Manila is the epicenter of the booming Philippine BPO industry.

There’s no question that the Philippines enjoyed several years as the defacto offshore darling. Populated by a skilled and energetic workforce, backed by massive infrastructure investment and fueled by a global demand for low-cost outsourced services, no one could touch the Philippines.

Recently, however, the Philippines faces several major challenges that have slowed growth considerably and caused the nation’s call center industry to feel a pinch for the first time in years.

The rise of the casino industry

The Philippine call center industry is being challenged by a new foe: Chinese gambling. The Philippines has become the unofficial home of online gambling operations aimed at Chinese customers. In most cases, these companies are largely staffed by Chinese transplants as opposed to local talent, and their contributions to the tax base are questionable at best.

The consequences go beyond a general strain on resources. As these gambling entities continue to open and expand, they are snatching up prime office space originally intended for call center operations.

Outlook: This is certainly an interesting wrinkle in the Philippine call center industry’s story, but the Chinese casino industry is far from comfortably established. Presently, it’s facing intense scrutiny from China, which at the very least will pump the brakes on the expansion.

Reduction tax incentives for urban development

Earlier this year, President Rodrigo Duterte changed course regarding ecozones – areas designated for development and aided by government tax breaks and incentives. In recent years urban development, primarily in Manila, had been the fundamental objective of these programs.

But in June, Duterte issued an order that shifted the focus to rural areas, an action no doubt guided by a political agenda rather than closely analyzed economic planning. The order will halt the creation of new ecozones in urban areas like Manila, eliminating the opportunities for tax breaks in cities and moving them to less populated areas.

Outlook: While new development will be hampered, it’s important to remember that the Philippines is already the gold standard in terms of BPO operations. The industry has already established itself and will continue to distinguish itself as the top destination for low-cost outsourcing support.

The undeniable rise of nearshore outsourcing

In many ways, Central and South America are experiencing the same outsourcing awakening that sculpted the offshore’s BPO industry years ago. Massive investment – both public and private – in facilities, training and technology has laid the groundwork for success. A highly skilled workforce that goes beyond basic English fluency and offers a true cultural alignment is undeniably appealing to companies in the US and Canada.

It’s no surprise that businesses are willing to pay a little more for nearshore call centers, especially given the geographical convenience.

Outlook: While it’s undeniable that nearshore call centers are pulling business away from the Philippines, those centers simply cannot touch the cost savings offered by offshore outsourcing. The demand for lower pricing will never go away, and the Philippines continues to surpass their counterparts in terms of service levels.

Still Standing

It’s becoming somewhat fashionable to jump on the hysteria bandwagon and predict the collapse of the Philippine call center industry, but fashionable rarely correlates with practical.

The bottom line is that the Philippines is still a smart choice for outsourcing in general and remain the top offshore option. The fundamentals that established the Philippines as an outsourcing hotspot continue to exist and support a thriving BPO industry.

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