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Sustained demand for BPO seen as cost pressures mount

Updated: Jan 23, 2021

Business process outsourcing (BPO) companies are likely to continue enjoying demand for their services after the coronavirus disease 2019 (COVID-19) pandemic is put under control, executives of real estate services company Colliers International Philippines said.

More BPOs, however, are likely to consider setting up offices outside the capital to attain a more geographically diverse workforce and promote work-from-home arrangements to clients in compliance with social or physical distancing requirements under the new normal workplace situation.

BPOs serving industries that have been least affected by the pandemic are also seen to fare better than companies serving industries with high exposure such as the tourism (including airlines and cruise lines), gaming, global shipping, automotive and non-food retail sectors.

Dom Fredrick Andaya, Colliers director for office services, noted that BPOs thrive because of cost pressures.

He said doing business in the time of COVID-19 will be even more expensive, given the new normal requirements for social distancing and minimum health standards in the workplace.

“With this pandemic, there will be more cost pressures. Of course, there’s technology solutions to address cost pressures. But outsourcing remains to be an effective way of addressing cost pressures,” he said during the open forum of the first Colliers live webinar on the Philippine property market situation on April 29, 2020.

Andaya said there will be a surge in demand for BPO services in the next several months, similar to what happened after the global financial crisis in 2008 to 2009.

Andaya also said he sees more work-from-home (WFH) arrangements.

"Prior to COVID-19, work-from-home is something that was frowned upon by clients of BPOs. It was not effective before. But because of COVID-19, BPOs were forced to adopt work-from-home arrangements," he said.

Feedback from BPO companies include higher quality of services rendered by an agent working from home.

"Looking forward, I think work-from-home will become part of the menu of services of BPOs.

It will become part of the new normal," Andaya said.

A vibrant BPO sector would also fuel the property sector, particularly the office segment, and other support sectors. But the work-from-home arrangement might lead to lower demand for office space.

"With social distancing requirement, however, the current density of 5 to 6 persons per square meter will no longer work. There will be pluses and minuses. I think it will even out," Andaya added.

BPOs also serve as the Philippines’ major connection to the global economy.

For his part, Colliers managing director Richard Raymundo said how a BPO will thrive in a post-pandemic scenario will depend on what sector it is in.

BPOs serving the financial or pharmaceutical sectors would be better positioned than BPOs serving the travel industry, he noted.

"The question is how will new normal affect density. How will density look like after this? Are they still going to do the 5 to 6 persons per square meter?" he said.

"Another is technology. A lot of BPOs use desktops. When this (COVID-19 pandemic) happened, it was very difficult for BPOs. Some even brought home their desktops. So will there be a shift to laptops now for BPOs. That’s gonna be interesting, moving forward after this," Raymundo added.

In his presentation during the live webinar, however, Colliers senior manager for research Joey Roi Bondoc noted that the outsourcing boom was still starting when then global financial crisis blew up in 2008 to 2009.

Office rents fell 15% as BPO expansions froze. Residential transactions collapsed although values held steady.

Bondoc said it took global companies 6 to 9 months to figure out that they were still solvent before they accelerated outsourcing to reduce costs.

Thus, it also took BPOs 6 to 9 months to start occupying office space after the global crisis. During the crisis, Bondoc said office take-up from BPOs plunged by 47%.

In the first quarter of 2020, as the COVID-19 pandemic disrupted supply chains and business operations, Bondoc said office transactions dropped by 24% compared to the yearago level.

He said the impact of this global health crisis on the Philippine real estate sector might be worse than the global financial crisis.

“In 6 to 9 months, we could still be social distancing,” he said.

Social or physical distancing, or keeping a distance of one to two meters between two persons, is part of the new normal protocols that government is drawing up as the Philippines prepares to relax quarantine restrictions.

Eleven areas in the country are still under enhanced community quarantine (ECQ) until May 15. These are Metro Manila, Central Luzon except Aurora, Calabarzon, Pangasinan, Benguet, Iloilo, Cebu, Davao City, Bacolod City, Albay and Zamboanga City.

Under ECQ, public transportation systems are suspended and the people are required to stay at home. Exempted from this policy are the frontliners in the fight against COVID-19 and essential workers.

Other areas in the country relaxed restrictions and are now under general community quarantine (GCQ).

This means public transport systems may resume operations at reduced capacity and provided social distancing is observed. Some establishments may be allowed to reopen. (Ventures Cebu)

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