Over the past decades, Asia has carved out a name for being a hub for business process outsourcing (BPO) for companies worldwide.
Companies are discovering that outsourcing to developing countries in the Asian region is an excellent strategy for getting work done efficiently at reduced costs. The same kind of work done in Australia as well as other Western countries can be outsourced to Asian countries, where workers receive smaller pay due to the low cost of living. Outsourcing can save companies as much as 60% on their labor costs.
From the call centre in the Philippines to the contact centre in India and other parts of Asia, there is definitely no shortage of companies where you can obtain outsourcing services. But with so many options when outsourcing to low-cost countries, which one do you pick to get more bang for your buck?
Here’s a comprehensive guide about outsourcing, where you get to know about the top outsourcing countries in Asia, their pros and cons, and notable trends in the industry to help you decide where you can outsource your company’s functions.
Top 5 Asian Countries for Outsourcing
1. Philippines
Often referred to as the world’s call centre capital, the Philippines is one of the top locations for delivery of contact centre services, which is part of the broader BPO sector. Global firms are outsourcing to the Philippines for reasons including cost-effectiveness, operational efficiency, and a large educated workforce who are proficient in English and are motivated to work hard to get ahead.
Industry Overview by the Numbers
Every statistic suggests that the Philippine call centre industry has everything going for it.
Based on 2018 data from The Everest Group, a Texas-based consulting and research firm, the Philippines is the number 1 provider of contact services with a market share of 16% to 18% of global outsourced services.
It wasn’t the first time that the Philippines led in the contact centre industry, as figures from 2017 fell within the same range, indicating that the growth rate of outsourced services provided by the country to the rest of the world is steady and strong.
The Contact Center Association of the Philippines is confident that by 2022, the country’s call centre industry will grow even more, with an expected revenue of US$20.4 billion, up from previous years’ performance.
Educational and Cultural Background
Education-wise, Filipinos have a great foundation that gives them a superior advantage in knowledge and skills. According to the United Nations, the Philippines has the highest literacy rate at 97.95% among Southeast Asia countries, producing over 680,000 university graduates each year.
The Philippines is also the third-largest English speaking country in the world, prompting more companies to choose it for customer support. Not only are Filipino call centre agents trained on the principles of excellent customer service, but they have also mastered speaking with a neutral accent.
Filipinos are equally adept at written English too, so they have no problems delivering non-voice services as well. Plus, many employees of BPO companies from the young demographic are attracted to the lifestyle of working on shifting hours to serve clients from different time zones.
Cost
Outsourcing companies in the Philippines are clear about how they calculate and charge fees for their service.
For example, an established call centre company would charge a client around AU$12-14 per hour per agent. This figure could go up to AU$18 per hour if you are inquiring with a mega call centre. The compensation package for Filipino employees already includes social security benefits and health insurance, so it’s quite fair and reasonable for the client.
Another factor to consider is the outsourcing company’s operating expenses, which include building lease, equipment, utilities, and so on. Although most call centres are located in the capital city Manila, more outsourcing hubs are also moving to progressive provinces near the city to lower their service costs further.
Pros and Cons
Aside from a competent and skilled workforce with a natural gift for customer service and reduced labour costs, the Philippine government also recognizes the outsourcing industry as one of the country’s top sources of revenue.
As such, it tries to support the BPO sector with tax incentives like tax holidays. However, this aspect may see certain adjustments when the time comes that artificial intelligence technologies start taking over basic services and processes, and the government decides to allot the tax incentives to other sectors.
2. India
India has been recognized as one of the pioneers in the call centre industry with approximately 25 years of experience in managing BPO accounts. Plus, it boasts of a workforce composed of almost 4 million employees who are skilled in software development and information technology (IT) services.
Industry Overview by the Numbers
India has more than 500 outsourcing companies, providing services to 66 countries through IT and BPO solutions. India’s IT sector saw a growth of 8% in 2017, resulting in an overall revenue worth US$154 billion. In the same year, the BPO industry contributed 7.7% to India’s GDP.
Educational and Cultural Background
When it comes to academic excellence, India is a force to be reckoned with. Students acquire technical and programming know-how at an early age and go on to develop their skills to advanced levels. In fact, in 2016, India was second to China in producing the highest number of STEM (science, technology, engineering, and mathematics) graduates at 2.6 million.
India’s English proficiency is quite impressive, too, with a score of 57.13 and a 28th world ranking, making it a strong contender as an outsourcing location for global markets.
Cost
Labour costs in India are lower than in developed countries. For example, the pay rate for software developers is between AU$14 and $20 per hour compared to the AU$83-per-hour rate in the United States. This wide gap in labour costs can give you more room in managing your budget—not to mention larger profits—as you partner with outsourcing companies in India.
Pros and Cons
Significant cost savings and world-class IT talent and infrastructure make India a top destination for your outsourcing needs. However, India’s status as a fast-developing nation may increase labour costs among middle-class earners, especially in regions where there are many foreign investments.
3. China
China is no longer just known in the manufacturing industry. In recent years, it has also been providing outsourcing services thanks to a large pool of highly-educated talent, especially in e-learning, mobile apps, animation, gaming software, and offshore engineering. Because of its people and skills availability, China is able to keep its costs low, which may arguably be the cheapest in the industry.
Industry Overview by the Numbers
The outsourcing market in China has seen consistent results, with industry revenue increasing from US$1.38 billion to $106.46 billion from 2006 to 2016. China’s offshoring engineering sector alone could grow to anywhere between US$150 to $225 billion in 2020, up from $10 to $15 billion in 2006.
Educational and Cultural Background
One of China’s outsourcing advantages lies in its educational programs. In 2016, China had 4.7 million STEM grads. Engineering is a leading course among the Chinese, producing countless graduates each year with a good number of them also having PhD degrees in engineering.
There are also Chinese nationals who study in top universities in the United States, Canada, and the United Kingdom, and then come home to work, adding to the country’s pool of high-quality talent.
The Chinese have also been ramping up their foreign language skills by integrating English instruction into the educational system to be at par with their counterparts in the Philippines and India.
Cost
Despite regional differences in wages, China is still believed to charge 30% to 50% lower than India. Some years back, a fresh engineering graduate would earn AU$345–$415 per month in China, while someone with the same job role in India would have a monthly wage of AU$1,040–$1,385 in India.
However, higher-level IT jobs in China and India don’t have a huge salary gap with the software industry in China, seeing an annual increase of 15% in recent years.
Pros and Cons
Apart from an abundance of engineers and technologists, China has special economic zones designated for foreign businesses, making it a well-suited environment for developing software and IT-related solutions for companies that need outsourcing services. On the flip side, China isn’t the most efficient in protecting intellectual property rights, which may put your company or customer data at risk.
Thailand
Thailand has some of the best outsourcing benefits for companies that choose to relocate their functions to Asia, including data privacy and security. In Thailand, outsourcing providers strictly follow the policy of anonymity through their non-disclosure agreement with companies in other countries. It was in 2019 when Thailand put the Personal Data Protection Act in place.
Industry Overview by the Numbers
Based on A.T. Kearney’s 2016 Global Services Location Index, Thailand was in sixth place in the global outsourcing market in terms of efficiency, with ranking criteria that include financial attractiveness, people and skills availability, and business environment. Today, Thailand continues to be a leading destination for IT outsourcing in the Southeast Asian region.
Educational and Cultural Background
Although only a small percentage of Thailand’s population is proficient in English, it does not necessarily mean that it is lagging in the outsourcing race. The country’s literacy rate is at 93.77%, with hundreds of thousands of university graduates each year.
Cost
Affordable property and labour costs are commonplace in Thailand. Figures from 2016 indicate that the country’s average annual salary was approximately US$9,600 or around AU$13,300, which is only a third of what workers in the U.S. earn yearly. Living expenses are also cheaper in Thailand, so BPOs can keep their outsourcing rates low.
Pros and Cons
Thailand knows that it has to improve its English competency to be more competitive. Currently, Thailand is in 17th place out of the 25 non-native English speaking countries in Asia. Although Thailand may be struggling in this department, it more than makes up for its technical skills, which are a top requirement in mobile apps development, web design, and software quality assurance, to name a few.
Vietnam
IT outsourcing may be a nascent industry in Vietnam, but the country has been recognized as the most improved in software development outsourcing, jumping five places in the 2017 Global Services Location Index.
Multinational companies like LG Electronics, Panasonic, and Toshiba are finding Vietnam competitive enough to provide tech services for them, with rates that are much lower than global standards.
Industry Overview by the Numbers
The percentage of growth in the country’s IT industry has been consistent in the last ten years or so, with many countries recognizing Vietnam’s skilled workforce.
Educational and Cultural Background
Aside from a high literacy rate of 95.8%, Vietnam has a tech-savvy population. In 2016, Neil Fraser, a software engineer at Alphabet Inc.—the parent company of Google—visited local schools and saw how computer science students solved challenging problems that are fit for a Google hiring interview.
Employee turnover rates are low, with most Vietnamese choosing to work locally instead of leaving the country for greener pasture.
Cost
One of Vietnam’s strengths as an outsourcing country is the price-quality ratio it offers to clients. Whether the work involves software development or web design, you can obtain top-notch services at half the price it will cost you if you are to outsource to other parts of Asia and the rest of the world.
Pros and Cons
In terms of English proficiency, Vietnam fares low, occupying the 52nd spot in the global ranking of countries and regions. As such, English training courses are being planned for Vietnam’s IT personnel, but this may put a strain on the country’s efforts to be a top destination for outsourcing services.
Outsourcing Only to the Best
Asia’s powerhouse of outsourcing countries can help your business cut costs, find the right talent, and expand your operations globally. Having to choose from several prospective partners may feel overwhelming, but the fact that they’re the industry’s bests should put your mind at ease.
In the Philippines, Select VoiceCom offers world-class customer support outsourcing. We are Australia’s premier call centre partner in the Philippines, and we are ready to provide professional call centre management services for your business. Learn more about us.