Donald Trump and the Future of Offshoring in the Philippines

The result of the recently concluded US presidential election is still being felt, even weeks after Donald Trump was declared the winner. Trump’s unexpected win took the world by surprise with people having plenty of mixed emotions about what his presidency would mean not just for the United States but the global implications as well.

The concerns certainly aren’t unfounded either. Despite not taking office yet as of this writing, president-elect Trump’s policies, appointments and opinions already has heads turning, with many questioning their long-term effect on the next four years on both offshoring and outsourcing.

Though a currently touchy issue for most businesses in the Philippines, looking at the bigger picture of what could happen in the next four years will not only bring up to speed what’s been happening but also what effect it has and how it may be felt by other countries.

An Affected Industry

It’s almost no secret that Donald Trump’s platform was based on strengthening domestic policies and employment for millions of Americans. Over the course of his campaign, Trump espoused that he would “Make America great again” and one of those promises included keeping jobs within the country instead of being outsourced to countries like China. Keeping and returning jobs to America has been such a major part of his campaign that it was one of the main issues he focused on during his formal announcement to run for the presidency last year.

So it’s a policy that puts more focus on America. Why do Australian and Philippine businesses need to be concerned? While true, to an extent, Australian businesses would not be majorly affected by this policy, the Philippines and the Filipino people may feel the brunt of it and experience a major setback economically and professionally. We’ve established previously that the BPO industry is a significant contributor to the Philippines’ GDP and Trump’s remarks no doubt have plenty of businesses in the Philippines concerned about their futures and what a Trump presidency will mean for them. Business leaders in the Philippines have also acknowledged that a “weakened” BPO industry could be looming with lesser investments coming from the United States.

Promises Versus Implementation

Meanwhile, the Philippine government has also done their part into assuring local workers who may be affected by the “Trump Effect” that it is still too early to jump to any conclusions. In a statement, Presidential spokesman Ernesto Abella said that the Philippines is in a “wait and see” mode to what Trump may actually do.

Indeed, most experts in the country see Trump’s promises as mostly campaign rhetoric that may have been highlighted in order to entice undecided voters to his side. They are also quick to point out that Donald Trump is always going to have a mind for business, and that the businessman side of him will always look for new investment opportunities, especially with foreign countries. Department of Labor and Employment (DOLE) secretary Silvestre Bello has stressed that investments do not look to the Philippines to be involved in politics. “For them, as long as the climate is there for the conduct of their business, they will stay.”

Looking ahead to 2017

The Trump presidency no doubt has plenty of Philippine businesses spooked, especially those with close ties to American companies. However, by being cautiously optimistic to what could transpire in the next few months, it also shows how resilient they are and are already taking steps to prepare for whatever comes next. While acknowledging the potential setbacks that could happen, the Philippines also knows that other investments from other countries in the BPO industry may help them out in the longer run. 2017 looks to be a particularly exciting year and taking advantage of upcoming trends may also prepare them further. The offshoring and outsourcing industry will continue to be a big part of the country and it’s time for more Australian businesses to recognise the talent and skill that a Filipino staff can do for their company.

The rise of offshoring in Professional Services firms

Okay, so you’re running an accounting practice and you keep hearing about this offshoring or outsourcing thing. Apparently, there are an increasing number of professional services firms doing it.

You’ve probably read the recent AFR article on Deloitte USA’s big Indian play with ‘Deloitte US India.’ Many of Deloitte’s global offices are leveraging some of their 27,000 employees based in India to conduct a range of tasks, from professional services like administrative work on company audits, research for mergers and acquisitions through to conflict of interest checks and collections.

The opportunities are growing even more for Deloitte as well. Their offshore location has also allowed them to continue being innovative in areas such as data analytics and cyber security. The acceptance and growth of offshoring is not just limited to financial services; legal service providers, both mid and top tier, have also rapidly embraced offshoring as an enabler of growth and efficiency.

An article published by the Australasian Legal Practice Management Association (ALPMA) referenced recent findings from a CommBank Legal Market Pulse Survey. The survey results identified that over 40% of top-tier law firms have established back-office offshore teams. The survey findings also highlighted the growth of offshoring back-office functions within mid-tier firms over this same period.

Over 40% of top-tier law firms have established back-office offshore teams

This figure has gone from just 9% in the March 2015 survey to over 30% this year. In some cases, firms are even beginning to offshore front-office functions as well. Maybe you’re aware of these figures, but you’re still not really sure what it is or how it works.

The accountant in you is worried about the risks – “it might work for them but not my practice”.

Well, that simply isn’t the case anymore. Offshore employees are accessible to any business; no matter what the size or industry.
This series of posts should allay any fears and highlight that there are many benefits to offshoring, from a capacity, cost efficiency, and customer service perspective.Some of the key benefits that can be gained from an offshore approach were identified in the 2010 CPA Report, ‘Offshoring: Impact on the accounting profession‘.

These included:

  • Access to new products and services (cyber security and data analytics for example)
  • Solving domestic skills shortages
  • Increased speed to market
  • Improved service levels
  • Cost savings
  • Access to qualified personnel.

The opportunities to enhance capability, deliver enhanced service, expand services and also reduce expenditure on some roles by up to 70% can no longer be ignored.

The Rise of Virtual Assistants

Most recently, EY have begun testing the use of virtual assistants in their practice. Another recent AFR article highlighted that ‘rising costs and margin pressure from clients has forced professional services firms to reduce support staff in the local market’.

A four-month pilot program was recently completed with around 20 equity partners. With Australian-based executive assistants being paid between $50,000 – $95,000 and similarly skilled employees in the Philippines $5,000 to $20,000, the cost benefits are clearly evident. The pilot was ultimately successful and it looks to become a greater part of the firm’s overall strategy. One of the program’s Pilot Participants, Jon Pye, deputy managing partner of EY’s Asia Pacific assurance practice, said that the impact of his VA was minimal and that everything operationally “gets done.”

Better yet, junior employees will be able to access admin support services meaning they’ll be able to focus on value adding service to their clients, and ultimately, focus on more effective billing.

It’s also important to acknowledge that offshoring does not mean taking opportunities away from local employees.

It gives firms the ability to empower their local employees with more strategic and value adding work. By removing the procedural and labour intensive elements of their roles, you’re able to realise more of their capabilities and foster a culture of professional development.

The acceptance and growth of offshoring are not just limited to accounting services; legal service providers, both mid and top tier, have also embraced offshoring as an enabler of growth and efficiency.

In my next post, we’ll cover off the difference between outsourcing and offshoring. These are two vastly different options, each with their own pros and cons – getting this decision right can determine whether or not your global workforce is successful or not.

If you have any queries on how offshoring can work for your business, please get in touch with us to get started.