Why You Should Choose The Philippines For Your IT Outsourcing
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IT outsourcing has become a highly profitable industry in the Philippines, attracting numerous global investors who have recently set up their offshore IT operations in the country. With the global IT outsourcing market expected to grow at an annual rate of 5.48% from 2019 to 2029, the Philippines is strategically positioned for growth in the next decade due to its vast pool of IT professionals and supportive government incentives.
There are many factors contributing to the development of IT outsourcing in the Philippines. In this article, we will walk you through some of them and also some drawbacks you should consider before making the decision to outsource in this country.
IT outsourcing has become a highly profitable industry in the Philippines
Advantages of IT Outsourcing in the Philippines
Large Pool of IT Professionals
The Philippines boasts a substantial workforce of IT professionals ready to meet the growing demands of IT outsourcing. In the 2017-2018 school year alone, state universities and colleges produced 77,747 IT graduates.
With such a significant number of tech-savvy graduates, global companies can easily find candidates to fill IT roles of varying complexity. This availability of skilled professionals has attracted Fortune 500 companies like Google, IBM, Amazon, and Microsoft to establish offshore IT operations in the Philippines.
Effective Cost
One of the main factors contributing to the growth of IT outsourcing in the Philippines is the lower cost of labor. The country's comparatively low cost of living results in significantly lower operational costs than those in Western countries.
For example, data from 2024 indicates that the cost of hiring an entry-level IT professional in the Philippines is substantially less than in the United States. Despite additional expenses related to outsourcing, such as mandated benefits and hiring costs, the overall expenditure remains much lower. This allows companies to save a significant portion of their budget, making the Philippines an attractive destination for IT outsourcing.
Cultural Compatibility
Due to its historical ties with the United States, having been a U.S. colony for 48 years, the Philippines has deeply integrated Western culture into various aspects of daily life. This cultural alignment makes it easier for Filipinos to adapt to Western organizational practices and work environments. As a result, the Philippines is an ideal location for establishing offshore teams for international enterprises, facilitating smoother collaboration and communication.
High Proficiency in English
Among popular IT outsourcing destinations such as India, Poland, and Malaysia, the Philippines stands out due to its high proficiency in English, which is a significant asset for seamless communication.
Filipinos are exposed to the English language from a young age, and the country ranks second only to Singapore in English proficiency among Asian nations. This makes the Philippines a top choice for sourcing English-speaking IT professionals, ensuring clear and effective communication for international clients.
Sustained Growth of the IT Industry
Since the early 1990s, the Philippines has been recognized as a provider of high-quality information technology services. While the country's outsourcing industry initially focused on voice-based BPO services, it has rapidly diversified its offerings to include IT services such as software development, web design, and tech support.
The Information Technology-Business Process Management Association of the Philippines (IBPAP) predicts a 7% growth in the Philippine IT BPO industry in 2024, reflecting the sustained expansion and increasing demand for these services. This growth underscores the Philippines' position as a competitive and reliable destination for comprehensive IT outsourcing solutions.
Data Privacy & Cybersecurity Measures
Security and privacy are paramount concerns in IT outsourcing today. In 2023, the FBI reported a record loss of $12.5 billion due to internet crime. Deloitte’s 2024 cybersecurity trends report highlights that 66% of organizations were impacted by ransomware in 2023, misuse of valid credentials caused 44.7% of data breaches, and IoT malware attacks surged by 400% across industries.
To bolster the defense of Philippine outsourcing companies against such cyber threats, the Philippine government enacted the Data Privacy Act of 2012. This law aims to protect individual privacy while facilitating the free flow of information to drive innovation and economic growth. Additionally, in the first quarter of 2024, the National Cybersecurity Plan 2024-2029 was approved, providing policy direction and operational guidelines to enhance cybersecurity measures.
With these robust safety measures in place, companies can confidently rely on Philippine IT outsourcing firms to manage their sensitive and confidential data securely.
24/7 Service Availability
Outsourcing companies in the Philippines commonly adopt multiple shift schedules
A significant factor driving Western companies to outsource their IT services to the Philippines is the flexibility in work hours and time zone differences. To ensure comprehensive coverage, outsourcing companies in the Philippines commonly adopt multiple shift schedules to align with the client's preferred time zone. This allows clients to collaborate with offshore teams seamlessly, as if they were working in the same location.
Some Challenges You May Face When Outsourcing In The Philippines
Besides several advantages, you should also consider the following challenges when looking for an IT outsourcing partner in the Philippines:
Outsourcing to the Philippines means working with a team on the other side of the globe. Clients from the U.S. or Europe might face communication and collaboration challenges due to the 12- to 16-hour time difference. To overcome this issue, it is crucial to select a Philippine IT outsourcing provider that offers 24/7 operations. However, it's only available for some entry-level roles because experienced employees are unlikely to choose the job for the long term, and there are unstable resources with a high turnover rate.
Communication Barriers:
The use of idioms and colloquialisms can pose communication challenges. While English is widely spoken in the Philippines, certain phrases or expressions may not be easily understood by the outsourcing team. Providing a glossary of commonly used terms and phrases can help ensure effective communication.
Cultural differences can also affect communication styles. For instance, some cultures prefer direct and straightforward communication, while others may favor a more indirect approach. Recognizing and understanding these cultural nuances can bridge communication gaps and enhance collaboration between the company and the outsourcing team.
Possible Business Disruptions:
Outsourcing to the Philippines may involve potential disruptions such as natural disasters, power outages, and public holidays. These factors can impact your IT outsourcing partner’s ability to deliver efficient and quality services. Implementing business continuity plans (BCPs) can help mitigate the risks of such disruptions.
Companies can effectively leverage the benefits of outsourcing to the Philippines
Conclusion
Outsourcing IT services to the Philippines offers numerous advantages, including cost savings, a large pool of skilled professionals, high English proficiency, and cultural compatibility. Additionally, the country's strong focus on 24/7 service availability and robust data privacy and cybersecurity measures make it an attractive destination for IT outsourcing. However, challenges such as time zone differences, communication barriers, and potential business disruptions need to be carefully managed. By understanding and addressing these issues, companies can effectively leverage the benefits of outsourcing to the Philippines, ensuring a successful partnership and sustained growth.
