The Philippines is a top global outsourcing destination.
In 2005, McKinsey discussed the merits of the Philippines as an offshore outsourcing destination.
Much has changed since 2005, but the Philippines remains a top contender among global outsourcing locations. It ranks 10th in ATKearney’s 2019 Location Assessment Index, 6th in Tholons’ 2020 Services Globalization Index, and 18th in 2021 Tholons’ Global Innovation Country Index. The country’s capital, Manila, also ranks 8th in Tholons’ top 100 super cities (i.e., the Global Innovation City Index).
Indeed, for now (and in the foreseeable future), outsourcing in the Philippines is an excellent option for business leaders looking for an offshore location to outsource their business operations.
Think Alphabet, Amazon, Meta, HSBC, Shell, and other major U.S. and U.K. conglomerates; chances are high that some of these conglomerates’ business functions have been outsourced to the Philippines.
The following are some of the reasons for the Philippines’ continued dominance in the global offshore outsourcing stage.
1. Cost Savings
In North America, a developer’s annual base pay is around $81,000. In the Philippines, it’s a little over $26,000. Outsourcing one developer role in the Philippines can net a software company approximately $55,000 in salary savings annually.
If you need ten developers, you’ll pay only $260,000 in salaries yearly if you outsource these positions to the Philippines. In contrast, if you hire people in the United States, you’ll spend $810,000 in annual developer salaries.
By outsourcing to the Philippines in this scenario, you can save a whopping 68% in salary costs. That’s not even counting the amount you’ll save on office rentals.
As a case in point, Grade A offices in Makati City, Philippines, cost an average of $1.95 per square foot per month. In downtown Los Angeles, the average office rental rate for the same period is $3.50 per square foot. In West LA, office space rentals can range from $3.76 to $4.96 per square foot per month.
Given these figures, it’s clear that setting up an office in a desirable location – one accessible to public transport, with the conveniences employees prefer – in the Philippines is cheaper than in the United States. When you add the money, you’ll save in office space rental to your salary savings, outsourcing to the Philippines equates to a significant operational expenditure reduction.
Cost reduction may be a necessary driver of business process outsourcing, but it is not a sufficient reason to outsource. Companies have standards, and outsourcing can only be a viable strategy if the workforce in the offshore destination has the competencies and proficiencies the outsourced roles demand.
The Philippines provides a rich pool of talent for outsourcing enterprises. Every year, over a million Filipinos graduate with a degree from more than 2,300 colleges and universities in the country. These undergraduate degree holders are distributed across a wide range of fields.
The massive number of college graduates the country produces each year makes the Philippines an excellent site for prospecting talent that can accomplish a wide range of business tasks and functions.
In case you’re curious, according to the Philippine Institute for Development Studies (PIDS), the following are the top 10 most popular bachelor’s degrees for females:
Hotel and restaurant management
Meanwhile, PIDS says the following are the top 10 most popular undergraduate degrees for males:
Hotel and restaurant management
A cursory look at the above lists will tell you the Philippine talent pool is particularly suited to customer support, front-end operations, and back-office functions, especially in the legal, medical, financial, education, and information technology domains.
3. English Language Proficiency
Two-thirds of the Philippines is deemed fluent in English. The Philippines is also the second most English-proficient country in East and Southeast Asia, just behind Singapore.
In the Philippines, students are expected to learn English (and study other subjects using the English language) from a young age. Even with the recent shift emphasizing the need to use the mother tongue (Filipino or a different Philippine language) for younger learners, English remains one of the primary mediums of instruction in the country.
The educational system also continues to put great stock in the quality of students’ spoken and written English communication skills.
Due to Filipinos’ high level of English proficiency, it is a suitable front-end operations outsourcing destination for any company serving English-speaking clients and customers. The Filipinos’ neutral English accent further makes the Philippines an ideal outsourcing destination for organizations based in English-speaking countries.
As the so-called call center capital of the world, the Philippine workforce has adapted to the demands of its major outsourcing clients. Therefore, you will find that Filipino employees working in the outsourcing industry are willing to work graveyard shifts to conform to their clients’ preferred time zones.
The Filipino workforce is also very adaptable when it comes to language. They find it easy to learn and use their clients’ vernacular.
Most importantly, Philippine history has given the people a strong affinity for Western culture. The country spent more than three centuries under the reign of the Spaniards before transitioning to American rule.
Many Filipinos have also worked and continue to work overseas. You will find them in the hospitals of London, hotels in Abu Dhabi, schools in Los Angeles, and many other places abroad. In all these instances, Filipinos find it easy to adapt to the local culture wherever they may be. They also bring a piece of the foreign culture home when they return to the Philippines.
You will find that Filipinos are very adaptable. This adaptability makes them ideal for outsourcing. Specifically, the Filipino workforce can easily adjust to your time zone, language, and cultural requirements.
Time to Outsource to the Philippines
The Philippines offers many advantages that make it a preferred offshore outsourcing destination.
The cost savings are undeniable. Meanwhile, the rich, high-quality talent pool ensures access to skilled professionals across various industries, enabling companies to meet their specific needs.
Moreover, the Filipino people’s exceptional English language proficiency and adaptability foster seamless communication, eliminating language, time, and cultural barriers—all desirable considerations that make outsourcing to the Philippines a sound business decision.