IT-BPO to remain as among Cebu’s ‘sunshine’ industries

CEBU, Philippines — Cebu’s information technology-business process outsourcing (IT-BPO) industry will remain as one of the province’s ‘sunshine’ industries amid the issues that hounded the sector in 2017.

Last year, the industry braved through issues including Cebu's exclusion from the top 10 global outsourcing hubs ranking by Tholons and the Trump presidency in the US, which stirred fears of a possible investment slowdown in the industry.

Cebu IT/BPM Organization (CIB.O) managing director Wilfredo Sa-a Jr. believes Cebu's IT-BPO sector continues to grow this year despite these concerns.

"2017 is still a better year for Cebu," the official said, noting that the year has generally been a good year for major BPO companies operating in Cebu such as Accenture and Skyes, for instance.

Employment Target

He said the industry was foreseeing an employment of at least P150,000-160,000 in Cebu's IT-BPO sector by the end of this year.

The Cebu City government had projected to grow Cebu's BPO workforce to 200,000 by 2019 from the current 140,000.

Sa-a noted the workforce target will largely depend on the performance of the industry in the next 2-3 years.

He believes Cebu has been aggressive in improving its talent pool to sustain the industry's growth prospects. 

The industry had sought to collaborate with the academe in terms of talent preparation, with the anticipated shortage of college graduates in the next two years.

The BPO sector has been seeking for partners to help in its efforts to maximize the hiring of Senior High School (SHS) graduates.

CIB.O had partnered with the Cebu City government, Cebu City Department of Education, and the Department of Information and Communications Technology for the Learning English Application for Pinoys (LEAP), a 40-hour self-paced training program that was introduced to 27 senior high schools in Cebu City in August last year to help improve the oral communication skills of SHS students.

The software was developed in the University of the Philippines-Diliman and was funded by the Department of Science and Technology. It was piloted in Cebu in 2014 through a partnership between CIB.O, the Technical Education and Skills Development Authority (TESDA) and Qualfon.

Sa-a said there really is a need to sustain BPO's growth in Cebu, considering that this industry has been instrumental in transforming Cebu's skyline particularly in Cebu IT Park and Cebu Business Park.

"Cebu's landscape has changed in the last 10 years mainly driven by the IT-BPO industry," he noted.

Under its national roadmap, the industry is targeting an employment of 1.8 million by 2022 and 30 percent of that will be coming from BPO hubs outside Metro Manila.

More Room For Growth

Sa-a believes Cebu's BPO industry will continue to grow in the next 2-3 years, although growth might likely taper off.

"Growth will still be there," he added.

He said the industry has still more room to grow outside Cebu's main business districts, considering the potential of Mandaue City, Lapu-Lapu City and South Road Properties (SRP) area as the next rising BPO centers. 

In a report last September, property consultancy firm Colliers International Philippines said Cebu’s BPO market has remained resilient amid concerns of BPO slowdown, as Cebu maintains a reliable and sizeable labor pool, helping keep it as among the top outsourcing cities despite its noted recent dip in overall ranking.

Cebu's pressing challenge to innovate has been underscored following Cebu's ranking in the Tholons Services Globalization Index 2017 (Top 100 “Super Cities”) slipped to the 12th spot from its eighth spot last year.

Manila's ranking —which was second last year after Bangalore, India —was also downgraded to fourth place after Bangalore, Mumbai and Delhi.

In the 2017 Services Globalization Index Top 100 Super Cities released last June 28, Tholons said it introduced digital innovation as its prime gauge which looks into cities and nations for the number of startups, startup diversity, startup ecosystem and government incentives to promote entrepreneurship and digital transformation.

The global advisory company introduced for the first time this year innovation, startup ecosystem and digital transformation as key components of its ranking of top outsourcing sites.Sa-a believes Cebu has an increasingly active startup ecosystem participated in by both the public and private sectors.

Cebu has to step up in digital transformation to be able to bounce back in its ranking in the Tholons' top outsourcing list.

Colliers believes Cebu will still bank on the quality of the labor force to keep the growth momentum in the office sector.

"Coupled with the upcoming supply of PEZA-proclaimed buildings in the business district, it is likely that demand will continue," the Colliers report said.

The property consultancy firm also noted a continued strong demand from both BPOs and offshore gaming companies in Cebu for the office market.

This year, offshore gaming also emerged in Cebu as a key industry with over 25,000 sq m (269,000 sq ft) of office space closed during the first half of 2017, driven by a 10-floor take-up in Tower One Plaza Magellan.

Since the fourth quarter of 2016, the Philippine Amusement and Gaming Corp (PAGCOR) has been mandated to regulate Philippine Offshore Gaming Operators (POGOs).

PAGCOR has since issued 42 POGO licenses. This led to the proliferation of POGOs across submarkets in Metro Manila, and it is noteworthy that the demand has spilled over to provincial locations such as Cebu.

Consequently, total office take-up in first half 2017 has reached 69,000 sq m (743,000 sq ft) across Cebu.

The breakdown has BPOs at 57 percent, offshore gaming at 37 percent and non-BPOs at 6 percent.

Colliers expects overall demand to continue especially given that the Cebu Business Park and IT Park are established information technology zones.

Thus, it has the benefit of faster PEZA accreditation of buildings, which would foster continuous BPO growth.

Cebu has remained as a viable location for BPO locators, particularly for those looking outside Metro Manila.

According to the latest global outsourcing cities report published by Tholons, Cebu was pushed out of the top 10 from 8th to 12th place as a bigger weight was given on innovation in the determination of rankings.

Nonetheless, it appears that the dip hardly had an impact on the demand in Cebu.

A total of 39,000 sq m (420,000 sq ft) of office space was closed by BPO firms in Cebu for the first half of the year.

The highly-skilled labor force that the province offers has kept Cebu in the radar of KPO and BPO firms.

Key tenants closed this year include Real Page, Weserv, and Ripe Concepts.

Under the industry's 2022 roadmap, local information technology-business process management (IT-BPM) is seen to generate revenues of $38.9 billion by end-2022, from a 6-year revenue of $25 billion until 2016. (FREEMANNEWS)