While India and China remain two of the most attractive outsourcing destinations in Asia, Philippines is becoming the most favorite location among foreign businesses for the industry.

The Economist Corporate Network carried out a survey on the Future of Outsourcing in Asia. Respondents were surveyed in May 2012, gathering insights from Asia’s senior business executives and decision makers.

The survey showed that the Philippines is becoming an important global outsourcing destination, putting India and China in the second and third place, respectively. It also showed the growing trend for software development and how India is becoming the largest provider of software development outsourcing, followed by China.

The Business Process Outsourcing in Philippines has been taking over as the world’s call center hotspot, offering comparable wage costs to India. One advantage from the country is that the Filipino customer service representatives have a higher quality of linguistic capabilities compared to their Chinese and Indian counterparts. In the survey, 45% of the respondents find Philippines to be an attractive location for outsourcing; 35% for China and 20% for India.

The survey results reflected that the figures may be due to the increasing wage costs of India while China and Philippines have rising levels of graduates highly skilled in linguistics. It is also a confirmation of how the Philippines has been the solution for labor-intensive functions of foreign businesses or companies.

The Philippine BPO industry has been known to be strong on outsourcing solutions such as customer relationship management (call center), human resource, finance/ accounting/legal, document processing, among others.

On the other hand, India and China have been increasing their wage costs due to the fact that they are strong on the software development section, coincidentally the most trending outsourcing solution in the global market nowadays. Fifty percent of the respondents outsource software development to India; twenty-six percent to China. Philippines may be leading in CRM, but it still can’t match the technological expertise that both India and China offer to its clients. Philippines still isn't the next option when it comes to outsourcing software development; rather, Singapore and Hong Kong are the next most favorable locations for the outsourcing solution. The country attracts 10% of the software development segment but still can’t compete to the caliber of technology graduates of India and China.

Businesses are redirecting their lower-valued outsourcing processes to the Philippines, and higher-valued outsourcing processes to India and China. The latter two countries may not offer lower wage costs, but they can offer a large number of technological expertise which could offer innovation and value-added prospects for medium and long-term business plans.

Another higher-valued outsourcing solution is product development and research. Malaysia is the top provider, with 32% of its respondents going to the country. Product development and research outsourcing needs are relatively high on companies’ lists, with 31% of firms outsourcing this service to India and China, while 16% outsource to Australia and 21% to Singapore.

Clearly, Business Process Outsourcing in Philippines need to develop more on high-value outsourcing solutions like software development, research, product development, data storage, and the like. Philippines should be done focusing more on CRM and other BPO solutions and start focusing more on KPO solutions, which are higher-value services. This type of service offers a longer term of sustainable growth for the country’s outsourcing industry.

Cost rationalization remains the biggest driver for outsourcing. This allows firms to focus on their core competencies and allocate more labor-intensive, time-consuming processes to outsourcing providers. With the rise of data innovation, many firms will be seeking a higher level of innovation in their outsourcing capabilities. Philippines somehow has to develop its workforce intensively to meet the rising demand of foreign firms in the years to come.

The Business Process Outsourcing in Philippines already has a vivid future, specifically on CRM, but it still has to improve on KPO services if it wants to prosper on sustainable development of the outsourcing industry.