Thursday, October 09, 2008

The Dynamics of the BPO Industry in Third World Countries in the Midst of a Global Financial Crisis

Having worked in a call center back in 2005, I somehow had an inkling that BPOs would be here in the Philippines at least until such time that the companies which are streamlining their operations find a more suitable venue to exploit cheap labor.

These BPOs created an artificial labor utopia here in the Philippines because their operations here in the Philippines are brought about by the streamlining and outsourcing of some business processes from their clients abroad.

I describe them as artifical labor utopias because the moment you step in the offices of a call center - you would immediately feel as if you were transported to another part of the planet - to the US to be precise. "Beam me up to New York Scottie!".

The language, the atmosphere, the attitude and of course the nature of the work being done all attest to this artificial environment.

As a pragmatic and hands on person, I feel that work that produces no tangible product - is the lowest among my hierarchy of works. It is a fact that most BPOs here in the Philippines are mainly service oriented industries. This puts BPOs in the Philippines on unstable ground as demand for non specialized services are the most fickle of creatures. BPOs and call centers in general - do not produce anything.

While value may be assigned to service, the type of service that is mostly catered to by BPOs here are mainly the more repetitive chores that the lazy first world "executives" tend to shun. They even outsource making power point presentations here.

I have tons of email from Jobstreet.com all offering jobs for "Collections Associates" "Credit Anaylsts" and so on and so forth. Banks such as J.P. Morgan, HSBC are among the biggest players in the BPO industry here in the Phillipines.

Basically, these jobs are preliminary efforts to collect from bad debtors. I am guessing here when I say that - Filipinos working in call centers catering to banks are tasked with the initial step in collections - making the call to the debtor who have defaulted in his or her mortgage or credit card payments.

With subprime mortgages encouraged by the US government, American banks created the real estate bubble when they allowed unqualified borrowers to avail of home loans even if they do not provide the necessary documents which would prove their capacity to pay. After all - that is part of the American Dream - to own a piece of America.

This bad credit practice led to many borrowers defaulting on mortgage payments giving rise to real estate creatures such as Bo Sanchez who prey on people who face foreclosures and pretend to be the knight in shining armor that would save them - for a profit.

As more borrowers were unable to pay back their loans - more homes faced foreclosure and there was a sudden spike in the number of houses in the US market. Couple that with a slowing demand and you have a dearth of bad debt to collect.

To collect these debts - banks in the US would need a whole army of collectors to collect. Hence, the job called "Collections Associate" was born. Legions of these CAs cost too much - the natural solution then was to find cheap labor who could work the phone from far away countries such as the Philippines and India, to call Mr. and Mrs. John Doe to say, "Good Morning, America - please pay your house loan."

Some of the more repetitive tasks are outsourced to third world crisis where labor was cheap and English was understandable.

Now, with the financial collapse at hand, banks faced mergers, acquisitions and some - government takeovers. The internal dynamics of their organizational structure would be affected down to its very core. CEOs will resign, upper management reshuffled or completely replaced and the lowest of all peons - the outsourced employee finds himself in limbo. Upper management would have to decide whether their third world collectors are still necessary.

Speaking contemplatively, this could either go two ways - either the BPOs would be strengthened or they would face imminent lack of use. Certainly their use would be debated by the new board but ultimately the most important factor would be the cost to benefit ratio. "Are our offshore working assistants generating value for our company?" is a question that is probably on the minds of the new upper management.

If indeed the situation goes mostly towards the reconsolidation of their workforces: I would suggest to the call center agent now to take a moment or two to think about these questions, "What value do I give the parent company? Does it generate revenue?"

The BPO sector here in the Philippines, while not the most dominant sector but most definitely a steady dollar earner, would then find themselves at a great bind when they couldn't get more accounts after their engagement contracts with the American companies have expired.

The problem really is that the skills developed by call center agents are mostly business skills that are more likely to be applied in the country of origin of their parent companies. Do not give me that globalization crap. If these kids lose their jobs in the BPO industry - they wouldn't find any local company here in need of "Phone Credit Collectors". All they will find are Shoe Mart sales clerks, fastfood crews and highly specialized fields such as industrial engineering, legal, manufacturing, and so.

The unemployment rate will balloon to disproportionate proportions and 30 year olds will suddenly find themselves in schools for Nursing.

Seriously speaking, production, manufacturing and agricultural sectors - even if they are abroad - should be the focus of the rallying point for our economic recovery. The Philippines lack rice farmers and rice, as proven by the recent rice shortage crisis.

It is time to go back to our roots as an agricultural nation while still retaining and nurturing the possibilities that technology related industries can offer us. Our leaders were - starting from Fidel V. Ramos were dead wrong when they shifted development to technology and service.

Now the world's population is booming, resources are getting scarce, food and water will be in constant demand - who needs websites if you cannot feed people? We cannot rely on food imports - that is the most ridiculous thing that our leaders have done. So so so short sighted. Now, we import food products from China, Australia, and our South East Asian neighbors. We are practically begging them to export more rice to us.

See where that has brought us - melamine in our baby milk, rice shortages and for the love of Jesus Christ our Savior - agricultural related scams such as fertilizer scams.

I am not alone in making this assertion and chances are our leaders are too comfy planning about their next vacation to the United States to listen to people like me while millions of our Filipino workers are getting exploited, ridiculed and abused here and abroad just to bring the dollar home. 

Disclaimer: Most of the things I have written here are my opinions based on what I have read from CNN (World Financial Crisis) and PinoyPress (BPOs)

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