No Free Lunch

BPO: how much longer?

/ 05:07 AM October 03, 2017

It’s well-known that business process outsourcing (BPO), now also known as business process management (BPM), has been a key economic driver for the Philippines. But will it continue to be so for some time to come? Given the rapid onslaught of the Fourth Industrial Revolution, with artificial intelligence (AI) threatening to take away BPO jobs, is the end of the BPO sector in sight? Should we begin planning for the post-BPO era and think of measures to respond to the expected massive displacement of BPO jobs?

The sector is expected to overtake overseas remittances in foreign exchange earnings this year, after bringing in $25 billion in 2016. The country’s services exports, which grew at an annual rate of 16.2 percent last year thanks largely to BPOs, have been the bigger driver of our external trade, far outpacing exports of goods, which grew by a slower 9.2 percent (both measured in real terms). From a tiny 0.08 percent contribution to GDP in 2000, this had grown to 2.4 percent by 2005, and around 6 percent in 2015, and still growing.


On the jobs front, more than a million jobs are now directly (and many more indirectly) attributed to the BPO sector, covering a wide range of services that include contact centers, data transcription, back office services, animation, and game, software and engineering development. The skills required in the industry thus range from purely mechanical (e.g., transcription) to technical and creative (e.g., software development, animation). For voice contact centers, language skills are key, along with some minimum of caring and patience—something with which Filipinos are said to be amply endowed.

Moreover, our sheer large number of college-level young people suitable for such jobs is an advantage, with about half a million tertiary-level graduates added to the labor force every year. The country in fact already dislodged India a few years ago from the top spot in call centers, based on number of workers. Posting an average annual growth rate of around 20 percent, the IT and Business Process Association of the Philippines projects up to 2.5 million jobs and $40-50 billion in revenues by 2020. This implies that the industry expects things to get better before they get worse—that is, if nothing upsets the current momentum.


What would make it get worse? Over the longer term, the feared substitution by AI for BPO jobs is projected to eventually kill the sector, in as early as 5-7 years. The most vulnerable subsector, call centers, makes up about 85 percent of the BPO jobs, while those that require human creativity (such as animation) would not be as endangered. In the nearer term, the apprehension is about tax reform proposals pending in Congress that would eliminate or reduce tax incentives currently enjoyed by the sector. If this dampens the otherwise still brisk flows of investments into the sector, or worse, cause existing ones to exit, then we could indeed see the momentum dissipate much sooner.

The dire predictions about AI are not without its critics, and Facebook creator Mark Zuckerberg has been publicly debating Tesla’s Elon Musk on the latter’s doomsday warnings about AI. The general defense is that the spread of AI will usher in new types of jobs as new needs and functions are brought about by the new technologies. It has been cited, for example, that the number of bank tellers in the United States has actually doubled ever since the introduction of automatic teller machines. Will the new types of jobs make up for the massive displacement in call centers and more mechanical BPO jobs? Even if they do, the process could take many years, and there is no debate about short-term hardships that will result from the AI revolution. The inescapable need is to help equip our workers with the ability to adapt to rapid changes in job requirements through lifelong learning. Traditional college education simply won’t do it.

Threats come with opportunities, and everyone—the government, educators, civil society, and especially the technology industry—must deliberately work together to make sure that the new technologies improve, rather than threaten, human lives.

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TAGS: BPO, business process outsourcing, Cielito F. Habito, foreign exchange earnings, No Free Lunch, overseas remittances
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