The evolution of outsourcing – from the world to the Philippines

In the 1950s and 1960s, companies around the world began to expand and take advantage of economic scalability. Still, many companies had made sure not to spend too much and protect their profits, even though diversification required multiple operating stocks. Eventually, during the 1970s and 1980s, companies in different countries tried to compete internationally despite labor shortages. To solve this problem, many large-scale companies developed a new strategy for them to focus on the core of their business, as well as to reduce labor and operating costs.

It was not until the 1980s that outsourcing began to be recognized as a business strategy. As the business expanded, they realized that they could not be completely self-sufficient. In addition to outsourcing customer service that was not the focus of their business, they discovered that outsourcing is one of the cost-effective ways, especially in labor costs – hence the emergence of traditional outsourcing. The procedure was for companies to transfer certain activities that were not the center of the business but that were essential in the workflow.

From the early 1990s to the early 2000s, companies began to outsource, not only because of the cost reduction but more to gain access to external expertise for the benefit of the company. It is called strategic outsourcing because it is based on the outsourcing of strategic business processes. The main goal is to achieve a competitive advantage by utilizing external resources such as people who are experts in their respective fields, improving internal competence, and developing processes.

From the early 2000s, strategic outsourcing developed into transformative outsourcing. This means that the main purpose why companies outsource customer service for e-commerce is to provide flexibility in adopting new technological advances and arriving at a rapid transformation of business needs. With traditional outsourcing, companies were able to increase revenue, develop market share and improve shareholder value as technology helped develop business processes, achieve smooth operational procedures and transform people, businesses, and systems.

Outsourcing online, when it becomes global, became extensive and many countries are already using this type of business strategy. And the Philippines is one of them. Who would have thought that this small nation in Southeast Asia would become the world’s BPO capital in the world after Frank Holz established the first contact center in the country in 1992?

Outsourced customer service in the Philippines began to grow and became the strength of economic growth in 2000. The country’s GDP or gross domestic product accounted for 0.075% and contributed to the rising BPO industry. It may have been small then, but the proportion has escalated over the years. In 2005, it reached 2.4%. The Philippines was recognized as the BPO capital of the world in 2010. Due to the continuous and recurring influx of many customers from all over the world, there are 638,000 employees who have been hired for various outsourcing jobs. Another 900,000 employees were hired in 2013.

Today, after the COVID-19 pandemic occurred around the world, the outsourcing industry retains its strength and resilience. And as we approach 2021, the future of the BPO industry in the Philippines continues to flourish. Therefore, it means more job opportunities and financial progress.