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. It includes IT-related activities such as application management and application development, data center operations, testing and quality assurance, financial and administration (F&A) processes, human resources (HR) functions, call center and customer service activities and accounting and payroll.
Majority of BPO Activities are into Database Activities and On-line Distribution of Electronic Content
The 2006 Census of Philippine Business and Industry covered a total of 13,199 establishments engaged in Real Estate, Renting and Business Activities (Sector K); and 6,032, in Other Community, Social and Personal Service Activities (Sector O). About 1,445 or 7.5 percent of the two sector's total number of establishments (19,231) were engaged in Business Process Outsourcing (BPO) Activities.
Establishments engaged in Database Activities and On-line Distribution of Electronic Content comprised the majority with more than three-fifths (897) of all BPO industries. Establishments engaged in Other Software and Consultancy and Supply and Other Computer Related Activities placed second and third with 175 (12.1%) and 149 (10.3%) respectively. On the other hand, Hardware Consultancy accounted for the least number, with only three establishments (0.2%). Figure 1 shows the distribution of BPO establishments by industry sub-class.
Call Center Activities employ the biggest number of workers
BPO Industries employed a total workforce of 141,630 workers or 25.1 percent of the total employment (564,098) for Sector K (481,623) and Sector O (82,475) in 2006. Almost all (99.6%) of the total workforce for all BPO industries were paid employees and the remaining 0.4 percent, working owners or unpaid workers.
Call Center Activities employed almost three-fourths (73.9%) of the total BPO workforce.
Other Software and Consultancy and Supply and Data Processing far followed with 9.3 percent and 9.1 percent, respectively. In contrast, Hardware Consultancy registered the least with less than one percent.
Software Publishing employees receive the highest monthly pay
In 2006, total compensation paid by BPO Industries to their employees amounted to PhP38.6 billion or 39.7 percent of the total compensation (PhP97.3 billion) paid by Sector K (PhP85.2 billion) and Sector O (PhP12.1 billion). Each employee received an average monthly pay of PhP22,810.
Call Center Activities paid the highest total compensation amounting to PhP28.8 billion accounting for almost three-fourths (74.6%) of the total compensation for all BPO Industries. Other Software and Consultancy and Supply placed far second with PhP4.9 billion (12.6%). Data Processing ranked third with PhP2.5 billion (6.6%). Meanwhile, Hardware Consultancy paid the lowest amount of PhP10.7 million (0.03%).
Software Publishing employees received the highest monthly compensation per paid employee of PhP36,559; followed by workers in Other Software and Consultancy and Supply, PhP30,864; and Animated Films and Cartoons Production, PhP28,543. Call Center employees received an average pay of PhP22,935 per month. However, workers in Database Activities and On-line Distribution of Electronic Content received the lowest monthly pay of PhP7,645. Figure 2 shows the average monthly compensation per paid employee for all BPO establishments by industry sub-class.
Call Center Activities top in revenue and costs
Gross revenue realized by BPO Industries reached PhP81.8 billion comprising 23.4 percent of the total revenue (PhP349.4 billion) earned by Sector K (PhP271.2 billion) and Sector O (PhP78.2 billion) in 2006.
Call Center Activities topped in revenue generation comprising about 70 percent (PhP56.7 billion) of the total revenue earned by all BPO Industries. Other Software and Consultancy and Supply, Software Publishing and Data Processing came next with PhP11.1 billion (13.6%), PhP5 billion (6.1%) and PhP4.8 billion (5.8%) respectively. However, Hardware Consultancy earned the least revenue with PhP28.3 million (0.03%).
Total costs (excluding compensation paid to employees) incurred by BPO Industries amounted to PhP33.7 billion or 19.1 percent of the total costs (PhP176.4 billion) spent by Sector K (PhP129.9 billion) and Sector O (PhP46.5 billion).
Call Center Activities likewise incurred the highest cost of PhP20.2 billion (59.9%). Other Software and Consultancy and Supply, Software Publishing, and Data Processing followed with PhP5.9 billion (17.6%), PhP2.7 billion (8.1%) and PhP2.2 billion respectively. Hardware Consultancy incurred the least cost of PhP14.4 million (0.04%). Figure 3 shows the top four BPO industries in terms of revenue and costs.
Revenue per peso cost is valued at PhP2.43
For every peso spent, PhP2.43 was earned by BPO Industries.
Among the BPO industries, Call Center Activities registered the highest revenue per peso cost of PhP2.81. Animation Films and Cartoons Production and Data Processing ranked second and third with PhP2.44 and PhP2.23 respectively. On the other hand, Database Activities and On-line Distribution of Electronic Content earned the least revenue per peso cost of PhP1.36.
Value added totals to PhP55.2 billion
Value added generated by BPO Industries in 2006 totaled PhP55.2 billion, representing 27.5 percent of the total value added (PhP200.7 billion) realized by Sector K (PhP161.6 billion) and Sector O (PhP39 billion).
Call Center Activities contributed the biggest share of PhP41.3 billion which is almost three-fourths (74.8%) of the total value added derived by all BPO Industries. Other Software and Consultancy and Supply ranked second with PhP6.5 billion (11.7%) and Data Processing third, with PhP3.1 billion (5.7%). On the other hand, Hardware Consultancy recorded the least share with PhP12.2 million (0.02%). Figure 4 shows the percent distribution of value added for all BPO establishments by industry sub-class.
Gross additions to fixed assets amount to PhP7.4 billion
Gross additions to fixed assets (capital expenditures less sale of fixed assets) acquired by BPO Industries amounted to PhP7.4 billion in 2006.
Call Center Activities acquired the biggest gross additions to its fixed assets with PhP6.1 billion (82.9%). Other Software and Consultancy and Supply followed with PhP794.3 million (10.7%). However, Hardware Consultancy recorded no additions to fixed assets.
Change in inventories total to PhP79.1 million
Change in inventories (ending inventory less beginning inventory) of BPO Industries totaled PhP79.1 million in 2006.
Animated Films and Cartoons Production recorded the highest change in inventories accounting for almost three-fourths (PhP57.3 million) of the total. Software Publishing and Other Computer Related Activities followed with PhP20.9 million (26.4%) and PhP7.5 million (9.4%) respectively. Other Software and Consultancy and Supply recorded the least with a negative value of change in inventories.
Subsidies granted by government amount to PhP269.1 million
Total subsidies granted by government to support BPO Industries amounted to PhP269.1 million or 36.1 percent of the total subsidies (PhP745.8 million) received by Sector K (PhP494.5 million) and Sector O (PhP251.3 million) in 2006.
Database Activities and Online Distribution of Electronic Content received the highest amount of subsidies with PhP160.4 million, equivalent to almost three-fifths of the total subsidies granted to all BPO Industries. Other Software and Consultancy and Supply and Other Computer Related Activities followed with PhP93 million (34.6%) and PhP8.8 million (3.3%) respectively. However, no subsidy was granted to establishments engaged in Hardware Consultancy, Medical Transcription and Animated Films and Cartoons Production.
Scope and Coverage
The 2006 Census of Philippine Business and Industry (CPBI) formerly known as Census of Establishments (CE) was conducted to collect information on the structure and trends of economic activities in the entire country for the year 2006. 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 Database Activities and On-line Distribution of Electronic Content (K724) and Other Computer Related Activities (K729) with ATE of less than 20, which were selected using stratified systematic sampling.
A total of 812 (94.6%) responded out of the 858 samples drawn for all BPO activities establishments. Adjustments for non-responses were made through imputations.
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) 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.
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.
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 - is 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 incurred by the establishment excluding compensation paid or payable during the year. 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, 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