To get the most out of outsourcing benefits, companies have to choose the right location. The Philippines and India share a lot of similarities in terms of being a competitive BPO destination, but the Philippines is poised to dominate in certain sectors, says Vector BPO.
Outsourcing Comparison: India vs. the Philippines
India’s large pool of IT professionals is the main driving force behind its robust outsourcing industry. India earned its reputation as the center of information technology outsourcing in the word.
The country is one of the nations with the largest IT workforce, thanks to its national educational system that puts a lot of emphasis on science and mathematics. To date, there are about 500 software firms operating in India.
As outsourcing continues to penetrate a growing number of industries, the availability of IT professionals is no longer the primary factor to consider when selecting a BPO location
Multinational companies are eager to fully take advantage of the benefits of outsourcing, that’s why many are breaking ties with Indian contractors as soon as they spot better outsourcing opportunities in the Philippines.
During the recent years, the Philippine BPO industry has been claiming a growing percentage of the global offshoring market which is currently dominated by India. The Philippines is increasingly becoming a better place to outsource call center and back-office jobs, mainly due to its closer cultural ties with the West, better English conversational skills and lower wages.
Cultural Affinity With the West
Since the American colonization in the 1940s, the Filipinos have been using English in their everyday lives. The influence of American culture on the Filipinos is evident in the local mass media, corporate world and the arts.
- Cinemas are dominated by Hollywood films, while the radio and television networks regularly broadcast Western shows and music.
- Retail goods like clothing, apparel and foods are also heavily influenced by American tastes.
It’s no wonder that Filipinos are in a better position than Indians in conversing with Americans.
On the other hand, Western culture is not as pervasive in India as it is in the Philippines. Although Hollywood films have their fair share of local patronage, Bollywood dominates the local cinemas. Also, certain cultural and religious practices in India directly clash with American ways of life.
Filipinos from all economic and social backgrounds use English as their second language. English is also India’s second language, but it is not as widely practiced as in the Philippines. For instance, many Indian advertisements are printed or broadcast in local dialects.
Lower Salaries and Price Levels
The average salary of India-based call center employees is $6K, compared with $3K for their Filipino counterparts. The salary gap tells much about the costs and benefits of outsourcing in the Philippines relative to India. IBM also cites lower inflation rate as one of the strengths of the Philippine outsourcing industry.
The Philippine government gives more tax incentives to BPO companies, adding up to the financial benefits of outsourcing. The Philippines’ 8-year tax holiday obviously contributed to higher net profit margin of BPO companies, estimated between 11%-21%, compared with 13%-16% in India, according to Orbto.
Given the talents, cost advantages and Westernized culture of the Philippines, more American BPO companies are expanding their operations in the Philippines. A research conducted by IBM showed that the Philippines already displaced India as the top provider of business support functions such as business process outsourcing and shares services.