Future Proofing the Philippine BPO Industry in the Age of Artificial Intelligence (AI)

Future Proofing the Philippine BPO Industry in the Age of Artificial Intelligence (AI)

8 January 2025

The Philippine BPO industry is currently one of the biggest drivers of the Philippine economy, contributing 8.12% of the country’s 2023 GDP, according to the IT & Business Process Association of the Philippines (IBPAP). Relative to the world, the Philippines hosts the second-largest services delivery location accounting for nearly 20% of the offshore services globally and primarily serving clients from North America (70%), Europe (15%), and Asia Pacific (15%).[1]

For decades, the Philippines has been a top destination for contact or call centres, the largest segment of its BPO industry, due to its deep talent pool and commendable English proficiency priced at a relatively lower cost. This growth was bolstered by improvements in the country’s digital infrastructures following the liberalization of the telecommunications industry to the private sector in the early 1990s.

However, the looming threat of automation and worker displacement has always cast a shadow over the industry. A study by the International Labour Organization in 2016 showed that almost 90% of those employed in the BPO industry are at high risk of unemployment because of the very nature of their work.[2] Only two months ago, Fitch Solutions warned that AI could “invalidate the Philippines’ current economic strategy”[3]—pertaining to the country’s continued reliance on the BPO sector.

Theoretically, these warnings are not unfounded because a call centre agent’s typical task can be considered routine, repetitive and voluminous, which economic theories suggest to be prone to automation and displacement due to new technologies. To further aggravate things, recent technological changes in the BPO sector have focused on artificial intelligence (AI), such as AI chatbots, emotional intelligence, call analytics, interactive voice response, and predictive call routing. Notably, 67% of BPO companies in the country have reported that they are already implementing AI to boost employee productivity and improve operational efficiency.[4]

Notwithstanding the perennial threat of automation and companies’ current use of AI, the Philippine BPO industry continues to expand—contradicting the predictions above. According to the IBPAP, around 135,000 jobs were added in the BPO industry last 2024[5] and the industry is on track with meeting their goal of an additional 1.1 million jobs and $29.5 billion increase in revenue by 2028.

Industry Growth Amidst Artificial Intelligence

The paradoxical growth in the BPO sector can be attributed to the continued global demand for more specialized call centre services in the advent of the automation of less-specialized services. Automation has essentially resulted in increased labor productivity of the BPO workers, allowing them to focus on more productive and specialized tasks, where there is increasing demand.

While automation and artificial intelligence have indeed resulted in the displacement of some BPO workers who primarily deal with routine, repetitive and voluminous tasks, the opposite is true for workers whose tasks are more specialized, and industry-specific. Thus, while some of the low-skilled workers are being replaced by automation and artificial intelligence, the demand for new and more skilled call center workers is increasing at a faster rate than displacements in general, resulting in a net gain in terms of overall employment number.

Thus, it was reported that more companies experienced headcount gains than those that reported reductions in the IT-BPO industry.[6]  This on-the-ground reality only affirms earlier reports of the call center industry being expected to generate 1,000,000 more jobs by 2028 despite the adoption of automation technologies.[7]

Implications of Demand Shift

Because the demand has now changed from generic call center services to more specialized ones, mere English proficiency and a college degree may no longer be enough to fill the role in demand in the BPO industry. The industry is now shifting toward roles that require technical expertise and familiarity with advanced tools, such as training chatbots and developing algorithms, as noted by Bouldr CEO David Sudolsky.[8] This also means that those already in the industry who are not able to upskill fast enough will most likely be displaced due to artificial intelligence and automation.

Despite the growing demand for workers and the abundance of Filipinos eager to join the BPO industry, companies now face a significant supply challenge: a shortage of employees equipped with technical skills or who can work with artificial intelligence. This skills mismatch exacerbates the displacement effect of AI, worsens the unemployment rate, and hinders the adoption of AI and other advanced technologies in Philippine-based businesses that could help stimulate economic growth.

Indeed, re-skilling and upskilling must remain a top priority for the industry stakeholders and the national government. To this end, the IBPAP has also worked closely with the Department of Education, Commission on Higher Education, and Technical Education and Skills Development Authority to address the skills gap in the ITBPM sector amid the fast-paced technology. Furthermore, the IBPAP has recently launched the Philippine Skills Framework to show schools what skills the BPO sector and other related industries need of its workers.[9]

Need for a Government-Led Approach

The effect of AI, however, is not limited to the BPO sector. In a recent study published by the IMF, it is estimated that 36% of jobs in the Philippines are “highly exposed” to AI, most of which are seen to be highly displaceable due to AI.[10] To address the challenges posed by AI in the labour market, the government must take a proactive role in fostering a future-ready workforce through integrating digital and AI-related skills into the national education curriculum, strengthening partnerships with other industry stakeholders, and expanding access to reskilling and upskilling programs.

Only through the adoption of a holistic approach that prioritizes innovation, skills development, and policy alignment, can the government mitigate the displacement effects of AI to the labor market and ensure that the BPO sector remains a key pillar of the Philippine economy in the age of AI.

[1] https://www.ibpap.org/download/file/faca951e009d123020752142e3e50b2154522b03

[2] https://www.ilo.org/sites/default/files/wcmsp5/groups/public/@ed_dialogue/@act_emp/documents/publication/wcms_579554.pdf

[3] https://www.bworldonline.com/top-stories/2024/10/18/628913/philippines-bpo-sector-seen-to-shrink-amid-shift-to-ai/

[4] https://www.bworldonline.com/technology/2024/10/31/631685/ai-accent-tech-to-improve-bpo-service-delivery/

[5] https://www.abs-cbn.com/business/09/28/23/it-bpm-sector-adds-135000-jobs-in-2023-group

[6] https://www.pna.gov.ph/articles/1234618

[7] https://www.philstar.com/business/2022/10/29/2219981/call-centers-seen-generate-additional-1-million-new-jobs-2028

[8] https://www.rappler.com/technology/features/filipino-call-center-workers-face-artificial-intelligence-threat/

[9] https://www.abs-cbn.com/business/2024/9/24/talent-shortage-may-hamper-ai-adoption-among-ph-bpos-1830

[10] https://www.imf.org/en/Publications/CR/Issues/2024/12/19/Philippines-2024-Article-IV-Consultation-Press-Release-and-Staff-Report-559739