the Philippines real advantages. 

Advantages and disadvantages of India and the Philippines in the BPO Setting

Economists and industry experts suggest that the Philippines may find it very difficult to become the leading country for outsourcing against India especially in the aspect of demographics. With the number of cities and people in India compared to a few cities in the Philippines that have active BPO firms, India most likely presently wins this outsourcing battle. The opportunity for emerging businesses to diversify their staffing solutions and offer a wide range of service options provides these entrepreneurs, startups and growing small to medium businesses real choice in how they position their services in the markets they serve. 

Tech vs Service

India has a talented workforce that can handle almost any IT-related concern and the bulk of the IT service related jobs are being sourced through India. With math and science the main strengths of the Indian education system, it makes sense that both Computer Science and Information Technology are also their strong suits. The Indian workforce can ultimately manage even the most challenging parts of business operations when it comes to outsourcing technology. The bandwidth system in India also gives them a slight edge amongst its competitors. 

From the US TV Show - Outsourced

The Philippines is really one of the up and coming offshoring countries which has seen explosive growth in the past five to ten years. This region has its advantages too; and possibly more. Young Filipino professionals are known to speak more fluent and understandable English (with a slight American twang) compared to their Indian counterparts. They are also quickly becoming highly skilled in the field of information technology like the Indians; though most of their workforce is presently in the call centre environment. When it comes to customer service offerings in the United States, Canada, Australia and the New Zealand markets the Philippines are well positioned to meet the demands of the customers when it comes to getting along with and communicating to the customer. 

Having great english speaking representatives makes a big difference, and this is to India’s disadvantage. Based on an economic survey by Nasscom, India has lost some 10% of the global BPO industry alone in 2013 and a reported 70% of all call centre activities. It seems as if big corporations that hire call centres for their services, have noticed how the level and quality of customer service has noticeably decreased in the country. India may be able to offer brilliant agents who can solve most if not all technical issue, but the Philippines is fast catching up and is offering well-trained agents who can do the same; with the added-value of a more common accent. Filipinos employed in outsourcing services are also known to be extremely polite, and with the advantage of better english speaking representatives the more customer-service oriented customers are likely to look to the Philippines to answer the call, so to speak.

From the Philippine movie - Call Center Girl

A further advantage for the Philippines is customers both large and now the small business sectors can have all of their concerns resolved in one call. Philippine call centres have named this breed of representatives, as the "universal agents." This means they can fix technical issues; answer all your general queries; and handle billing concerns all in one call. Call centres in India have been big on "tiering." You get transferred from one representative to another, which in many aspects, still achieves the same result, but can do more harm than good when passing a customer around, with potential drop outs and miss communications. Specialisation is one thing that Indian call centre representatives are very good at. On the other hand services that a firm or an individual may require, like writing, web design (as opposed to web development), and other creative outsourcing services, you will likely find yourself in better hands with the Filipino professionals.

Cebu: A City to Watch Out For

Cebu City, the Philippines “capital city of the south”, with 2.6 million plus residents has gained significant growth not only in the BPO industry (currently 8th on top 100 outsourcing destinations list), but also in other outsourcing tasks via virtual assistants and other dedicated sales and services programs. Cebu has about 25 functional IT parks, now filled with many of the worlds biggest multinational BPO firms. These companies offer a variety of jobs related to customer service, IT, back office administration, legal and accounting, medical and data transcription, travel and sales, engineering design, animation, and digital content creation. Life is also easier and far less congested in this city compared to that of Manila (Philippines biggest city).

Cebu - Asia town IT PARK

Low cost of living in Cebu is a factor for those who plan to build their outsourcing business in the city itself. The local government has existing and pending infrastructure projects that will generate more revenue for the city, and at the same time attract new investors. More jobs are likely to be created due to the new and existing BPO firms that are currently investing or expanding in the new cyber hubs across the city.

Cebu City also breeds great english speaking professionals. You can find an efficient workforce who are capable as call centre representatives, but you can also hire professionals like writers, graphic designers, editors and virtual assistants. Some of them are self-employed, and are able to manage clients online and work according to their own pace. Many of them, however, are very much willing to work with new companies, and startups like those that are Australian-owned and managed. If you're an Australian company that seeks efficient and talented workforce, you will be amazed at how welcoming and how professional Cebuano employees are. 

Cebu - Fuente Osmeña Circle 

A significant factor and likely the primarily reason for the growth in this city located in the south is due to the fact that Cebu has three very good state universities and several privately-owned competitive colleges and universities. With english as the main mode of instruction in schools, and a province of academically-inclined individuals; you will certainly win if you choose a workforce composed of hardworking Filipinos. Who knows how this trend will continue over the next 2-5 years, though Cebu is definitely a city likely to contend one of the top positions in the field of outsourcing destinations.

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A Personal Experience with Outsourcing to Cebu

A view from the Transeo Cebu office at night :)

As you the reader may be aware, Transeo is an emerging BPO services company. We're based in Sydney with offices now in Cebu and provide a range of Digital Marketing, Social Media and Sales related services targeted at emerging online businesses. We’re changing the landscape again in the BPO space, by building a young, energetic, social media driven firm by breeding true entrepreneurs at our company. With each staff member being given the opportunity to manage their affairs and business units in a unique way. We wanted to change the culture of the contact centre and offer a more friendly customer focused services business.

Initially you might be considering outsourcing and offshoring to the Philippines, if you are, that's great, you're on the right track and here’s some more good news. If you're willing to think long term and work with your chosen staff members to build your business, it can be done relatively easily. Like in any business you build on a certain level of respect to earn your fellow employees trust, then you grow and build from there. 

Advancements in technology have further enabled us to seamlessly blend our Sydney and Cebu offices together. This has allowed us to easily collaborate and work together to achieve our business objectives. 

While it might seem that there would be a number of difficulties in finding the right staff or hoping that your chosen employees or contractors will buy into your business idea to get the job done for you. There are many GenY and now GenZ young men and women that are keen and eager to get ahead in life. 

From a personal perspective there were a lot of expectations early on and its been a great journey so far. Its pleasing to announce that Cebu has delivered well above expectations for growing a service driven company that could meet the increasing demands of our Australian business customers. The future holds much optimism for growth in the BPO space and Cebu is a place that comes highly recommended for other Australian businesses seeking outsourcing and offshoring opportunities.

If you'd like to learn more about how you to can build your business offshore then I encourage you to send an email to mail@transeo.com.au and Ill help answer any of your questions.

But Which Country Does It Better?

There are and will likely be many more debates related to this topic. For now there are those who say that India is still the leader and is still the most preferred country for BPO services. As our economies continue to follow the information technology curve India is of course well positioned with very low labour costs in an increasingly expanding nation. 

Market analysis shows that India likely needs to achieve even greater heights by further innovating and being more dynamic in the emerging outsourcing fields like social media, marketing and digital design, if they want to stay at the top. Should India fail to adapt to the market changes then the Philippine destinations including Manila and Cebu will possibly replace the Indian cities Bangalore and New Delhi in the global outsourcing destination rankings. 

Cebu - Ayala Business Park, where growth is exploding year over year

You simply cannot discount the fact that the Philippines has a variety of talented professionals that are eager to succeed and they approach these different business fields in a completely new way. In fact, according to various studies and research groups, the Philippines is estimated to continue its explosive growth, with increased revenues by approximately 20%-30% this coming financial year and will likely see steady growth over the next 3-5 years.  The one determining factor could be the position of the Philippines and there ability to adapt to the South East Asian markets offering cultural advantages. 

What ever country, or destination you choose for your outsourcing and offshoring needs, one thing appears to remain the same, your business will change for the better once you realise the power that these emerging offshoring countries has to offer you in creating unique and dynamic businesses. 

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About the Author

 

About Adam Mole

Adam is the proprietor of start up BPO company Transeo and has been working with offshore and outsourcing services for more than 20 years. Adam is passionate about small business. He likes to write about his experiences in sales and startup business ventures. In his spare time you'll find him on one of Sydney's south coast beaches surfing and smiling. Email Adam at adam.mole@transeo.com.au and follow Adam on Twitter @adam_transeo.