Primary Article Analysts: Cierra Chong
Team Leader: Ma’ailah Blackwood
The Philippines has benefited from a recent trend of rapid growth within the technology sectors, with the medical transcription and software development subsectors of the technology sector enjoying particularly quick growth. North American companies are specifically attracted to the Philippines due to lower costs, quick turnaround time, and the prevalence of English as a first language in the Philippines. Each of these factors has contributed to making the Philippines a growing hub for medical transcription and IT outsourcing, which has had a massive impact on the Philippine economy.
Outside of the BPO market, there has been a growing need for knowledge process outsourcing (KPO). Defined as the outsourcing of core data-based business activities to offshore companies, KPO promises to add diversity for businesses looking to outsource to the Philippines. The KPO process includes a broad range of activities such as market research, engineering services, web development, and medical transcription.
Medical transcription refers to the method of converting audio-recorded reports dictated by a physician or other healthcare professional into a digital text format. In 2009, the KPO sector generated $1.3 billion in revenue and in 2013 the medical transcription industry produced nearly $1 billion in revenue on its own. This sector is expected to see an annual global growth rate of 23% from 2013-2018 due to an increase in European and North American demand where the availability of highly trained professionals is diminishing.
By 2011, the KPO industry employed 200,000 people in the Philippines, a significant portion of which belonged to the medical transcription sector. Many foreign hospitals have outsourced work to Filipino medical transcribers due to the potential cost savings they could create. Whereas medical transcribers in the United States make roughly $31,000 annually, Filipino medical transcribers earn significantly less, generally around $180 to $340 monthly ($2,160 to $4,080 annually). Lower salaries for medical transcribers translates into significantly reduced costs for companies.
In addition to BPO and KPO, the Information Technology Outsourcing (ITO) industry has been the second-fastest growing sector in the Philippines. Software development, a subsector of the ITO industry, has generated a significant amount of this growth. By outsourcing computer and internet related work to offshore companies, businesses can substantially cut operational costs. According to the Technology Office of the Department of Science and Technology, the Philippines provides the third largest number of IT workers in the Asia-Pacific region while also maintaining the lowest ITO cost globally. In 2013, the Philippines employed nearly 60,000 IT workers with an annual salary of $21,500.
Additionally, there has been a massive growth in expertise and specialization in the IT field, with the country producing 55,000 IT and software development graduates annually. In 2016, the ITO sector brought in approximately $2 billion, expanding by 20 percent from 2013. Revenues are predicted to double by the end of 2016.
Going forward, it will be difficult for the Philippines to continue its rapid growth in the ITO and KPO sectors. Nevertheless, growth can continue by ensuring that the Philippines develops and maintains the talent necessary to staff these areas of work. First and foremost there needs to be a high investment in education among the Philippine population to ensure a growing pool of highly trained workers in these fields. Next, it is important that the industry is open-minded and able to adapt to the ever-changing technology and advancements within the ITO and KPO sectors. Finally, it is fundamental that the government is facilitative and investment friendly towards foreign nations; which includes offering operational incentives and lower income tax rates to remain competitive within the global market.
Unfortunately, the current political turmoil between President Rodrigo Duterte and the American government may have an adverse impact on the growth we have seen in the ITO and KPO sectors. Approximately, 90% of outsourcing employment in the Philippines in through American companies so a severance of ties between the two nations would be catastrophic for both industries and the Philippines’ economy. Therefore, it's hard to predict whether we will see continuous growth or a complete stagnation of outsourcing in the Philippines.