The Philippines has retained its seventh place in an annual survey of global outsourcing destinations.
The research from global consulting firm A.T. Kearney’s Global Services Location Index analyses and ranks the top 55 countries for outsourcing worldwide based on metrics in three categories: financial attractiveness, people skills and availability, and business environment.
The Index aims to bring rigor to companies’ location decisions in the globalised services labour market, in particular for back-office functions such as IT and business process outsourcing. This year’s study, the seventh edition, identifies new disruptions and threats to the outsourcing market, an outcome that presents a bigger departure from past norms than any shifts in the country rankings themselves.
Commenting on The Philippines, the report said: “The Philippines is second only to India as a player in the global outsourcing industry, where it began in contact centers and gradually climbed the value chain to now incorporate most functions in BPO and ITS.
“Since the 2014 report the Philippines has registered gains in its scores in infrastructure, environment, and tax and regulatory costs.”
While this year’s Index examined the trajectory of offshoring cost arbitrage to low-cost developing countries, and the rise of some new locations, the real story lies in the disruption being felt throughout this already disruptive industry in levels of automation of business processes.
“Even though the top six or seven countries are landing in the same order this year as 2014, looking forward, this could all change radically because the very nature of what’s being outsourced is changing,” noted Arjun Sethi, global leader of A.T. Kearney’s Strategic IT practice and principal author of the study.
“For the first time, we have a trend – automation – that could displace the leadership of the likes of India and China in outsourcing. Technology’s relentless progress continues to transform in unanticipated and fundamentally different ways not only where work is moving to, but how and by whom – or by what -it is being done. The new business model associated with this automation threatens established concepts of offshoring, while expanding the market.”
The study projected that Robotic Process Automation (RPA) will continue to ripple through the service economy over the next decade, as the rules-based, repetitive tasks that most back-office employees perform are the easiest to automate. However, a disruptor has emerged in the form of Business Process as a Service (BPaaS). While in RPA robots are “taught” to emulate what humans do using the company’s own user interfaces, in BPaaS service providers use a standardised interface and process across multiple customers – with varying degrees of automation – to quickly deliver outcomes at any scale.
Johan Gott, A.T. Kearney Principal and a co-author of the study, added: “The implications on accessibility of services and employment in these countries are massive. On the client or receiver end, BPaaS dramatically lowers the entry barriers to business data management, opening the floodgates to smaller and newer companies.
“Simultaneously, we’re seeing a shift in required job skills that will play to those countries with the most adaptable educational systems—as standardisation and automation come to dominate the simpler processes, offshorers will demand skills of a more analytic nature.”
In the 2016 ranking, India, China, and Malaysia remain the top three offshoring destinations, and Asia continues to dominate, with six of its countries among the top 10 and eight in the top 20.
Latin America and Eastern Europe both place five countries among the top 20 in the 2016 GSLI, with the former region showing a spike in people skills and availability and the latter in business environment. Helped by currency depreciation, Brazil has risen four places in this edition of the GSLI.
The study also takes a deeper dive into optimal cities for offshoring within the ranked countries.
Sethi noted: “While India and the Philippines are still top of mind when it comes to offshoring, the hunt for new talent is now taking companies beyond these countries’ capitals and major cites to tier 3 locations such as Surat, Nagpur, and Lucknow in India and Bacolod and Iloilo City in the Philippines.
“We’re also seeing a sustainability phenomenon among some big companies, called social impact sourcing, impact workers include people from disadvantaged groups and lower-income backgrounds.
“There is even an emergence of impact sourcing service providers that focus on simpler processes and flexible work arrangements operating in frontier markets such as Kenya and Nepal.
“These emerging trends are good news for these countries’ social and financial platforms, and for business as a whole.”
Now in its seventh edition, the 2016 GSLI helps companies make key location decisions for offshoring and industry development projects with objective guidance. The 55 countries in the 2016 index – four new countries have been added this year – are selected based on corporate input, current remote services activity and government initiatives to promote the sector. Each country is evaluated against 38 measurements, including real estate, to assess its financial attractiveness, people skills and availability, and business environment.
