Blog: BPO threat is very real

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By Richard Parcia More than a decade ago, there was a group of people who met in an obscure location in Quezon City. The group called themselves the Katipunan Forum. It was so named for two reasons: First, it was a presumptuous attempt to declare the organization as a seed of a new revolution. Second, which I believe is more probable, it was just named after the highway where the location of the meeting took place. The names of the people who attended that meeting are not celebrities nor were they staple topics of broadsheets and televised news. However, what they lack in mainstream exposure they made up in scientific journals and technology papers around the planet. They are a special group of people who are collectively known in innovation studies as technology forecasters or futurists. As the term suggests, they predict the next wave of innovation and state. They do it by looking into recent scientific breakthroughs and the supply chain that will support it. It is actually a different approach to industry analysis, but it is more accurate because it is primarily based on tangibles of the innovation cycle, which in turn, are based on the basic principle of science with regard to the transformation of matter. Except for me, all of them, at the very least, had already contributed to science with their thoughts. Not a few had patents under their names or have pending certificates to be issued. A few are representatives of venture capitalists. I was there not because I was intellectually their peer. Far from it. My presence was really just by accident because my two mentors in the Russian way of solving things were members and I just decided to tag along like a groupie. It helped that the convener, a good friend of mine, thought he can make use of my good relations with the universities. I was more like a ball boy or water-boy for an all-star team. Anyway, there was only one agenda for the meeting. All of the members are related to the country?s erstwhile high-tech industry which is semiconductor and electronics. Quite a number were from Intel or had dealt with it in different capacities. All of them, just like the three kings of the Nativity story, saw the stars and the grim message. If the industry?s thrust will not evolve into something which will move it up the value chain, it will have a slow and agonizing death. As a short-term solution, it was proposed that the three stakeholders ? the industry, government, and universities ? double their current efforts. The industry will adopt more approaches just to be efficient and manage the cost further down. The government will seek to extend the tax holidays and incentives. And the universities will be more active in aligning curricula and send more interns. The long-term solution, though, should be started quickly or else the short-term solutions will just be stop-gaps to delay the inevitable. The industry should find ways to entice their corporate HQs to transfer value-added services here like design and technology development, and not just assembly and test. The government, through legislation, should make the incentives more permanent because the impact of business retention to economic activity significantly outweighs the revenues that can be collected through taxation of corporate income. Lastly, the universities need to produce more people, particularly with MS?s and PhDs, who can do added-value service that should be transferred by doing more research, thus building competency. To emphasize the importance of the cause, the convener, even had a term for the area that will be the epicenter of the movement ? he called it the Silicon Triangle. Unfortunately, the triangle did not materialize into something better than a geometrical imagination. The forum, just like similar revolutionary attempts in the past, fizzled out just as fast as it was conceptualized. The members went out of their ways, still contributing to the body of knowledge, with some of them, evolving into different careers and advocacy. The forum, on the other had, was attached to another member and is now a front for venture capital opportunities and the enticement of Filipino scientists to go home and bring some of their money. Intel, the crown jewel of the Philippine high-tech industry, left in 2009. Now, what has this go to do with the BPO industry? In particular, what has this got to do with the Obama threat of in-sourcing? My answer is nothing and everything. If not for convulsions of nature, the death of the semiconductor and electronics industry could have been faster. Surely, the industry still reported record investments in 2011. Since none of the proposals of the forum materialized, the threat hasn?t left because the Philippines is still primarily doing jobs that are at the bottom of the value chain, thus easily transported. Worse, the current administration and even in the last years of the previous one, no longer sees the industry as something that it should care about. In fact, one factor ? power cost ? hangs just like a Damocles sword. To answer the question, there is nothing because the circumstances are different as far as the specifics. The industry?s woes are not necessarily due to a threat of a US president of any in-sourcing. For one, any in-sourcing plan is bound to fail because unless the taxation in the US is overhauled, bringing back any industry is really not viable and is just plain political rhetoric. The GOP might use the same campaign line but it will surely balk at any idea that will grow a budget deficit. However, it has got to do with everything, because the threat is very generic yet very important not to address. The BPO industry should not be worried that the US will take back jobs. It should be worried that these same companies will move the jobs somewhere regardless of the country. The BPO industry is still capitalizing on the low labor cost and our proficiency in the English language. Any country can do those in a short span of time. The BPO industry is the current darling of the industry. But it should learn from the mistakes of the previous mistress because, at the end of the day, it is all about the margins and the bottom line (no pun intended). The writing is in their wall, too. A sample of the writings? A BPO company is hiring lawyers to do the job of legal assistants. Some companies are now nearing the end of their tax holidays and are actively lobbying for extension. China, whose labor cost is just 25 percent of ours, is learning English. Same with Vietnam. Russia is gearing up. Malaysia is just waiting for us to make a mistake. And our universities have no clue what value added is. Am I being an alarmist? I wish I was. I am just using the same technique of technology forecasting that I learned from the members of the Katipunan Forum. The stakeholders of the BPO industy can only pray that I did not learn that much or I learnt it the wrong way. Or, they can just pick up the lessons and run with it. It is their revolution now.]]>

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