McKinsey Global Institute

The Philippines offshoring opportunity

The Philippines is in a strong position to capitalize on the opportunities of offshoring. However, the government and private sector must work to strengthen both some perceived and real weaknesses.

The Philippines has emerged as a strong player in the rapidly evolving offshoring industry, competing successfully with India and other low-wage destinations in creating value.

In 2003, the Philippines exported more than $1.5 billion worth of services. Today it employs around 100,000 people in call centers, and the country is beginning to attract work in shared services, data entry/medical transcription, and animation.

Overall, it aims to win 5 percent of worldwide global business process revenues by 2010, creating an industry worth as much as $10 billion.

Yet, for all its potential, the Philippines faces enormous challenges in achieving this goal. MGI research shows that, although it boasts widespread English language skills, low costs, and promising human resource capabilities, the Philippines lags behind India and many other potential offshoring locations on several of the key criteria companies examine when choosing an offshoring location, such as: Risk, infrastructure, the availability of vendors, and a paucity of skilled middle managers.

If the Philippines is to capitalize on the opportunities that are undoubtedly there for the taking, the government, together with the private sector, must work to strengthen the perceived attractiveness and reality of offshoring to the Philippines. 

Key areas for action include: developing a clearer market strategy to sell its strengths, tackling infrastructure weaknesses, enhancing the suitable labor supply, attracting more flagship clients, establishing an industry association, and avoiding granting incentives.

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