CAREER DEVELOPMENT IN THE IT-BPO INDUSTRY

12th National PESO Congress

October 12, 2012, Baguio Country Club Nathan Andaya, Executive Director for Human Resources

Copyright 2012: Business Processing Assoc of the Philippines. All rights reserved

The Philippines IT-BPO industry has grown rapidly

Philippine IT-BPO industry size 20062011; US$ billion FTEs
x% YoY Growth

Revenue (US$M) 7,400 2,058

% inc. fr 10 21% 24%

11.0 8.9 7.1 6.1 4.8 3.2

~26% ~50% ~16% ~25%

Voice BPO Non-voice BPO/KPO ITO Health Info Mgt & Care

416,000 128,650

~24%

49,908 24,700 9,030 8,640 1,391

993 277 172 128 8

37% 172% 5% -10% 13%

2006

2007

2008

2009

2010

2011

Engineering Services Animation

# FTEs (~000) Global share1

240

300

370

423

525

638

Game Development TOTAL FTEs

5%

6%

6%

7%

8%

8%

638,319

11,036

24%

1 Philippines IT-BPO market as percentage of global offshore services market, in revenue terms Sources: BPAP, ACPI, CCAP, GDAP, HIMOAP, PSIA

1 Copyright 2012: BPAP. All rights reserved.

15%20% CAGR over next 5 years expected

Philippines IT-BPO industry US$ billion PPP CAGR: ~19%

CAGR: ~25% CAGR: 22%

CAGR: 9% 2006 % of GDP Direct employment Indirect employment 2.7% 240K 600K 2009 4.5% 423K 1100K 2010 4.8% 525K 1325K Low-end 2016 6.0% 680K 1700K Baseline 2016 7.0% 900K 2250K Road Map 2016 CAGR: 14.5%

9.0%
1.3M 3.2M

Sources: BPAP data; Everest analysis; World Bank and IMF projections

Larger tax base with even larger multiplier effects through consumption
DIRECT PAYROLL ONLY (@ YEAR 2016)
Transport and Communications

ACCELERATED CASE

73.7 billion Contribution of 5,000/month to rental of 1.2 million HHs

232.7 billion 2.4 billion Chickenjoy meals and 24.7 billion VAT

45.4 billion 3.2 billion jeepney rides & 22.5 billion 45 million P500 16 million prepaid cards Bench jeans & 535,000 80 billion iPads Investments in financial institutions

Food

13% 8% 4% 14% 41%

20%

Taxes

110 billion 200,000 classrooms & 3.3 million families receiving maximum CCT for a year

~US$12.9 billion annual salaries and benefits

Note: Based on consumption and savings of average Filipino family in the income 8th and 9th docile (in constant 2010 dollars) Sources: National Statistics Office; team analysis

The Philippine talent value proposition: large pool of young, English-speaking talent
Number of college degree graduates Medical and natural sciences, allied fields Business, accounting, and related fields Social and behavioral sciences, education Engineering and architecture IT-related and mathematics Fine arts, masscom, humanities TOTAL Tertiary level
2010: 481,862 graduates, 2.6% growth

2009 132,244 107,272 68,764 50,734 47,928 12,269 469,654

Annual growth

Abundant labor force of 39+ million 460,000+ college graduates per year 3,000+ CPAs English proficiency & other languages Affinity with Western culture Customer service orientation Highly trainable Cost effective High level of commitment and loyalty

5.8% Pop Labor force 3,179M 509M Unemp rate 8.7% 7.8% 4.3% 8.1% 7.4% Literacy 82.0% 61.0% 91.6% 88.6% 92.6%
4

World India

6,768M 1,130M

China 1,330M 814M Suitability rates are empirically based on a total of >80 interviews with HR professionals working in each country Brazil 201M 100M 102M 39M Philippines
Source: CHED 2010; CIA World Factbook 2010; NSO 2011

Talent supply gap, is it a problem?

Widening gap will accelerate cost and quality pressures
280 264
240 229

Total talent demand (Accelerated Case)

200 172
160 155 149

198

Annual Demand and Supply projections of entry-level industry talent PH IT-BPO 000 FTEs

137 120
103 80 84

Effective addressable supply (Base Case)

88

87

63 40

0 2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Recruitment Process
Final interview

Walk-in applicants

Job offer

Paper screening

Initial interview

Employee Referral

HIRE!

Testing

Job /campus fairs

Applicants responding to Advertisement in newspapers Applicants responding to Advertisement online

100 applicants Recruitment hit rate: 5-8% only

5-8 hires!

Quality of talent supply is a problem

Average Scores Per School for Basic Skills Overall Vis-a-Vis Industry Scores GCAT Baseline
100 90 80
Percentile Scores

70 60 50 40 30 20 10 0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 Schools #1 - 45

Based on testing of 15,500 students from 45 schools, vast majority fall below industrys minimum competency requirement

Industry Range

How BPAP is trying to address talent supply problems

Program Description

1. Global Competitiveness Assessment Tool (GCAT)

2. Advance English PreEmployment Training (AdEPT) 3. TESDA Industry Training for Work Scholarship Program (ITWSP) 4. TESDA Trainers Training (T3) 5. Emerging Services 6. Associate Program 7. Service Management Program (SMP) 8. Service Technology Management (STM)

An industry-developed test to assess competencies in basic skills for employment in IT-BPO & GIC* and other service industries (*captives)
A 100-hour English-proficiency course, using industry-developed courseware, offered in colleges as an elective A near-hire bridging program for different IT-BPO services subsidized by government, co-managed by industry

The development of new T3 programs for IT-BPO TESDA courses to fill large trainers gap for I-TWSP A program to address the training and education needs of specialized services

A program to develop 6- to 12-month IT-BPO training courses for high school graduates not going directly to college A 21-unit minor or specialization track taken by business and IT majors in college intending to go into IT-BPO & GIC or other service industries A post-graduate certificate or masters program for graduates and career shifters wanting to enter IT-BPOs & GICs as team leaders or managers

9. Executive Development A leadership and management program for current IT-BPO & GIC managers and executives or industry shifters

Will these programs solve the problem?

Demand Others SMP Career Marketing

GCAT
ITWSP Supply

2011

2012

2013

2014

2015

2016

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Growth of IT-BPO industry means economic growth of the entire Philippines

75% of IT-BPO jobs are in NCR, with only 25% of PH graduates; IT-BPO is biggest private-sector job creator and employer in many tier 23 cities
1 Calabarzon Hub Santa Rosa Bacoor/Imus/Dasma 792,000 Lipa Cainta Lucena 21,300 Current FTEs 5 2 Central Luzon Hub Angeles/Clark Cabanatuan Olongapo/Subic Tarlac 461,000 Malolos 25,600 Current FTEs 128,000 NCR Absorptive capacity at current yield rates Additional capacity at targeted yield rates

219,000
Absorptive capacity

3 Western Visayas Hub Bacolod Absorptive Iloilo City capacity 108,000

Davao-GenSan Hub 117,000 24,900 10,000 Current FTEs 42,000 Absorptive capacity Current FTEs

39,000 Absorptive capacity

National Capital Region 1.4M

485,600 Current FTEs 787,000 Theoretical capacity

4 Central Visayas Hub Cebu City Lapu-Lapu City Mandaue City Dumaguete 47,700 Tagbilaran Current FTEs

162,000

44,000 Absorptive capacity

Philippine IT-BPO employment projections to 2016

12

Established IT-BPO locators are importers of talent

000 FTEs

180 Absorptive Capacity IT-BPO FTEs 140

100

60

20

NCR

Metro Cebu

Next Wave Cities capacities are untapped

80 70 60 50 40 30 20 10

000 FTEs

Absorptive Capacity IT-BPO FTEs

Learning ability and English proficiency warrant attention

60

40

20

Cognitive Ability

English Proficiency
NCR

Computer Literacy
VISAYAS

Perceptual Speed and Accuracy

LUZON-NonNCR

Career Progression Voice /Non Voice

Program Director/ Site Director Sr. Ops Manager Operations Manager Shift Manager Sr. Team Leader Team Leader Customer Service Rep/ Technical service Rep

16

Pay Ranges for call center agents

* Source: Towers Watson (Jan. 2012)

17

Pay Ranges with allowances Voice (call center) *

* Source: Towers Watson (Jan. 2012)

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Pay ranges Estimated Monthly Cash Compensation only*

Program Director/ Site Director (P200K up) Sr. Ops Manager (P150K 200K) Operations Manager (P80K 150K) Shift Manager (P60K -80K) Sr. Team Leader (P40k P60K) Team Leader (P30k -40K) Customer Service Rep/ Technical service Rep (P16k P27k)
*Compensation depends on size of IT-BPO Operations ** Rates are based on MM data

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In Animation (career progression and pay ranges)*

Animation Directors Assistant Directors Checkers Layout Checkers/ Supervisors 2D Traditional & Digital animators Assistant Animators Digital Painters Digital Background artists Compositors

P80k - P150K P60k - P70K

P30K - P40k P40K - P50K P23K - P70K P15K - P40K P12K-P20K P20K - P40K P30K - P50K

* Monthly basic pay (Estimate only)

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In Animation (career progression and pay ranges)*

Programmers (games/E-learning) 3D Model Rigger 3D Modeller 3D Texture and Lighting

P25K - P40K P25K - P40K

P15K - P30K
P15K - P25K

Concept Artists/designers
Production Managers Production Assistants Storyboard Artists
* Monthly basic pay (Estimate only)

P30K - P50K
P40K - P60K P15K - P20K P40K - P60K

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