Davao City makes it to the Philippines’ 2008 Top 10 IT-BPO Outsourcing Destinations

Davao City has added another distinction to its cap by ranking 4th in the Philippine 2008 Top 10 Next Wave Cities for ITO-BPO Destinations. Conferred by the Commission on Information & Communications Technology (CICT) and the Business Processing Association of the Philippines (BPAP) last 3 December 2008 at the BPO Summit of the Philippines at Crowne Plaza Galleria in Ortigas Center, Pasig, this Award should put to rest the speculation that the city is not ready to host multiple IT-BPO locators/investors.

The CICT and BPAP scored no less than thirty-one (31) ICT-ready locations in the Philippine Cyber-Corridor and their performance in four (4) major areas to include talent, infrastructure, cost and business environment.

Davao City bested 4 other Mindanao ICT locations by scoring well in the areas of talent and infrastructure. The depth of Davao City’s manpower pool is on account of the presence of 42 colleges and universities, which yield about 15,000+ tertiary graduates annually. Complementing the city’s performance in the talent area is the presence of major telecommunication providers, increasing number of upcoming BPO real estate, accessibility by air & land, among others.

The local IT-BPO stakeholders led by ICT Davao Inc and its private and public sector partners welcome the challenge of increasing the city’s competitiveness for attracting ICT locators and investments by working on improving performance in the area of business environment and risk management. “We need to act together in improving the overall imagery of Davao City as a safe IT-BPO destination by providing substantive evidence to counter the negative perception on the Mindanao region. By so doing, we can continue to attract more ICT investments, create more jobs and improve Davao City’s economy,” says Wit Holganza, current president of ICT Davao Inc.

The ten locations that made it to the top next-wave cities for IT-BPO are:

1. Metro Laguna
2. Metro Cavite
3. Iloilo City
4. Davao City
5. Bacolod City
6. Angeles – Clark – Mabalacat
7. Baliuag – Marilao – Meycauayan
8. Cagayan de Oro City
9. Malolos / Calumpit
10. Lipa City

Despite the negative news and forecasts for the U.S. mortgage industry, Infinit-O sees this period as an opportunity to build new relationships and partnerships. In the process, Infinit-O has gone full force in developing existing and defining new verticals in mortgage outsourcing. The formula is simple: provide high quality services at typically only 50% of the price in the US. It may sound simplistic and straightforward, but these are exactly what mortgage industry players need to retain their edge and remain competitive in a tumultuous market.

Infinit-O‘s mortgage division has already processed hundreds of wholesale and retail loans ranging from Subprime, Conventional, FHA/ Govt, Fannie Mae/Freddie Mac, HELOC’s, and Alt-A in different states over the last 2 years and led the process development and optimization for 2 US-based mortgage companies. Backed with Infinit-O‘s proprietary framework, ISO 9001:2000 quality and ISO/IEC 27001:2005 security standards, this combination of mortgage and outsourcing experience unprecedented in the Philippines (a prime spot in the outsourcing world), may prove to be a winning solution for the mortgage industry players.

Infinit-O is based in Makati City, Philippines, and has been engaged in the outsourcing business since 2005. Aside from directly handling outsourcing projects, such as mortgage loan processing, this BPO outfit is also offering consulting services to other companies that plan to enter the global outsourcing market.

Chua was welcomed by Wit Holganza, school administrator of MTC Academy and founding president of Transcription Alliance of Davao Inc (TADI). Holganza reports that Chua considers Davao as having 3 plus points: a significant pool of human capital; the city’s accessibility in terms of air routes; and, lower power rates compared to Iloilo’s.

Transkripsyo is apparently also looking at Iloilo City as another possible investment site. Then again, it might not even be a toss-up, relates Holganza. If feasible, Chua said that his company might in fact locate in both cities. Transkripsyo is planning on opening an initial spread of 20 seats, and possibly transferring half of their operations outside Metro Manila in the near future.

Let’s examine this sudden increase in BPO locators in Davao more closely, though. Does this signify that we are now really prepared for the influx of bigger I.T. / ITES investments? Are all necessary facilities and allied services already in place? This might not be the case in reality. In recent articles I have pointed out some weaknesses in our city’s development planning, especially in our purported I.T. Parks. Those issues aren’t resolved yet.

Chua observes that this growing interest in Davao and other regional I.T. hubs is driven not necessarily by their preparedness, but by the weakening dollar. Remember, BPOs are essentially exporters. It might be that these call centers and medical transcription companies are relocating to regional hubs in order to cut their losses — hence the concern for power rates. Of course Davao, Iloilo and other I.T. hub aspirants can offer cheaper lease and rental rates as well.

So, the strengthening of the peso against the dollar may be good for us now. But this cannot possibly last: eventually the currencies will stabilize. And when industry recovers from its effects, we will probably lose our sudden advantage — IF we do not secure our position.

How? We give ICT Davao, the representative organization of Davao’s I.T. industry, a set of teeth. It’s a mobile and young group that has the capacity to adapt. It has leadership potential. But, it does not yet have any authority to set the course for Davao I.T. It cannot yet interface directly with the local government, much less influence it. (Easier said than done, I know. But somebody’s gotta put a finger on the button!)

Another way of ensuring that our BPO locator numbers continue to rise, even beyond the grace of a weak dollar, is a success story. Or several. Holganza says that the 40+ member-companies of the MTIAPI are at present on a wait-and-see mode. That is, if Transkripsyo locates to Davao and decides to stay for good due to fiscal viability, we might see more of MTIAPI companies here in the foreseeable future.

Ergo, in order to address immediate concerns in I.T. / ITES investment management, a consolidated and collaborative effort by industry, academe and government is urgently called for. Imagine this scenario: An I.T. firm wants to locate to Davao, and sends representatives here. Whomever they contact here will know to which agency or office they should be referred right away. Whatever requirements this company might have will be met within a reasonable period. They need office space? Our answer: ‘How large?’ We’ll even anticipate that they’ll need a leased line to the U.S., and a 24-hour standby generator that can power an entire high-tech building (which they most probably won’t use because our power company is super reliable). They need manpower? Our schools interface directly with industry, so fielding graduates won’t be a problem….

Utopia? I hope not, because this situation is supposed to be within reach if we are to truthfully call ourselves an honest-to-goodness I.T. hub.

Not quite apart from my involvement in Davao’s IT industry, I have also been active in the local Japanese language education scene for some years now. I say ‘not quite apart’ because one of my self-appointed responsibilities within IT is to promote the technological skills of Davao to the Japanese market. But it’s been a lonely road for me. When asked by Jetro representatives recently about the number of Davao-based IT practitioners proficient in Japanese… well, I’m the only one.

But in fact, there are none. What Jetro wanted to know about were programmers, systems engineers, even web applications developers. I am in IT as a marketer, a facilitator.

Last night I was with my Japanese friends and fellow educators. We have been planning for sometime now to establish an association of Japanese language teachers here in Davao. My proposal now is to accomplish this with the purpose of training IT people in the language. It is not an easy language to study (especially if the student is not interested), but for those who make it, the rewards will be tremendous.

According to the Jetro representatives who came to Davao last week to promote the PhilNITS exams (more coverage on this in succeeding posts!), Japan has a huge shortage of IT engineers. That is the reason why they’re hiring from outside, not only from the Philippines, but also from Vietnam, Malaysia, etc. And these highly-skilled IT engineers are paid the same as their Japanese counterparts. That is, if they know Nihongo and especially if they’re passers of the IT engineers’ exams.

The good news is, much of the lingo in Japanese IT is based on where most of the software of the world come from, the United States. So whatever an IT student learns here will be pretty much applicable in Japan. But wait a minute, am I trying to promote the exodus of manpower?? Well, not really promote, but I’d rather see that these skilled workers who go abroad get decent jobs outside. On the flipside, those who do decide to stay here can be instrumental in the local outsourcing industry, which is steadily moving forward.

If we are able to reach a critical mass of Japanese-speaking (and -writing of course!) IT professionals here, it would be the answer to the IT industry’s dream: to penetrate the Japanese market. In fact, we wouldn’t have to do any penetrating: the market will come to us!

Take a look at where we were a decade ago — read the Philippine Internet History — and see how much we’ve accomplished. If we do get the attention of the Japanese IT industry, our accomplishments will have jumped even further than we’ve had in the last decade.

SSP is a member of the Association of Solution Integrators in Davao (ASID). This association, however, is focused mainly on software development, so I remember many times when SSP seemed out of place during meetings and events, despite the fact that this member was one of the most active.

(One good thing, though, that ASID contributed to the MT sector was its drive, together with DTI-Region XI, to promote the business in Davao and other parts of Mindanao. I’d like to think this helped in raising awareness among potential investors.)

Now, SSP finds itself among colleagues in a new organization that was formed in 15 January 2007. The members of the Transcription Alliance of Davao Inc. (TADI) are MT companies, training institutions and MT individual practitioners. These are: Brokenshire Learning System, CITEC, Clickerz, Davao’s First Transcription Center, Kidapawan Technical Learning Center, MTC Academy, SSP Transcriptions, Synergy, Dr. Margaret Antonio, Mr. Rex Cobrado, Dr. Manuel Gonzalez, and Mr. Wilson Pingoy. Here’s an excerpt from TADI’s press release:

The Philippine forecast for 2007 for the MT industry is $238M and the required manpower complement to reach this goal is 17,000 qualified and trained MTs. Up to 2010, the Philippines hopes to generate $1.7B, if we can produce 122,000 trained MTs to cope with the US offshore outsourcing demand. Unfortunately, we now only have about 5,000 qualified and competent MTs in the country.

TADI, therefore, has its work cut out for it. They have a long way to go to realize their targets, but the organization is confident that Davao is prepared to accommodate a medical transcription business boom.

The course offerings of MTC Academy conform to the requirements of TESDA’s ladderized program and as such, the Basic Medical Transcription for High School has nominal equivalent units that can be credited towards a college or university degree program.

Holganza said that the rationale behind this program is the provision of alternative education to high school graduates who might not have the wherewithal to go on to college at present. And when a high school student graduates from this MTC program, the certificate that he will receive will be the same as that received by graduates of MTC’s regular training programs. MTC certificates are recognized by the TESDA, and by its numerous industry partners.

"The high school graduate, even without medical background, can be trained to become a medical language specialist and will adapt easily to the use of transcription-related technology given the extended program duration of 18 months. They are graduated from the program with the same competency requirements as those with medical or allied health background." – Wit Holganza

I think this is a sound undertaking by MTC Academy. It could provide early employment opportunities especially to the underprivileged, and it could also spur on the drive towards technopreneurship among their trainees who turn out to have a head for business. And ultimately, contribute to Davao’s near-future BPO industry.

Speaking of which, why don’t you check out this firm which offers Business Process Outsourcing services, and see how they might be able to help your IT business prosper. According to Holganza, there are now 5 MT companies in Davao, with 4 more coming this year. But there’s room for more! We’ve actually barely scraped the surface of this mother lode.

It was quite eye-opening during the MTC launch tonight. I’ve long known about medical transcription and the general workings behind the business, especially that I’d helped in promoting for more Davao-based MT companies. But it was my first time to actually do a transcriptionist’s job. MTC had us do a hands-on, I guess so that we could better appreciate the gist of the whole effort. I did pretty well, if I do say so myself — but of course it helped that I’ve always typed quite fast.

And for high school students who have ready MT-geared skills and whose families have an annual income of less than P60,000, MTC Academy is prepared to offer financial assistance under its Handog Edukasyon Para sa 2007 Graduates program. For more information, please contact 222-6822, or text (906)214-3300. MTC Academy is on E. Quirino Ave., Davao City (across the street from Tower Inn).

Ever since that time, we’ve had quite a number of new IT-related businesses that have been established, including a few small-scale domestic investments. However, we haven’t yet seen any significant foreign investments come in. Might there be something that we’ve overlooked?

We have the skilled manpower necessary for many new companies to establish themselves here. As I mentioned in my column last week, Manila-based call centers are heavily recruiting Dabawenyos, so there’s really no doubt that our talent pool is rich and promising. So where are these new IT companies?

Last 22-23 March, I accommodated a couple of top executives of Summersault Inc., a business process outsourcing (BPO) company based in Makati. This BPO company offers IT-enabled services to large corporations all over the world. Their services include automation and handling of back office transactions, outsourced medical billing, legal transcriptions, call center operations consulting services, among others. They were in Davao to take a look at how business is conducted in our fair city, and to assess the possibility of locating part of their operations south. Mr. Manolo Aquino, President of Summersault, indicated that instead of expanding their operations in Manila, it might be more feasible for them to set up an outfit in Cebu, Cagayan de Oro, or Davao.

I was able to arrange meetings for Summersault with DTI-Region XI, DTI-Davao City Field Office, the Sangguniang Panlungsod, as well as with Davao businessmen. The purpose of these intimate meetings was to show them the local flavor, so to speak.

Mr. Richard Eldridge, Chief Operating Officer of Summersault, in our meeting with government representatives, apprised us of the five factors that his company considers important to be present in an investment destination. Top of the list is people. Eldridge said that the availability of skilled and easily trainable staff is vital as his company’s operations rely heavily on quality manpower. Well, with over eleven thousand graduates per year (plus the thousands more from neighboring cities), I believe we can tick this one off with confidence.

Number two on Summersault’s list is the availability of facilities, and their attendant lease / rental rates. Considering the huge difference between Makati and Davao office space rental fees, one would think this item is a sure check mark. But it isn’t that simple. Do we have the necessary physical facilities in place? Are we truly ready for the myriad requirements of large IT companies? We can supply the people and the software systems, but can we address the more fundamental of their needs?

Take, for instance, electric power. Many will say that our light and power company is one of the best in the country, and this claim would have its basis. However, no one will be able to deny that outages, while rare, still do occur. BPO operations, due to the nature of the business, depend a great deal on uninterrupted power availability. Eldridge mentioned that, for a commercial building to effectively service an IT-enabled company, there should be an automatic generator in place–one that does not require human intervention to operate in case of a brownout, in other words. What if there were a blackout, one that would last more than a day? Would any of our existing commercial buildings be able to assure continuous power supply?

The Makati executives mentioned quite a few more provisions, and the more they said, the less confident I came to feel about the suitability of our city. However, it’s not too late yet. If our key players act very soon, Davao should be able to reach the minimum level of readiness to accept sizable IT investments.

Number three on the checklist is the availability–and reliability–of telco services. We have the major telephone companies and ISPs operating in Davao, and the suite of services that they are already offering are nearly identical to that offered in the nation’s capital. The rates, however, are slightly higher here. This is most likely due to the absence of more investments in telecommunications infrastructure.

The fourth item is local government incentives. This indicates the level of government support that the IT industry enjoys in a locality. I believe I can safely assume that the Summersault executives were fairly impressed by the positive attitude towards IT developments shown by the government representatives with whom they’ve met. Aquino said that, aside from providing tax incentives to incoming investments, it is important to IT investors to be confident in the local government unit. This means that the LGU is seen by the investors as being aware of their particular requirements and problems.

Last on the Summersault list, but just as essential as any of the preceding four items, is the existence of facilities for expatriates. The influx of large-scale IT investments invariably entails the entry of foreign nationals into the investment destination. And so Summersault is also concerned about schools for the children of expats, hotels, and other tourism-related establishments.

One definitely positive note was the lack of concern on the part of the Summersault representatives regarding safety. Apparently unfazed by the prevailing negative image of Davao City in the national media, the two executives came to our city to discuss business and displayed none of the usual apprehension over perceived security problems.

So are we ready for IT investments? Yes, if government, the private sector and academe join hands and hammer out a practical investment plan that will be able to take effect immediately.

And speaking of academe, that will be one of my topics in the coming weeks.

Reading, writing, speaking and comprehending English–this is the skill that the Filipino has always been known for from generations past. Can this still be our claim today? Some alarming reports are indicating otherwise. I fervently hope that what I’ve been reading are inconclusive, but there is a growing concern that we are in danger of losing our edge as English speakers in Asia.

On the other hand, Davao City seems to be enjoying a reputation for supplying quality graduates. This I infer from the above-average acceptance rate of call center applicants from our city. Andre Fournier of 3G Communications, which is handling the manpower recruitment in behalf of CyberCity Teleservices, says that more than 20% of Dabawenyo applicants are successfully hired. The national industry average is 5%.

Another substantiation that might be used to point to Davao’s remarkable performance is the constant presence of a number of Manila-based call center operators in the city. Bong Borja, president of PeopleSupport Inc., mentioned to me that he is often in town to hire what his company calls "eReps", their term for call center representatives.

Call or contact centers are fast becoming an industry all their own, and their need for manpower is insatiable. Borja, who is also the chairman of the Business Processing Association / Philippines, attributes this high human resource demand to the huge global customer care market, and to the brisk turnover rate of call center representatives.

The reality: Davao is rapidly losing her talent pool. While the healthy job market out there is a good thing for our graduates, it might not be so for the city in the long haul. In the interim we could be proud of our seeming success in educating our students and being able to send them off to greener pastures. But in the final analysis, shouldn’t we be concerned about the proverbial brain drain?

Can’t Davao be the greener pasture?

Well, some forward-looking Dabawenyos are hopefully making it so. This crop of entrepreneurs believe in the capability of their fellow Dabawenyos and in the capacity of the city for new business ventures. A shining example of a local company that endeavors to provide good-paying and stable jobs is SSP Transcriptions. They are a medical transcription (MT) services company that currently employs almost 40 regular staff, with plans to expand even further.

Jenny Sazon, SSP Transcriptions Marketing Manager, expresses concern over the availability of medical transcriptionists due to the exodus of qualified personnel from the city. The main consideration for expansion, according to Sazon, is the availability of trainable transcriptionists. She further stresses that the volume of MT services requirements from the US alone is very difficult to address. This should mean that the MT business is quite a lucrative one.

So much so that, SSP Transcriptions is actually willing to see more MT companies operating in Davao and other cities in Mindanao. In fact, a plan to establish an MT training facility is being drawn up by SSP, the Department of Trade & Industry-Davao City Field Office, and the Association of Solution Integrators in Davao (ASID).

On to the more mainstream sectors, it is heartening to see more software development outfits in the city. This is an indicator of the growing confidence in the IT industry as an established area of business. The desired next step is for this industry to become a provider not only of quality services to its global market, but also to become a provider of attractive jobs to its locality.

Davao’s hope of the future lies not only in the quality of its human resources, but also in the capacity of its various industries to provide employment, in order to take advantage of these resources.

To interested groups that are seriously considering venturing into medical transcription services, please contact this writer via e-mail: robillo [at] gmail [dot] com. The ASID, together with the DTI-DCFO and SSP Transcriptions, will host an orientation seminar this April. This seminar-cum-business meeting will be for discussing the ins and outs of establishing an MT services company.