SAN FRANCISCO – As the overall performance of the Philippines inches up higher, more businesses are considering the Philippines as the first-option for their software development outsourcing initiatives–and not just for call centers, reported the chief executive of a Philippines-based software development firm.
“Call centers are still our top money makers but we’re not encouraging them,” explained Exist Global, Inc. CEO Jerry Rapes at the recent “Tech Innovation” greet and meet at the Philippine Consulate here.
Exist Global, Inc., an outsourced software development company in the North American and European market, provides architecture and design consulting, application development, independent quality assurance, application maintenance and technical support services.
“The Philippines has plenty of technical talent,” he continued. “English-proficient and amazingly collaborative individuals not just in Manila, but also in IT hubs such as Cebu, (former US Air Force Base) Clark, (former US Naval Base) Subic and Davao.”
Other least known Philippine IT-BPO hubs include Sta. Rosa City, Laguna, Bacolod, Iloilo and emerging Baguio City.
Philippine Trade Commissioner Michael Alfred Ignacio echoed Rapes’ sentiment. “The Philippines used to be known as the Dark Horse of Asia. Now, not to be in the Philippines is to make a competitive risk.”
Rapes made the numbers talk: “According to (the globalization advisory firm) Tholon, Manila displaced New Delhi, and Cebu displaced Dublin, Ireland in the 2012 Top 100 Global Outsourcing Destinations.”
“Software services outsourced to the Philippines were posted at $1.5 billion, a 50 percent growth last year. There was also a 10 percent increase in the employment of Philippine IT professionals of about 55,000. And the IT-BPO revenue was at an all-time high of $13 billion– an 18 per cent growth, employing more than 780,000 in the Philippines last year.”
Top in business English
Rapes revealed that (cloud-based English literacy provider) Global English Corporation ranked the Philippines number one in the world for Business English proficiency. “Some countries turn to the Philippines to learn (Business) English. There are six direct flights from Korea to Cebu,” he added.
When language is not a barrier, negotiation is always “sweet.” Rapes declared, “Some (outsourcing provider) countries nickel and dime you. But in the Philippines, they just charge you one fee. No extras for bandwidth and other details.”
The Philippines has an annual average of 500,000 graduates every year, Rapes reported, some 200,000 them in medical/health sciences (“for your tele-medicine and transcription needs”). An estimated 180,000 are in engineering/IT related courses (“the IT courses in the Philippines are a little different in that they are apps heavy”). Almost 120,000 are in business courses. This sets the Philippines apart for scalability. “You will find your niche and the technology you want in the Philippines,” Rapes claimed.
One admitted problem is the high churn (turnover) rate, or staff retention. Rapes said the Philippines needed more middle managers to retain growth momentum. “The churn rate is almost 75 percent a year. It drives up hiring expenses. You are in a place where you could come back from lunch with a new hire. There’s no at will employment in the Philippines, and it’s very hard to lay-off people.”
Still, Rapes said, “the Full Time Engineering (FTE) revenue or bill per year for engineers in the Philippines is from $8,000 to $9,000, compared with $40,000 in India.”
Incentives to tech investors
Rapes was in the council that put together the US-Philippine Business Support and Delivery last year, to bring jobs and project to the Philippines. Among the results of this are the added benefits that the Philippine Economic Trade Zone Authority (PEZA) provides to foreign technology investors.
Aside from cutting out the bureaucratic red tape, PEZA grants foreign investors exemption from corporate income tax for four to eight years. After that expires, a five percent gross income tax can be opted instead of taxes.
Also granted are exemptions from duties on imported capital equipment, raw materials, supplies and even spare parts. Exemptions also include wharf dues and export taxes. There’s a 50 percent total cost reduction on manpower training. And permanent resident status is given to foreign investors and their immediate family members.
PEZA has reportedly 137 economic zones in the Philippines with a reputation for a four-day turn-around time for electronics. Also, it is a 24/7 “non-stop shop.” Rapes said, “It is one of the few government agencies I know where zone Director General Lilia De Lima will sign documents in front of you.” Rapes added that Subic, Clark and the Board of Investments all grant the same benefits as PEZA.
Rapes believes that the Philippines is seeing its growing share of techno-alphas for several reasons.
“Successful US-based Filipino entrepreneurs like Dado Banatao; (Exist Global, Inc. co-founder and CEO of the world’s leading cloud provider, Morphlab) Winston Damarillo; (Founder of the largest and fastest growing service provider to find care givers, Care.com) Sheila Marcelo and others have decided to come to the Philippines to share their experiences and mentor our young entrepreneurs. “
The Philippines’ IT sector can learn from being exposed to Silicon Valley, Rapessaid. “Our returning entrepreneurs have started the initiative of sharing this innovation mind set. We just need to be focused and consistent because it’s a long term initiative.”
The collaboration among government, industry and academe has been enhanced in the Philippines, creating the right ecosystem, business model, infrastructure and supply of talent. “The Philippines is currently in a perfect position to grab international recognition due to its sound business environment and performance.”
And don’t forget the fun factor. Rapes said, “We always keep our relentlessly happy psyche no matter if bad weather hits us or if projects hit a snag. I know there are hard-working engineers everywhere, but Filipinos have the most cheerful spirits of them all.”