Manila, June 20, 2017 – Cebu remains as the largest and most preferred knowledge process outsourcing (KPO) destination outside of Metro Manila. A number of KPO companies that provide higher value outsourcing services such as health information management, software engineering, and finance and accounting have opened shops in Metro Cebu due to the presence of adequate infrastructure, redundant internet connection, ample supply of skilled college graduates, and a high level of urbanization driven by the development of several townships and public infrastructure projects.
Colliers believes that Cebu is still the most practical choice for KPO firms looking for viable locations outside of the country’s capital due to its diverse and skilled labor pool. We see more Metro Manila-based KPO firms establishing operations in Cebu given the need to have a redundant site that would back-up their Metro Manila operations.
The influx of KPO firms has propped up office space demand within the Cebu Business Park and Cebu I.T. Park.
Accenture Philippines’ four facilities in Cebu (Pioneer House, Cybergate, ebloc2 and ebloc 3) currently employ 5,000 people. The company said it will hire at least a thousand more employees this year that can handle SAP, Java, and analytic programming, among others.
In May 2015, Hanoi-headquartered FPT Software opened its first office in the country in Ebloc 3 of the Cebu IT Park. The company initially hired 62 software engineers but it hopes to employ around 2,000 people by 2020. FPT Software officials said that establishing operations in Cebu is an integral part of the company’s ASEAN expansion strategy.
Health information management (HIM) firm Medcor also opened a site in Cebu and initially hired nurses to expand its clinical software development capabilities. The company is looking at expanding operations in the city.
Other major KPOs that occupied a significant amount of office space over the past 18 months include Synchrony, which leased four floors in ACC Tower; Cardno Engineering, which took a single floor in ACC Tower; Google, which leased about 8,600 sq m of office space in Ebloc 4; and Catapult International, which leased some 1,500 sq m in Norkis Cyberpark. Other KPOs that took large cuts in the previous years include JP Morgan, Fluor Daniel, and Dash Engineering.
Both public and private initiatives are important in boosting Cebu’s image as a major KPO hub.
The completion of key infrastructure projects in Metro Cebu such as the light rail transit (LRT), Bus Rapid Transit (BRT), Metro Cebu Expressway, Cebu subway, Cebu-Cordova bridge, and the Mactan-Cebu International Airport expansion should boost Cebu’s competitiveness amid an increasing competition from ASEAN neighbors Hanoi, Ho Chi Minh City, Kuala Lumpur, Penang, and Bangkok.
The completion of the USD300 million casino-resort proposed by Udenna Corporation should also make Metro Cebu a premier destination for leisure. This should enhance the city’s image as an enticing location for foreign KPO executives.
National and local developers are responding positively to the anticipated spike in office space demand that is partly attributable to the expansion of KPO companies. From 2017 to 2019, at least some 300,000 sq m of office space is expected to go online. Upcoming projects include Philam Life Center Cebu, Central Bloc BPO Towers 1 and 2, GT Time Square, and Cebu Exchange.
The expansion of the Cebu KPO sector primarily hinges on the quality of graduates that its universities will produce over the next few years. The share of KPO employees to Cebu’s outsourcing workforce has grown from a mere 10% in 2008 to nearly 30% in 2015. We see Cebu’s shift to higher value outsourcing being sustained by an ample supply of graduates with relevant college degrees. Of the estimated 30,000 graduates that Cebu churns out each year, about a quarter have Business degrees while a combined 35% have Engineering, IT and Math, and Medical degrees.
Colliers believes that Cebu colleges and universities must work with local ICT councils in calibrating their academic programs to ensure that graduates are equipped with skills required by KPOs. Meanwhile, the local government should grant additional incentives to KPO companies that will provide free training to college students and graduates.
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