The information technology-business process management (IT-BPM) industry is poised to recalibrate middle of next year its 2024-2028 roadmap following the slowdown in the growth of the sector.
Reeling from serious talent supply-demand gap and rising costs that erode its competitiveness, the industry observed India is no longer the Philippines’ lone rival in the sector.
“Our roadmap is a six-year plan, developed in partnership with Everest and IBPAP. We agreed on a midpoint recalibration, scheduled for 2025. By mid-2025, we will assess our progress,” said Jack Madrid, president and chief executive officer of the IT Business Process Association of the Philippines (IBPAP) in a virtual press conference yesterday.
Madrid said while the industry exceeded its baseline targets for job creation, it is falling short on the revenue side.
The industry is projected to grow 7 percent to $38 billion in revenues in 2024, slower than the projection of 10.4 percent provided in the roadmap. By the end of the year, workforce should number1.82 million.
Madrid said as it is, the attrition rate in the industry has not changed, with the highest posted by contact centers at around 40 percent and the lowest by global in-house centers between 10 and 15 percent.
This situation aggravates the skills gap problem in the industry.
Madrid noted the emergence of cost competitive rivals in IT-BPM once dominated by the Philippines and India.
“While we are still one of the leaders, maintaining our position will require us to continually improve our skills and services. We’re seeing other markets, like Poland, Egypt, South Africa, and Vietnam, emerging as competitors. Each market has its own unique value proposition,” Madrid said.
Celeste Ilagan, IBPAP chief operating officer, said an ongoing concern is Revenue Memorandum Circular (RMC) 05-2024 issued by the Bureau of Internal Revenue in January which imposes additional costs that were not accounted for in the budgets of local players.
The RMC slaps a withholding tax of 25 percent and 12 percent value added tax (VAT) from non-resident foreign corporations that provide service to locally based enterprises, such as those in IT-BPM.
For industries like IT-BPM which are export-oriented, the 12 percent VAT should not be imposed, Ilagan said.
Ilagan said IBPAP joined other business groups in submitting a position paper opposing the RMC which was issued to clarify the tax treatment of cross-border services. The RMC affects information technology outsourcing, financial, telecommunications, engineering and construction, education and training, tourism and hospitality, and other similar services.
