It's well documented that BPO in the Philippines has experienced remarkable growth for the last twenty years. One of the key beneficiaries of this growth has been the commercial real estate sector in the country. As the demand for outsourcing services grew, so too did the number of BPO providers. These organizations needed more and more office space as the industry continued its stratospheric growth. The byproduct of this is the commercial real estate industry experienced a boom of its own, leading to unprecedented growth rates. COVID-19 has been a game changer, however, for both the BPO and commercial real estate industries in the Philippines. That's not likely to change anytime soon either, as the negative impact of the pandemic will likely have far-reaching effects on both sectors.
The most significant way the impact of COVID-19 will be felt by both industries is the loss of business. Some support programs handled by BPOs in the Philippines have been downsized due to decreased consumer demand, others have been re-shored. “Most of these re-shored support programs – primarily by large, multinational organizations – will very likely never return to the Philippines. Reinstating them would simply be too costly, not to mention a logistical nightmare. This has resulted in thousands of jobs lost in the BPO industry, and commercial office contracts being shuttered,” says Ralf Ellspermann, CEO of PITON-Global, a leading mid-sized BPO in the Philippines.
“Also, because of the pandemic, outsourcing strategies have changed. Multinational and globally operating organizations that were the primary driver behind the exponential growth of the BPO and commercial real estate industries in the Philippines over the last two decades are taking a more cautious, diversified approach to outsourcing. Because of the sudden, unexpected loss in production, most outsourcing decision-makers will choose to keep more BPO-related jobs onshore and, ideally, in-house. Mitigating risk and maintaining higher levels of control during uncertain times like these will factor heavily into future outsourcing decisions,” says Ellspermann.
With COVID-19 still being around, there will also likely be a delay of new, large-scale program implementations by Fortune 500 corporations. “These support programs, which often range from 100 to often well over 1000 agents, typically require an onsite presence of company representatives for agent training and onboarding purposes. Ongoing travel restrictions and related quarantine requirements will make it very difficult to implement and ramp up new programs for large clients. Another obstacle in this regard is the fact that almost half of the BPO workforce in the Philippines currently work from home, providing even more logistical challenges. And at least 30% of those remote work arrangements are expected to continue even after the COVID-19 pandemic,” adds Ellspermann.
Another factor that will increasingly figure into the fortunes of BPOs and commercial real estate companies in the Philippines is the accelerated development and increased use of artificial intelligence (AI). “The ongoing adoption of AI by BPOs in the Philippines will ultimately lead to job losses within the next 2 to 5 years as this technology assumes the role of agents handling simple and highly repetitive tasks. Much like robots replaced workers in the manufacturing industry, this development will ultimately lead to further decreased demand for office space by BPOs in the Philippines,” explains Ellspermann.
COVID-19 has significantly impacted the BPO industry in the Philippines, and this has had a domino effect on the country’s commercial real estate sector. With so much uncertainty around the Coronavirus, such as the recently discovered variant, Omicron, this is likely to continue for the foreseeable future. BPO to the Philippines will continue, albeit at a much slower pace. Due to the aforementioned reasons, the stratospheric growth of the industry will level out amid fewer outsourcing contracts and reduced business volumes. The result of this will undoubtedly continue to impact the commercial real estate industry as well.
The BPO industry in the Philippines is the largest private employer in the country, accounting for approximately about 1.3 million direct jobs. Considering the size of this sector, the decrease in demand from BPOs foretells a rather bleak outlook for the country's commercial real estate industry.
