India outsources its outsourcing
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India outsources its outsourcing

India-based IT and business process outsourcing (IT-BPO) companies, particularly call centres, are moving more to the Philippines to use the country as a base for serving American company clients and improving profits.

India was widely regarded as the global IT-BPO leader for many years but the Philippines took over the crown in the call-centre segment from India in 2011.

Some Indian companies have now expanded to the Philippines to take advantage of a large talent pool and low costs.

Avantika Desai, senior manager for corporate relations and strategic programmes with Aegis, said the company’s profit margin from the Philippine operation was as high as 40-50%. The Indian operation does not have such a high margin because most of the clients are local companies, while the clients of the Philippine unit are Fortune 500 companies.

Aegis expanded to the Philippines in 2008 through the acquisition of People Support. It was looking for new human resources for its voice services, and the Philippines was able to provide a pool of workers with good spoken English skills. It benefited initially from tax exemptions and reduced costs, but competition in the BPO industry has pushed up salaries and the government has increased the minimum wage, so cost savings are no longer as great.

“In India, the wage cost is now lower than in the Philippines, but we have to pay higher costs for taxes. In the Philippines, we pay less tax, but the wage cost is increasing,” said Ms Desai.

However, Aegis is still happy with the operation in the Philippines because it has the opportunity to serve international clients that pay more for its services, she added.

Asheesh Mehra, head of BPO for Asia Pacific, Japan and the Middle East with Infosys, said that the primary reason for doing business in the Philippines was the demand of customers who are looking for English-language support for voice-based service.

Another supporting factor is low real-estate rental costs, making the Philippines one of the most competitive locations for the BPO industry. Strong support from the government is also present in the form of tax incentives.

In terms of operating cost, he said, the Philippines now was generally priced marginally higher than India, depending on the skills and domain requirements. India also has the advantage of offering a unique combination of cost efficiency and quality in his view.

Mr Mehra added that although the Philippines was very promising for the BPO business, Infosys’s Indian operation remained the strongest base in terms of scale of operations. The company has six centres in Bangalore, Chennai, Pune, Jaipur, Gurgaon and Hyderabad, offering services in finance and accounting, sourcing and procurement, sales and fulfillment, legal process outsourcing, business analytics, customer services, human resources outsourcing, and other fields.

Infosys BPO currently employs 21,950 people in India and around 1,450 people working in two offices in Taguig and Alabang in the Philippines, which it first entered in 2005.

Mr Mehra said the company planned to invest more in the Philippines by adding new centres within Metro Manila and provincial areas, and would also increase its headcount.

“The Philippines as an offshore location presents several opportunities for us,” he said. “We are seeing growth across areas such as the healthcare sector, applications support and development, higher-level finance and accounting services, human resource services and complex voice services.

“While western economies continue to be the primary market for the Philippines’ services, we have also seen demand coming in from the emerging markets of late, and expect this trend to continue.”

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