Software Industry in the Philippines
Last August, I attended the "International Outsourcing Summit" in Manila organized by the Business Processing Association of the Philippines. According to the data presented at the conference, between 2000 and 2004, only five countries - Canada, China, India, Ireland and the Philippines accounted for 95% of the total software outsourcing market. However, today the combined share of these five countries had shrunk to 80% as other new competitors have emerged such as Malaysia, Singapore, Vietnam, Czech Republic, Hungary, Poland, Romania, Argentina, Brazil and Mexico.
The Philippines still has a major advantage over other Asian countries due to their English language as they still control 15% of outsourcing market with revenue close to USD $ 8 Billion a year and employ over 600,000 people. The outsourcing industry also created to more than seven million "secondary jobs" - Jobs that related to people working in the outsourcing industry such as housing, transportation, restaurants, food services etc. However, as other countries are improving their language capabilities, the Philippines market share could shrink if there is no immediate action taken.
The Philippine government has set the target that by 2020; the country should achieve a USD $100 billion a year and should employ about 5 million people. However my friends in the Philippines believe that the targets are not practical due to the poor quality of its current education system. My friend Jose Galapagal, a senior manager of a large software company said: "We can not improve if the current education does not change. We have language advantage over other countries and it worked well in testing center, help-desk, back-office outsourcing but we can not depending on English language alone. We need to focus on other technical areas before our competitors move in and grasp bigger market share Today we do not have many high technical skills people, especially in technical management".
Based on several speakers at the conference, it seemed that the outsourcing industry is struggling to maintain the demand of quality workforce, especially in the management area. Outsourcing countries like India, China and Philippines are struggling to produce technical managers that can manage the demand of fast growth. Jose told me: "We have no problem of getting more business but have difficult to maintain the quality that our customers demand. Because of the fast growing market, many top managers change jobs often to get better salaries. We have many programmers and testers but they need good managers and it is very difficult to find good technical manager. Even when we have good managers, they do not stay very long. For years, our education system is focusing on training mostly programmers, testers and help-desk support people but NOT technical managers. Without good managers, projects will fail and customers will be angry at us. Information Technology is a business that customers can change suppliers easily if they are NOT happy with the quality and skills”.
According to data presented at the conference, only 43% of customers feel satisfied with the quality of the works in the Philippines. It is clear to Philippines companies that many unhappy customers will take the business elsewhere where they can find better quality and good management structure. If it happens, Philippines will lose this lucrative market and it may create significant economic downturn and high unemployment. Jose said: "Most people understand that if they do not have strong management to run the business, the industry can not grow. Strong managers come from quality education and trainings so the most important thing to do now is to improve the education systems. We have been talking about this need for a long time without any agreement. The academic people do NOT see the urgent need and they do NOT want industry people tell them what to do. They want to maintain their status and their view of how to educate their students. Today, despite government urging, there is a big gap between industry's needs and academic's view”.
This situation is NOT unique because almost every country in Asia have similar dilemma, including India and China. They have been talking about improve their education systems for a long time as they all facing the same problem with their education systems but changes come slowly and business does not wait so many countries could miss this golden opportunity. In India, many software companies have lost their patient with the traditional colonial systems so they invest heavily in their own private universities to make sure that they have quality workforce in the future. Several Chinese companies are beginning to do the same. Neusoft, the largest software company in China already open its NeusoftUniversity in five major cities. iSoftstone, another large software company open the iCarnegie Training center in Wuxi, in affiliation with CarnegieMellonUniversity to develop their own workforce.
Several companies in the Philippines are planning to adapt the same strategy by having their own company-based universities for their workers. Unfortunately, there are various aspects that the software industry here also needs to do in order to bring out its strengths. From my research on the situation there, I believe the software industry can NOT grow faster due to the weak basic infrastructure with limited access to networks. To do business globally, Philippines needs to upgrade and expand current network to fiber-optics backbone in order to provide better bandwidth capabilities. In my presentation at the conference, I made some recommendations as follows:
1) Improve training for middle level IT professionals e.g. Project manager and senior technical leaders.
2) Improve cooperation within the industry and between government and private sectors
3) Create a policy to marketing, advertising the Philippine's software industry globally.
4) Government should provide funding to help promote software as major industry and support start-up companies
5) Improve domestic software market
6) Improve IT education to meet the needs of global software industry
7) Reduce cost of telephony and Internet access for domestic market.
As I have been conducting research in software market throughout the world, I believe to improve the economy and create jobs, especially high paying jobs every county must focusing on improve the education because in the “Information age”, knowledge and skills are the best assets a country could have to survive and thrive in the “globalized world”.
Sources
- Blogs of Prof. John Vu, Carnegie Mellon University
