Canada’s critical shortage of IT workers has led to a boom in countries like the Philippines and India as more and more companies seek to outsource their information technology operations to Asia.
Canada is facing a shortfall of about 160,000 IT workers over the next three years, according to a research done by the Ryerson University’s Ted Rogers School of IT Management, reported ITWorldCanada.com.
While India has been the favored destination, the Philippines strengthened its position as a leading alternative IT outsourcing hotspot, according to a recent report
Indian Information technology outsourced service firms continue to dominate the field but their counterparts in the Philippines are rapidly carving a place for themselves as alternative providers, according to an IT and outsourcing consultancy group.
While India continues to dominate information technology outsourcing (ITO), the Philippines strengthened its position as a leading alternative ITO destination, according to a recent report from Tholons Inc., which lists the world’s top 100 ITO hubs each year.
The report said, Manila moved to third place behind Bangalore and Mumbai on the list, replacing Delhi and breaking India’s monopoly of the top three spots. Furthermore, another Philippine municipality, Cebu City climbed one place to number eight on the list while five of the country’s other centres made it into the top 100.
One of the advantages the Philippine ITO sector enjoys over its rivals, according to the global economy and investment consultancy firm Oxford Business Group, is its easy access to United States market reinforced by shared historical and cultural ties and an ample supply of skilled workers with a good command of the English language.
The country’s current IT and IT-enabled services market is estimated at $14 billion, but a few years ago the total market accounted for only half of that. The number accounts for more than four per cent of the nation’s gross domestic product. The sector, called Business Process Outsourcing (BPO) in the Philippines, is expected to earn no less than $25 billion by 2016. No less than 640,000 Filipinos are employed in the industry.
Large businesses, mainly from the U.S., Europe and Australia have BPO operations in the Philippines. Among the few Canadian companies outsourcing to the country is Telus Corp. which employs more than 3,000 workers in a massive call centre in mall located in a former military installation converted into a commercial and industrial centre.
Telus initially considered India but chose the Philippines instead because the Indian market was already heated at that time. The successful operation, which began in 2005, now has some 40 clients which include several North American telecom and cable firms and one line video game companies.
Offshoring, which refers to hiring or contracting people for IT services abroad (as opposed to outsourcing in general, which is also done domestically) is a business worth between $2.5 and $3 billion in Canada, says Mark Schrutt, director of services and enterprise applications at IDC Canada Inc.
It’s certainly a strategy that’s been proven to give bang for your buck. Offshoring to India is a prime example: a large workforce of highly skilled young IT professionals willing to work at a fraction of the cost of their Canadian counterparts makes it an ideal place to look for bargains.
Offshoring really began to take off in the 1990s, fueled by the demand for large amounts of low-cost resources to do work that wasn’t adding any value, says Jason Trussell, senior vice-president and Canadian regional manager at iGATE Inc., a major provider of outsourcing services worldwide. “But once people saw that they could get some of this remediation work done out of India then it transitioned into ongoing development, maintenance,” he says.
Trussell estimates that clients of his that outsource development and maintenance jobs to India save an average of 30 to 40 per cent compared to the cost of having these services performed domestically.
The quality of the work, meanwhile, is “on par” with what the companies could expect within Canada, according to Schrutt.
However, says Trussell, offshoring these IT jobs isn’t merely about saving money. Eventually, it’s going to become a matter of economic necessity in Canada.
“People are not going to go to an India, Mexico or China if there wasn’t some financial benefit,” says Trussell. “But the reason that they’re going to those places isn’t purely because of the financial benefit.”
Part of the reason is simply a shortage of IT professionals in Canada, he says. With a very low rate of unemployment in the industry, it’s a seller’s market. Not only is the workforce shrinking, but it’s also getting older, he notes. Companies are “not going to be able to sustain that domestically and if they do, it’s going to become very expensive,” he says.
Offshoring is a sometimes controversial subject within Canada, especially amid a shaky economic climate. However, Schrutt suggests that within the IT industry, outsourcing is filling a critical need to have many low-level IT roles filled.
Sending these jobs abroad doesn’t necessarily take work away from Canadians, he says, given that we’re often unable or unwilling to do that work, or only willing to do it at prohibitive rates. “Companies just cannot get the right resources at the right time at the right cost,” he says.
And offshoring can ultimately create a new benefit for the economy, opening up new positions at home based on growth of the workforce abroad, Schrutt adds.
“Outsourcing can help create opportunities that didn’t exist before,” says Trussell. Recruiting more bodies in another country can “upskill” Canadian IT workers, boosting them into higher level managerial positions, he says.
“The jobs are slightly different than what they may have been before, but it actually is an economic addition, not necessarily a detractor from the economy and from the employment landscape.”