Attracting more offshoring to the Philippines
Christopher P. Beshouri, Diana Farrell, and Fusayo Umezawa
Also available at www.mckinseyquarterly.com

(Excerpt)
The Philippines is emerging as an important supplier of labor to the global offshoring market. In 2003, the country supplied $1.7 billion worth of offshore services to the world economy; today around 100,000 people are employed in call centers. Low costs are one reason for the country’s emergence as an offshoring location.

Studies point to the Philippines as the country with the second-lowest hourly wage for offshoring professionals, at 13 percent of the Western level.

The Philippines also has a larger pool of workers suitable for multinational companies than its relatively small population of 88 million would suggest. For every 100 college graduates with finance and economics degrees from the countries studied, executives from multinationals said they will hire 30 in the Philippines, compared with just 15 in India. The corresponding figures for generalists and life science researchers, respectively were 25 versus 10 and 20 versus 15. The Philippines even compares favorably on the suitability of its engineering graduates for employment with multinationals. Moreover, a higher percentage of the Philippines’ population than of India has earned a college degree. The Philippines has a large diaspora that could be a potential source of managers.

Cost-conscious companies may well regard the Philippines as an attractive offshoring location now. As its public-private sector leaders address the remaining barriers, the Philippines will become even more eye-catching.