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Doom or boom faces the IT-BPM industry

THE CORNER ORACLE - Andrew J. Masigan (The Philippine Star) - January 27, 2021 - 12:00am

The Philippines is unique from its regional neighbors. In stark contrast to Thailand, Malaysia and Vietnam, all of whom pursued industrialization as a way to foster prosperity, the Philippines depended on its population to drive economic development. OFW remittance and the information technology-business process management (IT-BPM) industry are the main drivers of the economy, accounting for 9.5 percent and 7.1 percent of GDP, respectively. Together, they serve as the catalyst for our consumer-led growth.

Our IT-BPM industry began to take off in earnest in 2007. Back then, the Philippines was known for doing simple services like directory assistance for telecommunication companies abroad. In time, we expanded our range of services to include customer service, tele-marketing and technical assistance. Collectively, these services are known as “voice-based business processes.”

Even today, the Philippines reigns supreme in voice-based business processes due to our English proficiency, neutral accent and ability to understand American maxims. Working to our advantage too is our natural sense of empathy and service-oriented culture. These cultural traits matter to service-oriented clients like banks, hotels and airlines. The Filipino’s soft skills have made him the global leader in voice-based business processes, taking 18 percent of the global market share today.

The Philippines has also diversified to more sophisticated IT-BPO processes. Apart from voice-based services, we have become specialists in clerical work, transcriptions, multimedia processing, animation and professional services (eg. accounting, engineering & architecture), among others. Still, the lion’s share of the industry is still voice based. All things considered, the IT-BPM industry generated $26.3 billion in revenues in 2019 and jobs for 1.3 million of our countrymen. The industry has grown six times since 2007. According to Kearney’s Global Services Index, the Philippines was the second most popular outsourcing destination in the world that accounted for 12-15 percent of the global IT-BPO market before the pandemic struck.

But the road ahead is fraught with uncertainty. See, demand for voice-bases services is seen to rapidly decline, given the arrival of chat robots and artificial intelligence. Companies around the world are under immense pressure to drive down costs and chat bots have proven to be more cost-effective than outsourced labor.

The first generation of chat bots communicate through pre-written scripts. As such, they could not replicate the empathy of humans. However, deep learning programs are now in use and this allows bots to detect the slightest nuances in a caller’s voice. The bot can adjust its tone and dialogue accordingly. With deep learning in play, it is only a matter of time before bots can be as empathetic as the most considerate human being. In fact, Citibank Global CEO Michael Corbat opined that human call centers will be a thing of the past in as early as three years.

The Philippines stands to lose hundreds of thousands of jobs and billions of dollars in revenues in the voice-based segment if we do not respond quickly. The way to keep our industry intact is to pivot away from voice-based work and climb the value chain to perform more technical tasks. This requires massive upskilling.

According to American consulting firm Frost & Sullivan, 29 percent of low skilled jobs (eg. call center agents) will be obliterated by next year. Meanwhile, mid-skilled jobs (eg. accounting and engineering services) are seen to grow by 12 percent. High-level jobs (eg. software programmers, animators) are seen to rise by 19 percent. By 2022, 73 percent of all jobs in the IT-BPM industry will require mid- to high-end skills.

This is confirmed by the IT and Business Process Association of the Philippines (IBPAP). According to IBPAP, the following fields will be in high demand in the next three years (enumerated from highest to lowest): animation and game development; health care & information management; global in-house center; software development and general back-office processes like bookkeeping.

There are also job opportunities in robotics. Behind the chat bots is an army of humans who must analyze deep learning data, write new scripts and modify programs. Our workforce can re-position themselves as the human component behind this technology.

For the Philippines to maintain its competitiveness and preserve its market share, it must diversify into technical services. Government and the private sector must work together to intensify training programs, improve university curriculums and aggressively promote technical education among our youth. This includes computer science, data analytics, animation and the whole spectrum of engineering courses.  Proficiency in English and empathy are no longer enough.

The Department of Science and Technology (DOST), in coordination with De La Salle University, Ateneo and the University of the Philippines, established a five-year road map to develop our proficiency in artificial intelligence. For its part, TESDA launched courses on animation and software programming, among others. Some universities have added artificial intelligence and robotics to their curriculum. Are these enough? Far from it. We need to do more.

There must be closer cooperation between the academe and the IT-BPM industry to allow deeper collaboration in curriculum development. IT-BPM companies must allow more internships to better integrate students into the industry and provide them hands-on experience. Universities must work closely with IBPAP to allow them to generate graduates with the right skills. Above all, the DepEd and CHED must aggressively promote technical courses and make them accessible to the majority.

In addition to upskilling, government must improve our country brand. We cannot be perceived as a country that detests everything American simply because the President has a personal bias. America is still our biggest market. We must be “marketed” as an open and progressive economy, whose government is supportive of IT-BPM firms and with a work force that is skilled and plentiful. Government must support and incentivize start-ups, especially in the tech field. Mentorships of medium- to high-level talent as well as tech entrepreneurs must be organized. Digital infrastructure must be improved. And, most importantly, tax incentives for highly coveted IT-BPM firms must be given, not taken away. This is important not only to attract new IT-BPM firms but to retain the ones already here.

We are at a crossroad. The IT-BPM industry can realize another boom if both the government and private stakeholders move fast to upskill our workforce. Conversely, the industry will be doomed to dwindle if we don’t. The clock is ticking.

 

 

Email: andrew_rs6@yahoo.com. Follow him on Twitter @aj_masigan

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