Call Center History in the Philippines

The growth of the call center sector in the Philippines can only be understood by looking back at its beginnings, particularly when going into the call center history in the Philippines. The business took off in the early 2000s, helped by the country’s large and well-educated labor base and high level of English proficiency. Although it started small, its meteoric rise may be attributed to two factors: significant potential savings and remarkable service quality.

The Philippines’ participation in software development during the 1990s contributed in addition to the country’s English competence. However, it wasn’t until recently that the country made a serious push into back-office operations including finance and accounting as well as HR administration. (1).

Over the years, government support in the form of incentives and infrastructure development has further facilitated the industry’s expansion. In 2001, the government formed the Information Technology and E-Commerce Council (ITTEC) to serve as the highest policy-making body. It provides policy directions on information and communications technology. One of ITTEC’s main objectives is to develop the country as an E-services hub.

In 2005, the government launched the Philippine Cyberservices Corridor, an “ICT belt stretching over 600 miles from Baguio City to Zamboanga”, which is said to be capable of providing a variety of BPO services. It covers at least three primary urban centers in Luzon, Visayas, and Mindanao, and 15 other provinces across the country. These urban centers are Metro Manila, Cebu, and Davao. The government is allocating P26 billion for cyber corridor projects (2).

The industry’s growth has not been without challenges. The growth of the local BPO is largely shaped by the expansion of contact centers. Although software development in the Philippines has also been marked by considerable growth, its expansion has not been as dramatic as that of contact centers. For high-value KPOs to strongly emerge, more specialized skills in areas such as IT, Science, and Engineering are needed (3).

Despite these challenges, the Philippine call center industry has shown remarkable resilience and adaptability, becoming a significant player in the global BPO landscape.

There are several notable companies in the Philippine call center industry, each playing an important role in shaping the sector’s trajectory and contributing to the call center history in the Philippines. These range from international corporations like Convergys, Accenture, and Teleperformance, to local companies like Sykes and ePLDT Ventus. Each company offers a unique blend of services, with some specializing in specific industries such as healthcare, finance, or tech support.

In addition to the broad advantages mentioned earlier, there are several benefits that Philippine call centers bring to the table. For example, the Filipinos’ cultural trait of “malasakit” or empathy makes them particularly effective in customer service roles. Additionally, their high level of English proficiency extends to written communication, making them adept at handling tasks like email support and social media management.

The Philippines enjoys a high literacy rate (97% in the National Capital Region; 89% in the country) and is a popular destination among call center operators due to its people’s English language capabilities and affinity with Western cultures (NeoIT 2004). The country also has a higher proportion of the population in the 25–34 age group with at least tertiary education compared to India, which is a critical factor in the BPO sector (4).

The average salaries in the Philippine BPO sector are lower than those of many key offshore destinations, making it a cost-effective choice for businesses. The country also has a low office rental cost, which is just 32% and 40% of the rates in India and the PRC, respectively (5).

The growth of the local BPO industry in the Philippines is largely shaped by the expansion of call centers. Proficiency in English, a key requirement for call center work, has often been highlighted as the main skill demanded by the BPO industry. The country is also known for its back-office operations, which cover numerous services related to finance, accounting, and human resource administration (6).

Moreover, the BPO industry in the Philippines is not a key sector in terms of stimulating production in other sectors of the Philippine economy. However, growth in the sector’s revenues can have a significant impact on compensation and employment. An increase in the sector’s revenues will generate a considerable increase in the sector’s total wage bill and in that of the other sectors (7).

In summary, the advantages of Philippine call centers extend beyond cultural compatibility and language proficiency. The country’s favorable demographics, cost-effectiveness, and growing expertise in various BPO services make it an attractive destination for businesses looking to outsource their customer service operations.

The Philippine call center industry, a significant segment of the country’s Business Process Outsourcing (BPO) sector, is not without its challenges. These include maintaining employee wellness in high-stress jobs, dealing with the threat of automation, and addressing the need for more specialized skills in areas such as IT, science, and engineering for high-value Knowledge Process Outsourcing (KPO) roles(8).

However, these challenges also present opportunities for growth and innovation. Companies are increasingly investing in wellness programs and training initiatives to ensure a healthy and skilled workforce. The government support appears to be biased towards contact centers, given the disproportionate share that goes to contact centers in terms of funding for training(9).

The rise of artificial intelligence has led to a shift in focus from basic customer service tasks to more complex problem-solving roles. This shift creates opportunities for higher-level job roles within the industry(10). The industry is also experiencing a natural process of moving up the value chain ladder(11).

Moreover, the Philippines enjoys a high literacy rate and is a popular destination among call center operators due to its people’s English language capabilities and affinity with Western cultures. The country also has a higher proportion of the population in the 25–34 age group with at least tertiary education compared to India(12).

Despite these advantages, the industry faces issues related to human capital such as low hiring rates, high turnover rates, and weaknesses in broad IT skills and English proficiency. Addressing these constraints effectively could lead to sustained high growth in the BPO sector.

The growth of the Philippine call center industry has been greatly facilitated by supportive government policies. Tax incentives, infrastructure development, and training programs have all played a role in fostering a conducive environment for the industry. For instance, in 2001, the government formed the Information Technology and E-Commerce Council (ITTEC) to serve as the highest policy-making body, providing policy directions on information and communications technology with the main objective of developing the country as an E-services hub (13).

In 2005, the government launched the Philippine Cyberservices Corridor, an “ICT belt stretching over 600 miles from Baguio City to Zamboanga”, capable of providing a variety of BPO services. The government allocated P26 billion for cyber corridor projects, with the completion of this corridor expected to accelerate the growth of the BPO sector (14).

Moreover, the government announced in May 2006 that it had earmarked about half of the P500 million “Training for Work Scholarship Program” for the IT industry to provide educational grants for the training of BPO applicants. This program issues training certificates to “near-hires” or applicants whose qualifications fall just slightly below a hiring company’s skill requirements (15).

Looking ahead, the integration of advanced technologies like AI and machine learning will be crucial in maintaining the industry’s competitive edge. However, for high-value Knowledge Process Outsourcing (KPOs) to vigorously emerge, more specialized skills in areas such as IT, science, and engineering are needed (16). The government’s current support appears to be biased toward contact centers, given the disproportionate share that goes to contact centers in terms of funding for training. This gives the impression that the local BPO industry is merely waiting for a “natural process” to occur in which, at some point in time, the industry would eventually move up the value chain ladder. It is still not clear, however, how such dynamics would come into play (17).

In conclusion, the Philippine call center industry has proven itself as a formidable force in the global BPO landscape. From its humble beginnings in the early 2000s, it has grown exponentially, reaching an impressive $25 billion in total revenue by 2016 and employing over 1.3 million people. This remarkable growth has been fueled by a combination of factors including low labor costs, a highly skilled and educated workforce, widespread proficiency in English, competitive infrastructure, and supportive government policies (18).

The industry’s journey is a testament to the resilience, adaptability, and hard work of the Filipino people. Despite facing challenges such as skills shortages and high turnover, the industry has shown an impressive ability to innovate and adapt. Initiatives such as public-private partnerships and national competency tests have been implemented to address these issues and ensure a steady supply of skilled workers.

Looking ahead, the industry is poised for even greater growth. With the integration of advanced technologies like AI and machine learning, the Philippine call center industry is set to transition towards higher value addition and more knowledge-intensive activities. This shift not only ensures the industry’s competitiveness but also creates opportunities for higher-level job roles within the industry.

In the face of rapid technological changes and increasing global competition, the Philippine call center industry stands as a beacon of resilience and innovation. It is a shining example of how a country can leverage its unique strengths to carve out a niche for itself in the global economy. 

Deeper into the call center history in the Philippines, it’s evident that companies such as SupportZebra have been instrumental in this growth. As we move forward, there is no doubt that the Philippine call center industry will continue to play a vital role in the global BPO landscape, creating jobs, driving economic growth, and showcasing the exceptional talent and skills of the Filipino workforce.

Sources:

Magtibay-Ramos, Nedelyn; Estrada, Gemma; Felipe, Jesus. 2007. An Analysis of the Philippine Business Process Outsourcing Industry. © Asian Development Bank. http://hdl.handle.net/11540/1849. License: CC BY 3.0 IGO.

Bodwell, Charles & Errighi, Lorenza. (2016). Business Process Outsourcing in the Philippines: Challenges for decent work. 10.13140/RG.2.2.13337.93287.