Companies today search worldwide for low labor rates, and outsourcing has led to a redistribution of jobs from Western countries to Asia. The flow of jobs first went to India, but recently an increasing number of companies have relocated some operations to the Philippines.
Outsourcing Definition
Many U.S. and European companies "outsource," or contract outside firms to do company work, often IT and customer service functions. Outsourcing companies called BPOs (business process outsourcing) employ local workers such as Indians and Filipinos.
Salary Expense
Salary represents the largest labor cost component. While costs are low in both countries, salaries in the Philippines are generally higher than in India. Relative currency exchange rates can also affect relative costs.
India Benefits
India boasts a much wider array of outsourcing companies, specializing in different business processes. More centers also offer greater economies of scale. More than 300 million English-speaking college graduates provide an excellent hiring pool.
Philippines Benefits
Filipinos tend to speak idiomatic English and are more culturally aligned with Westerners. They are particularly adept in over-the-phone customer service work.
Considerations
While important, basic labor costs represent only one aspect of doing business. Selecting the right firm to do the work is equally important. Excessive attrition and continuous training can result in poor customer service and loss of goodwill.
