Outsourcing is no longer just a strategy—it’s a game-changer for companies looking to boost efficiency, access top-notch talent, and significantly cut costs.
As a leading destination for global outsourcing, the Philippines offers unparalleled opportunities to transform your business operations.
With its unmatched advantages, the country manages 10-15% of global outsourcing demand, which is estimated to reach over $380 billion by 2030.
I. Why Choose The Philippines?
The country offers several distinct advantages:
The Philippines ranks among the top in English proficiency globally, with a robust education system that ensures a highly skilled and articulate workforce. This makes communication seamless, even in complex business contexts.
Culturally, the Philippines has a strong cultural affinity with the West. Filipinos intuitively understand Western values and business practices, allowing them to adapt to client expectations easily. Whether it’s customer service, technical support, or digital marketing, Filipino professionals have a deep understanding of what colleagues and customers require.
That said, one of the biggest draws in picking the Philippines is the affordability of the available talent. Salaries are significantly lower than in the U.S., U.K., or Australia—allowing companies to access top talent while reducing costs.
A software developer will cost 70% less than a counterpart in the United States while providing the same level of service.
Making the country even more attractive are the favorable conditions for setting up operations. Its strong focus and support for the sector means the government has tax incentives and programs to attract foreign investment.
II. Legal and Business Environment
The Philippines’ regulatory environment is not only supportive but also forward-thinking, with laws crafted to encourage and sustain foreign investments. This proactive stance provides a stable foundation for your outsourcing ventures.
Some of the relevant laws include:
- Ease of Doing Business Act: Simplifies procedures, reduces permits, digitizes registration, and offers one-stop-shop services to attract foreign BPO operations.
- Data Privacy Act (RA 10173): Protects sensitive data and aligns with international data security standards, building trust with foreign clients.
- Telecommuting Act (RA No. 11165): Allows flexible work arrangements, enabling companies to offer telecommuting and retain talent within the country.
The existing legal framework also provides tax incentives for outsourcing companies, such as:
- Income tax holidays
- Exemption from certain local taxes and
- Preferential tax rates on specific income streams
These incentives further reduce the already low operational costs and provide foreign businesses with a solid ROI when choosing the Philippines.
The government has also established agencies like the Philippine Economic Zone Authority (PEZA) and the IT and Business Process Association of the Philippines (IBPAP) to help promote and oversee the sector’s development.
III. Key Outsourcing Sectors
The Philippine outsourcing industry excels across multiple key sectors:
- Call Centers: Leading globally in customer service excellence.
- IT Services: Home to top-tier software developers and IT professionals.
- Digital Marketing and SEO: Powering successful global campaigns with cutting-edge strategies.
- Back Office Operations: Streamlining administrative tasks with precision.
- Creative Services: Fueling innovative marketing and design projects.
IV. Understanding the Workforce
The Philippines’ youthful and dynamic workforce brings unparalleled energy and adaptability to your operations. With a median age of 24.5 years, these professionals are not only eager to learn but also bring a fresh perspective to your business challenges.
Filipinos are highly adaptable to new technologies, making them ideal for roles that require agility and a forward-thinking mindset.
The country places a high value on education. Many possess university degrees, with its strong network of universities and technical institutes that produce a steady stream of specialists annually.
Its literacy rate of 99.27% (2021) is one of the highest in the region.
The workforce is committed to continuous learning and professional development, ensuring they remain competitive and competent to handle increasingly complex tasks.
V. How to Start Outsourcing
Here’s a quick look at the key actions and important considerations at the start of your outsourcing venture:
1. Define: Your Outsourcing Goals and Needs
Before diving into details, clarify and define what you want to achieve.
- Are you looking to reduce costs?
- Do you want access to specialized talent?
- Are you looking to scale your business quickly?
Identify the functions or tasks you plan to outsource. This will help you develop a clear plan of action.
2. Decide: Tap Established Service Provider/ Build Own
- Select an Outsourcing Partner
When selecting an established provider, focus on companies or freelancers with a proven track record, industry expertise, and a thorough understanding of your business needsTake time to vet companies, checking client testimonials, case studies, and online reviews. Further assess their capabilities by doing interviews and asking questions.When you have found a suitable partner, start crafting the SLA or Service Level Agreement which should cover matters like:- Scope of services
- Performance metrics
- Communication protocols
- Issue resolution
- Billing and payment
- Review and audits
- Termination clause
- Build Own
Companies that choose to establish their presence by setting up an office, and directly managing their operations, should be ready to put in the time, energy, and resources.The reward is greater control over functions.Those choosing this route should familiarize themselves with:- Setting up a legal entity (obtaining necessary permits)
- Hiring local staff (recruitment channels, compensation packages)
- Philippine labor and business laws (employee’s rights)
- Setting up bank accounts (finances, taxation and transactions)
Tasks like looking for an ideal location and putting up a working office will have to be dealt with as well.
3. Develop: Monitor & Optimize
Once operations are up and running, it’s essential to monitor performance and make optimizations as needed. Assess how well the team is meeting your goals.
If gaps are identified, work to make improvements. This could involve tweaking workflows, providing additional training, or adjusting the scope of work.
Monitor to ensure that your efforts continue to deliver value.
VI. Cultural Integration
Besides its affinity to Western culture, the Philippines has its own practices and traditions. Outsourcing partners would do well to know about these nuances and adapt their management styles to the local context:
1. Respect for Authority and Hierarchical Structures
Filipino culture values authority and hierarchy. Outsourcing partners should be aware that employees may defer to their managers or superiors more frequently, avoiding confrontation or direct disagreement. This hierarchy-based respect can sometimes make it challenging for employees to voice concerns or offer feedback.
What Outsourcing Partners Should Do: Foreign managers should create an environment that encourages open communication and assures employees their input is valued. This can be achieved by promoting the open expression of thoughts and opinions. Meetings where people are asked to share can help employees become more comfortable with voicing their concerns.
2. Relationships and Social Bonds
Personal relationships are important for Filipinos, often taking the time to build trust and rapport. Outsourcing partners who build strong relationships with their teams can expect a higher level of loyalty, commitment, and collaboration.
What Outsourcing Partners Should Do: Emphasize relationship-building activities such as team-building exercises, regular virtual catch-ups, or in-person meetings when possible.
Celebrating Filipino holidays, recognizing personal milestones like birthdays, and showing genuine interest in your employees’ lives will create a stronger bond between teams. This personal connection leads to better engagement and productivity.
3. Communication Considerations
English proficiency is a strong advantage of the workforce, but nuances in communication styles still exist. Filipinos tend to be indirect communicators, avoiding confrontation or saying “no” outright, especially when speaking with superiors or foreign partners.
This could lead to polite or vague responses, even in situations when employees may not fully agree or understand the task.
What Outsourcing Partners Should Do: Foster an environment where feedback and clarification are welcomed rather than seen as a challenge to authority. Provide clear guidelines, repeat key points, and confirm understanding to mitigate any misunderstandings.
4. Adaptability and Resilience
A Filipino term, “diskarte,” embodies resourcefulness, resilience, and creativity in problem-solving. This characteristic is crucial in fluid situations where things can suddenly change.
What Outsourcing Partners Should Do: Leverage Filipino “diskarte” by encouraging innovation and problem-solving at all levels. Trust in their ability to handle situations and be open to their creative solutions. They might surprise you.
5. Flexibility
While it’s essential to respect deadlines and schedules, foreign businesses should also be prepared for a degree of flexibility in timelines, particularly in less critical areas.
What Outsourcing Partners Should Do: Establish clear expectations around deadlines and time commitments, but allow for flexibility where appropriate. This balance will spur professional standards and a more productive workflow.
6. Business Etiquette
Filipino business etiquette is a blend of formality and friendliness. Politeness, respect, and proper greetings are important in interactions. Meetings often start with casual small talk before moving on to the agenda.
What Outsourcing Partners Should Do: Take time to engage in casual conversation at the beginning of meetings. Formal titles such as “Sir” and “Ma’am” are commonly used as a sign of respect. Displaying patience, politeness, and genuine interest during these interactions will set the right tone for a respectful and professional relationship.
VII. Infrastructure and Technology
With cutting-edge technology and robust infrastructure, the Philippines is equipped to meet global demands. From high-speed internet to state-of-the-art office facilities, the country offers the tech backbone your business needs to thrive.
Technological Infrastructure: The country has upgraded its tech infrastructure to match global standards. Major cities like Manila, Cebu, and Davao have modern office buildings with state-of-the-art facilities, specifically designed to support the needs of outsourcing companies.
These offices are equipped with reliable power supplies, data centers, and telecommunications networks.
Internet and Connectivity: Major internet service providers offer high-speed broadband and fiber-optic connections, particularly in metropolitan areas. BPO facilities in the country often come with redundant internet connections.
Co-working Spaces and Dedicated Outsourcing Facilities: The country can support small start-ups and big companies. Co-working environments are ideal for small teams looking to establish operations without committing to long-term office leases. Larger companies can have dedicated facilities, which are fully furnished and equipped with everything needed to run a major operation.
VIII. Cost Structure
The main cost-saving factor is labor.
As mentioned, the cost of hiring a skilled worker in the Philippines is significantly lower than in Western countries.
A Cisco Engineer in the Philippines costs approximately $31,600 annually, compared to $115,031 in the U.S. or Europe—a 73% savings. Such cost efficiency extends across various roles, making the Philippines a prime choice for cost-conscious businesses.
In addition to labor costs, companies benefit from lower overhead expenses. Office space in the Philippines is much cheaper than in Western countries, even in prime locations like Makati City or Bonifacio Global City (BGC).
Businesses can lease modern, fully furnished office spaces with high-end facilities at a fraction of the cost of similar spaces in the United States or Europe. Other overheads such as utilities, maintenance, and transportation are also relatively inexpensive, contributing to overall cost savings.
Hidden Costs to Watch Out For: While the benefits are clear, businesses should also be mindful of hidden costs that may arise. These can include expenses related to employee training and additional layers of management required to oversee teams.
Businesses should also factor in possible costs from disasters and emergencies, particularly if they are operating in regions prone to typhoons or earthquakes.
Other hidden costs may come from exchange rate fluctuations. While the Philippine peso has been relatively stable, businesses should still account for currency risks when calculating long-term expenses.
ROI of Outsourcing to the Philippines: Despite these potential hidden costs, the return on investment (ROI) is generally high.
Businesses save money through reduced labor and overhead while gaining access to skilled talent and specialized services.
Furthermore, the flexibility to scale operations up or down based on market demands allows companies to manage their resources more efficiently.
IX. Risk Management
Outsourcing comes with risks, but these can be mitigated through proper planning, understanding the local environment, and establishing strong security and continuity measures.
Political and Economic Stability: The Philippines has experienced consistent political and economic growth in recent years, making it a relatively stable environment for business.
However, like any country, it is not immune to political shifts and economic fluctuations. Businesses should stay informed about the political climate and any changes that could impact operations.
Data Security and Privacy: The country has implemented data privacy laws in line with international standards, such as the Data Privacy Act of 2012.
This law requires companies to implement strict measures to protect sensitive data and prevent misuse or access by unauthorized parties.
That said, businesses should still work closely with their providers and adopt strong cybersecurity measures, like encryption, firewalls, and regular security audits. (It’s also important to include specific data protection clauses in contracts to safeguard confidential information.)
Disaster Recovery and Business Continuity: Most reputable outsourcing providers have robust contingency plans designed to minimize disruptions in the event of a disaster. These plans often include data backups, redundant internet connections, and alternative work locations to ensure that operations continue even during emergencies.
X. Case Studies
Accenture in the Philippines
Accenture is a prominent player in the outsourcing landscape, employing over 45,000 individuals across 22 delivery centers, including major locations in Cebu and Ilocos.
The company has evolved significantly since its inception in the Philippines in 1985, originally starting with just 75 employees. It has since grown to become one of the largest IT companies in the country, focusing on a wide range of services beyond traditional outsourcing, including strategy, digital transformation, technology, and operations.
The highly skilled Filipino talent available has allowed Accenture to shift from conventional business process outsourcing (BPO) to providing more specialized and high-value services.
JPMorgan Chase in the Philippines
JPMorgan Chase has established a significant presence in the Philippines, focusing primarily on technology.
The company is a leader in financial services, including investment banking, asset management, and consumer banking.
The firm emphasizes the importance of technology in its operations. With Filipino ITs manning the helm, JPMorgan Chase has leveraged digital tools and platforms to enhance service delivery.
Concentrix in the Philippines
Concentrix is a leading business process outsourcing (BPO) provider with a strong footprint in the Philippines. The company has been instrumental in shaping the BPO landscape in the country, employing over 100,000 people across multiple locations.
Concentrix specializes in customer engagement services, technology solutions, and analytics—catering to a diverse range of industries from technology, to healthcare, and retail.
XI. Challenges and Solutions
The nature of outsourcing opens it up to some unique challenges. Here are the most common ones, and effective ways businesses can handle them.
Challenge: Time zone differences
Time zone differences can create operational hurdles and make collaboration difficult, especially if there’s limited overlap in working hours between teams.
Solution: Time zone differences are resolved with Filipino workers’ willingness to accommodate clients’ business hours–working night shifts in the Philippines. Also, many BPO companies operate 24/7, providing around-the-clock service availability. These offset time differences that could otherwise impact operations.
Challenge: Quality control
When a company outsources services or tasks to an external provider, managing quality becomes tricky. Factors like distance, communication barriers, and varying standards of excellence come into play.
Solution: Implementing regular monitoring systems, performance reviews, and setting clear standards can effectively mitigate the issue. Leveraging technology can ensure that agreed-to standards are consistently met.
Challenge: Cultural differences
Working with teams from different cultures can lead to potential misunderstandings and miscommunication.
Solution: This can be addressed by investing in cross-cultural training for both the in-house team and the offshore staff. Building cultural bridges through regular team-building activities and encouraging open communication will strengthen the working relationship.
XII. Employee Management
A. Hiring & Attracting Talent
The Philippine outsourcing market is competitive, so it’s essential to develop attractive recruitment and retention strategies for top talent:
- Offering competitive salaries: This directly impacts a company’s ability to attract, retain, and motivate top talent. Competitive salaries signal potential employees that the company values their skills, contributions, and experience. This, in turn, helps reduce turnover rates, as employees are more likely to stay with an employer that fairly compensates them for their work.
- Professional development opportunities: It can lead to greater motivation, higher productivity, and a deeper sense of loyalty. Workers who feel stagnant or lack growth opportunities are more likely to seek employment elsewhere.
- Positive work environment: A positive work environment is one where employees feel respected, supported, and motivated, leading to higher levels of engagement and performance.
- Perks & Benefits: Retention ensures business continuity. So offering employee benefits such as healthcare, performance bonuses, and flexible working arrangements can keep employees contented and engaged.
B. Managing Performance
After securing top talent, the next challenge is keeping their performance aligned with your goals.
Here are the “non-negotiables” for managing employee performance:
- Clear communication of expectations: When expectations are clearly defined and communicated, employees understand what is required of them. Without clear guidance, they may struggle with uncertainty, and become confused and frustrated.
- Setting measurable performance indicators: To drive accountability, create a concrete framework for evaluating performance. This could be in the form of Key Performance Indicators (KPIs) like—conversion rates, number of support tickets resolved, average handle time, revenue growth rate, etc.
- Continuous feedback: Unlike a traditional annual review which focuses on past performance, continuous feedback emphasizes real-time, ongoing dialogue. Conducting regular reviews helps ensure that employees remain aligned with business goals.
- Recognition of achievements: Acknowledging and celebrating accomplishments, big or small, reinforces positive behaviors. By highlighting what works, companies can sustain team morale and high performance.
XIII. Future Trends
Outsourcing is evolving with the rise of emerging sectors and technologies. While the call center industry remains dominant, IT services, digital marketing, and AI-driven processes are gaining momentum.
More companies are also outsourcing specialized roles in cybersecurity, cloud computing, and data analytics to the Philippines due to the country’s growing pool of IT professionals.
Advancements in Artificial Intelligence (AI) and automation are expected to significantly impact the BPO industry. While automation may reduce demand for certain types of jobs, it will also open new opportunities for higher-skilled roles such as AI systems managers, AI software developers, and machine learning engineers.
The Philippines is well-positioned to take advantage of these shifts, thanks to its adaptable workforce and strong educational focus on STEM fields.
Because of the country’s long list of advantages, experts predict the continued growth of the Philippine BPO industry.
XIV. Sustainability and Corporate Social Responsibility (CSR)
As awareness of corporate social responsibility increases, many outsourcing providers have implemented environmentally sound practices such as reducing energy consumption, minimizing paper usage, and promoting recycling programs.
Companies also support local communities by providing jobs, sponsoring education programs, and participating in charitable drives, all in a bid for community engagement.
These efforts not only help the environment but also enhance the image of outsourcing firms. By giving back to local communities, companies foster goodwill and long-term partnerships.
From a business perspective, CSR initiatives have become deciding factors for many potential clients—as the businesses that prioritize social responsibility are more likely to attract clients who value the same.
XV. Exit Strategies
Companies may need to scale down or exit operations for various reasons.
Here are some considerations to keep in mind:
- Write Exit Provisions in the Contract: Spell out the processes and obligations involved when terminating the contract, providing a roadmap for a fair and organized exit.
- Provide Adequate Notice: Most service contracts have specific notice periods for termination. Adhere to these terms to avoid any potential legal disputes.
- Settle Final Payments: Settle all financial matters, including payments for services rendered and other obligations mentioned in the contract
- Data Protection and Confidentiality: Before ending the partnership, ensure all sensitive data is properly transferred to your company. Confirm that the provider has destroyed any confidential information they no longer need.
- Exit Interviews and Reviews: Conduct exit interviews to gather feedback. This can provide valuable insights if you plan to re-enter the market in the future.
- Transition Planning: If outsourced functions need to be moved back in-house or transferred to another provider—ensure that knowledge transfer, training, and proper handover procedures are in place to avoid disruptions.
XVI. Testimonials and Expert Opinions
The outsourcing decision can be guided by the experience of executives who’ve come before.
Many have cited the high level of professionalism and cultural compatibility with Filipino professionals as reasons for the success often mentioning how their remote teams have consistently exceeded expectations and exhibited adaptability and creativity in solving problems.
Similarly, businesses across various industries often express satisfaction with the cost savings, improvements, and efficiencies gained by choosing the Philippines.
XVII. Resources and Tools
Managing remote teams requires effective tools. Platforms like the following are widely used to facilitate real-time collaboration:
Tools like Trello and Asana enable teams to collaborate across different time zones.
Interested companies can benefit from local agencies that provide guidance in navigating the outsourcing landscape:
- Philippine Economic Zone Authority (PEZA)
- IT and Business Process Association of the Philippines (IBPAP) and
- Department of Information and Communications Technology (DICT)
Ready to take your business to the next level? Contact Kinetic Innovative Staffing today to discover how our expertise and extensive candidate pool can help you achieve significant cost savings and access world-class talent.
Kinetic Innovative Staffing has been providing hundreds of companies in the Asia Pacific, North America, the Middle East, and Europe with professionals working remotely from the Philippines since 2013. Get in touch to know more.
