Betting on the IT-BPM sector
BIZLINKS - Rey Gamboa (The Philippine Star) - July 14, 2020 - 12:00am

Competition in the global information technology and business process management (IT-BPM) sector continues to heat up, driven by new demands created under the new normal conditions resulting from a deadly contagion that has affected the world.

The Philippines, acknowledged as one of the biggest players in many areas of the global IT-BPM sector, had a bumpy adjustment period during the first few weeks after the government called for enhanced community quarantine (ECQ) in many parts of the country.

While the IT-BPM sector was declared an essential business, and therefore allowed to continue operations, work under a new normal environment forced companies to send a huge part of their work force to work from home (WFH).

Other staff were assigned to dormitories near the work place but had to be shuttled to and from the office after the government banned all forms of public transportation and even set up strict checkpoints for private vehicles.

All these was an additional cost for IT-BPM service providers, although they managed to provide almost uninterrupted service to global clients, especially those in the healthcare sector, which was being besieged by a higher work load because of the contagion.

WFH arrangements, of course, were not ideal. Concerns by clients about data security had to be assuaged, but the most difficult part was keeping WFH staff connected with enough data speeds. High speed internet connection for homes continues to be a challenge.

Near perfect opportunity

Competitors, notably from India and Latin American countries like Mexico, Argentina, Brazil, and Costa Rica, saw this as the near perfect opportunity to seize market share that could lead to a possible realignment of future investments by global IT-BPM companies.

While it was almost impossible to compete against the high literacy and English proficiency rates of Filipinos, many of the Latin American countries offered better Internet connectivity to the United States where most of clients were being served.

What was not factored in, however, was the eventual spread of the coronavirus infection in Brazil, India, Mexico, and Argentina that would on really bad days claim lives by the thousands and reported daily cases soar to tens of thousands.

The Indian and Latin American offices of IT-BPM companies were affected more than those in the Philippines. More significantly, though, the economic damage as reckoned by the World Bank was more severe for the Indian and Latin American countries than the Philippines.

The Philippine IT-BPM sector continues to receive support from the government, notably the Department of Trade and Industry and the Philippine Economic Zone Authority. The sector generated gross revenues of about $25 billion last year, and currently employs more than 1.2 million.

Philippine-based IT-BPM companies are looking forward to keeping the incentives they receive from operating in economic zones after the government recently softened its earlier position to rationalize tax incentives given to locators.

This move is expected to bolster the robustness of the IT-BPM sector in the medium-term, even against external threats from recent advancements in artificial intelligence and the Internet-of-Things technology.

Furthermore, the Board of Investments spoke about the Philippines’ initiatives in improving digital connectivity, including the utilization of a 60,000-kilometer nationwide fiber optic network and the entry of a third telecommunications company that hopefully will improve bandwidth speeds and bring down costs of connectivity.

The Philippines is also betting on a strong economic rebound next year premised on a solid performance for more than a decade before the pandemic. Inflation has remained relatively stable also, and the country maintains a strong fiscal position.

Strong growth potential

Investments in the IT-BPM sector, both globally and locally, are being bolstered by the pandemic as economies ramp up their shift to digitalization to quickly return operation efficiencies to pre-coronavirus levels.

While many businesses are seeing lower revenues for the remainder of the year, they also acknowledge that offshoring and outsourcing of non-core functions are effective measures to bring down their operating costs.

Thus, we’ll be seeing IT-BPM firms hiring more people in the coming months specifically because of increasing demand for services related to healthcare, telecommunications, and logistics. More cities outside of Metro Manila, Cebu, and Davao are also being seen as new hubs for IT-BPM operations.

More recently, Converge ICT Solutions Inc. announced plans to raise P35.9 billion in fresh capital this year through a public offering which would expand its fixed broadband service in the Philippines. It cited the accelerated need for connectivity to support WFH arrangements in the IT-BPM sector.

This call for public investment, reportedly the biggest ever for the Philippines, is a bold, but logical move during these pandemic times coming from a technology company.

Two trump cards may come into play later this year that may decide on the continued optimism of the country’s IT-BPM sector. First would be the ability of the Philippine government to control the virus spread and, therefore, negate any return to a lockdown.

Another ECQ would be the last thing that the Philippine economy needs, especially if our competitors in India and Latin America are able to survive the current pandemic in a better position than us.

The second would be the coming November elections in the US, which would decide the fate of the current administration of Donald Trump who is seeking reelection. His slogan to make America great again is clearly a protectionist move intended to keep jobs in America for Americans, not overseas as in the case of the current IT-BPM setup.

Until then, it’s still anybody’s bet.

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