- Published on Saturday, 17 November 2012 18:57
- Written by Max V. de Leon / Reporter
IT is said that “when
America sneezes, the world catches a cold.” But what if somehow, during
these lame-duck sessions, or at any period during President Obama’s
second term, one of his previous priority bills—the Bring Jobs Home
Act—earned the nod of the Republicans and became a law? Will the
outsourcing world get a big headache?
For the Philippines, if the words of industry players are to be taken as a doctor’s diagnosis, there is no need to worry at all.
Both the Business
Processing Association of the Philippines (BPAP) and the Contact Center
Association of the Philippines (CCAP) have issued very encouraging
statements that with or without the proposed law being enacted, the
outsourcing industry in the country will continue to thrive.
Benedict Hernandez,
president of both BPAP and CCAP, said more than just cost savings, the
Philippines puts in the table more winning propositions to American
companies that are outsourcing here.
He said four critical
aspects would make American companies still decide to outsource some of
their jobs to the Philippines, even at the risk of getting penalized by
Washington as mandated by the proposed Bring Jobs Home Act.
The first, of course, is getting quality talents at less cost.
It is a given that the
cost of labor here is far cheaper than in the United States. This is
validated by a study made by the Everest Group and Outsource2Philippines
(O2P).
In the study, which is
a major component of BPAP’s 2016 Road Map, Everest and O2P noted that
the direct operating cost per full-time employee (FTE) for English voice
work in the United States ranges from $70,000 to $72,000 a year.
In the Philippines the cost per FTE is only $15,000 to $16,000 per annum.
Already, that’s a
staggering 350-percent cost reduction. And some companies have made the
calculations that the Philippine proposition is better, even if the
impact of the Bring Jobs Home bill were considered.
“Some say there is still a cost advantage [here] even if the law were passed,” Hernandez told the BusinessMirror.
The next consideration
after cost savings is the availability of talent. Hernandez said even
the economists and experts in the US are saying that in some parts of
America, there is a mismatch between the skills available and the
outsourcing jobs needed. This is why in some places in the US,
call-center and other outsourcing jobs could not be filled up.
In the Philippines, on the other hand, degree holders are available to take on both voice and non-voice outsourcing works.
After that, Hernandez
said the cost savings that American companies are getting from the
outsourced jobs can be used by the firms for other purposes, be they
expansion in the US or offshore, hiring of additional employees, or
trainings to enhance the competencies of their existing work force.
The fourth aspect
addresses what every big company aspires for—risk management. Hernandez
said by locating some of their functions in the Philippines and
elsewhere, American companies are able to manage risks geographically.
This means that if something bad happened in one of their locations,
their operations would continue via the other sites.
“This is why we have to change our perspective on this. It is not just about cost. We offer more,” Hernandez said.
The Bring Jobs Home
bill was sponsored by re-electionist Democrat Sen. Debbie Stabenow of
Michigan and was pushed by President Obama as one of the priority
measures to address the crisis in the US.
The bill seeks to
amend the US Internal Revenue Code and mandates the grant of tax credit
for up to 20 percent of expenses incurred in relocating an operation to
American shores. It also removes the fiscal perks enjoyed by companies
that outsourced jobs to other countries.
The bill was junked.
However, with Obama winning a second term, talks of a possible revival of the bill surfaced.
John Forbes, director
and senior adviser of the American Chamber of Commerce of the
Philippines, said that while indications point to the dedication of the
lame-duck sessions only to measures that would address the looming
“fiscal cliff” in the US, no one can tell if a surprise in the form of
the Bring Jobs Home Act could spring.
Forbes said what the
US Congress is now working on is a large tax bill that aims to cushion
the impact of some revenue and spending laws that are due to either
expire at the end of the year or take effect in January. These laws
combined, including the debt limit and budget cut, are feared to put the
US economy into recession.
If a deadlock ensues
between the Democrats and the Republicans and there is a need for a
compromise, there is a long shot that the so-called insourcing bill
could be factored into the talks and placed on the negotiating table.
“But I believe that [insourcing] bill is not in the radar at this time,” Forbes said.
Then, in the new US Congress, Forbes said Filipinos need not be too concerned about the bill getting passed.
This, he said, is
because the current makeup of Capitol Hill—with the Senate led by the
Democrats and the Republicans dominating the House—would also be the
same in the incoming Congress. Even if the bill is approved in the
Senate, it is not likely to pass the House of Representatives.
Aside from that, even
if the bill became a law, Forbes said the Philippines would be in good
stead. “Like in any business, it’s all a matter of cost.”
Jojo Uligan, executive
director of CCAP, said the industry is confident the US Congress would
again junk the bill as the American lawmakers would give more weight to
benefits that US firms are getting in outsourcing some of their tasks,
particularly in the Philippines.
“BPOs in the
Philippines are very beneficial to American companies. We deliver
quality service at lower cost. We are still confident that the bill
would not pass like the last time. But we would continue to monitor the
moves of [President] Obama and we will act accordingly,” Uligan said.
BPAP, in a statement,
congratulated Obama on his re-election to a second term despite
speculation that his victory may resurrect talks on the passage of
anti-outsourcing legislation in the US Senate.
“We congratulate
President Barack Obama on his re-election. While there has been
speculation that anti-outsourcing legislation may be revisited, the
Philippine IT-BPO industry will continue to support the US economy and
American businesses to help ensure they are among the most competitive
in the world while freeing up resources to create more jobs in the US,”
said Hernandez.
He added that
“outsourcing business services to the Philippines helps make American
companies more competitive and profitable. Profitable companies hire
more workers, both here and in the United States.”
“Numerous studies have
shown that outsourcing has little negative impact on job losses and, in
fact, fosters job growth in companies that outsource business
processes. Dartmouth’s Tuck School of Business economist Matthew
Slaughter, in a study of the hiring practices of 2,500 US
multinationals, found that for every job outsourced, nearly two new jobs
are created in the US,” said Hernandez.
From a $35-billion
global IT-BPO market in 2009, the industry is expected to generate at
least $220 billion in revenues this year, according to a report by the
Everest Group. “Demand for global IT-BPO services is huge and continues
to expand at a rapid rate,” he said. “Outsourcing is a win-win
proposition, and we believe that both American and Philippine
companies—and American and Filipino workers—will continue to benefit
from the opportunities it provides,” Hernandez said.
In 2011 the
Philippines’s IT-BPO industry generated more than $11 billion in revenue
and employed almost 640,000 Filipinos. By 2016, it is expected to grow
to $25 billion in annual revenue and employ 1.3 million, according to an
industry road map.
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