Best global outsourcing destinations: Cebu out of top 10

CEBU, Philippines – Cebu City is no longer in  the top 10 global destinations for outsourcing, according to the latest report by Tholons, a strategic consulting and investment advisory firm based in London.

The Tholons Services Globalization Index 2017 (TSGI) report released yesterday has placed Cebu City on the 12th spot, or five notches below its 2016 ranking.

For three years before 2016, the city had been stuck on the 8th rank.

Manila is the lone city from the Philippines to crack the top 10, although it slid down to 4th from 2nd last year.

Cebu City and the Indian city of Pune, which previously ranked 8th and this time 11th, have moved out of the top 10 Super Cities while Sao Paolo and Buenos Aires have entered the list for the first time, representing significant strides made by Latin American cities.

Sao Paulo and Buenos Aires ranked 27th and 33rd, respectively, in 2016.

Bangalore, a city in southern India, has maintained its top position this year, followed by Mumbai (2nd), Delhi (3rd), Manila (4th), Hyderabad (5th), Sao Paulo (6th), Dublin (7th), Krakow (8th), Chennai (9th), and Buenos Aires (10th).

The FREEMAN tried to reach Wilfredo Sa-a, executive director of the Business Processing Association of the Philippines, as well as a representative from the Cebu IT/BPM Organization (CIB.O) but both were not available for comment as of this writing.

Calls and text messages to Cebu City Mayor Tomas Osmeña were also left unanswered last night.

New Metrics

Outsourcing pertains to the practice of contracting out a business process to a foreign territory, although the item outsourced does not always have to be a business process; sometimes, it’s a knowledge process or information technology.

The TSGI, which is now on its 12th year, collects and validates data from a network of industry stakeholders, including enterprise buyers, service providers, governments, trade bodies, and associations.

But why the drastic movements in the list?

Tholons explained that its report this year considered factors like innovation, startup ecosystem, and digital transformation as key components of the index.

Originally, it only took into account the following key metrics in determining the top cities: talent, skills and quality, cost, risk and quality of life, business catalyst, and infrastructure.

The firm wanted to present this year its perspective on how digitization is changing the industry. This as the automation of work like applications management, infrastructure support, testing, business processes, self-service, and customer relationship management is quickly reducing the need for manpower.

It said many cities are trying to cope with the changing demands of outsourcing companies in this digital era.

Clients, for example, have been increasingly seeking for transformational and innovative services involving mobility, analytics, cloud, social media, cyber security, and digital marketing – services that, according to Tholons, traditional business models will find hard to deliver.

“Services globalization or outsourcing industry has been shaken at the very core as big industry leaders are grappling to align their business model to the new world of enterprise digital innovation and transformation,” Tholons said.

It added that cities where players will have an engaged focus in digital innovation at enterprise level will take the lead and stand a great chance in capturing the market.

“Leaders like India, Philippines, and China are being stunned by disruptors like Canada and Israel, while innovators like Brazil and Chile are going to collectively redefine the leadership for the next decade,” it said.

Aside from Cebu, other cities outside Manila that made it to the Tholons 100 all suffered a decline in their rankings: Davao City is now 85th from 69th last year; Bacolod City, 97th from 85th; and Sta. Rosa, 100th from 82nd.

Sunshine Industry

Despite the dip in the rankings, Cebu’s outsourcing industry has actually come a long way since 2001, when there were only five local IT-BPM (information technology-business process management) companies employing roughly 1,200 people.

Latest data from the Philippine Economic Zone Authority showed that Cebu now houses 22 information technology centers and parks and 349 companies employing 160,000 workers.

Large multinationals with presence in Cebu include JPMorgan Chase, Aegis, Accenture, Teletech, IBM, and Convergys, among others. They have all established delivery centers across Cebu City’s numerous IT parks and centers.

Last year, Tholons reported that Cebu’s talent pool continued to swell, attracting workers from the southern part of the country, which in turn allowed the city’s IT-BPM sector’s growth to further expand.

Tholons likewise pointed out Cebu’s strength being an educational hub in central and southern Philippines.

In Central Visayas alone, there are 138 existing higher education institutions that attract more than 250,000 college enrollees every year.

“Today, Cebu City’s local IT-BPM industry is a healthy mix of services, cutting across all three major service lines (information technology outsourcing, knowledge process outsourcing, business process outsourcing). The variety of process groups being fulfilled in the city also mirrors the diverse talent pool available to the location,” Tholons said in its 2016 report.