• By quade
• 24 June 2024

Growing Threats to the Philippines BPO Industry: AI And Talent Shortages

The Philippines is urgently safeguarding its position in the $300 billion global BPO market amidst several threats emergent that can challenge the dominance of the Philippines BPO industry. Although the second-largest outsourcing provider in the world, new technologies and issues threaten to undermine that dominance.

Challenges include dwindling talent and heightened competition as the country struggles to fill all the necessary jobs to serve such a large sector. The other issue is technology as rapid AI advancements may automate most of the work done by BPOs.

Skill Issues in the Philippines BPO Industry

The Philippines BPO industry faces a critical shortage of graduates with essential communication and technical skills. This shortfall risks missing out on opportunities to create 800,000 jobs over the next five years according to the IT & Business Process Association of the Philippines.

Jack Madrid, head of the Philippines’ main BPO trade group, highlighted a common challenge, comprehension among job seekers. Speaking from Manila, he emphasized that many fail at fundamental levels. The skills gap is intensifying efforts to protect the nation’s role in an industry pivotal to its middle-class growth since the 1990s. Outsourcing contributes about 8% to the GDP and drives significant foreign exchange inflows.

However, the proliferation of AI-driven bots, accelerated by the Covid-19 pandemic, is reducing the longstanding advantage of English-speaking Filipinos. Highlighting a decline in educational standards, World Bank data reveals that nine out of 10 Filipino children cannot comprehend a basic text by age 10.

“I believe we were better English speakers before,”

-Jack Madriad, President of the IT & Business Process Association of the Philippines.

He advocated that schools shift back to English as the primary language for the Philippines instead of Tagalog. He also noted the lack of fundamental technology skills in applicants. Many of the jobs that people struggle to learn are programming and troubleshooting, which are increasingly crucial for the Philippines BPO Industry.

During the pandemic, the Philippine’s BPO Industry grew by adding 255,000 jobs but grew by 1% less than its competitors like South Africa, Egypt, Poland, Colombia, and Costa Rica. One reason for this decline is poor employability as only one out of every ten outsourcing job applicants successfully land the job.

Tech Developments In the BPO Industry

The skills gap is increasingly critical as artificial intelligence threatens to disrupt industries globally and in the Philippines BPO industry. With new AI systems being developed, they can automate many of the previous tasks done by BPOs such as content creation, coding, and marketing.

The Asian Development Bank forecasts that AI and related technologies could replace nearly a quarter of the outsourcing workforce in the Philippines BPO Industry by 2030. According to Jack Madrid, workers in the BPO sector need to proactively learn to leverage new technologies for greater efficiency.

“There’s still time to prepare and upskill, but that window is narrowing,”

-Jack Madriad, President of the IT & Business Process Association of the Philippines.

Healthy Growth

Despite these challenges, the industry still shows promising signs as it is growing by leaps and bounds. In terms of employment, the number of BPO employees in the Philippines BPO industry will grow by 6%-7%, reaching about 1.57 million employees in 2022. Meanwhile, revenues will also increase 7%-8% to about $35 billion. These are signs that despite the challenges, the Philippines BPO industry remains healthy and isn’t in immediate danger of collapse.

The Philippines’ BPO industry has created a plan to generate 1.1 million new jobs and become a $59 billion industry by 2028. They hope that this will increase its economic contribution to nearly 9% by increasing its presence in Europe where there is still room for growth.

Despite ongoing challenges, prospective investors are still investing, and existing ones are expanding in the Philippines. Jack Madrid noted that demand remains strong despite these issues and highlighted the need for the Philippines’ Commission on Higher Education to revamp IT education programs, ensuring alignment with current industry trends and fostering relevant competencies.

“There are some fundamental weaknesses in our educational system. It’s an old problem but it’s just become much more urgent now.”

-Jack Madriad, President of the IT & Business Process Association of the Philippines.