Business Process Outsourcing in the Philippines

What is Business Process Outsourcing (BPO)?

The practice of contracting specific work processes to an external service provider.

When did BPO start gaining traction?

BPO began as early as the 18th and 19th centuries in cities like London and New York.

What percentage of the global BPO market does the Philippines account for?

10% - 15%.

What is the compound annual growth rate of the local BPO sector in the Philippines?

10%.

What are the two main types of services provided by BPO?

Back office services and front office services.

What do back office services include?

Internal business functions such as billing or purchasing.

What do front office services include?

Customer-related services such as marketing or tech support.

Define offshore outsourcing.

Contracted outside a company's own country.

Define onshore outsourcing.

Contracted within the company's own country.

Define nearshore outsourcing.

Contracted to a company's neighboring country.

What are IT and software operations in the context of BPO?

Technical support functions including application development, testing, and IT helpdesk.

What are customer interaction services in BPO?

Services where third-party vendors interact directly with customers, addressing issues and finalizing sales.

What do back office transactions in BPO include?

Checks, credit/debit card processing, collection, receivables, logistics, and warehouse management.

What are knowledge services in BPO?

Services including data analytics, data mining, and internet research.

What functions are included in finance and accounting services in BPO?

Billing services, accounts payable, receivables, general accounting, auditing, and regulatory compliance.

What do human resource services in BPO focus on?

Recruitment and hiring processes.

What are some sustainability practices in BPO?

Reduction of carbon footprint, transition to green buildings, waste management, and community engagement programs.

How do organizational executives decide to outsource a business process?

By identifying functions that can be outsourced and evaluating the pros and cons of outsourcing.

Why do start-up companies often outsource back-office and front-office functions?

Because they lack the resources to build staff and support functions in-house.

What is the role of management experts in the BPO decision-making process?

To advise executives on identifying functions for outsourcing and evaluating their strategic sense.

What are some advantages of Business Process Outsourcing (BPO)?

Cost savings, better performance, and flexibility.

What are the disadvantages of Business Process Outsourcing (BPO)?

Data/security breaches, communication/relationship challenges, and unanticipated costs.

What challenges does the BPO industry face?

Shifting political and economic situations, surpassing high client expectations, workforce turnover and health issues, managing recurring interruptions, and lacking talent supply.

What is the first step in determining the scope of work for outsourcing?

Identify workflows and processes affected by the shift.

Which country is known for outsourcing front-office tasks such as customer service?

The Philippines.

What types of tasks are commonly outsourced to the Philippines?

Front-office tasks like customer service and back-end functions like data entry services.

Name two major companies that outsource customer service to the Philippines.

Facebook and Apple.

What was the employment figure for Filipinos in the BPO industry as of the latest updates?

1.3 million Filipinos were employed in over 1000 BPO companies.

What growth rate does the BPO industry in the Philippines experience annually?

8-10% growth every year.

What percentage of the global BPO market does the Philippines hold?

10-15%.

What was the increase in IT-BPO investment pledges from January to July 2020?

37%.

How many new full-time employees were added to the BPO industry in the Philippines during the crisis?

23,000 new full-time employees.

What lobbying efforts is IBPAP involved in regarding the BPO industry?

Lobbying for the permanent adaptation of hybrid work and allowing up to 100% work-from-home arrangements with tax incentives.

What is the estimated revenue of the BPO industry in the Philippines as of 2021?

USD 38 billion.

Which country was dethroned as the 'BPO Capital of the World' by the Philippines?

India.

What are two factors driving the growth of BPO companies in India?

Larger talent pool and lower cost.

What factors contribute to the growth of BPO companies in the Philippines?

English language proficiency, cultural compatibility, government support, customer service delivery, and higher political and environmental stability.

What significant contribution did Bill Gates make to the BPO industry in the Philippines?

He donated free Microsoft Apps Licenses to the PCPS program to support the growth of the BPO industry.

What incentives were provided to support the growth of the BPO industry in the Philippines?

Tax holidays, tax exemptions on imported equipment, simplified import procedures, and freedom to employ foreign nationals.

As of the latest updates, how many registered BPO companies are there in the Philippines?

Approximately 788 registered BPO companies.

What is the expected revenue increase for the BPO industry in the Philippines?

An expected 7% increase in revenue, reaching $37.87 billion.

What is the role of the Philippine Development Plan in the BPO industry?

It ensures incentivized local and international investments and other tax benefits.

What type of tasks are considered back-end functions in BPO?

Data entry services.

What is the significance of customer service in the BPO industry?

It is a major area of outsourcing, particularly in the Philippines.

What incentives are offered to investors in the Philippine BPO industry?

Investors are offered tax holidays, tax exemptions on imported equipment, simplified import procedures, and freedom to employ foreign nationals.

What legislative change supports the growth of the BPO industry in the Philippines?

The Data Privacy Act, which ensures stringent international quality data privacy standards.

What was the impact of COVID-19 on SMEs in the Philippines?

SMEs were left cash-strapped, while larger businesses with cash buffers saw sharp revenue drops.

Which industries were hit hardest by the pandemic in the Philippines?

Travel, hospitality, and tourism industries.

What was the percentage increase in investment pledges for the BPO industry from January to July 2020 compared to 2019?

Investment pledges were 37% higher than in 2019.

What percentage of employees in the BPO industry were still employed during the pandemic?

60% of employees were still employed, utilizing work-from-home strategies.

What percentage of BPO employees were working from the office during the pandemic?

22% were working from the office with government-mandated accommodations.

What percentage of BPO employees were already working from home before the lockdown?

40% were already working from home.

What challenges did the BPO industry face during COVID-19?

Challenges included addressing data security concerns, productivity impacts from inadequate infrastructure, poor call quality, and personal information disclosure.

How did the BPO industry adapt to COVID-19?

The industry provided remote workers with necessary technology and internet allowances, and adopted cloud-based work platforms.

What is the predicted rise in remote work due to COVID-19?

Remote work is predicted to rise to 300%.

What are some risks associated with outsourcing in the BPO industry?

Risks include communication and privacy risks, data breaches, and underestimating the costs of services.

What percentage of IBPAP member companies are considering employee retrenchment?

18% of IBPAP member companies are considering employee retrenchment.

What percentage of member companies do not expect growth during the pandemic?

36% of member companies do not expect growth.

What sectors experienced growth during the pandemic?

E-commerce, financial services, and logistics experienced growth due to enforced community quarantines.

What did companies invest in to adapt to the new normal during the pandemic?

Companies invested millions to facilitate work-from-home setups.

What are the main considerations in a Business Process Outsourcing audit?

Considerations include security risks, communication issues, and underestimating running costs.

What does PEZA report about the number of BPO companies in the Philippines?

PEZA reports 788 BPO companies, including large and SMEs.

What are the effects of the pandemic on headcount and revenue projections in the BPO industry?

Pandemic impacts caused changes in work and service models, affecting headcount and revenue projections.

What is the source of statistics for the BPO industry in the Philippines?

The source is IBPAP (IT & Business Process Association Philippines).

What is a significant impact of COVID-19 on the BPO industry regarding employee skills?

Workers need to upskill or reskill in high-demand areas.

What were the effects of COVID-19 on client employment status in the BPO industry?

Clients left employees on floating status.

What does the BPO industry need to address regarding data security?

The industry needs to address data security concerns and productivity impacts due to inadequate infrastructure.

What are the potential risks associated with outsourcing?

Operational restoration, non-local employees, political instability, technological changes, and specialization risk.

What is the focus of SOC 1 reports?

Controls relevant to financial reporting.

What does SOC 2 reports focus on?

Security, availability, processing integrity, confidentiality, and privacy of data.

What is materiality in the context of outsourcing?

Determining the materiality of outsourced processes to the client's financial statements.

What are the key audit procedures for a client company in a BPO audit?

Understanding outsourced processes, assessing risk and controls at the BPO, testing BPO transactions and data, and conducting substantive procedures.

What are the objectives of an external auditor in a BPO audit?

Express an opinion on the fairness of the BPO company's financial statements, assess the effectiveness of internal controls, and identify significant risks that could impact financial performance.

What are the objectives of an internal auditor in a BPO context?

Ensure adherence to regulations, identify and mitigate operational, financial, and reputational risks, assess resource utilization, and ensure accurate financial reporting.

What is the Special Economic Zone Act in the Philippines?

A form of government support providing tax incentives, exemptions, and other privileges to foreign investors in the BPO industry.

What is Republic Act No. 7916?

Also known as 'The Special Economic Zone Act of 1995,' it established the Philippine Economic Zone Authority (PEZA) to manage economic zones.

What are the benefits of PEZA registration?

Tax holidays of up to four to eight years, a special 5% tax rate on gross income, tax-free import of capital equipment, and permanent residency for foreign investors.

What are the conditions for PEZA registration?

Compulsory relocation to PEZA zones and an export requirement of 70% of total production.

What are the benefits of BOI registration?

Income tax holidays, deduction of labor expenses, and unrestricted use of consigned equipment.

What are the conditions for BOI registration?

An export requirement of 70% of total production and a Filipino ownership stipulation for foreign-owned companies over time.

What is a key difference in location considerations between PEZA and BOI registrations?

PEZA is restricted to PEZA zones or IT Parks, while BOI allows flexibility in setting up a business anywhere in the Philippines.

What specific advantages does PEZA offer for BPO?

Export manufacturing, IT, and tourism.

What specific advantages does BOI offer for BPO?

BPO research and development.

What is the role of the Philippine Economic Zone Authority (PEZA)?

To create and manage economic zones aimed at promoting industrial, commercial, and economic development.

What is the significance of understanding outsourced processes in a BPO audit?

It helps assess risk and controls effectively.

What does 'testing BPO transactions and data' involve in a BPO audit?

It involves verifying the accuracy and integrity of the transactions processed by the BPO.

What is the importance of compliance in a BPO audit?

To ensure that the BPO adheres to relevant regulations and standards.

What is the impact of political instability on outsourcing?

It poses risks to the stability and reliability of services provided by outsourced vendors.

How does technological change affect outsourcing?

It can create risks if the BPO does not keep pace with technological advancements.

What is specialization risk in the context of outsourcing?

The risk that a vendor may not have the necessary expertise or resources to perform the outsourced function effectively.

What is the primary responsibility of the banking and finance sector?

To mobilize domestic savings and convert these funds into productive investments.

What are the two general groups that compose the financial system?

Banks and non-bank financial institutions.

What are the main functions of banks?

Safekeeping money and extending loans, credit, and payment services.

List the types of banking institutions mentioned.

Universal banks, commercial banks, thrift or savings banks, rural and cooperative banks, investment banks, and financing companies.

What is the role of non-bank financial institutions?

They encourage the public to invest household savings in various financial instruments but are not allowed to collect deposits.

What are the sources of funds for insurance companies?

Premium payments for insurance policies.

What are the sources of funds for pension fund institutions?

Regular contributions to pension funds.

What are the three classifications of Philippine banks?

Universal/commercial banks, thrift banks, and rural/cooperative banks.

What services do universal and commercial banks provide?

Savings and checking accounts, loans, credit cards, investments, and foreign exchange services.

What is the focus of rural and cooperative banks?

Providing financial services to the agricultural sector and local communities.