Unit of measure

Experience Excellence:

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The Philippine Advantage

Oscar Sañez
President and CEO

Business Processing Association

Philippines

* Footnote
Source: Source
Unit of measureeconomy: weathering the crisis
Philippine
GDP Growth (%) •Remittances from overseas Filipino
1Q 09 2Q 09 workers
Philippines 0.4 1.5

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•Strong banking and finance sector—
Singapore -10.1 -2.5 reforms from 1997 Asian financial crisis
Taiwan -10.2 -7.5
•Continued growth of the BPO industry
Hong Kong -7.8 -3.8
Thailand -7.0 -4.9
Malaysia -6.1 -3.9 •Inflation at a 22-year low
•Interest rates at an all-time low
Source: ADB, country Web sites; NEDA •Strong growth in particular subsectors:
Philippines’ Projections • Services exports – 15.2% (including BPO
and tourism)
2009 2010 • Mining – 21.4%
• Retail trade – 8.8%
GNP 2.1-3.1 4.7-5.6 • Fishery – 5.9%
• Air transport – 4.5%
GDP 0.8-1.8 2.6-3.6
* Footnote Source: National Economic Development Authority 2
Source: Source
Unit of measure
2009 Outlook - BSP

Actual Projections
2008 2009 2009

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Real GDP Growth 3.8 1.0 (Jan-Jun) 0.8-1.8
(%)
Headline Inflation 9.3 3.7 (Jan-Aug) 2.5-4.5

OF Remittances 16.7 10.0 (Jan-Jul) 16.4

(US$ Bn)
Current Account 3.9 3.9 (Jan-Jun) 4.1
(US$ Bn)
Balance of Payments 0.1 2.8 (Jan-Aug) 0.7
(US$ Bn)

Gross International 37.6 41.5 (end-Aug) 37.5-38.5

Reserves (US$ Bn)

* Footnote
3
Source: Source
 Working Draft - Last Modified 8/21/2007 10:21:17 PM Printed 08/21/2007 5:45:59 PM
4
Unit of measurefinancial markets improve – BSP

Footnote
Source
Domestic

*
Source:
The Business Processing Association of the Philippines
Unit of measure

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IT Services Outsourcing
• Software Development
• IT and Data Center Operations
• IT Infrastructure Engineering and Design
Business Process Outsourcing
Services Outsourcing
• Voice
• Engineering Design
• Non-Voice (F&A, , HR)
• Architecture Design

Source:
* Footnote
Source
www.bpap.org
The Business Processing Association of the Philippines
Unit of measure

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IT Services Outsourcing
• Software Development
• IT and Data Center Operations
• IT Infrastructure Engineering and Design
Business Process Outsourcing
Services Outsourcing
• Voice
• Engineering Design
• Non-Voice (F&A, , HR)
• Architecture Design

Source:
* Footnote
Source
www.bpap.org
 The
Unit Philippines in Global BPO and IT-ES space
of measure

Global #2 BPO destination after India

Over $6 billion in export revenues growing at 36% annually
Employing ~400,000 workers, end 2008

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Drivers for success
• 90 million people; 36 million workforce; over
450,000 College graduates annually

• Large pool of highly educated, English-

speaking talent with strong cultural affinity to N
America

• Highly reliable infrastructure

• Competitive cost structure
• Diverse choices of suitable locations in-
country

• Strong government support

* Footnote 7
Source: Source
copyright 2008: Business Processing Assoc of the Philippines. All rights reserved
 Global Sourcing Map
Unit of measure

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Source: Everest Global Inc.; Market Vista 2008: In Review
8
* Footnote
Source: Source
 Manila is the largest offshore BPO city in the World
Unit of measure

Offshore BPO market by

hilippines is now a significant global player destination
2007; Percentage
100% = US$19-21 billion

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Number of BPO Workers

9
Sources: *Nasscom and John Clements Consultants, Inc. ; Everest data
Footnote
Source: Source
copyright 2009: Business Processing Assoc of the Philippines. All rights reserved
 The Philippines very quickly established strength in the
Unit voice-BPO
of measure sector

Philippines Outsourcing & Offshoring market size NOT EXHAUSTIVE

2008; Percentage
MNC Captives
100% = 6.1 billion 380,000
Animation, Software 18% 15%

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& Engineering
15% 24%
Non-voice BPO1

Global/India-centric suppliers
67% 61%
Contact center
(voice BPO)

Revenues Employees

Local Filipino suppliers

1 Includes Back office and Transcription 10

* Sources:
Footnote Joint BPAP/BOI/PEZA/CICT Task Force (2008)
Source: Source
copyright 2009: Business Processing Assoc of the Philippines. All rights reserved
 . . .and now establishing in-roads into the non-voice
Unit BPO market as well as IT and ESO
of measure

Philippines Outsourcing & Offshoring market size NOT EXHAUSTIVE

2008; Percentage
100% = 6.1 billion 380,000 MNC Captives
Animation, Software 18% 15%

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& Engineering
15% 24%
Non-voice BPO1

67% Global/India-centric suppliers

61%
Contact center
(voice BPO)

Revenues Employees

Local Filipino suppliers

Non-voice BPO revenues to double in 2 years!

1 Includes Back office and Transcription 11

Sources: Joint BPAP/BOI/PEZA/CICT Task Force (2008)
* Footnote
Source: Source
copyright 2009: Business Processing Assoc of the Philippines. All rights reserved
 Philippines has become COE for BPO due to depth of talent
Unit of measurein this sector
available

Expertise in diverse BPO and KPO functions:

Finance/HR/Publishing/Supply Chain/Legal/Medical
- Accounting and bookkeeping - Legal Transcription
- Account maintenance - Litigation Support

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- Accounts receivable collection - Content Development
- Accounts payable processing -Contract Summarization - Market Research and Analysis
-Fund adm/reconciliation - Editing, Sub-titling, Translation - Intellectual Property Management
- Payroll processing - Publishing - Account Risk Management
- Retail banking support - Health Services revenue cycle -Equities/Portfolio research & analysis
- Asset management - Travel Services Back Office
- Financial analysis and auditing - Credit/Loan processing
- Inventory control and purchasing - Health Insurance
- Expense and revenue reporting - General Insurance
- Financial reporting - Sales and marketing
- Human resources administration - Tax reporting
- Customer Management - Financial leasing
- Credit card administration - Transaction management
- Factoring and stock brokering - Sourcing and Procurement
- Revenue management - Logistics
- Transaction processing - Disaster recovery
- Business data processing - Business Intelligence
- Database management - Network management
- Supply chain management - Warehouse and inventory Mgmt

Total BPO workers: 323,300

 Revenues
* in 2008: US$ 5Bn, voice + non-voice BPO, growing at 36%/year
Footnote
Source: Source
copyright 2009: Business Processing Assoc of the Philippines. All rights reserved
 Philippine IT Outsourcing continuing to establish a strong
Unit of measure
niche in global ITO space

IT Skills

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Applications Development
IT Operations Mgt Data Center Operations IT Infrastructure
& Maintenance

Service Desk Technical Consulting/ Business Analysis

Maintenance Application Development & Deployment

Asset Management Package Implementation

Remote Network Application Conversion & Integration

Application Maintenance & Support

Total IT professionals: 35,300

13
 Revenues
* in 2008: US$ 601 Million, +42% vs year ago
Footnote
Source: Source
copyright 2009: Business Processing Assoc of the Philippines. All rights reserved
UnitAnd creative
of measure sector showing potential for growth
 Total animation and game development studios in the country: 50
 Total animators in the country: 7,000
 Revenues in 2008: US$120 million, +14% year ago

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Capabilities:
- 2D/3D animation incl pre and post production work
- Flash animation, web design, graphic & art design
- Interactive game dev (PC gaming and console games)
- Medical/Educational animation

* Footnote
Source: Source
copyright 2009: Business Processing Assoc of the Philippines. All rights reserved
The Philippine talent value proposition: Large pool of English-
Unit of measure
speaking talent
Number of college degree 2007 Annual
graduates growth
 Abundant labor force of 36 million
 Over 400,000 college graduates per year

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Business & Accountancy 128,000  Large pool of accounting and business
graduates
Engineering & Tech 55,752  English proficiency
 Affinity with Western culture
IT-related courses 42,047
 Customer service orientation
Architecture 3,100  Highly trainable
Medical Sciences 31,400  Cost effective
 High level of commitment and loyalty
Fine Arts/Humanities 7,660
TOTAL Tertiary level 454,818 3.8%

Pop Labour force Unemp rate Literacy

World 6,602M 3,400M 6.3% 82.0%
India 1,130M 509M 7.8% 61.0%
China 1,322M 798M 4.2%* 90.9%*
Suitability rates are empirically based on a total of >80 interviews
with HR professionals
Brazil working in each 96M
190M country 9.6% 88.6%
Philippines 90M 36M 7.9% 92.6%
*
Source:Footnote Phils Comon Higher Education : CIA World Factbook 2007; *China data for unemp and literacy is major
15
Source: Source
Cities only
Unit ofPhilippine
The measure talent value proposition: Quality

“Of 100 graduates with the correct degree, how many would you employ if you had demand for all?”
Per cent
Countries Engineer Finance/accounting Generalist

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10 20 10
Russi
a 50 40 20
Eastern Czech
50 30 15
Europe Republic
Polan 50 50 30
d 15 3
10
Hungar
y 20 30 30
Chin
25 15 10
a
Philippine 35 25 20
Asia s 13 13 8
Indi
a 20 25 11
Malaysi
a
Latin Brazi
America l
Mexic 42* 35*
o

Suitability rates are empirically based on a total of >80 interviews

with HR professionals working in each country
* Mexico is the only country where interview results (higher number) were adjusted ex-post since interview
base was thinner
* Footnote
Source: Interviews with HR managers; HR agencies and Heads of Global Resourcing centers;
16
Source: McKinsey
Source
Global Institute
TheofPhilippine
Unit measure talent value proposition: Cost competitiveness

Comparison of direct operating cost1 per FTE for transactional F&A work Source
2006; US$ thousand per annum Destination

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75-77
~80% savings

60-61
~75% savings

36-37
~55% savings

21-23 20-25
14-17 16-17 15-16
UK US Australia Mexico E. Europe India China Philippines

Companies
Companiesare
arere-structuring
re-structuringtheir
theirglobal
globaloperating
operatingnetworks
networkstototake
takeadvantage
advantageofofthis
thisopportunity
opportunity

1 Operating cost includes salary, facilities, equipment, telecom, training, and attrition cost 17
* Footnote
Source: Everest Research Institute (2008)
Source: Source
copyright 2009: Business Processing Assoc of the Philippines. All rights reserved
Economist Intelligence Unit: 2008 IT Industry
Competitiveness
Unit of measure

Rank Score Global Ranking

in Asia
2008 2007

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1 Taiwan 69.2 2 6
2 South Korea 64.1 8 3
3 Singapore 63.4 9 11
4 Japan 62.2 12 2
5 Hong Kong 54.1 21 21
6 Malaysia 34.2 36 36
7 Philippines 29.8 47 47
8 India 28.9 48 46
9 China 27.6 50 49
10 Sri Lanka 24.9 54 50
11 Indonesia 23.1 58 57
12 Bangladesh 22.4 60 -
13 Vietnam 21.4 61 61
14 Pakistan 20.9 62 60
* Footnote
18
Source: Source:
Source
EIU IT Competitiveness Report 2008
2

Risk perceptions: The Philippines, India, China, and many

Unit of measure countries share overall risk rating
developing

EIU Risk Rating 2008

A Hong Kong, Singapore

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B Hungary, Malaysia, Taiwan, South
Korea
C China, India, Indonesia, Philippines,
Thailand, Vietnam
Brazil, Guatemala, Jamaica, Mexico,
Paraguay, Peru
Egypt, Morocco, South Africa,
Albania, Armenia, Azerbaijan,
Russia, Serbia, Turkey, Ukraine

D Bolivia, Cambodia, Ecuador,

Honduras, Kenya, Laos, Pakistan,
Venezuela

E Iraq
Source: Economic Intelligence Unit Source: Political & Economic Risk
(EIU) 2008 Consultancy Ltd. 2009

* Footnote
19
Source: Source
copyright 2009: Business Processing Assoc of the Philippines. All rights reserved
 Gaining
Unit positive reviews from respected analysts and organizations
of measure

• IMF, March 2007: “The Philippines has established a strong presence in voice-based BPO
sectors such as call centres, and there are also signs of growth potential in other offshore
services, such as medical transcription and animation.”
• Gartner, Dec 2007: The Philippines has become a destination for call centre and back-office

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finance and accounting operations; rates highly in cost, labour quality and language/cultural
compatibility. Nov 2008: The Philippines has a good labour pool that is scalable at low cost.
Its overall cost structure is lower than India's, and wage inflation and attrition ratios are also
lower.
• Nomura Securities, November 2007: “We think that the Philippines has grown into the No.
2 outsourcing base after India in call centre–based BPO fields.”
• Everest Consulting, Jan 2009: The Philippines, whose offshore market has grown 46
percent annually since 2004, is poised to emerge as a leading destination for non-voice
business process outsourcing (BPO) work .
• Frontier Strategy Group, September 2007: The Philippines is among seven key markets
that are “above the rest” and are the “most critical to achieving corporate growth and
outperforming the competition in 2008 and beyond”
• National Outsourcing Association (UK): Philippines awarded Off-shoring Destination of
the Year for 2007 and 2009
Top 10 Asian Cities of the Future:
#7 Quezon City
#8 Cebu
* Footnote #10 Davao Top 10 Outsourcing Cities in Asia Pacific:
Source: Source #2 Manila 20
 Philippine
Unit of measureIT-BPO: Prospects for growth

US$ million

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27%

26%

23%

48% CAGR 26%

* Footnote
Copyright ©2009: Business Processing Association of the Philippines. All rights reserved
21
Source: Source
Roadmap 2010 launched in June 2007 to ensure growth of the
Unit of measure
industry is sustained

BPAP Roadmap 2010

• Need to recruit over one million new people into the industry to reach 10% market share
Suitable and • High percent of top talent in emerging
Talent areas outbound to other markets (e.g., nurses,

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abundant talent engineering, accountants)
• Mismatch in location density between providers and labor. Smaller labor pools not tapped

• Wage pressures emerging, reflecting accelerating growth and lack of transparency on wages
Operational
• Competitiveness relative to established players (e.g., India) and emerging players (e.g.,
Vietnam) at-risk
performance
• Wage appear to be growing faster than billing rates, creating imperatives for operational
excellence, scale and migration to high value services

• Availability emerging as major issue Next wave cities

Quality – NCR rental space only available to reach 68% of revenue target
infrastructure – Given market uncertainty, facilities being built only on commitment, slowing time-to-market
• Rental rates rising sharply in Makati Central Business District

• Need to ensure that current incentive regime continues to sustain competitiveness

Conducive • Most locators concentrated in NCR; other cities may not be O&O-ready
business
• Under resourced industry association
environment
•
Business
Good investor support in pre-investment phase; potential to improve in execution phase
environment
Risk • Persistent issues around critical risk factors that affect outsourcing decision (e.g., IP
management protection, data privacy)
* Footnote
22
Source: Source:
Source BPAP Team analysis
BPAP
Unit 2007-10
of measure – executing the roadmap
• Talent Development
• Developing a comprehensive assessment and training program –
BPAP Assessment Tool, ADEPT, Middle-management program
• Improving awareness for career opportunities in O&O – Campus

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Caravan
• Tapping alternative talent pools; ability to fund – PGMA Scholarships

Programs will deliver ~290,000 incremental qualified workers

to the industry from 2008 to 2010!
More than 50% ahead of baseline requirement!
* Footnote
Source: Source
copyright 2009: Business Processing Assoc of the Philippines. All rights reserved
BPAP
Unit 2007-10
of measure – executing the roadmap
•Business Environment
• Leading the industry priorities behind govt policy and legislative
agenda – Fiscal incentives, Data Privacy, IP protection, Cybercrime,
Labour Code amendments, DICT

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• Supporting investors with set-up through “industry roundtable”
Infra – Telco, Property, Hardware BPAP advisors
• Provide best options • Provide industry overview
available that fit requirements • Organize site visits and
• Provide end-to-end service
meetings with vendors & govt
support
• Complete delivery and after-
dales service

Government – BOI, PEZA, Investor Assistance

Group Legal consulting
LGUs
• Due diligence assistance • Provide end-to-end quality
• Business registration assurance for investors
Staffing consultants/Advisors setting
facilitation
• Provide overview on talent up operations in the
• After care service Philippines
pool based on competency
requirements • Assist investors with
government approvals
• Deliver recruiting and training
quantity and quality
requirements
* Footnote
Source: Source
copyright 2009: Business Processing Assoc of the Philippines. All rights reserved
 BPAP 2007-10 – executing the roadmap
Unit of measure
•Next Wave Cities Next wave cities

Cordillera
Ilocos Cagayan Valley Super cities have >15,000 IT-BPO workers
Large cities have a potential capacity of 10,000–15,000

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Mid-sized cities 5,000–10,000

Central Luzon Angeles/Clark Another 20-plus cities offer a potential capacity of <5,000
Manila Metro Laguna FTEs each
Southern Tagalog
Bulacan Metro Cavite
Lipa Bicol

Eastern Visayas

Western Visayas
Bacolod
Iloilo
Cebu

Central Visayas

Cagayan de Oro
Northern Mindanao

Western Mindanao
Southern Mindanao

Central Mindanao Davao

Development and promotion of Philippine top 10 “next wave” cities to host more BPO
companies
* Footnote
Source: Source
copyright 2009: Business Processing Assoc of the Philippines. All rights reserved
 BPAP JUST HOSTED A GLOBAL BPO
Unit of measure
CONFERENCE – OCT 20-21
CHAIRMAN’s PANEL
• composed of Leaders of the
different Global IT/BPO

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organizations

ACADEME PANEL
• composed of representatives from
different schools and universities
worldwide

SHARED SERVICES/CAPTIVE PANEL

• composed of representatives from
shared services operations

ANALYST PANEL
• composed of various
analyst/advisory groups

MORE INFORMATION

www.internationaloutsourcingsummit.co

* Footnote
Source: Source
Unit of
An measure
Invitation

Discover

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the
Philippine
Advantage!

Experience Excellence
Experience Philippines

* Footnote www.bpap.org
Source: Source