Dollar depreciation won't hurt BPO industry long-term—CCAP

By Lawrence Casiraya

MANILA,Philippines--Despite the further devaluation of the dollar against the peso, Philippine call centers are shielded from long-term losses, according to the head of the Call Center Association of the Philippines (CCAP).

The peso is currently trading at around P45 per dollar as compared to P52 per dollar a year ago; and analysts expect the local currency to strengthen further as the economy improves and the dollar weakens.

In an interview, Raffy David, CCAP head, admitted that the industry has suffered a "direct hit" due to this development.

Most local call centers serve US customers and thus, measure revenue in dollars.

David, however, said this affects foreign-owned operators, not those that cater to the local market.

"It's forcing international players to negotiate better deals," he said.

Overall, he said dollar losses affect low-volume contracts; which means operators now prefer multi-year contracts that open doors for serving different types of requirements.

"It's not unusual anymore for customers to farm out requirements to different countries or to multiple service providers," David noted.

"This problem couldn't have come at a better time for the industry," he added. "Our quality of service is already proven and this offers leverage in negotiating better contracts. Likewise it's pushing the industry to maintain and improve service levels."

Lauro Vives, founding chief of outsourcing analyst XMG Inc., also believes that there are no "drastic" effects to local players.
"Our research shows that offshore service providers on average have a 5- to 7-percent margin advantage even after foreign [exchange] fluctuations," Vives commented via e-mail.

To weather the dollar depreciation and continue a modest operating margin, he said the industry must ensure it monitors salaries closely and does not get hit by an industry-wide wage hike similar to India.

"For longer term growth and to avoid the vagaries of global currency fluctuations, service providers in the Philippines should diversify their revenue by looking at Europe where the demand for outsourcing is outpacing that of the US by 14 percent in the first half of 2007," Vives said.