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OM in the News: Philippine Call Centers Overtake India

December 7, 2010

For the past decade, when you called an 800 number for customer service or a plane reservation, the chances are you would be speaking with a young person in Bangalore or Gurgaon, India. But Businessweek (Dec.6-12, 2010) reports  that you are now more likely to be phoning up the Philippines. With $5.7 billion in call center work this year,vs. $5.5 billion for India, the Philippines have overcome a slow start in outsourcing. OM managers in the US may wish to take a note.

Why the move from India? (1) English is taught in all schools; (2) Filipinos have a cultural affinity for the US (with teens weaned on radio stations that play US Top 40 and hip-hop);  (3) Special economic zones offer tax breaks and exemptions from import taxes on telecom gear; and (4) power is more reliable than in India, where companies often rely on diesel generators. The call center  jobs are popular, as nocturnal workers can earn $6,850 a year in a country where per capita income is 1/4 of that.

This is not to say that India is giving up its dominance in outsourced work that requires a higher level of skill. Its overall outsourcing revenues are still $70 billion (vs. $9 billion in the Philippines). Indian outsourcing firms are migrating from answering  phones to account management,high-tech support (it graduates 400,000 engineers annually),and financial and supply chain consulting. “In IT and software, India really doesn’t have any competition”‘, says a Wipro exec.

As a sidebar/update, on Jan.10,2011, USA Today devoted a cover story article to the Philippines call centers.

Discussion questions:

1. Why are the Philippines a popular call center alternative for US, European, and Australian firms?

2. How has the call center industry matured in the past decade and what has been its impact on India?

3. Identify other outsourcing industries that have migrated from one country to another in the past 20 years.

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