The Philippine IT-BPM Industry Outlook & Prospects

The Philippine IT-BPM Industry Outlook & Prospects

Who Are With Us Voice Based Services Suppliers Homegrown Suppliers Banking, Financial Services and Insurance IT and Software Services NASSCOM S Top BPOs Shared Service Centers / Captives

Who Are With Us Engineering Services Outsourcing Creative Services Outsourcing HR Outsourcing Medical Services Outsourcing Legal Process Outsourcing Clinical Research Outsourcing Maintenance, Repair, Overhaul Services

O n e M i l li o n 3

The Philippine IT-BPM 2014 Performance Philippine IT-BPM industry size 2006 2014; US$ billion x% YoY Growth 19% 22% 18.9 45% 3.4 31% 4.5 34% 6.1 17% 7.1 25% 8.9 24% 11.0 19% 13.2 16.1 2006 2007 2008 2009 2010 2011 2012 2013 2014 # FTEs (~ 000) 236 298 371 424 527 640 777 917 1071 1Philippines IT-BPM market as percentage of global offshore services market, in revenue terms Sources: BPAP, ACPI, CCAP, GDAP, HIMOAP, PSIA Copyright 2014: BPAP. All rights reserved. 4

2014 Headcount Distribution 87 13 10 4 86 Contact centers Back office/kpo ITO Healthcare ESO Animation Game development 187 685 5

Headcount Split By Sector Headcount Split by services areas in 000 with annual growth rates (100% = 1020k)

2014 Revenue Distribution 142M 1,304M 227M 55M 2,122M 3,440M Contact centers Back office/kpo ITO Healthcare ESO Animation Game development 11,700M 7

Key Global Markets Revenue Contribution by Regions (%, 100% = USD 18.4 BN) 77% 9% 5% 9% IBPAP, Tholons Analysis

Impact on the Philippine Economy GDP USD billions Total Exports USD billions Others IT-BPM 100% = 98.8 272.0 100% = 47.5 76.0 97.6% 2.4% 2005 94% 6% 2013 95% 5% 2005 Employment contribution Million jobs 79% 21% 2013 Industry s 27% CAGR for 8 years exceeded 6% CAGR of total exports for the same period 100% = 1.1 3.1 IT-BPM industry contributed 6% to total Philippine GDP by 2013 88% 12% 2005-06 84% 16% 2010-2013 Note: GDP at current prices Source: Philippine Statistical Authority (PSA); BSP; DOLE-BLES; team analysis The IT-BPM industry contributed 16% to annual increases in total no. of employed individuals for the 9 past four years

Second-order Effects from Direct Employment Housing USD670 million 90,000 middleclass houses Transportation and Communications USD335 million 1.7 billion jeepney rides 34 million P500 prepaid cards Others USD1,340 million 34 million Bench jeans 6.7 million ipods Savings USD1,000 million Investments Financial institutions Food USD2,000 million 1.7 billion Chickenjoy meals 1 billion Big Mac meals 30% 10% 5% 20% 15% ~USD6.7 billion annual salaries and benefits *Based on consumption of average Filipino family; savings of 80th and 90th percentile Source: National Statistics Office; team analysis 20% Taxes USD1,340 million 1 million classrooms 7 billion days of nutrition program 10

2012 Next Wave Cities Centers of Excellence Metro Manila Metro Cebu Metro Clark Metro Bacolod Next Wave Cities Baguio City Davao City Dumaguete Iloilo Lipa City Metro Bulacan Metro Cavite Metro Laguna Metro Naga Metro Rizal Centers of Excellence Next Wave Cities

IT-BPM Services Delivered The Philippines remains the Global Leader in Contact Centers, exceeding growth projections by 3% The Non-voice BPM market is being led by Finance & Accounting and the GICs, the market size of about USD 3.6 BN is expected to grow upwards of 22% Healthcare Information Management Services crossed the USD 1 BN market employing ~80k employees The Animation Services sees massive growth among the freelancing community IBPAP, CCAP, HIMOAP, Tholons Analysis

Contact Centers in the Philippines

Headcount Growth 14

Contact Center Service Offerings 15

Language Support 16

GIC landscape in the Philippines

GICs in the Philippines More than 40 of the 2014 Fortune 1000 and other large global companies have a Global In-House Center (GIC or Captive ) in the Philippines

GICs 2014: Highs and Lows - Increasing leverage on Manila to meet shared services and back-office needs of the APAC region - GICs have built sizeable scale in the Philippines and have been driving the growth of non-voice and complex services in the country - Pressure to grow rapidly by taking on new activities or entirely new lines of business not originally planned - Lack of multilingual skills (Korean, Japanese) - Scalability challenges as companies aspire to deliver more non-voice services

Largest GICs in the Philippines Company Services J.P. Morgan Chase Voice (inbound and outbound), banking and financial services HSBC Global Services Center Customer service, banking and financial services HP ADM/IT support Shell SSC Financial services, HR, customer service Manulife BPS F&A, HR, IT, Healthcare, Marketing and sales, Analytics, Underwriting, Actuarial, Legal Maersk Non-voice, KPO, logistics DKS Financial analysis and reporting SC Reservation (Intercontinental Group) Inbound hotel reservation Chevron Finance, HR, IT, Procurement Citigroup ANZ Global Services Customer services, HR, IT, banking and financial services Accounts payable, Back-office, HR, IT, Property services, Sourcing AIG Shared Services Customer contact, Legal, F&A, HR, Logistics, IT Support and software dev. 21

industry challenges 22

The Recruitment Funnel Paper Screening 100 Applicants Initial Interview Testing Final Interview Job Offer Hire 7-10 Hires 23

Global Competitiveness Assessment Test (GCAT) Basic Skills Learning Ability (Verbal and Numerical) English Proficiency Perceptual Speed and Accuracy Computer Literacy Behavioral (Service Orientation) Communication Learning Orientation Courtesy Empathy Reliability Responsiveness Conducted across 3,000 agents and 20,000 students 24

Average Scores per School Communication* Average Scores Per School for Communication Vis-a-Vis Industry Scores * Communication: explaining service, keeping the customers informed in language they can understand and listen to. 25

Service Management Program Targets by end of Project: 685 Teachers trained in SMP 2,800 Teachers trained in Language Tracks 20,000 Students enrolled in SMP 26

SMP Rollout There are 8 State Universities and Colleges offering SMP to students this semester Batangas State University Bulacan State University Cavite State University Laguna State Polytechnic University Northern Iloilo Polytechnic State College Negros Oriental State University Polytechnic University of the Philippines Tarlac State University 686 SMP students from 3 SUC s entered Internship this semester 120 Interns from Polytechnic University of the Philippines 250 Interns from Negros Oriental State University 316 Interns from Laguna State Polytechnic University SUC Number of Interns Passed BPO Screening LSPU 316 103 33% Company Total Interviewed Passed % Genpact 248 59 24% SPI 123 16 13% Sutherland 58 8 14% Tsukiden 13 7 54% Startek 66 11 17% Kalibrr 15 2 13% % 27

Facing the Challenges Middle management availability and experience Niche skills, ie investment banking Growth of tourism industry Change of leadership in 2016 Changing policies and regulations Growth outside Metro Manila Emergence of other countries Rise of new technologies Impact of ASEAN integration

The Road ahead 29

The Road Ahead Roadmap 2022 Next Wave Cities Assessment SMP intern rollout goes full blast esmp complete suite availability K-12 Implementation

Million 2015 Direct Employment Forecast 31

US$ billion 2015 IT-BPM Revenue Forecast 32

Thank you!! 33