January 2002

BY TRACEY E. SCHELMETIC, CUSTOMER INTER@CTION Solutions'

I was recently invited to attend a press conference organized by Source One Communications and its new partner, Philippines-based contact center operator Customer Contact Center, Inc. The two companies have teamed to form an entity called Source One Communications Asia, Inc., which will operate out of Manila, the Philippines, and will offer both inbound and outbound teleservices in English to the U.S. and Canadian markets.

In addition to formally marking the announcement of the new Manila-based company, the conference's goal was to familiarize the U.S. call center media with the concept of the Philippines as an up-and-coming challenger to India's dominance as a foreign provider of voice and Web-based outsourced customer care services. To that end, several ministers of the Philippines government were present, and the coup de grace was the appearance of the President of the Philippines, Gloria Macapagal-Arroyo.

The Philippines, a nation comprised of some 7,000 islands in Southeast Asia, is in the process of settling down after a somewhat bumpy history (though political problems remain endemic in the far southern regions of the country). President Macapagal-Arroyo, sworn in just last year, has publicly declared her goal of bringing the country's business climate in step with the developed world. To that end, she has identified what she refers to as ICT (information and communications technologies) as the Philippines' primary business opportunity.

'IT Is Our Number One Way To Defeat Poverty'
President Macapagal-Arroyo spoke candidly about her government's goal to foster in an age of IT in the Philippines, underscoring the fact that she intends to help make information and communication technologies the country's future. 'Every time I visit schools, I tell the students, 'go ICT, not administration or communications, but ICT.'' She personally chairs the country's IT and e-commerce councils, and her presence at the press conference, held at the Waldorf-Astoria in New York City and which was fit in to her intended schedule of meeting with President Bush in Washington, spoke to her commitment.

The facts presented at the conference were noteworthy. The Philippines has a skilled labor pool 29 million strong, and a literacy rate of 94 percent. Seventy-two percent of the Philippines' population is fluent in 'American English' (more on that later) and it is the third-largest English-speaking country in the world.

The English spoken in the Philippines is American-style, as opposed to India's British-style English. This is due primarily to the fact that the country, first a colony of Spain from the sixteenth to the nineteenth centuries, became an American protectorate when the U.S. defeated Spain in the Spanish-American war of 1898. (The Philippines fought on the side of the U.S. during this war.) The U.S. purchased from Spain the land occupied by the Philippines after the war, and the country's journey to independence took place during the first half of the twentieth century, full independence being achieved post-WWII in 1946.

True development was stunted in the last several decades, most notably due to the infamous and well-shod rule of Ferdinand Marcos from 1965 to 1986. Subsequent presidents, including Cory Aquino and Fidel Ramos, focused largely on the reestablishment of democracy to the country, which helped from a social standpoint but did little to boost the battered and bruised economy. President Macapagal-Arroyo has made it her number-one goal to wipe out poverty and corruption, and has thus far proved herself to be a tireless whirlwind of economy-boosting activities for her country.

Open Market Economy
As President Macapagal-Arroyo and her ministers could have guessed, the words 'tax holiday' go a great way in attracting the attention of foreign investment. Many developing countries do not allow 100 percent foreign direct investment (FDI), which can make companies about to stake millions or billions of dollars into an overseas venture nervous. The Philippine government has decided to allow 100 percent FDI, and is currently offering four- to eight-year tax holidays, as well as tax and duty exemptions on imported capital, to companies setting up business on Filipino soil and hiring local workers.

According to government ministers, there are 100,000 IT-literate graduates annually entering the workforce in the Philippines, and turnover tends to be low. Additionally, it was pointed out that a call center agent's salary is one-fifth of his or her American call center counterpart, and the average salary of a manager is one-seventh of that of an American call center manager. The total variable cost of operating a call center in the Philippines as opposed to the U.S. was quoted as one-third. President Macapagal-Arroyo stated that one of the country's current priorities is the certification of programmers and the strengthening of math, science and English in schools. A final bonus in the Philippines' language monopoly is the presence of its ethnic Chinese population, which brings the globally spoken Mandarin and Fukienese dialects into the call center.

Government ministers were particularly keen to point out that because of India's position as a former colony of the British Empire, most English-speaking contact center workers in that country speak with a decidedly British flair. Because of the Philippines' position as a former U.S. protectorate, the style of English taught in schools is American (a distinction particularly important to companies who manufacture aluminum, elevators or wrenches, if they'd rather not be trying to sell aluminium, lifts or spanners. And the pants-versus-trousers discussion is best left to the imagination.) Additionally, Filipino citizens, according to the conference presenters, are more versed in American culture than contact center workers in India.

'We Want To Promote Convergence'
Following India's example, the Philippines has begun a no-holds-barred venture to build infrastructure, Western-style IT 'parks' and high-quality, low-cost bandwidth. Offshore customer contact services would be impossible without the cost savings of voice over Internet Protocol (VoIP), and any country wishing to attract Western businesses must be savvy enough to realize that in the end, it may all come down to bandwidth. President Macapagal-Arroyo stated, 'I would like to have the highest Internet penetration in our part of the world in a couple of years.' This is a goal she and her government currently seem determined to achieve.

It's not hard to imagine that the Philippines will present a serious challenge to India's dominance in Asia of the outsourced contact center market. The breakneck speed at which the present government is moving to put the people and processes in place seems to attest to this, not to mention the industrious goals and activities of its president. Asked about the country's lack of an intellectual property law and if she thought that would deter Western companies from locating in the Philippines, the President fixed the ill-informed questioner with a stern look. 'We do have an intellectual property law,' she responded. 'I authored it.'

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