Outsourcing and Offshoring to the Philippines

 

Offshoring experts:  DiversifyISS are experts in assisting businesses establish their own offshore teams (also commonly referred to as outsourced staff, offshore outsourced staff, remote staff or BPO) in the Philippines. Learn More >

Benefits to business: The benefits of offshoring are many and include promoting growth without incurring massive overheads, operating 24/7/365 as well as achieving  increased value for your staffing dollar spend. Learn More >

Industry specialisation: DiversifyISS specialises in assisting businesses in the professional services and retail sectors with offshore staffing implementation, including strategy and planning.

Why the Philippines?: With 94% English literacy, 400,000 graduates each year and an average age of just 22 the reasons for choosing the Philippines as your offshoring destination are many. Learn More >

Contact Us




Blog

The rise of offshoring in Professional Services firms

Thursday, May 05.

Ok, so you're running an accounting practice and you keep hearing about this offshoring or outsourcing thing. Apparently there are an increasing number of professional services firms doing it.

May05

The rise of offshoring in Professional Services firms

Thursday, May 05.

Ok, so you're running an accounting practice and you keep hearing about this offshoring or outsourcing thing. Apparently there are an increasing number of professional services firms doing it.

You’ve probably read a recent AFR article on Deloitte USA’ big Indian play with ‘Deloitte US India’. Many of Deloitte’s global offices are leveraging some of their 27,000 employees based in India to conduct a range of tasks, from administrative work on company audits, research for mergers and acquisitions through to conflict of interest checks and collections. 

The opportunities are growing even more for Deloitte as well. Their offshore location has also allowed them to continue being innovative in areas such as data analytics and cyber security.
The acceptance and growth of offshoring is not just limited to financial services; legal service providers, both mid and top tier, have also rapidly embraced offshoring as an enabler of growth and efficiency.
An article published by the Australasian Legal Practice Management Association (ALPMA)  referenced recent findings from a CommBank Legal Market Pulse Survey.  The survey results identified that over 40% of top-tier law firms have established back-office offshore teams. The survey findings also highlighted the growth of offshoring back-office functions within mid-tier firms over this same period.
...over 40% of top-tier law firms have established back-office offshore teams...
This figure has gone from just 9% in the March 2015 survey to over 30% this year. In some cases, firms are even beginning to offshore front-office functions as well.  Maybe you're aware of these figures, but you're still not really sure what it is or how it works.
The accountant in you is worried about the risks - "it might work for them but not my practice".
Well, that simply isn't the case anymore. Offshore employees are accessible to any business; no matter what the size or industry. 
This series of posts should allay any fears and highlight that there are many benefits to offshoring, from a capacity, cost efficiency and customer service perspective.Some of the key benefits that can be gained from an offshore approach were identified in the 2010 CPA Report, 'Offshoring: Impact on theaccounting profession'.

These included:
  • Access to new products and services (cyber security and data analytics for example)
  • Solving domestic skills shortages
  • Increased speed to market
  • Improved service levels
  • Cost savings
  • Access to qualified personnel.

The opportunities of enhancing capability, delivering enhanced service, expanding services and also reducing expenditure on some roles by up to 70% can no longer be ignored. 
It’s also important to acknowledge that offshoring does not mean taking opportunity away from local employees.
It gives firms the ability to empower their local employees with more strategic and value adding work. By removing the procedural and labour intensive elements of their roles, you’re able to realise more of their capabilities and foster a culture of professional development.

In my next post, we’ll cover off the difference between outsourcing and offshoring. These are two vastly different options, each with their own pros and cons - getting this decision right can determine whether or not your global workforce is successful or not. 

If you have any queries on how offshoring can work for your business, please get in touch.

Read More

When should you set up your own facility in the Philippines?

Monday, Feb 22.

We commonly come across businesses that believe that the easiest and cheapest way to start operations in the Philippines is to lease their own space and set up their own wholly owned facility. Most often these operations fail to deliver the outcomes the business is looking to achieve around cost savings, productivity and quality. The purpose of this article is to examine the reasons behind most failures.

Feb22

When should you set up your own facility in the Philippines?

Monday, Feb 22.

We commonly come across businesses that believe that the easiest and cheapest way to start operations in the Philippines is to lease their own space and set up their own wholly owned facility. Most often these operations fail to deliver the outcomes the business is looking to achieve around cost savings, productivity and quality. The purpose of this article is to examine the reasons behind most failures.

Management 

The main reason most of these start ups fail is due to lack of investment. In order to meet your regulatory obligations and management obligations in a Filipino context you are likely to need at least the following management staff:

  • Office manager
  • Finance manager/officer
  • HR manager
  • Recruiter 
  • Office junior (to do all the daily lodgments and running around of which there is a lot)

The appointment of your local office “leader” will probably be your biggest challenge. The best way is to pay an Australian to move there and run your operations – but with the high cost of expat living and the lack of attraction of living in Manila this is likely to require a package north of AUD$200k. The alternate is to employ a local Filipino but very often this leads to self-interested local decision making which can greatly increase the cost of everything from business purchases through to local salaries.

Access to local knowledge

As with any new venture into a new environment, understanding the lay of the land is a key piece of the puzzle. Access to experienced professional services providers is a key element of the process and it is important to find the right local law firm and accounting firm to work with you. Once you are happy you then need to engage them on a monthly retainer, as this is the only way that the best local firms will undertake work for you.

Location, location, location!

In the Philippines there are low and high cost areas for offshoring, each with unique characteristics related to the specific access to talent they have. In our experience it is important to be in one of the main business districts in order to attract the best talent and to ensure reliable infrastructure. In these locations you are entering a lessors market and you will find some of the following interesting issues:

  • Standard lease terms include 6 months rent in advance (that is by way of cash – no bank guarantees) 
  • You will need to also meet the full cost of the fit out without a contribution from the lessor.  
  • Premises are usually handed over as a bare shell (no flooring/ceiling/walls/cabling etc) 
  • Fit-out costs are about 75% of what they are in Australia (usually around AUD$650 - $800 PSM) 
  • Minimum lease terms are usually 3 years. 
  • Rent free/reduced rent periods are very unlikely.  

Local detail…

Before you can even lease a premises for your offshoring operation you will need to establish a local company and to successfully do that you will need a majority of Filipino directors, all of whom must also be shareholders in your company. Typically a company will take around 4 – 6 months to reach the incorporated stage. If your company is substantially owned by an Australian company you may fall under the controlled foreign corporation provisions of the Australian tax legislation and will be subject to increased costs of doing business in the Philippines. You will also need to be mindful of the Australian transfer pricing laws and the Privacy Principles.

In addition there will be a range of local and National taxes you will be subject to including for business permits, VAT, income tax and withholding tax. Fail to get these right and to attend to your lodgements on time (which can be as frequent as monthly) and you will likely incur stiff penalties.

Culture

Having established a basic operation then comes the hard part of working out how to best entice people to work for you and motivate and engage them. Cultural differences can be one of the hardest barriers to overcome. Get this right and you may develop a loyal long term productive workforce but get it wrong and you will be plagued by high staff turnover and low productivity.

In Summary

In most cases we find that organisations that do partner up with a provider, intending to eventually establish their own facility, end up continuing to utilise their provider. They eventually realise that the cost of scoping, investigating, setting up and then maintaining and developing their offshore facility are far too great, both financially and time wise.

All in all if you are planning to have less than 50 staff and are not committed to spending at least 3 years of investment to make your office work then you will be far better of running with an existing offshoring provider to help you set up your team. Even beyond those numbers the benefits of establishing your own team may be questionable. An experienced offshore  provider can:

  • Assist you in setting up without having to think about office fit outs and legislative and accounting issues
  • Provide you with cultural insight into how to manage and grow your team
  • Scale up and down as per your business requirements

Key takeaway

Remember the reasons you are considering offshoring is to achieve cost savings, increase efficiencies and improve service delivery (a few of the more common ones), a poorly considered and executed attempt to implement your own facility offshore will result in all of those base objectives being  missed.

Read More

Offshoring success - Selecting the right offshoring destination for your business

Saturday, Jan 30.

The business processing outsourcing (BPO) industry continues to grow rapidly. This growth has led countries in low cost jurisdictions to focus heavily on developing their BPO capabilities. As a result of this, many destinations across the globe have positioned themselves as high value offshore service providers, with the Philippines regarded as one of the top offshoring destinations in the world.

Jan30

Offshoring success - Selecting the right offshoring destination for your business

Saturday, Jan 30.

The business processing outsourcing (BPO) industry continues to grow rapidly. This growth has led countries in low cost jurisdictions to focus heavily on developing their BPO capabilities. As a result of this, many destinations across the globe have positioned themselves as high value offshore service providers, with the Philippines regarded as one of the top offshoring destinations in the world.

What do the experts say?

The recent AT Kearney’s Global Location Index places the Philippines in the top ten offshoring destinations in the world, especially strong in financial attractiveness and people skills and ability. If we then look at this more granularly, particularly in regards to actual locations, consulting firm Tholon’s 2015 report on the top 100 outsourcing destinations placed Metro Manila in second place overall.  

Looking at these results it can be established that the Philippines are a high quality offshoring destination, offering businesses the opportunity to develop and grow in an environment that is financially attractive with an exceptional talent pool to draw on.

How do I determine which area is suitable for me?

Selecting the right offshoring location is absolutely critical to achieving a successful outcome. As with any business decision, conducting your due diligence on each specific location is a must. Determining which part of the Philippines is right will come down to the specific goals and objectives of your business and then narrowing down the roles you are looking to offshore. 

As relative examples, it is common knowledge that that San Francisco is the hub for software development and start-ups, Silicon Valley the epicentre for technology and IT and, as an Australian based example, Sydney’s dominance in the marketing and advertising space. This same principle is applicable to the Philippines, some areas are better known for delivering specific outcomes in particular industries than others. Some areas are far cheaper and some costlier, and some regions have better access to specific talent pools than its neighbour may have.

To determine which areas are suitable for your business to offshore, ask yourself:

  • Do I need access to a highly skilled and motivated workforce?
  • Am I looking to offshore roles where competition for candidates is fierce?
  • Are the roles quite simple, easy and process driven?
  • Do I want to set-up a call centre or voice operation?
  • Is cost a major factor? The cheaper the better?
  • Do I value employee engagement and cultural integration?

I have an idea, where to now?

Let’s refer back to Tholon’s 2015 Survey again, if we scroll down the list of locations you will see (as mentioned) that Manila is in second spot. Unfortunately, the other offshoring locations in the Philippines do not fare so well:

  • Cebu – 8th 
  • Davao City – 69th 
  • Santa Rosa, Laguna – 82nd 
  • Baquio City – 95th 
  • Metro Clark – 98th 

There are a variety of reasons as to why selecting Manila as your offshoring destination in the Philippines is the smart option. The disparity in the above results stems down to the value and quality that Manila does offer over competitor regions. 

A few of the key reasons include:

  • It is the capital city of the Philippines where both large and small companies from other countries have established their businesses 
  • Metro Manila (NCR) is considered the nation’s gateway to the world.
  • It is considered the pioneer for the BPO industry making it a prime spot for outsourcing solutions. 
  • The latest technology is initially released here so business owners who are planning to offshore can expect that Information technology here is more aligned to global standards and it is up to date to deliver their requirements more efficiently. 
  • Access to a larger, higher quality talent pool
  • Far better resources, infrastructure and technology
  • Easy access for staff

Selection should be based on ideal outcomes

As an organization quality outcomes are reliant on quality processes and resources. The alternative locations available can be viable options if you are looking to implement an offshore solution that is totally centered on cost savings, or the offshoring of low skilled and high volume work. As an example, if your business is looking to roll out a large call center operation then it may be worthwhile considering Clarke or Cebu as the location. 

A recent BPAP report stated that:  “the current outsourcing activity in the locations is small compared to that of Metro Manila. Stand-alone suppliers in these cities are low on service maturity, having to make do with employees who have no significant experience and insufficient infrastructure.” 

If a business’s drivers, towards an offshore implementation, are cost, access to low skilled, unsophisticated functions or setup of large voice accounts then areas out of Metro-Manila should be considered.

However, if your business is looking to offshore key functions that require high quality candidates with practical experience and a solid understanding of working with high performance organisations, Metro-Manila should be at the top of the list

Diversify ISS is a high quality provider of offshore staff solutions located in the heart of Manila. Our high class location, excellent facilities and focus on staff engagement have positioned us as one of the leading offshore service providers in the Philippines. Click here to have a look at our facilities and location.

Key takeaways 

  • Location is critical – make sure you choose a location that reflects your business objectives
  • Different regions in the Philippines have different connotations – some bad, some good
  • Manila is considered the premier offshoring location in the Philippines – it provides access to the best candidate pool
  • Other regions may be cheaper – this is at the expense of service, employee engagement and ease of access
  • If you are looking for a sophisticated multi-function offshoring implementation then Manila should be the only place you consider

Read More