Lower costs lure BPOs outside Metro

Lower land development cost and less competition for the talent pool are the driving factors behind the march of business process outsourcing (BPO) companies outside of Metro Manila.

“There’s a push to expand the BPO presence to other areas primarily because of labor. They just want to be closer to where labor is and also because of cost,” Colliers International Philippines director for research and advisory Julius Guevara said in a phone interview.

“It’s much cheaper to build outside of an established area,” he emphasized.

Developers prefer the first-mover advantage to capture the top talents in the labor pool of specific places.

“They’re looking for greenfield areas where the labor is still plentiful,” Guevara said.

Locating BPO operations in the Metro Manila is slowly becoming less of an advantage for companies due to rising salaries and rental rates.

“The whole BPO phenomenon is based on our front advantage over some other countries, but since salaries are increasing, rental rates are now increasing, which is slowly eroding the advantage in the area, so they’re all looking for other areas wherein those advantages are present,” Guevara said.

From a BPO company’s perspective, locating operations outside of Metro Manila offers scalability with more land that can be developed in the future.

Vikram Singh, country manager of Tata Consultancy Services Inc. (TCS), told The Manila Times one of the factors is really scalability.

TCS is a global IT services and business solutions firms based in India. The firm recently expanded its Pampanga operations and took a lease on 8,486 square meters of office space in the Entec 2 building by local developer Juan D. Nepomuceno Sons Inc. TCS initially occupied 800 sqm in Entec 1 building in 2013.

“We started with 300 people in Entec 1. We had Entec 2, which we knew was coming up in the next two to three years. And that was in line with our scalability and sizable operation in one location. We have a further opportunity to expand there,” Singh noted.

“We started with 100 people [in Pampanga]. So, already we have grown. But our capacity in Pampanga will be around 1,700 seats,” he said.
Locating in Pampanga was also in line with TCS’s Business Continuity and Disaster Recovery (BCDR) plan.

“So part of our dual strategy is we look for a couple of locations within the Philippines and finally we came up with Pampanga for a number of reasons . . . Number one is its proximity to Manila. It is not so far, we can travel in 2 to 3 hours. At the same time it gives us a desired BCPDR,” Singh said.

Singh described the “talent pool, quality infrastructure, and better infrastructuring with respect to the connectivity that promote customer level perspective,” as the top factors in looking for a location.

“It is at the heart of the commercial business district of Angeles City and there’s a 24/7 availability of transportation, “ Singh noted.

In a separate interview, Arni Valdez, president of Juan D. Nepomuceno Sons Inc., affirmed the growing demand for office space outside of Metro Manila, specifically in Angeles City, Pampanga.

The company currently has two developed BPO buildings in its 11-hectare Nepo Center complex in Angeles City.

Valdez said Angeles is attractive to BPO companies due to its talent pool, as the city is home to a number of schools and universities.

The firm decided to build office developments in the city in order to create more jobs that would cater to the growing talent pool in the area.

“If we started to do it here, we might be able to get some people who are working in Metro Manila. And a lot of people worked in Manila,” Valdez said.

Despite the growing interest for BPO buildings outside of Metro Manila, the country’s capital is still be the top preference of BPO companies because of the conveniences urban cities offer such as hotels and malls, Guevara emphasized.

“If you would take a look at the demand, the typical BPO locator would still prefer urbanized areas. If you compare the take up in terms of square meters, more than 80 percent will still be located in Metro Manila,” Guevara said.

Source: http://goo.gl/EQE3jv