Monday, April 30, 2007

BPOing the HMOs

We've all heard about medical tourism -- rich country citizens traveling to poorer nations to have surgery, either critical or cosmetic, that they can't afford back home.
Here's the thought. If a consulting firm like Accenture can hire doctors in poor countries to shephard drugs through clinical trials, why can't it hire those same doctors to shephard rich-country patients to recovery?
In the U.S., HMOs were set up to deal with runaway health costs. Is the next stage in the battle against ever-rising medical costs offshoring the HMOs' work? As this online article suggests, the cost savings available to U.S. corporations with mounting health bills are just too huge to ignore:
In what could be the next big step in the outsourcing saga, big corporates in the US are planning to offshore their employee healthcare to India.
Wal-Mart hires over a million employees in the US – spending $8,000 on each employee's healthcare every year takes its total expenditure to a staggering $8 billion. What if Wal-Mart could save 90 per cent of that amount with help from us?
As health insurance gets painfully expensive in the US, huge cost advantages of medical procedures in countries like India are proving to be irresistible for companies there including those on the Fortune 500 list.
Mercer Health & Benefits Dr Arnold Milstein said, “We estimate that the price advantage for the most efficient Indian hospitals would be around 85 per cent to 90 per cent."
American companies are obviously feeling the heat. Many believe that unless they control the spiraling health expenditure their profits could start taking a serious hit by 2008.
A study suggests that outsourcing of health care can easily reduce the showroom price of a GM car by a thousand dollars – it's all very simple logic so what's the problem?

Tuesday, April 24, 2007

The First Gram is Always Free

There's a study out by Compact Management Consulting on how IT and BPO outsourcers deliver cost savings in the first year, and then ratchet up their prices in successive years, making them the costlier option for a company than if it kept the service in-house.

The research, based on an analysis of 240 deals worth more than £20m, found that outsourcing providers were pricing contracts to produce savings of up 18% compared with in-house costs in the first year. But costs then began to escalate, reaching 36% above comparable top quartile internal operations by year three. . . .

Simon Scarrott, head of business development and marketing at Compass, said: “With those figures, it is easy to see why the claim that all outsourcing will save money is a myth. There can be sound strategic reasons for outsourcing but saving money over the long term is not one of them.”

He added: “Outsourcing providers are not that different from an in-house operation. Indeed, they often use the same people as the in-house operation after the deal is signed and outsourcers cannot perform alchemy on a business process and turn an operation into gold.”


Hold on. There are significant savings involved if the business model is to arbitrage the labor costs between an expensive developed country's workers and the cheaper rates available in a developing country. So even if you are still using the same number of IT programmers, clerks, project managers, and customer representatives, there's no doubt the correct outsourcer can do it, cheaper.

Then again, even if you, the chief information officer of a fast-growing company, take the Compass study as gospel truth, you can always choose what Aviva has done -- get an outsourcer to build it for you so you can enjoy the first and second-year savings, and then take over the facility.

The previous month, Aviva transferred 1,600 employees in Bangalore from an outsourcing vendor, 24/7 Customer, to Aviva Global Services. It was the first move of its kind and size in the Indian business processing outsourcing industry, NASSCOM said.

When a vendor creates a call center for a company, runs it for a certain period of time, then hands the operation over to the company, it's called the build-operate-transfer (BOT) model. Typically, a company moving operations to India would build the operation from scratch, or subcontract the operation to an outsourcing vendor, or some combination of the two.

The BOT approach lets a company get going in India faster, Aviva executives said at the ceremony in Mumbai. That helps Aviva, and its Norwich Union insurance subsidiary, adapt to change, [Executive Director Patrick] Snowball said when he accepted the award.

"Our excellent operations in India are critical for us to ensure we maintain a competitive advantage," he said. Aviva has worked with three vendors under the BOT model: EXL, WNS and 24/7 Customer. Over the course of the year, 5,000 employees will be transferred from those vendors to Aviva's own offshore division. The Bangalore facility was just the first to be transferred. Later this year, the company will transfer facilities in Sri Lanka to its control, and in Pune.

73% Attrition

Can any business survive if three-fourths of its workers leave every year?

India's Economic Times has an article saying Wipro's worker attrition rate is 73% per year. Now the way Wipro calculates its "attrition rate" may inflate the headline number; the company includes persons the company had made a job offer but declined to join.

Even if the true figure is 25% a year, i.e. one out of every four jobs has a new face each year, it still speaks to the operational problems facing Wipro, and the rest of India's A-Team BPOs. Anyone care to be the HR director in an Indian BPO?
The business processing unit of IT bellwether Wipro has seen an annualised attrition rate of 73 per cent for 2006-07, a top company executive said today. The attrition rate included those who were given the offer letter for a job but did not join the organisation, Wipro BPO's Chief Executive T K Kurien told reporters after Wipro announced its financial results here. The annualised figures were calculated on the basis of 16.9 per cent in the fourth quarter of the fiscal 2006-07. During the quarter, voluntary attrition rate was 15.7 per cent. "Though the attrition rate has slowed down, a lot is still needs to be done on this aspect," he said. Outlining the reasons for attrition, he said one-third of those who dropped out were because of offers by competitors while another one-third quit to pursue higher studies. "One-third of those who left were those who had quit the industry as a whole. Women form a large part of this segment," Kurien said. The late night shift was a possible reason for women dropping out, he added. He said the company has started several programmes, including one-on-one meetings with employees to reduce the attrition of employees. Commenting on the high figure of 73 per cent as compared to rival figures, Kurien said it was because the measurement of attrition varied from company to company. Wipro BPO considered attrition right after the offer letter was handed over to the individual quitting the job, he said.

Media KPO

Who will be the first in the Philippines to provide outsourcing for America's television industry? According to televisionpoint.com, which tracks the Indian TV industry, Infosys is about to tie up with India's TV18 group to do production work and provide the technology backbone to make it easier to get the digital content we all crave.

The Philippine broadcast industry has the same untapped capabilities -- it's a matter of marrying it with someone who will have enough credibility among TV titans in the U.S. so that those services will be bought.

Sources said the TV18 group was in advanced talks with Infosys BPO and was in the process of finalising the management team that would head this venture. The size of the deal is unavailable, but according to company sources, the deal will involve use of the TV18 brand name and the technology and delivery capabilities of Infosys BPO. This will include rolling out online initiatives and creating technology platforms for high-definition content, digital content and projects that involve editing media-related content.

According to infotech analysts, Infosys BPO is increasingly focusing on getting more knowledge process outsourcing work. According to PricewaterhouseCoopers, the global media-entertainment industry is estimated at $1.3 trillion (India's GDP in the region of $800 billion) is and is expected to grow to $1,7 trillion by the end of 2009. Infosys is India's second largest infotech software services exporter. TV18, with interests in television and Internet business, runs four television channels including news and entertainment and about a dozen Internet portals spanning technology to travel.

Saturday, April 21, 2007

Infosys 300 Seats

Here's Infosys BPO on the record saying their Manila facility will be up and running within six months.

Driven by a strong customer demand, Infosys BPO is planning to scale up its presence in Manila by setting up its own delivery centre soon. Infosys BPO currently has a tie-up with Ventus, the call centre company of Philippine Long Distance Telephone Co's (PLDT) unit ePLDT Inc.

"We are looking at setting up a 300-seat facility in Manila over the next two quarters," said Mr Amitabh Chaudhry, CEO and Managing Director, Infosys BPO Ltd. "The partnership with Ventus has worked well for us and we plan to continue with it," Mr Chaudhry said.

Infosys BPO plans to use the Manila facility to serve the US clients in both voice and non-voice processes. Mr Chaudhry said clients are more comfortable with getting serviced from the Philippines because of the availability of better skill sets, especially in areas of F&A (finance and accounting), the familiarity with the US GAAP standards and in customer relationship management.

Moreover, the Philippines has emerged as an ideal offshore destination for BPO firms because of the English fluency and familiarity with American culture. The Manila facility would also double up as a business continuity centre for Infosys BPO, Mr Chaudhry said

Take note of that other phrase peculiar to the BPO industry: "business continuity." The majors are all building in redundancy and reducing the risk that a single event can undermine their ability to do business. In a post 9-11 world (and nuclear-armed Pakistan and India), it's essential to doing business.

Coming Soon: Bosses from Bangalore

When your backyard is crowded, you need to go someplace else. The success of India in making the awkward term BPO an acronym we now all know has led to homegrown problems. While India sorts it out, in the meantime the greener pasture is the Philippines. Competition for Manila's best workers who can speak straight English with an American accent is intensifying, though the labor surplus in the Philippines is still large, so the runaway bidding for qualified workers isn't there -- yet.

Expect a few announcements from major BPO players within the year, according to India's Financial Express.
The wheel has come a full circle for the Indian business process outsourcing (BPO) sector with runaway wage inflation driving the who’s who in the domestic BPO world to look for low cost destinations such as the Philippines to scale up operations.
Leading the pack is the Infosys BPO, which has already set up shop in the Philippines in association with a local partner. The company is said to be planning to ramp up its presence there through an acquisition or floating a new facility. Other BPO players such as HTMT, IBM Daksh and GenPact are also ramping up their Philippines operations, industry watchers say.
“The challenge is real. For a tier-II player who needs to grow to graduate to tier-I, Philippines are an extremely attractive base to expand into. In 2007, we expect four to five deals involving large Indian players who are moving to that country,” he said, adding, “most of the investments there would be towards setting up support operations for primary facilities based in India.” Many BPOs are eyeing tier-II locations outside Manila and Makati in the Philippines to set up disaster recovery centres for Indian facilities, sources said.

Friday, April 20, 2007

Lawson's Hiring

Ramp up. The phrase is insufficient to capture what some hiring managers face when they go from 100 to 900 employees in less than two years. Here's one company that's a microcosm of what's going on in the Philippines:

Lawson Philippine Solutions & Services Center (PSSC) Inc. last year opened its office in Fort Bonifacio Global City with less than a hundred employees. [Lawson Vice President James] Sanderson said they would be spending $5 million in payroll for their targeted 400 employees this year. [Lawson Philippines President John] Mulchrone said they have upped that number to 900 by May next year. Lawson currently employs 350 Filipino software engineers, quality engineers, and business process outsourcing staff for internal support.
In choosing between the Philippines and India, Lawson clearly prefers a nation of 90 million versus a sub-continent of 1 billion:
[Lawson's decision] to transfer operations in the Philippines is based on results of their investigation on the country’s cost advantage. Aside from tax incentives, Lawson said the “an intelligent workforce with high energy and good work ethics” can easily be tapped in the Philippines.

Mulchrone said the firm’s experience in India has much larger costs compared to the Philippines. “So for the past five years, we began transitioning our operations from India to the Philippines,” he said.

Shortage

Is there a global labor shortage? Some think so. But mention that at any of the recruitment agencies in Manila, where men and women line up in the hopes of landing that overseas job, and you would be laughed at. Perhaps the shortage has to do with qualified skilled workers. You may know how to balance a balance sheet or troubleshoot a troubled network, but if you can't speak English, you can't join the BPO workforce.
At first, the flood of three billion new workers into the global marketplace for labor was a boon to employers across the globe. But cost cutting strategies, like offshoring and outsourcing work to low-wage countries, are running out of gas far sooner than many expected.
The salaries of IT workers from Central Europe to India are rising by double-digits every year. In the past five years, Hewlett-Packard (HPQ), SAP (SAP), and even Morgan Stanley (MS) have set up shop in former Communist countries of Eastern Europe. There, a deep pool of highly qualified math and science graduates were supposed to be willing to work for a third of that paid their Western counterparts.
Yet today, IT directors in Poland can cost companies more than $100,000 a year. That approaches Silicon Valley levels. And the number of highly qualified workers is surprisingly low. Multinationals have reacted swiftly, moving operations to ever lower-cost centers. Nokia, which already employs nearly 5,000 people in Hungary, recently announced that it is building a new handset factory in Romania.
This is all rather unexpected. Five years ago companies never thought they would have to worry about human resources. China and India were supposed to have seemingly inexhaustible pools of cheap labor. Yet today, the #1 challenge for multinationals setting up operations abroad is finding and keeping good workers.

The Global Labor Shortage: "The Saudi Arabia of Outsourcing"
India accounts for 65% of all IT work performed offshore. This is largely thanks to its seemingly limitless supply of low-cost engineers and other professionals. Yet, not all is as it seems. India produces 400,000 engineering graduates a year (five times as many as the United States) and a stunning 2.5 million university graduates overall. Yet only about a quarter of India's college graduates are up to snuff. The odds at top Indian companies are even worse. Some 1.3 million people applied to tech-services giant Infosys last year. Fewer than 2% of those were employable.
Graduates of non-elite schools suffer from weak English skills. The quality of faculty and courses is sub-par. In-house training programs for new recruits at top Indian IT services firms such as Infosys (INFY), Genpact, and Tata Consultancy Services fill some of the gaps. But by 2010, India will have a shortfall of 150,000 IT engineers and 350,000 business-process staff.

Tuesday, April 17, 2007

Out-Doing the Outsourcers

Business Process Outsourcing is the current jargon of choice to encompass an industry helping the Indian and Philippine economies modernize. Do you date yourself when you say the term should just be simplified to "supplier"? After all, does not Toyota Motors, the world's most valuable automaker, rely on outsiders to provide key parts for its machines? Nowhere in their lexicon do they refer to it as BPO/KPO. In the electronics industry, the term is contract manufacturing, such as Microsoft leaving it up to Flextronics to manufacture the hardware for its Xbox.

Now when you hear the name Accenture, the first thing that comes to mind is "consulting." Here's an interesting piece from BusinessWeek. You would not normally associate the name Accenture with the "d-word".

To see how Accenture is offering hard-to-match services, take a look inside the company's Life Sciences Center of Excellence in Bangalore. The sprawling office building houses dozens of medical doctors, PhDs, pharmacists, math whizzes, and statisticians. They work alongside biology grads to prepare clinical trial reports for the world's top drug companies.These high-skill employees—all of them Indian—coordinate closely with business consultants who are on site with clients around the world. Accenture consultants help clients revamp the way they handle the trials essential to getting new drugs approved by regulators. Once those processes are sharpened, Accenture software programmers in Bangalore design databases and algorithms for storing and analyzing clinical data. Accenture people distribute electronic forms to physicians who conduct the trials. Accenture's physicians review the data to spot errors and, when necessary, get on the phone with doctors conducting the trials. When all the data are collected, they analyze them for safety and effectiveness and write reports. All told, Accenture has cut the average time to prepare reports from six months to a few weeks. Each day saved is worth about $1 million to a drug company.

But just as important, one client, Wyeth Pharmaceuticals Inc. (WYE ), says it has been able to hand off huge chunks of work to a partner that can perform them even better than it can. "We are launching drugs that otherwise would have been held up by our inability to handle the work," says Robert R. Ruffalo Jr., Wyeth's president of research and development.


Of course, few businesses like to refer themselves as "suppliers" because of the connotation that what they are providing is a commodity. But anytime a business changes its value proposition to the customer from "doing things cheaper" to "doing things you could not do," that supplier becomes a powerful force -- and then the buyer wouldn't care what term is used.

C'mon, Aussie, C'mon

It's somewhat hilarious what some people will say as they face stiff competition for business. Some resort to FUD (fear, uncertainty, doubt) attacks. Australia's Sunday Telegraph writes about medical records for transcription being sent to India, Pakistan and the Philippines, where costs are half those in Aussie Land.

Lyndie Arkell, chief executive of the wholly Australian transcription service OzeScribe, described the quality of overseas transcriptions as "absolutely terrible".

"There is a large industry sending work to India because there are doctors who want cheaper transcriptions," she said.

"But they are violating privacy laws and disrespecting their patients' privacy. I don't think patients go to their doctors thinking their records are going to end up in India."

Mistakes and mix-ups in medical terminology are common among overseas transcribers who cannot understand Australian accents, she warned.

Examples included confusion between "hypo" and "hyper" and "perineum" and "peritoneum".

And so mate, only Aussies can understand bloody Aussie accents. No Sanjit or Rajiv or Jose could ever hope to understand the inscrutable Down Under Droll. Crikey.

Monday, April 16, 2007

Using Your Accent With Accenture

Accenture is opening its seventh office in the Philippines in a massive expansion that will see capacity jump by about 50%, and employment by 36%, according to Philippine press reports. It's all good for those with the proper accents to man the call centers or the skills to do global accounting and programming, not to mention the ability to be productive in a time zone not of your own.

Note to managers: if your lease on office space with excellent telecommunications facilities is expiring soon, make sure you renew and lock in your rates. Landlords are seeing strong demand for prime space.

All Headline News gives us the Accenture capacity figure:
Accenture currently operates seven facilities in the Philippines, with a total of more than 10,000 contact center seats. Its latest and biggest facility is housed at the Robinsons Cybergate Tower II in Mandaluyong City, which has 5,000 contact center seats. Accenture is looking to end its fiscal year with a total of 15,000 seats, including the planned Cebu center, which will initially house 500 seats but will be ramped gradually.
While Inquirer says this about its headcount:
The company expects to have a total of around 15,000 employees in the country by the end of its current fiscal year in August.

Basilio Rueda, senior managing director of Accenture's Global Delivery Network, said that in the Philippines, call center operations exhibit the biggest growth in terms of employee count. In terms of revenue, application development contributes the highest at about 40 percent.
Here's the rub. If you assume a generous yield of one successful hire for every 10 applicants interviewed, that means Accenture has to churn through 40,000 people to get its workforce up from the current 11,000 -- by August.

The Shot Heard in Illinois

How much ammunition is left in the PLDT arsenal? They certainly have not been keeping their powder dry.

SPI, the wholly owned subsidiary of ePLDT Inc., which in turn is the wholly owned subsidiary of PLDT, said today it is spending at least US$44 million to buy Springfield Service Corp., a BPO assisting doctors in sending out bills and getting paid. Illinois-based Springfield adds 383 employees to SPI's headcount. Valuation is at 1.5 times forecasted revenue of $30 million in the year ahead. Last year, SPI spent $35 million for medical transcription company CyMed Inc. of Virginia, which had 2005 revenue of $19.6 million.

"The inclusion of Springfield's service offerings in our healthcare portfolio allows us to further strengthen our relationships with the more than 400 hospitals, multi specialty clinics and physician practices that we currently serve," said SPI CEO & President Ernest Cu.

You'll have to hand it to the SPI folks. They sold themselves for $135 million, and in less than a year have convinced their new master to open the checkbook for $79 million of additional spending. (No disclosure on the contingent liabilities building up on ePLDT's and SPI's balance sheets with respect to future payments. To eager bankers, take a number if you want to lend to the subsidiary of the subsidiary of the subsidiary. . . just make sure the loan guarantee you ask the parent is bulletproof.)

As the saying goes, "the time to strike is when the iron is hot," or as my Uncle Chot quipped: the purse strings are looser when the honeymoon is not yet over. Regardless of the envy competitors might feel of SPI's ability to use the balance sheet of mother PLDT (the Philippines' most valuable company with a market cap of $9.4 billion) to borrow and pay for its acquisitions, the BPO playing field is rapidly changing.

Sunday, April 15, 2007

Buy, Buy, Buy

It may someday be common for a Filipino to have an Indian boss, as common as Indians reporting to American bosses. And as the BPO industry evolves in both countries, it will become common too for Americans to be reporting to Filipino or Indian bosses. In the race to grow, the homegrown champions of each country will be buying what they can't develop on their own, causing office workers in the India, the Philippines, and the U.S. will experience first hand what the phrase "flat world" means.

EXL is busy scouting for companies it can scoop up to bulk up, says India's Business Standard. Some are already on the acquisition trail: in 2006 ePLDT's SPI bought an American medical transcription company, while LiveIt, a unit of PLDT's cross-town rival Ayala Corp., bought Affinity Express of Chicago for $28 million.

EXL Service Holdings, an IT services provider, is on the lookout to acquire companies in Eastern Europe, the Philippines, South Africa and China. The company is looking to mitigate its risks by diversifying into delivery and support centres in other cheaper destinations and also offer capabilities to service clients from markets other than the US.

The acquisitions, in each of the geographies, could be in the range of $25-50 million in revenue and will add capabilities in the verticals such as research and analytics where EXL is already fast gaining ground. “We have almost $85 million in cash with the company and the ability to use stock options also lend us flexibility to do at least two of the acquisitions this financial year,” said Rohit Kapoor, president and chief financial officer of EXL.

For adding the voice-based services and clients, the company will look to the Philippines and in South Africa, EXL is on the look out for adding diverse business verticals to its BPO business. The company is also eyeing to service the domestic market. “Although the size of domestic BPO-ITeS market is nothing to boast about, but our international clients who have business in India have been talking to us to set up centres that will service the domestic markets.”

Friday, April 13, 2007

One Citi's Loss is Another's Gain

Citibank, the financial colossus with 327,000 employees scattered around the world, says it will eliminate 17,000 jobs and move 9,500 to lower-cost countries.

Citibank's Philippine operations (4,100 employees) already does the accounting backroom for the bank titan's Asian operations. What will Manila gain at the expense of New York? Here's how many Citibank employees in the Big Apple will get pink slips, according to the NYTimes:

Some of the biggest body blows in the cost-cutting effort will be felt in New York, where Citigroup is the largest private employer. About 1,600 jobs will be eliminated in the city, where Citigroup has 27,000 employees and its headquarters.

An additional 200 jobs will be lost in New York State, about 75 jobs will be cut in Connecticut, and a handful will be shed in New Jersey. The first pink slips have already been handed out.

Over all, roughly 8 percent of Citigroup’s 327,000 workers worldwide, from entry-level consumer bankers to senior executives in the investment bank, will be affected.


This from Citibank Philippines:
Citigroup Business Process Solutions provides BPO, Call Center and other IT and IT-enabled services to various Citigroup consumer group operations around the region supporting 3 key domains: Citiphone Banking, Credit Operations and Transaction Services.

In addition, three regional operations are located in the Philippines: Citigroup Business Services, the global financial and management reporting center and global payment services center supporting over 60 countries in Asia, Europe, Middle East and Africa; Citigroup Information Technology and Infrastructure Philippines; and a satellite office of the Asia Pacific Banking Institute.

Thursday, April 12, 2007

Singapore vs Philippines

Sometimes, you can compare the housing markets and the level of sophistication of the banking industry by the products they offer.

If you are a Singapore office worker, you can borrow for a home loan, and you'll know what the interest rate will be for two years. Beyond that, you wouldn't know for certain, because the loan becomes variable. If you are an office worker in the Philippines, you could fix the interest rates that you will pay on your home loan for the next 25 years.

In Singapore, OCBC offers the following package fixed-rate loan:

Year 1 3.75% p.a. (fixed)
Year 2 4.00% p.a. (fixed)
Thereafter VALUE RATE Less 0.75% (variable)


In Philippines, BDO offers these rates:


9.00% fixed for 1 year
9.25% fixed for 2 years
9.75% fixed for 3 years
9.95% fixed for 4 to 5 years
11.00% fixed for 10 years
11.50% fixed for 15 and 25 years


Of course, anyone would rather borrow at 3.75% than at 11%. But having a First World economy does not always mean you are ahead of everyone.

More Choices for Punters

Like a supermarket shelf that seems to proliferate with more and more brands to choose from, the financial market will soon offer us a surfeit of BPO companies in which to invest our retirement money.

Sutherland and Genpact, both from India, are among those queuing to sell shares to the public for the first time. They will join the battle for investors' capital, a fight already being fought by publicly traded companies PeopleSupport and eTelecare. As some in the Philippines like to quip, "the more, the many-er."


After the bumper debut by EXLService Holdings and WNS on Nasdaq and NYSE, respectively, Rochester, New York-headquartered third party BPO service provider Sutherland Global Services, is eyeing a US listing to raise close to $250 million. At the same time, it is also learnt that Genpact, one of the country’s largest BPO firms, is mulling a US listing through an IPO to raise over $600 million for the company and its promoters.

The company, previously part of US-based General Electric, is planning to offload about 15% equity through a public float on either Nasdaq or New York Stock Exchange later this year, sources said. The company’s major shareholders — GE and US-based private equity giants Oakhill Capital and General Atlantic — are likely to sell part of their holding through this IPO, which could value the company at around $4 billion.

Genpact has appointed three US-based investment banks — Morgan Stanley, JPMorgan and Citigroup — for the IPO and it may file the regulatory prospectus in the next few weeks, the sources said.

When BPO Demands, The Ecosystem Responds

Office workers working in the expanding BPO industry need offices to work, right? The beneficiaries of the BPO boom include property developers busy adding supply to meet demand. Manila's skyline is changing, as surely as Bangalore's. Maybe the pace is not as fast as Shanghai's, but the change is illustrative of how one industry can be the economic engine for the rest of the country.
Real estate developer Megaworld Corporation is riding mightily on the fast-growing business process outsourcing (BPO) sector and is investing P1.5 billion ($31.2 million) in a new office building exclusively aimed at BPO operators.
Megaworld expects to finish the construction of the 27-storey Global One Center, which will house BPO players, by early 2009. The new building, which will offer 42,000 square meters of office space, follows in the heels of other Megaworld properties catering mostly to IT and BPO companies.
The country's BPO sector - which includes call centers, outsourced accounting, and transcription firms, among others - is expected to grow 20 to 30 pecent annually, putting pressure on property developers, like Megaworld, to keep up.
Jericho Go, Megaworld's first vice president for business development and leasing, said they are set to build at least 500,000 square meters of office space aimed at the IT and BPO markets in the next five years, when demand is expected to peak.
Megaworld owns the Eastwood City Cyberpark, the country's first information and communications technology (ICT) park accredited by the Philippine Economic Zone Authority (PEZA), where IBM Philippines is the developer's biggest tenant. The Cyberpark is currently home to about 60 firms, half of which belong to the IT and BPO sectors.

Wednesday, April 11, 2007

Lowering Costs for eCost

Another welcome mat to unfurl. PFSWeb , which had about 1,200 employees at the end of 2006, mostly in the U.S., opened up a customer contact center at the Tycoon Center Building in the Philippines' Ortigas business district. Capacity is 108 seats, according to TMCnet.

Their press release here:

PFSweb, Inc. (Nasdaq: PFSW) a global provider of integrated business process outsourcing (BPO) and web commerce solutions, today announced it is expanding
its Customer Care Services operations with a new 6,500 square foot customer call
center in the Philippines.
The new facility, located in downtown Manila, will initially house the customer service department for eCOST.com, PFSweb's wholly owned subsidiary. Additionally, certain support functions for eCOST.com, including an expanded web development team, will be relocated to the facility. On a case-by-case basis, PFSweb will evaluate offering this location's services to other PFSweb service fee clients. Cindy Almond, PFSweb's Vice President of Client Services, will be overseeing the Manila operations, and Mary Jennifer Nubla will be the facility's on-site General Manager.
"The Philippines offers exciting new opportunities for us to advance our growth strategy and expand our service capabilities, while maintaining high levels of customer service at a reduced cost," said Ms. Almond. "Many clients view our international presence as a key differentiator, enabling speed to market in expansion strategies. We consider this new facility to be yet another avenue to extend our market reach, reduce cost and deliver the highest level of service to our clients and their customers."

For context, PFSweb has a Canadian facility in Eastern Toronto with 22,000 square feet of space. It also has 480 seats at two facilities in Memphis, Tennessee and Plano, Texas (40,000 square feet) . Guess where most of its capacity (and jobs) will go once the Philippine facility proves itself.

As The Blue Marble Turns

If you want to view the history of the world for the past 50 years, in a way that combines hard statistical data with pleasing graphics, see this from the TED conference. You'll think twice about using "Third World" and "Developed World" after viewing it. And it will reinforce a theme that NYTimes columnist Thomas Friedman has been writing about: the world is flat.

Sunday, April 8, 2007

Welcome Perot

Few businesses in the Philippines can create hundreds of jobs in a single year. But when it's a business serving a global marketplace, it becomes commonplace.

Perot Systems(stock symbol: PER), which had $2.3 billion of revenue in 2006, recently opened shop in the Philippines. The story from Manila Bulletin forecasts their end-2007 headcount at 400.

Perot Systems, a US-based major player in business process outsourcing (BPO) and Information Technology (IT) services has started operations in the Philippines.

The company, which serves half of the global business in healthcare, over 250 hospitals in the US alone, has set up a BPO operation in Makati for the requirements of one client, Tenet Healthcare, the second biggest healthcare firm in America.

Tenet hauls in $ 8.5 billion annual revenues, covers 66 hospitals in California, Texas, Florida and Southeast US, averaging 564,000 hospital surgical patient admissions per year and 4.2 million annual outpatient visitors.

By the end of 2007, we will be employing 400 workers in Manila, 350 of them in business process operations and healthcare functions and 50 in infrastructure solutions," announced Perot Systems Global Director for Corporate Communications Joe McNamara.

Tuesday, April 3, 2007

Hither They Will Come

PeopleSupport's annual report has this to say as to why its profits rose in 2006:
Excluding the income tax benefits, the increase in net income was primarily attributable to growth in our customer management business, which enabled us to build revenues, and our move to the Philippines, which allowed us to reduce our operating costs, improve our margins and offer cost savings to our clients.

The point isn't that PeopleSupport will continue to be a profitable entity. It's that the relentless pursuit of it by companies in the U.S. makes it impossible for them to ignore the significant savings available, if only they locate in lower-cost countries like the Philippines. The hundreds of thousands of corporations seeking better bottom lines will continue to turn to companies such as PeopleSupport, eTelecare, Convergys, etc.

And when BPO companies sell customer-care services to a Fortune 500 company, and achieve 40% gross margins doing it, powerful incentives are created for even more people to enter the business. In that vortex of searching-for-savings will blossom the Philippines' sunrise industry.

Monday, April 2, 2007

Another BPO Stunner

Twice this month investors buying the BPO-growth story experienced heart attacks. In early March, PeopleSupport said it would not meet Wall Street expectations and disclosed that client Vonage would not renew a contract. Then on the last Friday of the month, ICT Group warned that earnings per share for the first quarter of 2007 would be a tenth of what they originally forecast.

Both stocks now sport charts showing steep cliffs where their prices plummted.

Here are the few paragraphs from ICT that prompted the tumble:
ICT GROUP, INC. (NASDAQ:ICTG), a leading global provider of customer management and business process outsourcing (BPO) solutions, today announced that the Company currently anticipates first quarter 2007 revenue of approximately $115 million and diluted earnings per share to be in the range of $0.02 to $0.04. This estimate compares with the Company's previous expectation of revenue in the
range of $116 to $118 million and earnings per diluted share in the range of $0.20 to $0.23.
The earnings revisions were primarily caused by capacity-related issues with two clients, both of whom are serviced exclusively from North American customer care centers.
John J. Brennan, Chairman and Chief Executive Officer, stated, "The volume of work associated with two of our clients exceeded what we had originally projected. As a result, ICT GROUP incurred significantly higher training and staffing costs as well as certain penalties that reduced revenue, all of which impacted profitability for the period."


While ICT Group maintained that 2007 revenue would exceed $500 million, Wall Street quickly abandoned the stock. One piece of bad news always elicits the Cockroach Theory -- you never find just one cockroach in your kitchen.