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Philippine Outsourcing Targets Europe after Obama Tax End
With the Philippines continually betting on revenues and jobs from the global outsourcing market, forecasting a growth rate for this year of 20 to 30 percent, the country then needs to refocus its promotion direction to new markets like Europe especially with its main client, the United States’ increasing protectionist moves.
On May 4th, U.S. President Obama announced his plans to end tax breaks for US firms expanding overseas as part of fixing a broken tax system saying that it aims to save American taxpayers $210 billion over the next ten years and to generate more jobs in the country. The announcement caused concerns for American multinational firms whose major competitive strategy is to outsource. Both the Business Processing Association of the Philippines (BPAP) and India Inc. dismissed this threat.
BusinessWeek reported that major US financial firms such as Citigroup Inc.(Public, NYSE:C) with 60 percent of its workforce abroad and JPMorgan Chase & Co.(Public, NYSE:JPM) with 10 percent of its workforce in Asia have hired employees abroad not for tax deferrals but because of lower cost of competitive labor. Commission on Information and Communications Technology (CICT) commissioner Ibrahim told Times that companies will continue to move jobs to places where they can be done “cheaper, better and faster” like the Philippines. The commissioner also mentioned that CICT has anticipated this US move and have started focusing their promotions to new markets like Europe where demand is high.
New Market Outsourcing Demand
Labor Sourcing Adviser TPI Managing Director Aitchison noted that Europe has shown an increase in outsourcing activities in the past 4 years. In 2004, it has accounted for 49 percent of major outsourcing contracts worldwide. He emphasized that Europe has realized that outsourcing is the key to remain competitive on a global scale. In 2004 alone, UK signed a total of €11.5 billion outsourcing contracts. Moreover, German companies awarded €7 billion of outsourcing contracts in 2005. In 2007, Europe signed outsourcing deals which amounted to $40.9 billion which was even higher than Americas $26.6 billion.
Predictions are strong that with the tough times, more European countries will outsource. BBC also reported that 30 percent of European companies intend to outsource some of its operation. Furthermore, Gartner forecast that IT outsourcing in Europe will reach $90.9 billion in 2009.
European Firms Outsourcing in the Philippines
With the Philippines’ years of tested credibility in offering high quality service at competitive rates through outsourcing, several major European companies have already started to outsource in the country. German giant powerhouse Siemens AG (ADR)(Public, NYSE:SI) has outsourced 40 Service Desk/Technical Support jobs to the Philippines as early as 2005 growing it to 900 employees in 2007.
Royal Dutch Shell plc (ADR)(Public, NYSE:RDS.A) has its back office accounting and finance work in the Philippines, starting with 50 employees in 2004 and expanding to around 1,100 in 2007. Swedish Telecom provider Ericsson Telecommunications, Inc. (Public, NASDAQ:ERIC) set-up Ericsson Shared Service in 2002 to service its offices in Southeast Asia, Americas, Europe, Africa and Middle East accounting needs. International Danish shipping company Maersk A/S hired 200 more people in last year increasing its workforce here to 1,200 to finance and accounting, IS processes and logistics services.
Outsourcing Opportunity
Looking at the seemingly high demand for outsourcing in Europe, the Philippine BPO might have a good chance in hitting its US$ 7 billion dollars target and creating 100,000 new jobs by tapping into the European market and getting a slice of it. The Philippine Outsourcing industry can use strategies like joining trade fairs and investing on further manpower training to give them leverage.
Author: Chris V.
Source: Outsourcing Insider in association with BPOVoice.com
On May 4th, U.S. President Obama announced his plans to end tax breaks for US firms expanding overseas as part of fixing a broken tax system saying that it aims to save American taxpayers $210 billion over the next ten years and to generate more jobs in the country. The announcement caused concerns for American multinational firms whose major competitive strategy is to outsource. Both the Business Processing Association of the Philippines (BPAP) and India Inc. dismissed this threat.
BusinessWeek reported that major US financial firms such as Citigroup Inc.(Public, NYSE:C) with 60 percent of its workforce abroad and JPMorgan Chase & Co.(Public, NYSE:JPM) with 10 percent of its workforce in Asia have hired employees abroad not for tax deferrals but because of lower cost of competitive labor. Commission on Information and Communications Technology (CICT) commissioner Ibrahim told Times that companies will continue to move jobs to places where they can be done “cheaper, better and faster” like the Philippines. The commissioner also mentioned that CICT has anticipated this US move and have started focusing their promotions to new markets like Europe where demand is high.
New Market Outsourcing Demand
Labor Sourcing Adviser TPI Managing Director Aitchison noted that Europe has shown an increase in outsourcing activities in the past 4 years. In 2004, it has accounted for 49 percent of major outsourcing contracts worldwide. He emphasized that Europe has realized that outsourcing is the key to remain competitive on a global scale. In 2004 alone, UK signed a total of €11.5 billion outsourcing contracts. Moreover, German companies awarded €7 billion of outsourcing contracts in 2005. In 2007, Europe signed outsourcing deals which amounted to $40.9 billion which was even higher than Americas $26.6 billion.
Predictions are strong that with the tough times, more European countries will outsource. BBC also reported that 30 percent of European companies intend to outsource some of its operation. Furthermore, Gartner forecast that IT outsourcing in Europe will reach $90.9 billion in 2009.
European Firms Outsourcing in the Philippines
With the Philippines’ years of tested credibility in offering high quality service at competitive rates through outsourcing, several major European companies have already started to outsource in the country. German giant powerhouse Siemens AG (ADR)(Public, NYSE:SI) has outsourced 40 Service Desk/Technical Support jobs to the Philippines as early as 2005 growing it to 900 employees in 2007.
Royal Dutch Shell plc (ADR)(Public, NYSE:RDS.A) has its back office accounting and finance work in the Philippines, starting with 50 employees in 2004 and expanding to around 1,100 in 2007. Swedish Telecom provider Ericsson Telecommunications, Inc. (Public, NASDAQ:ERIC) set-up Ericsson Shared Service in 2002 to service its offices in Southeast Asia, Americas, Europe, Africa and Middle East accounting needs. International Danish shipping company Maersk A/S hired 200 more people in last year increasing its workforce here to 1,200 to finance and accounting, IS processes and logistics services.
Outsourcing Opportunity
Looking at the seemingly high demand for outsourcing in Europe, the Philippine BPO might have a good chance in hitting its US$ 7 billion dollars target and creating 100,000 new jobs by tapping into the European market and getting a slice of it. The Philippine Outsourcing industry can use strategies like joining trade fairs and investing on further manpower training to give them leverage.
Author: Chris V.
Source: Outsourcing Insider in association with BPOVoice.com
Tags: outsourcing, accounting, and, bpap, bpo, commission, communications, contracts, cuts, deals
Comment
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Comment by Vijai Kumar on December 5, 2009 at 10:51pm -
hi Chris,
Considering Philippines does not have a scalaeable pool for languages other than English as far as Europe is concerned, how do you think the choice between Philippines and India will play out? Contracts like Siemens(2005) ,Shell and Ericsson are 2006 or earlier...and at that time, F&A for Europe required extensive customer/client interaction operationally...not really backoffice work. India therefore may have been a no-no then. what is your read of things now - new Europe wins in Philippines in last 2 years? Not that there have been many in India either - maybe Nissan, GSK..
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Comment by Outsourcing Insider on May 25, 2009 at 7:51am -
@Posco. I agree with you that Europe is more sensitive to outsourcing compared to U.S., U.K and Australia. The very small amount of data available online on European companies which are outsourcing will already give you an idea how sensitive they are. European companies which are outsourcing will most likely not publicize it as this can affect consumer patronage. In my past article, I wrote how German companies are easing out on outsourcing. Please feel free to visit it and let me know your thoughts.
Instead of seeing the language difference as a barrier, I’d consider it a good opportunity to gain the European clients’ confidence by recruiting locals who can speak German and French for instance. After all, to be able to speak a language is almost like being able to understand the culture and the people.
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Comment by Outsourcing Insider on May 25, 2009 at 7:50am
- @Rita Batra. Thanks for the comment. Obama’s stance is no surprise. During his campaign he has been actively watching the outsourcing industry which made the later a little more nervous if he takes the Whitehouse seat. Now, that he is the most powerful man in US, and not campaigning anymore, public statements such as the tax reform, indicating his tendency to be protectionist can make the US business environment stiffer. Last February, United Kingdom Prime Minister Gordon Brown, Canadian Minister Stephen Harper and Brazilian President Luiz Inacio Lula da Silva expressed their disagreement with Obama’s protectionist clause within the stimulus package bill.
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Comment by Rita batra on May 13, 2009 at 12:45pm - Though i am really not sure if Obama would go all out implementing his so called tax reforms against outsourcing but then certainly it's no harm looking at options available... Interesting article..
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Comment by Posco on May 13, 2009 at 12:27pm - Hi, thanks for the link ... i saw an important warning...- “Some inexperienced organisations that are driven into outsourcing to achieve rapid cost reduction may create another wave of unsatisfactory outsourcing contracts, a situation that happened in the 2001-2002 economic downturn,” said Mr Da Rold. “This must be avoided in such an uncertain business climate as the inflexibility of bad outsourcing relationship can seriously harm business viability.”" any idea what is the success ratio of the call centers in India in comparison to Philippine..
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Comment by Outsourcing Insider on May 12, 2009 at 12:27pm
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@posco. Europe may have its own country-specific issues and may not be largely responsive to outsourcing/offshoring. However, the global economic recession most likely may force companies in Europe to venture into an outsourcing agreement to achieve cost optimisation in order to survive.
Have a look and read this article about Outsourcing Activity in Europe Is Growing During Economic Downturn.
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Comment by Posco on May 12, 2009 at 10:57am
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Welcome to BPO Voice. Very informative article indeed..
But don't you think Europe has its own share of problems.. like the language issues, and moreover politically Europe is more sensitive to outsourcing than other destinations...
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