17 August 2012 – “Every day 500,000 young, university-educated, professional Filipinos get out of bed to work for United States companies.” Australia faces similar challenges as the global economy grows and a thriving educated workforce emerges on our doorstep at massive discounts to local costs. These are some of the structural changes underway with the global economy that Australia will need to face as part of broader sustainability issues emerging at the economic and social level. Denise McNabb reports.
Australian companies looking for a competitive advantage through outsourcing jobs to countries with cheap labour tend to keep quiet about their “external workforce” for fear of a backlash over ignoring local talent.
Unless they are big corporations like Telstra and ANZ with offshore call centres.
But the attitude is changing rapidly, says Chris Moriarty, chief executive of “virtual talent” recruiter Flat Planet.
The former IT journalist, dot.com marketer and job recruiter transplanted himself to the Philippines two years ago to catch this next big wave, as he describes it.
Retaining a small office in Sydney, he set up a service and recruitment centre offering business process outsourcing, or BPO, for small to medium enterprises. This expansion of his Australian business came after observing more and more clients toggling between hiring staff in Australia or the Philippines for their back office administration.
Moriarty had also noticed a gap in the market for smaller business servicing as most of the focus was on large corporations for scale and profitability.
Moriarty says there were Australian SMEs that had found offshore outsourcing through eBay-type platforms such as odesk, freelancer, elance and other web outsourcers but he knew he could get an edge by being on the ground as an Australian, delivering trust, accountability and sustainability.
Moriarty recruits skilled Filipinos to do myriad jobs, mainly for Australian companies, for wages up to 60 per cent cheaper than it would cost for the same skills back home.
His family has since joined him from Australia and the business is cash flow positive and profitable.
His base, Makatai, is considered the BPO heart of the Philippines. It is one of 12 business districts that sit in a sea of skyscrapers in the capital, Manila, and is home to the country’s stock exchange where railway lines and public transport converge
Three hour’s drive north of the capital, the old United States Clark Military Air Base has been transformed into a “freeport zone”, a business park where not only BPO is done but where companies set up their Asian manufacturing or servicing hub in tranquil surrounds with an airport on their doorstep.
President Benigno Aquino III’s government has encouraged foreign investment through the Philippines Economic Zone Authority with incentives such as 5 per cent tax on gross profits for certain types of companies. Moriarty says these incentives work for some kinds of businesses, but not others.
But whatever way a company chooses to pursue opportunities Moriarty says the Philippines is no longer only about remote call centres where staff endlessly phone Australia in the hope of striking a product sale for a client.
He says the country’s education-driven social policies have resulted in heavy investment in education in the past 30 years to so that the Philippines can move from a developing nation to one that is developed.
The upshot, he says, is a highly-skilled talent pool with experience in western-style business culture and a strong knowledge of what is expected from employers.
“Like it or not Australia has to get over this ‘them or us’ mentality about jobs being sourced overseas,” says Moriarty.
“Opportunities for Australian companies outside the mining industry are huge in Asia. Once the GFC has passed it will become a tidal wave that is too big to ignore.”
Recent statistics show BPO to be a $US300 billion global industry, propelled in the last decade by the internet, the drive for IT outsourcing and a push by countries for trade policies based on optimising resources by minimising costs. Large corporations have also gravitated towards re-engineering – the breaking down of large companies into bite-size chunks for core and non-core work.
BPO growth in the Philippines has climbed from a $2 billion industry hiring 101,000 workers in 2004 to a $14 billion industry, hiring 750,000 workers in 2011. The country’s GDP is around $US161 billion.
Why not sell in Asia?
Moriarty says Asia can also be about bringing business to Asia’s doorstep to lift profits back home.
His office is a stone’s throw from Glorietta shopping mall, which is three times the size of a typical Westfield shopping centre.
“It has shops from all over the world but no Australian brands.
“Why is it that the English can get on a plane on the other side of the world and come and open a store here yet we are just a few hours away but don’t have a single retail outlet there?
“There are three billion people in greater Asia and 600 million are middle-class with money to spend.”
Moriarty says he can’t understand people like Harvey Norman boss Gerry Norman “banging on tirelessly in the press” about losing business to the internet when he doesn’t have stores in Asia with vast potential to lift the bottom line of his chain.
Sky is the limit
One of his clients, an Australian web company that keeps its outsourcing quite for fear of criticism, set up a web development office in China several years ago to keep the lid on costs.
It started getting business from within China, then Malaysia so it opened an office there too. Now it has 15 staff at its Melbourne headquarters and offices throughout south-east Asia employing 300 people –70 of those, high-end developers.
“With services, retailing or an accounting firm the sky is the limit in terms of transforming a business into a truly global competitor.”
Safety and other problems will give way to growth
The Glorietta mall’s reputation has been marred by a bus bombing nearby in 2005 that killed four people. An explosion in a noodle shop in the mall that killed seven in 2007 was initially thought to have been caused by an electrical fault but it may have been a bomb.
Moriarty is quick to defend the country against what he says are ill-founded accusations from compatriots who claim the Philippines is a land of multiple problems and unsafe.
“Makatai is safer than Kings Cross or Paddington. It is a modern city within a city with first class amenities where 640,000 BPO workers come each day to work.”
Their skills are so high that knowledge processing outsourcing is the new BPO, says Moriarty.
As for accusing people like himself of exploiting cheap labour, Moriarty says critics have to get their head around the fact that the Philippines is not about the amount of wages paid but that it is a country where 20 per cent of its population experiences hunger.
“They are not starving but there are times when there is not enough money for food.
“There are children on the streets begging for money. People here live very hard lives and if westerners want to exploit them they can as they are imminently exploitable because they are vulnerable.”
But Moriarty says the younger Filipino population is climbing out of poverty through a good education and they are smart and hungry for opportunity.
According statistics the Philippines produced 450,000 graduates in 2010 for its 36 million-strong workforce.
“It’s about opportunity, tapping skills of a highly educated, English-speaking population so that your business back home can prosper and expand and provide jobs further up the food chain,” says Moriarty.
“Filipinos are very methodical and accurate and don’t get bored so you can be assured of concentration and attention to detail when they do their work.
Every day 500,000 young, university-educated,
Filipinos get out of bed to work for
United States companies
“Every day 500,000 young, university-educated, professional Filipinos get out of bed to work for United States companies,” he says.
Australian businesses hire 17,000 Filipinos, according to the Business Process Association of the Philippines
Moriarty says this number is a drop in the ocean when Telstra and ANZ’s call centres and back office administration soak up almost half of this number, especially since Telstra moved its call centre from India to the Philippines.
ANZ leading the pack
ANZ recently put its name up on a building in Makatai, and is expanding its team for more back office, clerical and administration roles.
“It is ahead of most banks and is not afraid to advertise its market advantage in the Philippines as it moves strongly into Asia,” Moriarty says.
He says though most of his clients are small to medium sized he provides some specialised staff for two US global corporations but they also have 5000 staff of their own in the Philippines.
His clients range from retail chains and companies requiring back office work such as accounts, payroll, online response, and answering website queries to engineers, data processors, debt collectors, digital media and advertising and boutique finance companies with specialist niche products.
He also has technology firms, a software company doing enterprise resource planning and research companies on his books.
“We provide anything that can be done at a desk with a phone and computer.”
Flat Planet is one of the more expensive recruiters, he says, but the flip side is that by having a Sydney office not only is there accountability and trust but clients are signing contracts with an Australian company subject to Australian law; they have to pay GST and are invoiced directly out of the Philippines.
The company will charge an Australian firm $2500 a month for a “virtual employee”.
The worker’s base salary would account for between $800 and $1000 of that sum a month with the balance charged for providing an office, computer, a secure and reliable internet connection, high speed bandwidth, instant conferencing with clear calling, HR, a required 13 month bonus for staff, medical health cover, input into a scheme similar to superannuation, attendance records, emergency power, secretary services, bio-security expenses and training plus his company’s fees.
Moriarty says at the moment Australian companies have the bonus of their dollar going further than it used to on the exchange rate so they can afford to pay for highly qualified and experienced employees that they might otherwise not consider.
AMP says Australia will lose its low skilled jobs
AMP’s chief economist Shane Oliver was quoted recently as saying that when there’s an economic shift in one sector it creates opportunity in another. As he sees it, the Philippines, India, China and other low cost labour countries will remove Australia’s low-skilled jobs and move local jobs further up the value chain.
Moriarty agrees, but says those high paid jobs are also available to Australians in Asia. He says the Chinese can’t get enough English teachers, for instance and they will pay good money for them in financial hubs like Shanghai.
“I’m determined my kids are going to go to a school in an Asian city because I want them to be confident about doing business there, not living out west somewhere in Sydney with a blinkered view”.