Secretary Ray Anthony Roxas-Chua IIICommission on Information and Communications Technology

The Philippine O&O IndustrySSME Conference

7 August 2008

Industry Overview

O&O Industry Growth

Source: BPAP

101

163

236

300

0

50

100

150

200

250

300

350

2004 2005 2006 2007

$1.3

$2.2

$3.3

$4.9

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

2004 2005 2006 2007

Total Employees (000s) Annual Revenue (US$B)

Software9%

ContactCenter

74%

Back Office

8%

TranscriptionEngineering

Animation

4.9B USD

4%3%

2%

Software10%

ContactCenter

66%

Back Office13%

TranscriptionEngineering

Animation

300K Employees

6%3% 2%

Segment Breakdown

Source: BPAP, CICT, DTI

2007 Breakdown by Employees 2007 Breakdown by Revenue

Global O&O Market Share

Philippines15%

India37%

Canada27%

Central and Eastern Europe

ChinaOther

5%

4%2%

Source: Everest Group, 2008

5%

5%

Mexico

Ireland

Awards and Distinctions

Offshoring Destination of the Year: Philippines

Top 10 Asian Cities of the Future:#7 Quezon City#8 Cebu#10 Davao

Top 50 Emerging Outsourcing Cities:#4 Cebu#23 Pasig#36 Baguio

Top 10 Outsourcing Cities in Asia Pacific:#2 Manila

The Philippine Advantage

Quality Human Capital

� Abundant labor force of 32 million

� Over 400,000 college graduates per year

� Large pool of accounting and business graduates

� English proficiency

� Affinity with Western culture

� Customer service orientation

� Highly trainable

� Cost effective

� High level of commitment and loyalty

World Class Infrastructure

� Telecommunications

� Deregulated telecommunications industry

� High-bandwidth fiber backbone and digital network

� Redundant international connectivity

� Power

� Reliable electricity with excess capacity over current demand

� Real Estate

� Low rental rates with favorable terms

� Dedicated IT parks in urban areas

Government Support

� Talent Development

� PGMA Training for Work Scholarship Program

� SSME initiative

� Investment Incentives

� Board of Investments

� Philippine Economic Zone Authority

� Philippine Cyber Corridor

� 24 cities identified outside Metro Manila

� O&O Scorecard

� Establishment of regional ICT councils

PGMA Training for Work Scholarship Program (TWSP)

� Training program for potential hires

� PHP350M allocated to O&O industry

� Targets to train at least 40,000 near-hires by

TESDA-accredited training institutions

� Vouchers range from P5,000 for call center training

to P30,000 for software development training

SSME Initiative in the Philippines

� Collaboration among government, academe, and

industry

� Objective is for the SSME Curriculum to be adopted

by the higher educational institutions in the country

� Aims to develop a critical mass of trained

professionals for the O&O industry

Investment Incentives

� Board of Investments (BOI)

� Grants fiscal and non-fiscal incentives in preferred areas of economic activity specified in the Investment Priorities

Plan (IPP)

� Priority sectors include contact center, BPO/KPO,

software development, animation, data transcription, engineering design and ICT support services

� Philippine Economic Zone Authority (PEZA)

� Grants fiscal and non-fiscal incentives to developers of

economic zones, export producers, and exporters of IT enabled services

� Offers ready-to-occupy locations to foreign investors

PEZA IT Parks and Buildings

Breakdown by Location

Bacolod 6Bacong, Negros Oriental 1Bacoor 1Baguio 1Cabanatuan 1Cagayan de Oro 4Cainta 1Calamba 1 Camarines Sur 1Cebu 21Davao 1

Dumaguete 1General Santos 1Iloilo 3Leyte 1Lipa 1 Manila NCR 78 Meycauayan 1 San Fernando, Pampanga 2 Sta. Rosa 3Tarlac City 3Urdaneta 1Total 134

Source: PEZA

Philippine Cyber Corridor

Cities with Operators

Bacolod

Bacoor

Baguio

Batangas

Cabanatuan

Cagayan de Oro

Cainta

Camarines Sur Province

Cebu

Clark/Angeles

Davao

Dumaguete

Iloilo

Legazpi

Lipa

Manila NCR

San Fernando, Pampanga

Sta. Rosa

Other Ready Cities

Dagupan

General Santos

Leyte Province

Subic/Olongapo

Tagbilaran

Tuguegarao

Urdaneta

Cities with Operators

Other Ready Cities

O&O Scorecard

• PEZA-approved facilities

• ICT Council

• Real estate developers

• Rental

• Regulatory fees and taxes

• Median pay

• Utility costs

• Airports

• Roads

• Utilities (telecom, power, water)

• Real estate

• College and high school graduates

• Professionals

• Schools and degree programs

Talent

Infrastructure

Cost

Business Environment

Regional ICT Councils

Govern-m

ent(national

and local)

Academe (universities, schools)

Real

estate

developers

Infrastructure/utility

providers (telecom,

power, water)

Industry

players

ICT

Councils

Established ICT Councils

Quezon City ICT CouncilQuezon City

Technology of Information and Communications in Koronadal (TICK)Koronadal

Urdaneta

Laguna

Iloilo

Iligan

General Santos

Davao

Dagupan

Cebu

Cagayan de Oro

Cagayan

Bohol

Bacolod

Angeles

Albay

Urdaneta City Council for ICT (UCC-ICT)

Laguna ICT Council

Iloilo Federation for IT (IFIT)

Iligan ICT Council

ICT Solutions Association of Region 12 – General Santos City(ISA12 GENSAN)

ICT Davao

Dagupan ICT Council

Cebu Educational Development Foundation for IT (CEDF-IT)

Cagayan de Oro ICT Business Council

Cagayan (Tuguegarao) ICT Council

Bohol ICT Council

Bacolod Negros Occidental Federation for IT (BNEFIT)

Angeles City ICT Council

Albay ICT Association

Challenges Ahead

Challenges Ahead

� Talent development

� Currency appreciation vis-à-vis USD

� High concentration of customers in USA

� Dependence on voice services

� Sustainability of labor cost advantage

� Competition from other countries

Thank You!