Philippine BPOs: Getting Ahead of the Automation Curve

The Philippine workforce is the country’s main comparative advantage on BPO.
The Philippine workforce is the country’s main comparative advantage on BPO.

By Sameer Khatiwada

By leveraging new technology, the Philippines can pave the way for sustainable and jobs-rich growth in business process outsourcing.

The business process outsourcing (BPO) sector became a major player in the Philippines two decades ago due as new technologies emerged to deliver unprecedented connectivity. Today, the country commands 13% of the global BPO market. The sector accounts for 6% of gross domestic product and directly employs 1.2 million Filipinos.

However, the 4th Industrial Revolution could change that narrative. Technologies such as artificial intelligence, Big Data and cloud computing have the potential to transform the sector. The fast-improving service delivery automation (SDA) technology is shaping as a particularly disruptive technology for BPO.

Clerical support work represents almost two-thirds of BPO employment in the Philippines. There are concerns that these relatively low-skill, repetitive jobs could be threatened by SDA, which enables automated delivery of customer support to overseas clients.

At an IT-BPO summit held in Manila last November, BPO executives based in the Philippines explained why they are embracing new technologies like SDA. By far the most important drivers are cost and accuracy. They told me that sophisticated “chatbots” can conduct conversations with human callers due to recent advances in cognitive automation, delivering customer satisfaction at less cost.

One BPO executive pointed out that a worker can match a computer on a task like invoice processing. But after a month on the job, the accuracy of the human worker diminishes while a machine never gets bored and doesn’t make mistakes.

 Doomsday predictions of mass BPO job losses not realistic

According to an analysis by Credit Suisse, SDA could reduce costs by 15%-20% in insurance, and by 20%-25% in finance and accounting. As the technology becomes more reliable, more companies are automating repetitive tasks to reduce head-count, given that personnel typically accounts for over two-thirds of total operating costs.

Will these trends lead to job losses in the Philippine BPO industry? Some estimates claim that anywhere between 50% to 90% of BPO jobs are at risk of automation.

But doomsday predictions of mass joblessness are not realistic. Even pessimistic projections of employment growth in the sector show steady increases in job creation.

Industry leaders emphasized at the summit that the Philippine workforce is the country’s main comparative advantage on BPO, and it remains intact despite ongoing automation. Indeed, the Information Technology and Business Process Association of the Philippines expects the total number of workers directly employed in the industry to increase from 1.2 million in 2016 to 1.8 million by 2022.

Local BPO executives expect the rate of increase in lower-end clerical job numbers to decline. But they say that in absolute terms there will still be more low-skill workers in the industry than today. They add that the pace of job growth in mid- to high-skill occupations in the industry will accelerate.

 Low-skill clerical BPO jobs to decline as demand for higher skills rises

The industry association estimates that the share of low-skill BPO workers will decline from 47% in 2016 to 27% in 2022. These positions—such as customer support clerks and data entry assistants—entail process-driven tasks that can be handled by automated processes with relative ease.

On the other hand, across the industry, there will be more jobs in 5 years in medium-skill occupations such as financial data analysis and for high-skill workers like computer programmers.

This focus on leading-edge skills and services is likely to buoy demand for highly trained workers. For example, demand for trained nurses and doctors in the BPO industry has accelerated recently and is expected to grow further to meet rising healthcare needs in developed countries.

Services such as digital healthcare can provide quality treatment for overseas patients remotely, while earning higher incomes for medical professionals in developing countries than they would otherwise receive.

Moreover, BPO executives at last year’s summit pointed to a gap between what could be automated and what is actually being automated. This gap was highlighted in the recently released 2018 Asian Development Outlook, which noted that the technical feasibility of automation doesn’t necessarily make it a logical next step in economic terms.

 Technical feasibility of automation doesn’t make it logical next step

Despite the optimistic outlook, the Philippines must nonetheless confront a major education challenge if it is to maintain leadership in the global BPO market and prevent BPO jobs leaving the country. More training and education is needed to ensure the workforce is equipped to carry out the middle- and high-skill jobs that will emerge from automation.

At present, Philippine universities don’t produce enough graduates trained to meet evolving BPO job needs like higher-value services in animation, design, and software development in a range of sectors. This is important, as the BPO industry is very demand-driven. Companies will go where skilled workers are available, or “right-shoring” as one BPO executive described it.

To prepare for the likely growth in middle and high skill jobs, industry leaders point to a need for a concerted effort to upskill and reskill BPO workers.  

One proposal presented at the summit by industry leaders was a “Skills Development Fund” aimed to train IT-BPO workers in new technologies, so they become familiar with automated service delivery models. Incentives for this kind of approach would help the industry to remain globally competitive.

BPO got its start in the Philippines by leveraging new technology. By doing so again today, it can pave the way for sustainable and jobs-rich growth in the sector.