When it comes to the outsourcing industry in the Philippines, the first thing—if not the only—that comes to mind is the contact center sector. With nearly half a million Filipinos employed, the call center industry is so far the brightest sector in the Philippine economy.

Beyond contact centers, the Philippines is also making waves in IT, particularly software development. In recent years, the tech sector has also embraced a more robust IT consulting, which includes implementation, deployment, and administration of IT systems.

Analysts project that the total size of the Philippines’ ICT sector will increase from US$1.2 billion in 2005 to US$2.3 billion by the end of the decade. The Philippine government recently unveiled a five-year program, which it hopes to generate up to US$12.8 billion, from the combined contact center and IT services sectors. Out of the projected worth, it is not known how much software development will contribute. But with satellite development centers for leading technology firms opening on these shores, it is safe to say that the application development outsourcing industry is on a growth path.

Taking advantage of the large number of college-educated workforce, engineers, and application developers all over the country, the government has opened regional centers to provide low-cost labor to firms based in Europe, North America and Australasia. The tech sector eyes the financial services industry; locally, SMEs will spur the growth in IT.

There are a number of challenges, though, that the tech sector faces. For one, the local market is not yet ready to sustain growth in the IT industry due to lack of funds and business models that do not fully integrate automation, analysts say. Moreover, competition from the rest of the region poses a challenge to projected growth. The Philippines is fourth, behind India, China and Malaysia, in attracting offshore outsourcing deals. Political upheavals and lack in infrastructure development hinder further growth.

Junior and middle management still need to keep up with emerging practices in process methodologies and management practices. According to a McKinsey Group report, The Philippines’ Offshoring Opportunity (2005):

“… for all its potential, the Philippines faces enormous challenges in achieving this goal. MGI research shows that, although it boasts widespread English language skills, very low costs, and promising human resource capabilities, it lags behind India and many other potential offshoring locations on several of the key criteria companies examine when choosing an offshoring location. These include risk, infrastructure, the availability of vendors, and the supply of middle managers who are key to establishing large offshore operations quickly.

If the Philippines is to capitalize on the opportunities that are undoubtedly there for the taking, the government, together with the private sector, must work to strengthen the perceived attractiveness and reality of offshoring to the Philippines.”