Is the Philippines an Overlooked Area in the Procurement Outsourcing Equation?

Despite the self-serving nature of this article/press release by a procurement group in Asia, it's worth considering whether the Philippines is an overlooked area for procurement outsourcing, especially for back-office buying and transaction-management functions. With all of the attention that Indian-based outsourcing firms receive, perhaps the Philippines deserves equal consideration for key tasks and processes. As a technical support hub, the Philippines has certainly given other low-cost countries a run for the outsourcing dollar. I came across a BCG paper on the subject a couple of years ago, and I saved it because it captured the essence of the region succinctly. It suggests that the Philippines, along with its other Southeast Asia neighbors, "have assumed an important role in the globalization of cost structures … [thanks to] well-educated, low-cost labor forces and fast developing internal market." Still, the region is fraught with potential perils that some might not consider at first glance.

For one, the region has a higher kidnapping rate that than Columbia (250 in a recent year, according to the National Counterterrorism Center). There's also the issue of domestic terrorist activities. Core business issues may prove constraining as well. According to an AT Kearney research brief on the area, "Compared to India, the Philippines has a smaller pool of resources and somewhat higher labor costs." Still, The Philippines may prove to have core niche expertise that could be valuable in certain procurement and payables areas.

AT Kearney also notes that the region is "ideally suited for such processes [as filing tax returns, as it does for P&G] given its oversupply of accountants who are trained in U.S. accounting standards." Perhaps, with a bit of retraining, some of these low-cost bean counters would be ideally suited for invoice and supply chain risk audits. A number of research firms and analysts have also suggested that the Philippines may be ideally suited to take advantage of the trend towards knowledge process outsourcing (KPO). In this area, we might see Filipino providers become more involved in such areas as supply markets intelligence, regional/country-specific market intelligence, and commodity price forecasting and analysis.

Jason Busch

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