East West Commercial Real Estate

The outsourcing industry, also known as BPO, in the country is the latest fad; more so, is the most lucrative field at present. Employing more than 2 million Filipinos, it is considered as one of the last strongholds of a struggling economy. It being so, territorial expansions are currently being made outside established commercial districts like Makati and Ortigas. Pampanga, Baguio, and Davao Cities are some of the few that have been added to the growing business outsourcing network.

As different markets are growing at various rates around the world, the concept and scope of outsourcing is still evolving. This could only mean that there is plenty of space for growth. From formerly outsourced services such as financial assistance, online helpdesks, mailroom services, manufacturing, telemarketing and business consulting, top companies are now investing as well into the prospects of outsourcing record management, advertising, administrative information systems, supply/ inventory, recruitment, and reprographics. This only shows that the pressure for the industry to expand their services – vertically and function-wise – and improve their services in order to accommodate clients’ demands is high. In embracing outsourcing, the impetus to execute strategic and careful planning of their workflows is recommended.

Below are the drivers behind today’s outsourcing decisions:

Accelerated reengineering benefits. Reengineering aims for dramatic improvements in critical measures of performance such as cost, quality, service, and speed. By outsourcing a non-core function to a world class provider, the organization can begin to see the benefits of reengineering.
Access to world class capabilities. World class providers make extensive investments in technology, methodologies, and people.
Cash Infusions. Outsourcing involves the transfer of assets from the customer to the provider.
Free resources for other purposes. Outsourcing permits an organization to redirect its resources, most often people resources, from non-core activities toward activities which serve the customer.
Function difficult to manage, or out of control. Outsourcing is certainly one option for addressing this problem.
Improve company focus. It allows company focus on its core businesses by having operational functions assumed by an outside expert.
Make capital funds available. There is tremendous competition within most organizations for capital funds. Outsourcing can reduce the need to invest capital funds in non-core business functions.
Reduce operating costs. An outside provider’s lower cost structure, which may be the result of a greater economy of scale or other advantage based on specialization, reduces a company’s operating costs and increases its competitive advantage.
Reduce Risks. Shared investments spread risk and significantly reduce corporate jeopardy born by a single company.
Resources not available internally. Companies outsource because they do not have access to the required resources within the company.

To conclude, Oracin and Boyd (2008) gives essential guidance on how BPOs should evaluate how they might execute strategies given current state of the constrained economic climate:

Evaluate your “operational” delivery infrastructure and determine how it can scale both up for large international opportunities and down to meet the requirements of midsize businesses. Significant opportunities await those that can demonstrate their ability to support both large and midsize businesses.
Determine which model, build-buy-partner, best suits your strategic vision. If you are a new entrant in this market, adopt the partner model to not only gain quick transaction but also to learn what works best.
Pay close attention to existing contracts especially in these economic times, to ensure that your clients believe you are bringing true value with your outsourced services.
Focus on the growth markets, especially managed print services and imaging and document archival opportunities. The former will provide you with a beachhead with your clients and the latter will provide insights into the client’s document-intensive processes and the opportunities that reside there.
Solicit and engage large BPO that are aiming to take complete control over entire business functions for their clients. The numbers in this market are very large and there are significant opportunities for partnerships to subcontract specific functions within the processes.

BPOs are fairing well despite economic crisis. Resorting to this option for companies still appear to be the cheaper option to go. Trend shows that outsourcing is a profitable industry based on general industry reports and individual financial statements of several companies.

Bernard Joseph Esposo Guerrero. Member, International Honor Society of Phi Kappa Phi. Graduate Student, Industrial Relations, University of the Philippines Diliman.