Half a Million Jobs

The Contact Center Association of the Philippines (CCAP) has a target: 500,000 gainfully employed in the industry by 2010. If this target is achieved, what will it do to the ecosystem that serves this industry? More Manila bars, open at noon, with dark curtains to shield the sun, so that graveyard shift workers can still feel like they're going out at night? More 7-11 and Ministop convenience stores with dine in facilities? More "We will give your accent an American twang" ESL (English as second language) centers? More healthcare workers trained to diagnose and treat "graveyard disease"?

Raffy David, CCAP director, said in a phone interview that industry estimates peg the total current industry workforce at around 200,000 workers.

Since call centers began setting up around the early part of the decade, the industry has been doubling its workforce annually but has tapered off in recent years due to concerns in the supply of skilled labor.

This is one of the perennial issues CCAP wants to address in an industry roadmap currently in development. CCAP plans to unveil this roadmap, basically detailing a strategy for the industry until 2010, in its annual conference this July.

"Since 2001, we've been trying to address perennial issues like HR, including poaching of agents, and promoting the Philippines abroad," said David, who also serves as CCAP director for membership.

Blackstone Flag to Fly in Philippines

A Reuters news story in the NYTimes website says Blackstone Group has bought Intelenet Global Services of India, teaming up with its management in an 80-20 venture. The buyout price was in the region of $200 million.

This marks the first foray in the industry for Blackstone. And such big boys with deep pockets don't usually stop at one deal. Rollup strategy, anyone?

The British bank Barclays and an Indian mortgage firm, the Housing Development Finance Corporation, said separately that they each were selling their holdings in Intelenet, without disclosing the price.

Intelenet plans to expand its operations in Britain and begin services out of the Philippines and Mauritius, said its chief executive, Susir Kumar.

Manila's Construction Boom

There was a time when property developers had to rely on a "build it, and they will come" strategy. Now the world has turned -- all the big boys with capital and spare land are being approached by BPOs, i.e. "we have come, please build it." The larger BPOs are ready, willing, and eager to take up entire buildings and sign long-term leases in their rush to expand. Which goes to show that the constraint for the Philippine economy's growth engine isn't the ability to sell its services abroad. BPOs with U.S.-facing businesses are so confident of demand that they are snapping up any sizeable office space that comes onto the market. What's holding back the boom are domestic capacity constraints, be it buildings with the right cabling, or qualified managers to manage the pell-mell growth. But have faith -- the capitalist system is responding to remove those constraints . . .

SM Investments Corporation, one of the Philippines’ largest conglomerates, broke ground on its latest built-to-suit project in Makati City.
The firm disclosed to the Philippine Stock Exchange (PSE) yesterday that the project, to be called SM Makati Cybezone, is a 4- storey building at Sen. Gil Puyat Avenue, due for completion in Q2 2008. Located at the heart of the Metro’s business district, SM Makati Cyberzone will have a gross floor area of 18,700 square meters and will be occupied by eTelecare Global Solutions, Inc.
"With the growing presence of the BPO industry comes also the growing need for spaces and integrated office facilities," said SMIC vice chairman Henry Sy, Jr.
He added that "the SM Group is more than prepared to answer those needs, as we have aligned with the market demands of this growing industry to provide well-planned and integrated office facilities to BPOs and Contact Centers in strategic locations.". . . .SMIC also broke ground for its second business process outsourcing (BPO) building for PeopleSupport at the SM Baguio Cyberzone recently.

RPO

We now live in the age of the derivative acronym. First there was BPO (business process outsourcing). Then there came KPO (knowledge process outsourcing). The new acronym popping up is RPO (recruitment process outsourcing), in which the person who interviews you is not even employed by the corporation that is hiring you.

Corporations have always used head hunters to find executive-level employees.
But now the search for lower-level workers has been outsourced as well. Companies are desperate for talent, and they can't always find it on their own. Staffing firms like Spherion (NYSE: SFN) and Korn/Ferry, along with consultancies like IBM and Accenture (NYSE: ACN), have all moved into the recruitment process outsourcing (RPO) business. They find candidates, root through résumés, do background checks and even conduct initial job interviews for jobs paying anywhere from $30,000 to $200,000 a year. And the candidates often don't even know that an outsourcer, rather than the company itself, is running the show. . . .According to research firm Gartner, the RPO business was worth $1.2 billion in 2006 and is growing about 8.6% a year. Some outsourcers, however, are seeing much faster growth. At staffing firm Spherion, the RPO business has tripled in the last 18 months and now tops $50 million annually. At 4-year-old firm The Right Thing business has been tripling every year. And the deals are getting bigger. Three years ago, the biggest recruitment process outsourcing contracts were worth $5 million, according to Jason Corsello, an analyst with the Yankee Group. Now, deals are often worth more than $30 million a year. That means someone at a call center in Manila might be interviewing you for your next job. Even if the recruiter is based in the U.S. or Canada, the entire process, until the final interview, may now be conducted over the phone and online. "Face time is not part of this business," says Lowell Williams, head of the human resources practice at EquaTerra, a firm that connects corporations with outsourcing partners. "You could definitely have a job interview with someone in India or China. It's going on all the time."

Boom

The first quarter GDP figures for the Philippine economy came in last week. And as the Philippines does every so often, the figures surprised everyone: GDP 6.9 percent higher in the first quarter versus the same period a year before. It was the fastest growth in 17 years, and no professional economist or business forecaster saw it coming. This is a country that some refer to as the "Sick Man of Asia"; most people you talk to believe in keeping a portion of their savings in dollars "in case there's a devaluation." Expectations are still low; just like any brand it will take awhile for "Philippines" to become synonymous with rapid growth. Well, with an economic engine revved up by BPOs expanding faster than you can say "English language proficiency," expect several more quarters of upside.

While the economists may have to ratchet up their forecasts, anyone on the ground can tell you that deals are getting done. The stock market is ahead of things, moving to record highs. As we've argued in this blog, this is a multi-year economic boom. Banks are shaking off their trepidation at lending. Capital is flowing into the economy. It's nowhere near a China frenzy: we are simply at the end of the beginning of a powerful expansion wave.

If Citi Can Do It, So Can HSBC

HSBC , according to this press report, will add a few thousand more jobs in the Philippines to serve its US and UK customers. As more and more financial bigwigs such as AIG and Citibank cluster their in-house operations in the Philippines, you can say the Philippines is becoming the center of backroom operations -- the contradictory terms intended.

...the visiting bank official said HSBC is committed to the country in terms of expanding its banking services and its support group by increasing its Business
Processing Outsourcing (BPO) operations.
A third BPO is scheduled to open this coming year, which will increase the total employees of the bank on a consolidated basis to roughly 11,000, disclosed HSBC Philippines Chief Executive Officer Mark Watkinson. Specifically, its banking operations employs a total of 2,500 and 5,500 for BPOs.
At present, the bank has a couple of BPOs, one in Ayala-Alabang and another in PBCom Tower at the heart of the Central Makati Business District. These two service HSBC’s clients in the United States and United Kingdom.
It was explained the Philippines has an edge to service the bank’s US and UK customer base because of the natural talent of locals to speak English as a second language.

300? No 3,000

With money in the bank after selling shares to the public for the first time, eTelecare says it's busy adding capacity in the Philippines with plans to open a new 13,000 square meter site, its 13th office, in a few months. Triskaidekaphobians need not apply for any of the new jobs opening up, which will boost eTelecare's Philippine headcount past 10,000.

eTelecare Global Solutions, Inc. (NASDAQ:ETEL), a leading provider of business process outsourcing solutions, today announced it will invest in its sixth delivery center in the Philippines. The new center, located in the Annex@Shaw facility in Mandaluyong City, Metro Manila, will open in the third quarter of 2007 and employ more than 3,000 employees when fully deployed.
Funding for the new center comes from eTelecare’s recently completed initial public offering of American Depository Shares.
eTelecare is the first Philippine-incorporated business process outsourcing (BPO) company, and the second Filipino company overall, to trade on the NASDAQ stock exchange.
“Our successful U.S. IPO affirms that the Philippines is one of the top outsourcing delivery locations in the world, and that there is strong market demand for a high-quality multi-shore provider such as eTelecare,” says John Harris, eTelecare President and Chief Executive Officer.
“We plan to invest a significant portion of the proceeds from our IPO in further expansion in the Philippines,” added Fred Ayala, Chairman of eTelecare.

WaMu Chooses Cebu

Washington Mutual (stock symbol: WM) is putting in a captive operation in Cebu, the Philippines' second-largest metropolitan area.

Joel Mari Yu, Cebu Investment Promotions Center managing director, announced the entry of Washington Mutual Inc., one of US’ leading retailers of financial services catering to consumers and small business banks. He said WaMu will be among the locators of a 12-story building that will be constructed in the Asiatown IT Park (AITP).

While WaMu's entry into the Philippines will mean an addition of 1,500 jobs to the country's burgeoning BPO industry, what happens to PeopleSupport?

A Low Attrition Rate for BPO

Pop quiz. Genpact, which had US$613 million of revenue in 2006, had what attrition rate that year?

A. 15%
B. 24%
C. 32%
D. 43%
E. 55%
F. 61%

Before you answer, let's hear from Genpact, which is planning to sell shares to the public for the first time. Genpact's DNA comes from General Electric, the company that gave us Jack Welch and the mantra to either be No. 1 or No. 2 industry or get out, i.e. it was a "captive" serving the needs of GE Capital before becoming an independent company. Excerpts from its draft prospectus filed with U.S. regulators:

We have an experienced and cohesive leadership team and a culture that emphasizes teamwork, constant improvement of our processes and, most importantly, dedication to the client. Many members of our leadership team developed their management skills working within GE and many of them were involved in the founding of our business. As of March 31, 2007, we have more than 28,000 employees including over 5,500 Six Sigma trained green-belts, 300 Six Sigma trained black-belts and 60 Six Sigma trained master black-belts, as well as more than 4,500 Lean trained employees.

A key determinant of our success, especially as we continue to increase the scale of our business, is our ability to attract, train and retain employees in highly competitive labor markets. We manage this challenge through innovative human resources practices. These include broadening the employee pool by opening Delivery Centers in diverse locations, using creative recruiting techniques to attract the best talent, emphasizing ongoing training, instilling a vibrant and distinctive culture and providing well-defined long term career paths. We monitor and manage our attrition rate very closely, and believe our attrition rate is one of the lowest in the industry.

Ready?

The answer is C.

More info from Genpact:

Our attrition rate for all employees who have been employed by us for one day or more was 32% in 2006. A number of our competitors calculate employee attrition rates for their Indian employees who have been employed for six months or more. On this basis our Indian employee attrition rate for 2006 was approximately 21%, which we believe is relatively low for our industry based on statistics published by third parties such as NASSCOM. We attribute this low attrition rate to a number of factors including our effective recruiting measures, our extensive training and our strong culture.

Losing Half

If you drive around two of the Philippines' biggest metropolitan areas -- Manila and Cebu -- the burgeoning presence of the call-center industry readily makes itself apparent. Recruitment posters plaster anyplace that might harbor a budding customer service representatives and BPOs use billboards to build their brand as the recruiting war intensifies.

I recently talked to an employee of a U.S.-based call center. She is only a year out of college. Like many of her generation, she started her career with a local call center, earning her chops before transferring, in less than six months, to the American company where she almost doubled her pay.

Here's the shocker: in her training batch of 25 employees, in less than six months, more than half are no longer working for the company. Those fired were let go for frequent absences or committing too many mistakes. The voluntary resignees cited the growing workload and the stresses of the reversed lifestyle (working when the rest of the country is asleep) as the factors in giving up the good pay.

If you're an investor in any of the BPOs, make sure you pay rapt attention to their attrition rate.