Philippine Call Centers Face Challenges from AI and Lack of Talent

Amidst challenges such as declining talent, increasing competition, and the rapid advancement of artificial intelligence, the Philippines is striving to protect its portion of the lucrative global business process outsourcing market, which is valued at approximately $300 billion.

The Southeast Asian nation, the world’s second-largest provider of outsourcing services, is producing a “low number” of graduates with the required communication and technical skills, potentially missing out on an opportunity to add 800,000 jobs over the next five years. for the industry group IT & Business Process Association of the Philippines.

“The most common challenge I hear is understanding,” Jack Madrid, who heads the country’s main BPO trading group, said in an interview, referring to unsuccessful job seekers. “I think they are failing at the basic level,” he said in his office in Manila on August 2.

A skills gap makes it difficult for the Philippines to protect itself in a sector that has helped expand its middle class since the 1990s — outsourcing accounts for about 8 percent of the country’s gross domestic product and is a major source of foreign exchange flows. Artificial intelligence-powered robots are taking away more and more outsourcing jobs after the Covid-19 pandemic, the rise of English-speaking workers around the world is also reducing the long-term language advantage of the natives of the former US colony.

According to data from the World Bank, nine out of ten Filipino children cannot read simple text with comprehension by the age of 10, illustrating the decline in the quality of education in the country.

“I think we were better English speakers before,” Madrid said, urging the government to consider returning to English as the medium of instruction in schools instead of the learner’s mother tongue.

Job seekers in the Philippines also lack basic IT skills, such as programming and troubleshooting, which Madrid says are increasingly needed by BPOs.

He said that during the pandemic, the Philippine outsourcing industry added 255,000 jobs, representing at least one percent slower growth than global growth. This suggests that the country may lose market share to India as well as new entrants such as South Africa, Egypt, Poland, Colombia and Costa Rica.

Part of the problem is poor employability. According to industry leaders, only one out of ten outsourcing job seekers is hired.

The skills mismatch is becoming an increasingly pressing issue as artificial intelligence threatens to disrupt industry worldwide. According to the Asian Development Bank, AI and similar technologies are predicted to displace nearly a quarter of the people in the Philippines’ outsourcing industry by 2030.

The impact of AI on the industry will be seen in a few years, and BPO workers should start learning how to use the new technology to make their work more efficient, Madrid said. “There is time to prepare and develop skills, but time is getting shorter.”

Despite these challenges, the industry group leader predicts BPO full-time employees will grow 6-7% this year from 1.57 million in 2022, while revenue is expected to grow 7-8% to around $35 billion.

The outsourcing industry has charted a plan to create 1.1 million new jobs and become a $59 billion industry with 2.5 million employees by 2028. It aims to increase its contribution to economic output to nearly 9 percent as it seeks to increase its market share in Europe.

Currently, potential investors are constantly coming and current investors want to further expand their presence in the country. “There is still significant demand for our industry here in the Philippines. It doesn’t seem to be abating despite all the headwinds,” he said.

The group has collaborated with the Higher Education Commission of the Philippines in initiatives such as reforming the IT training program to meet current trends and developing expertise in the field.

“There are some fundamental weaknesses in our education system,” Madrid said. “It’s an old problem, but now it’s become much more urgent.”