The ballroom was filled with beaming business executives of different nationalities as I delivered my talk during the recently held 6th Annual Shared Services and BPO Week Philippines Conference. Perhaps much of the anticipation was because my topic was “Transforming from customer-vendor relationships to strategic alliances,” which is apropos in today’s rapidly changing business environment.
The urgency to respond and adapt to such shifts stem from the fact that BPOs and shared services firms need to continue their growth trajectory. According to World Bank estimates, the sector is projected to generate up to $55 billion in revenues by 2020 or roughly 11 percent of the country’s GDP. The Information Technology and Business Process Association of the Philippines (is likewise optimistic that the industry is on track to meet its goal of 1.3 million jobs and $25 billion in revenues or 8 percent of GDP by 2016.
Gearing up to face challenges
It’s laudable that industry leaders are not resting on their laurels, but instead gearing up to face the challenges ahead as well as capitalize on the opportunities. I highlighted two main shifts that that will impact the industry.
First is the Asean Economic Community. According to international business consultancy group, Oxford Business Group, its implementation could hinder the sector’s rapid growth as major international firms may start to rationalize and consolidate their operations in other countries following the lowering of trade and employment barriers in the region. However, the Philippines is well-poised to capture much of the consolidation opportunities as the country already has a strong foundational dominance and relationship with international clients.
Second is technology. The rise of cloud computing has opened up new ways in which companies can make their IT operations more efficient, and it has started to cut down on the outsourcing industry in India as western companies bring back IT work onshore where cloud technology adoption is mature. In addition, with increased automation and diminishing incremental benefits from labor arbitrage, the global labor pool for IT outsourcing services will only continue to shrink, according to a Gartner report, resulting in outsourcing services dropping by at least 15 percent through 2016.
Entering into new strategic alliances
So how can BPOs and shared services firms adapt to these changes and instead capitalize on the silver lining it presents? A key component of the firm’s strategy is transforming the typical customer-vendor relationship into strategic alliances.
In fact, the 2015 Annual Global CEO Survey of PwC reveals that 51 percent of CEOs plan to enter into new strategic alliances or joint ventures over the next 12 months, up from 44 percent last year, as companies increasingly focus on key strengths and looking to partnerships to enhance their capabilities. The top reasons for partnering are access to new and emerging technologies and innovation capabilities, apart from the rationale of expanding markets, cutting costs or sharing risks.
Strategic Alliances are agreements among firms in which each commits resources to achieve a common set of objectives. To effectively address the environmental forces that beset the industry, BPO and shared services firms may form strategic alliances with their customers as well as suppliers.
Working closely with customers and suppliers
Industry players can help drive consolidation and rationalization opportunities to the country, brought about by AEC, by working closely with their customers to transition operations from other countries to the Philippines. For example, operations in Thailand where English is not the medium of communication, can be moved to the country by jointly planning and investing for language training for local employees as well as smoothly moving Thai employees to work and live in the country.
As regards to technology, BPO and shared services firms can force strategic alliances with technology providers to jointly conduct proof-of-concept activities for the adoption of virtual desktop infrastructure or VDI, a practice of hosting a desktop operating system within a virtual machinerunning on a centralized server which will significantly reduce cost and improve customer responsiveness.
But the success of strategic alliances is incumbent on the alignment of objectives between and among the BPO/shared services firm with its customers, may it be internal or external, and with its suppliers. Alignment in people, technology, and processes is crucial for the success of the alliance. Once the alliance is set, a governance structure to oversee the execution and monitoring of the joint activities is likewise key.
I ended the talk by highlighting that in the execution of strategic alliances, the most important component are the people involved in it – attracting and retaining the right people is the most important piece.
The author is a senior executive in an information and communications technology firm. He also teaches strategy, management and marketing courses in the MBA Program of the Ramon V. del Rosario College of Business, De La Salle University.
The views expressed in this article are the author’s, and do not necessarily reflect the viewpoints of the DLSU administration and faculty.