Philippine gov't pushes 'next wave cities' for outsourcing

Posted on February 18, 2008 admin

No Comment BOOKMARK

As part of its aggressive efforts in growing the outsourcing and off shoring (O&O) industry in the country, the Commission on Information and Communications Technology (CICT), together with the Department of Trade and Industry (DTI) and the Business Processing Association of the Philippines (BPA/P), have embarked on what has been dubbed as the “next wave cities” project.

Designed to “spread” O&O opportunities outside Metro Manila, the next wave cities project identifies cities that are viable locations for O&O investments. “This is an initiative that we are working on to try to expand the offshoring and outsourcing industries all over the country,” said CICT chairman Ray Anthony Roxas-Chua at the 8th e-Services Philippines: Global Sourcing conference and exhibition. He said these cities are expected to form regional ICT hubs, which will primarily compose the country’s Cyberservices Corridor.

DTI Undersecretary Carissa Cruz-Evangelista, head of the regional operations group at DTI, said that the heavy concentration of O&O activities in Metro Manila have resulted in the increase in salaries and rent, and in a race to get talent and infrastructure.

And the only way to address this issue is to create O&O opportunities outside of Metro Manila by generating interest among local governments and IT stakeholders.

The “next wave cities” project is expected to help government reach its goal of the one million job target by 2010. With only 300,000 employed so far by the O&O industry as of the end of 2007, the government is aggressively tapping the next wave cities as sources of talent.

Excluding Metro Manila, 15 areas have already been identified as “O&O ready” and which already have major locators, namely Bacolod, Bacoor, Baguio, Batangas City, Cagayan de Oro, Cainta, Rizal, Camarines Sur province, Cebu, Clark/Angeles, Davao, Dumaguete, Iloilo, Legazpi, Lipa, and Sta. Rosa, Laguna.

Six other areas have also been identified as “ready” locations: Cabanatuan, Dagupan, Leyte Province, Subic/Olongapo, General Santos, and Urdaneta.

Roxas-Chua said that an O&O scorecard was used to assess each city in four main categories: talent, infrastructure, cost, and business environment. The weighted score of each city is determined and compared vis-à-vis other cities.

“We are currently evaluating and validating the data that we have and hopefully later this year, we can release a ranking of the other cities that are ready for O&O investments,” Chua said.

Meanwhile, BPA/P CEO Oscar Sanez said that cities not in the list will not be left out in the strategy since cities or municipalities surrounding the next-wave cities will have roles to play, primarily to provide talent. “The way this will evolve is that cities prepare for O&O readiness and the other parts of the ecosystem have to do their thing as well. There will be cities that will host these (locators) and the surrounding cities will provide talent. Eventually, we will really see hubs since this is talent-oriented, the business will go where the talent will be,” he explained.

Continued growth

“Believe it or not, we’re still looking at the tip of the iceberg here; there are a lot of processes that can still be outsourced,” said Sanez, adding that research estimates range from $415 billion to $2 trillion in terms of the work that is still potentially “outsource-able.”

“We have very bullish targets for the industry because we see the O&O market growing despite the potential US recession. As a matter of fact, this could even potentially increase that business prospects as more jobs may be moved out of the US,” said Chua, adding that now is the time to work even harder to position the country to grow and make a mark in the global market.

“We’re not so much concerned about the demand but the competitiveness and how we can sustain this,” noted Chua. Admitting that the availability of talent remains a major problem, Chua said the short-term solution the government has is the Technical Education Skills and Development Authority (TESDA) Training for Work project which has allotted P350 million for the training of near-hires and is expected to produce between 40,000 to 70,000 potential employees. “We acknowledge that there is a skills gap; we could have gotten more jobs in 2007 if we had enough skills,” he said.

Meanwhile, DTI’s Cruz said that the government is also working with the private sector on developing the country’s capabilities in providing higher value-added services.