Growth of offshoring in the Philippines

27 Mar 2014

In September 2005, the McKinsey Global Institute published its report ‘The Philippines offshoring opportunity’. In that report, the authors identified the potential opportunity for significant growth in the offshoring industry in the Philippines, particularly in the shared services and back office areas. During that period, the Philippines were employing approximately 100,000 people in the offshoring sector and generating about US$1.5 billion worth of services. So nearly nine years on, have these predictions been accurate?

The Philippines’ growth rate

Since then, the offshoring/outsourcing industry in the Philippines has been growing at an annual rate of approximately 30 percent. It is anticipated that based on the current growth rate that by 2016, the industry will be generating revenues of US $25 billion and will have 1.3 million direct employees (IT & Business Process Association Philippines, 2013 (IBPAP)). Additionally, the growth is now spilling over from the capital city Manila to regional areas. The growth into regional areas is assisting the broader country to benefit from the growth of the industry and will also provide ongoing access to low-cost labour by tapping into the greater Philippines population of 104 million people. The average age of the population is 22 years which provides an opportunity for overseas organisations to tap into a young, well-educated and motivated labour market.

The initial focus of the offshoring/outsourcing industry was on the provision of voice services in the customer support sector. Since those initial days, the industry has developed considerably to now include more complex business support services. These business support services are now the fastest-growing part of the industry. Back office services currently lead the way with an annual growth rate exceeding 40%. It is estimated that by 2016, the offshoring/outsourcing industry could account for about 8% of the Philippine’s GDP (IBPAP, 2013).

The Philippines has the world’s third largest annual graduate pool after India and China. Along with India, the Philippines is now regarded as a mature destination for offshoring/outsourcing services with high-quality infrastructure and government support and assistance. With excellent English proficiency, exposure to western culture and an experienced and growing talent pool, the Philippines will continue to grow its presence as a major participant in the growing offshoring/outsourcing sector. These are some of the reasons why Diversify considers the Philippines the best place to find an offshoring staff that can meet all of your company’s needs. If you have thought about or considered offshoring for your business, feel free to drop us a line to not only learn more about offshoring but also how Diversify can help you meet your objectives.

It seems that the Mckinsey Global report was right on the money with its forecasts.