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Business Process Outsourcing: Should You Choose India or the Philippines?

When it comes to outsourcing, only two major players often come to mind: India or the Philippines. So which one should you choose? To make that choice, you need to get to know the facts behind these two global outsourcing giants.

What is the best country for outsourcing IT staff? For most people, the answer is only one of two choices: India or the Philippines. 

Since the 2000s these two countries have been battling it out for outsourcing supremacy. If you’re planning to outsource IT staff you won’t have to search and scour where in the world you should outsource to–  your best bet is just one of these two. The real question is: which one?

To find the answer, we’ll break down the differences between both of these choices.

Beginnings

In terms of when they were established, India has the upper hand. The business process outsourcing or BPO industry in India started way back in the 1980s with companies like American Express and General Electric. These companies set up back office operations in the city then known as Gurgaon in the northern Indian state of Haryana. This was quickly followed by several global airlines such as British Airways and Swissair, and by the 1990s India was already taking on various outsourced business processes including billing, data processing, and customer support.

In this aspect, India has an advantage. They have years more experience in outsourcing, have established longer ties with clients, and many other first-mover advantages.

The Philippines’ BPO industry didn’t start until the early 1990s with the multinational consulting and business processing services firm Accenture. But just because the Philippines didn’t start first doesn’t mean it’s finishing last. In fact, it’s actually overtaken India in recent years. In 2010 it was declared  as the world’s BPO capital by IBM’s Global Locations Trend, and it hasn’t relinquished that title since. Today the Philippines covers 15% of the global outsourcing market, with a total revenue of nearly $23 billion. This is predicted to grow easily to $40 billion by 2022, and is expected to replace overseas-based Filipino worker remittances as the biggest contributor to the country’s economy.

Language & Culture 

Why has the Philippines been so successful in BPO? One of the main reasons is the English language proficiency of the general population, which is over 93%, as well as the neutrality of their accent. Unlike most Indians who have a heavy and distinctive accent, Filipinos have a more neutral accent. This makes them easier to understand compared to their Indian counterparts, especially over the phone. And this is why many call center companies prefer to outsource to the Philippines.

Filipinos are also more attuned to American idioms and slang, as well as western culture. A lot of their culture and media from sports, songs, and movies, to food and clothing are full of western influences. This is due to the fact that the Philippines was a colony of the USA for almost 50 years. This really imbued the western language and culture into the Filipino people. In fact, most people don’t realize that the Philippines is actually the third largest English speaking country in the world, next to the USA and the UK. Because of this, they are culturally a better fit for businesses based in the US.

Communication is an essential part of business, and especially in BPO. In this aspect, the Philippines is the preferred option over India. Their neutral accent and more westernized culture means a lower chance of language barriers, cultural barriers, and other communication issues that can cause problems for businesses.

Skills 

When it comes to technical skills, India has a lot to offer. Many skilled programmers come from India, and are able to work in such large companies like Google and Tata Group. There’s no doubt that India has some of the best programmers in the world. 

That isn’t to say however, that the Philippines is lagging too far behind. The Philippines’ IT-BPO industry currently has 8 sub-sectors, and that includes software development, game development, and knowledge process outsourcing (apart from call centers and several others). This shows that the Philippine talent pool is quite varied and sizable. And while they may not have as many high level programmers as in India, what they lack in technical skills they do make up for in soft skills, which can be applied in a number of different positions. Soft skills like empathy, active listening, and care in their work make Filipinos ideal for customer service positions. It’s no wonder that so many Filipinos around the world take on the roles of doctors, nurses, and caregivers, because they are very good at caring for other people. You can be sure that they will take great care of your customers should you decide to hire them.

So while India may have the upper hand in terms of technical skills, the Philippines is not far behind and offers a great set of soft skills to boot. They are excellent at customer service and satisfaction, which can be a great advantage for any business.

Support

Another major reason why the Philippines is winning the battle for outsourcing supremacy is the tremendous support offered by their government and other institutions. Since the start of the BPO industry in the Philippines, the government has offered its support. It passed the Special Economic Zone Act, which created zones that encourage foreign investments through tax incentives and lower area requirements for developments. The BPO industry was also one of the few industries given certain exceptions by the government back when strict pandemic restrictions were still in place. 

And the government continues to support the industry by:

  • Offering tax holidays and exceptions
  • Having easier export and import procedures
  • Offering various training programs for those looking to work in the BPO industry
  • Establishing a Department of Information and Communications Technology to offer added support
  • Revising the Data Security Act to protect client data, and more.

In contrast, for a long time India’s economic policies leaned towards state-controlled industries, which was detrimental to open trade. It wasn’t until about a decade after the establishment of their BPO industry that India’s policy makers began to make changes to liberalize the telecom sector and encourage private participation. 

In 2002 the Indian government accepted the recommendation of the National Association of Software and Service Companies and removed several procedural bottlenecks that were hampering the growth of the Indian call center industry. It has also made changes for tax exemptions on the export of IT enabled outsourcing services, permissions for duty-free imports, and promoting several Software Technology Parks. 

So in terms of government support, both India and the Philippines are well supported; however the Philippines has the advantage of getting greater support early on. 

In terms of support from educational institutions, the Philippines also has a leg up. Recognizing the significance of the BPO industry and its capacity to hire thousands of new graduates each year, the country’s schools established curriculums to prepare their students for highly lucrative jobs in the BPO industry. Apart from the courses being offered in universities, there are also a number of government and private specialty training courses that interested Filipinos can take to expand their skill set and enable them to work in the BPO industry.

Conclusion

Putting together all of the above factors, if you plan to outsource IT staff, choosing to outsource to the Philippines would be a more reasonable choice. While outsourcing to India may guarantee lower labor costs, many western companies find that the quality of the labor provided by the BPO sector in the Philippines is much higher, and offers companies a better cost-to-skill ratio. There’s also greater government support, less cultural and language barriers (if any), and guaranteed skilled workers for your business’s needs, especially if you partner with a reliable outsourcing company.
If you’re ready to take your business further and reap the many benefits of outsourcing, get in touch with CoDev today. CoDev is an established offshore development outsourcing company that has been serving clients in the US for over a decade. We have a number of offices based in the Philippines and a proven vetting process that allows us to provide our clients high quality Filipino talent every time. Learn more and get started, talk to us about your outsourcing needs today.

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