By: Gervy James Biagtan, MA
Last year I discussed the growth of the business-process outsourcing (BPO) industry and the notion of the midnight sun that would never set. That sun is now facing some potential and imminent headwinds in the next nine months, within the next three to five years and within the next six to 12 years.
The Duterte and Trump effect
Much discussion has been made across both mainstream media and social media about the implications of the Duterte and the Trump administrations in the BPO industry. Since Donald J. Trump started campaigning for the presidency, his key economic themes already revolved around “Making America Great”—some of which can even be associated to autarky or self-reliance. He calls for big tax cuts, steady wages, repeal of Obamacare and massive tariffs on countries that are seen taking American jobs. Such steps have serious repercussions to “source” countries, like Mexico, China, India and the Philippines. Nearly 80 percent of the outsourced work in the Philippines comes from the North American market (77 percent), while the rest comes from European and Asia-Pacific regional markets. However, these expected policies of the Trump administration (from an outsourcing standpoint) may not hold. First, his policies are mainly directed toward the manufacturing industry specific to the businesses in Mexico and China, and not necessarily a crackdown on the BPO industry. Second, even if jobs come back to America, he cannot stop other Western countries from producing overseas.
As a result, not only would the other Western countries become more competitive versus their US counterparts, but also these “outsourced” products and services will still get exported to the US. The worst that could happen but is very unlikely is a tariff war between the US and its western allies. Third, implementing his “bring back jobs to America” can be complicated. Both Dan Reyes (country head of genpact Philippines and IBPAP chairman of the board of trustees) and Travis Coates (managing director of TelePhilippines) shared the same perspective: it’s not that easy just to migrate jobs back to America. With the robust infrastructure and skillset of running the contact centers in the Philippines, migrating back the jobs to America simply cannot be performed overnight. There will also be issues of being able to distinguish, which are outsourced jobs versus which jobs are the by-products of overseas growth of the business. With the attractive cost arbitrage of offshore outsourcing, US companies can be lured to look for loopholes and workarounds to outsource amidst the call for “bring back jobs to America”. Last, both Reyes and Coates asserted that we have to wait and see when Trump becomes president.
Read the full article at http://www.businessmirror.com.ph/the-bpo-industry-thrive-in-transition/
The BPO Industry: Thrive in Transition
By: Gervy James Biagtan, MA