Business Process Outsourcing (BPO) is the leveraging of technology or specialist process vendors to provide and manage an organization's critical and/or non-critical enterprise processes and applications. The most common examples of BPO are call centres, human resources, accounting and payroll outsourcing. Business process outsourcing may involve the use of off-shore resources. The major components of the BPO industry are Contact/call centers, Software development, Animation/creative service, Data transcription, Back office processing and Engineering design.
Majority of BPO activities are Call Centers
Preliminary results of the 2008 Annual Survey of Philippine Business and Industry showed that a total of 1,992 establishments with total employment of 20 and over were engaged in Real Estate, Renting and Business Activities (Sector K) and 558 in Other Community, Social and Personal Service Activities (Sector O). About 456 or 17.9 percent of the total number of establishments for the two sectors (2,550) were engaged in Business Process Outsourcing (BPO) activities.
Majority of BPO activities were Call Center Activities which was almost half (48%) of the total or 219 establishments. This was followed by Other Software and Consultancy and Supply (or customized software development) with 138 or 30.3 percent. Data Processing shared 8.3 percent or 38 establishments. Database Activities and On-line Distribution of Electronic Content and Animated Films and Cartoons Production had the least number with 6 and 7 or 1.3 percent and 1.5 percent of the total of BPO activities respectively. Figure 1 shows the distribution of BPO establishments by industry sub-class.
Call Center Activities employ majority of workers
Employment generated by BPO activities in 2008 reached about 187,000 which was 35.2 percent of the total employment (531,044) for Sector K (483,868) and Sector O (47,176).
The bulk of the jobs were in Call center activities, which employed about 150,000 workers. Far second were establishments engaged in Other Software and Consultancy and Supply with about 17,000 workers. Data Processing Activities employed around 13, 000 employees or about 6.9 percent of the total workforce for BPO activities. Database Activities and On-line Distribution of Electronic Content employed the least with only 410 workers.
Most workers in BPO activities are Female
More than half (52.5%) of the total workforce (187,146) for BPO activities were female workers. Data Processing, Call Center Activities and Medical Transcription Activities employed more female than male workers. On the other hand; Software Publishing, Other Software and Consultancy and Supply, Database Activities and On-line Distribution of Electronic Content, Other Computer Related Activities and Animated Films and Cartoons Production employed more male than female. Figure 2 shows the percent distribution of male and female workers for BPO activities establishments by industry sub-class.
Software Publishing employees receive the highest monthly pay
Total compensation paid by BPO activities in 2008 amounted to PhP62.4 billion, equivalent to an average monthly compensation of PhP27,808 per paid employee. Call Center Activities paid the highest total compensation of about PhP47 billion accounting for three fourths (75.3%) of the total compensation paid by BPO Activities. Other Software and Consultancy and Supply placed far second with PhP8.9 billion (14.2%). Data Processing, ranked third with PhP3.5 billion (5.6%). Meanwhile, Data Base Activities and On-Line Distribution of Electronic Content paid the lowest amount of PhP128.6 million (0.2%).
Software Publishing employees received the highest monthly compensation per paid employee of PhP66,387; followed by workers in Other Software and Consultancy and Supply, PhP42,643; and Other Computer Related Activities, PhP35,776. Call Center employees received an average of PhP26,141 per month. However, workers in Medical Transcription Activities received the lowest monthly pay of PhP12,322. Figure 3 shows the average monthly compensation per paid employee for BPO activities by industry sub-class.
Call Center Activities top in revenue, costs and value added
Gross revenue realized by BPO Activities reached PhP127.2 billion comprising 30.1 percent of the total revenue (PhP422.4 billion) earned by Sector K (PhP333 billion) and Sector O (PhP89.4 billion) in 2008 .
Call Center Activities topped in revenue generation comprising almost three fourths (PhP89.5 billion or 70.4 percent) of the total revenue earned by BPO activities. Other Software and Consultancy and Supply, Data Processing and Software Publishing came next with PhP21 billion (16.6%), PhP8.4 billion (6.6%) and PhP5.3 billion (4.2%); respectively. On the other hand, Database Activities and On-Line Distribution of Electronic Content earned the least revenue with PhP453 million (0.4%).
Total costs (excluding compensation paid to employees) incurred by BPO activities amounted to PhP51.9 billion or 22.8 percent of the total costs (PhP228.1 billion) spent by Sector K (PhP178.9 billion) and Sector O (PhP49.2 billion).
Call Center Activities likewise incurred the highest cost of PhP32.5 billion (62.6%). Other Software and Consultancy and Supply, Data Processing and Software Publishing followed with PhP10.3 billion (20%), PhP5 billion (9.5%) and PhP2.5 billion (4.8%) respectively. Medical Transcription Activities incurred the least cost of PhP196.6 million (0.4%).
Value added generated by BPO activities in 2008 summed to PhP83.5 billion which is more than one third (35.1%) of the total value added (PhP237.7 billion) generated by Sector K (PhP186.2 billion) and Sector O (PhP51.5 billion).
Call Center Activities contributed the biggest share to the total value added for BPO activities comprising more than three-fourths (PhP63.3 billion or 75.8 percent). Other Software and Consultancy and Supply ranked second with PhP11.7 billion (14%) and Data Processing came third with PhP3.9 billion (4.7%). On the other hand, Database Activities and On-Line Distribution of Electronic Content recorded the least share with PhP178.5 million (0.2%). Figure 4 shows the top four BPO Industries in revenue, cost and value added.
Revenue per peso cost is valued at PhP2.45
For every peso spent, PhP2.45 was earned by BPO activities. Among the BPO industries, Call Center Activities registered the highest revenue per peso cost of PhP2.75. Medical Transcription Activities and Animated Films and Cartoons Production ranked second and third with PhP2.44 and PhP2.40, respectively. On the other hand, Database Activities and On-line Distribution of Electronic Content earned the least revenue per peso cost of PhP1.23.
Labor Productivity stands at an annual average of PhP446 thousand
Labor productivity (value added per employment) in BPO activities stood at an annual average of PhP446 thousand in 2008. Software Publishing and Other Software and Consultancy and Supply surpassed the national average for BPO activities with PhP1.4 million and PhP672 thousand, respectively.
Gross addition to fixed assets totaled to PhP10.8 billion
Gross addition to fixed assets (capital expenditures less sale of fixed assets) acquired by BPO activities totaled to PhP10.8 billion, comprising more than three-fifths (63.1%) of the total gross addition to fixed assets (PhP17.1 billion) obtained by Sector K (PhP7.7 billion) and Sector O (PhP9.4 billion).
Call Center Activities recorded the highest gross addition to fixed assets accounting for more than four-fifths (PhP9 billion or 83.4 percent) of the total gross addition to fixed assets acquired by BPO activities. Other Software and Consultancy and Supply far followed with PhP1 billion (9.7%). Meanwhile, Medical Transcription Activities had the least with PhP19.7 million (0.2%). Figure 5 shows the percent distribution of gross addition to fixed assets for BPO activities by industry sub-class.
BPO establishments are concentrated in the NCR
As expected, BPO establishments were concentrated in the NCR wherein the biggest share in employment, compensation, revenue, cost, value added, gross addition to fixed assets, change in inventories and subsidies were also recorded, (ranging from 74.1 percent to 99.4 percent).
Scope and Coverage
The 2008 Annual Survey of Philippine Business and Industry (CPBI) formerly known as Annual Survey of Establishments (ASE) was conducted to collect information on the structure and trends of economic activities in the entire country for the year 2008. Covered were establishments engaged in economic activities as defined under the 1994 Philippine Standard Industrial Classification (PSIC).
These establishments were classified into 14 sectors, two of which are Real Estate, Renting and Business Activities (Sector K) and Other Community Social and Personal Service Activities (Sector O) which covered, among others, establishments engaged in Business Process Outsourcing (BPO) activities.
All establishments engaged in BPO Activities nationwide were covered on a 100 percent basis except Call Center Activities (K74996) with Total Employment (TE) of less than 100 and Medical Transcription Activities (K74997) with TE of less than 20, which were selected using stratified systematic sampling.
A total of 1,010 (98.45%) responded out of the 1.026 samples drawn for BPO activities establishments with total employment of 20 and over.
Concepts and Definition of Terms
Establishment - an economic unit which engages under a single ownership or control, i.e. under a single legal entity, in one or predominantly one kind of economic activity at a single fixed location. It is also defined as the unit that is engaged in the production of the most homogenous group of goods and services, usually at one location, sometimes over a wider area for which separate records are available that can provide data concerning the production of these goods and services and the materials, labor and physical resources used in the production.
Economic activity or business - is the activity of the establishment as classified under the1994 Philippine Standard Industrial Classification (PSIC). The main activity refers to the activity that contributes the biggest or major portion of the gross income or revenue of the establishment.
Computer and related activities establishment - Office or firm engaged in hardware consultancy, software publishing, software development, data processing, database activities and on-line distribution of electronic content, maintenance and repair of office, accounting and computing machinery and others.
Miscellaneous business activities establishment - Office or firm engaged in legal, accounting, bookkeeping and auditing; tax consultancy; market research and public opinion polling; business and management consultancy; architectural and engineering activities; land surveying services; technical and testing analysis; advertising; labor recruitment and provision of personnel; investigation and security services; cleaning of buildings of all types; pest control services; industrial cleaning activities; photographic activities; packaging activities; management and administrative services; bill collecting and credit rating services; business brokerage; stenographic, duplicating and mailing activities; fashion design; interior decoration services; call center activities; medical transcription and others.
Business Process Outsourcing (BPO) - defined as the delegation of one or more information technology (IT) intensive business process to an external provider that in turn, owns, administrates and manages the selected process or processes based on defined and measurable performance metrics. It also refers to relocating entire business back office functions to either self owned or third party service providers, typically in low cost locations.
Outsourcing (or contracting out) - is the delegation of non-core operations or jobs from internal production within a business to an external entity (such as a subcontractor) that specializes in that operation. Outsourcing is done to save money, improve quality, or free company resources for other activities. Outsourcing was first done in the data-processing industry and has spread to areas, including telemessaging and call centers.
Offshore outsourcing - is the practice of hiring an external organization to perform some or all business functions in a country other than the one where the product or service will be sold or consumed.
Hardware Consultancy - includes consultancy on type and configuration of the hardware with or without associated software applications
Software Publishing - includes production, supply and documentation of ready-made non- customized software operation systems business and other applications
Other Software and Consultancy and Supply - includes, analysis, design and programming of customized soft ware ,development ,production , supply and documentation of made to order software, web page design, software maintenance
Data Processing - includes complete processing of data supplied by the customer, data entry services, scanning of documents , time share computer services etc
Database Activities and On-line Distribution of Electronic Content - some of the activities included in this group are compilation of data from one or more sources, online data base publishing, internet search sites ,,electronic learning are examples of the activities undertaken
Other Computer Related Activities - includes computer disaster recovery, software installation services
Total Employment - is the number of persons who worked in or for the establishment as of November 15, 2005.
Paid employees - are persons working in the establishment receiving regular pay as well as those working away from the establishment when paid by and under the control of the establishment. Included are persons working as full-time or part-time and those employees on sick leave, paid vacation or holiday. Excluded are consultants, home workers and workers receiving commission only.
Unpaid workers - include working owners who do not receive regular pay, apprentices and learners without regular pay, and persons working without regular pay for at least one third of the working time normal to the establishment.
Compensation - the sum of salaries and wages and employer's contribution to SSS, GSIS, etc.
Salaries and wages - are gross payments made by establishments to its employees in cash or in kind, that is, prior to deduction for employee's contribution to SSS/GSIS, withholding tax, etc. Included are total basic pay; vacation, sick and maternity leave pay; overtime pay and other benefits.
Employer's contribution to SSS, GSIS, etc. - includes contribution to Employees Compensation Commission (ECC), Philhealth, PAG-IBIG, etc.
Revenue - refers to cash received and receivables for goods sold and services rendered by the establishment.
Cost - refers to all expenses excluding compensation incurred during the year whether paid or payable. Valuation should be at market price including taxes and other charges, net of discounts, rebates, returns and allowances. Goods received from and services rendered by other establishment of the same enterprise are valued as though purchased.
Fixed assets - are physical assets expected to have productive life of more than one year and intended for use and/or being used by the establishment. Included are land, buildings, fixtures, machinery, tool, furniture, office equipment, vehicles, and the like.
Gross additions to fixed assets - refer to the difference between the cost of acquisition of fixed assets acquired in 2006 and the value of sales of fixed assets during the year.
Capital expenditures - refer to the cost of acquisition of fixed assets acquired in 2006 whether or not full payments have been made.
Change in Inventories - is a derived indicator, is computed as the value of ending inventory less the value of beginning inventory.
Subsidies - are special grants in the form of financial assistance or tax exemption or tax privilege given by the government to develop an industry or production and to protect it against competition.
Inventories - refer to stocks of goods owned by or under the control of the establishment as of a fixed date, regardless of where the stocks are located. Valuation should be at current replacement cost in purchaser's price at the indicated dates. Replacement cost is the cost of an item in terms of its present price rather than its original price.
Value Added - is gross output less intermediate costs.
Gross output (for PSIC K701) - is equal to the sum of total revenue, capital expenditures of fixed assets produced on own account, and change in inventory of real estate for sale; less cost of real estate purchased for sale.
Gross output (for PSIC K702, K71, K72, K73 and K74) - is equal to the sum of total revenue and capital expenditures of fixed assets produced on own account.
Intermediate costs - is equal to the sum of the following cost items: materials and supplies purchased; fuels purchased to run motor vehicles, machinery and other equipments; electricity purchased; industrial services done by others; non-industrial services done by others; computer software expenses; research and experimental development and other costs (plus change in inventory of "materials and supplies" and "fuels, lubricants, oils and greases").
Source: National Statistics Office