Nearshore Americas

The Philippines BPO Meltdown: What Went Wrong?

With its high rates of literacy and English-language proficiency, the Philippines has long enjoyed a reputation as the contact center capital of the world. The BPO sector is currently the second-main driver of the economy, generating more than US$25 billion in annual revenue.

But amid the coronavirus crisis, a substantial number of clients and providers have moved aggressively to eliminate thousands of positions. This process of ‘de-risking’ has many elements and the sheer magnitude of the pullback has some observers wondering if the country will ever fully recover. (Nearshore Americas estimates that between 20,000 and 25,000 full-time equivalent positions will migrate from the Philippines to the Americas – both domestic US and through various third-party channels in the Nearshore – during the next 18 months.)

With contact centers slow to adapt once lockdowns began in March, foreign service providers are increasingly pulling their operations from the Philippines. “The BPO sector was badly hit by Covid,” said Peter Ryan, Principal at Ryan Strategic Advisory. “That is forcing a lot of providers to revisit their strategy in terms of where they want to set up capacity. Because the Philippines… had such heavy investment, it doesn’t take a rocket scientist to figure out that finding a new location or even several new locations is going to be top of the list for any service provider company.”

When Work-from-Home Doesn’t Work

Amid government shutdown orders, the BPO sector struggled in the transition to work-from-home models. A survey conducted by The Manila Standard showed that by mid-May, nearly 60 percent of BPO employees on Luzon – the most populous island in the country – had made the move to remote working. But a smooth transition for all workers was always bound to be a Herculean task – the industry employs more than 1.2 million people. Living conditions for many workers are not conducive to a WFH model – overcrowding and noise pollution are a fact of life throughout the islands.

The country’s Internet infrastructure – considered to be one of the lower performing globally – has also proved a significant obstacle.

“The main problem with WFH is the internet connection is not reliable, so it affects the availability and productivity of the employees,” said Mylene Cabalona, President of the BPO Industry Employees Network (BIEN).

Lack of competition has hampered the country’s telecommunications market, as two internet service providers – Globe Telecom and PLDT – operate a virtual duopoly. The Economist Intelligence Unit ranks the Philippines as 63rd out of 100 countries in the 2020 Inclusive Internet Index.

“Our organization has called on the government to push for a better, faster, more reliable internet service,” Cabalona said. “We have been lobbying… for a bill that would improve the internet service in the country. [That measure] would also result in better productivity for the workers.”

BIEN organizer Mylene Cabalona at a protest for worker’s rights

Privacy concerns have also contributed to the BPO industry’s reluctance to adopt WFH. Strict regulations governing data management in sectors such as banking, insurance and healthcare have slowed the smooth transition to new working arrangements.

A Crisis for BPO Workers

With connectivity problems and data issues posing a threat to WFH models, many BPO employees have been forced to adapt to highly irregular – and in some cases dangerous – working arrangements.

By March, the commute to-and-from work had already become impossible for many contact center workers, as travel restrictions were introduced to contain the virus. Some BPO firms began housing their workers in hotels near their offices. Others have even forced employees to remain on site at their call centers or lose their jobs entirely.

Numerous international media outlets have drawn attention to the lack of protective equipment and social distancing protocols at many facilities. Such negative press will not endear the location to international companies – who must increasingly answer for any exploitative practices across their service or supply chains.

Other BPO workers face an uncertain future – placed on “no-work-no-pay” or “floating” status, without their regular work or salary. Cabalona said these workers had been denied financial aid from the government because they were not classed as unemployed. She also said that tenured agents – those with more experience and higher salaries – had been specifically targeted as a cost cutting measure.

Cabalona stressed that such malpractice in the BPO sector began long before the Covid-19 outbreak. In January, BPO workers were forced to report for work despite the heavy ashfall that resulted from the eruption of Taal Volcano, south of Manila. In 2017, a fire at a call center in Davao City killed 37 workers.

Erratic Governance

Cabalona’s union, BIEN, has been a vocal critic of both the BPO sector and the government. But speaking out has come at a cost. In October last year, the police and the army arrested 57 unionists and activists in a sweeping crackdown on progressive organizations. Leading BIEN unionist Anne Krueger was jailed as part of the operation. She was freed on bail after 12 days but still stands accused of illegal possession of firearms – charges she emphatically denies.

The government of President Rodrigo Duterte is also set to enact a new anti-terrorism bill which allows for warrantless detention and surveillance of any government opponents. Many experts have raised concerns that the new measure – which is set to become law on July 9 unless brought forward or vetoed – will lead to more human rights abuses in the country.

President of the Philippines Rodrigo Duterte

Such a tense climate does little to instill certainty in clients, who have been monitoring President Duterte with some concern since he came to power in 2016. In last year’s Global Location Trends report, IBM researchers wrote that the recent decline in investment levels in the Philippines “may also reflect a perceived greater risk and uncertainty about the country’s political environment.”

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Protectionist measures from the White House have compounded investor uncertainty. President Donald Trump’s “America First” policy has forced many international companies to rethink offshoring strategies which has had a ripple effect on the Philippines.

The Challenge Ahead

In the wake of the chaotic move to WFH models in the Philippines, the government was quick to play down the long-term significance of these challenges. Last month, Labor Secretary Silvestre Bello III said the Covid-19 pandemic would eventually lead to more offshore BPO jobs. “A good size of those jobs will go to the Philippines, particularly Clark, Cebu and Metro Manila,” Bello said.

In statement emailed to Nearshore Americas, Sykes Enterprises, a BPO company, said the industry was aiming to transition towards automated services and more technical and creative jobs.

“As the need to better diversify a workforce has been highlighted, areas where outsourcing is prevalent, such as the Philippines, would benefit from this,” the company said.

But the Philippines is not alone in its aim of retraining the workforce towards digital competencies. India and Nearshore locations have already made significant strides in that direction. So only time will tell whether the faltering BPO industry in the Philippines can make those upskilling goals a reality.

Stephen Woodman

Stephen Woodman is an independent journalist based in the Mexican city of Guadalajara. He has six years’ experience covering business and culture in Latin America. Stephen has been published in numerous international media outlets, including The Financial Times, BBC News and Reuters. To share story ideas, drop him a note here


  • I work as a mid-level manager for a third party billing company within the healthcare sector. How ironic it is that despite the name, the company is pressing those employees who live within the metro (even those living near suburban areas) to report in the office. When these employees refuse because of fear of safery, they are given an ultimatum – report to the office or lose your job. They do this even if a work from home setup is available.

  • We need to focus on the solutions rather than making the problem more eratic!!! More of the centers only provide dongle’s. I think it would be perfect if the company will provide their agent a LAN connection instead. Imagine once almost of their agents becomes contaminated due to inhumane decision like- the company is pressing those employees who live within the metro (even those living near suburban areas) to report in the office. When these employees refuse because of fear of safery, they are given an ultimatum – report to the office or lose your job. They do this even if a work from home setup is available – as mentioned byn Sareeya.