Business process outsourcing (BPO) has been one of the most dynamic sectors of the Philippine economy over the past 25 years and is a substantial contributor to the country’s gross national product. By tapping into a large pool of English-speaking college graduates and having an affinity with the United States and its culture, the Philippines has become a leading beneficiary of international subcontracting of certain business functions to overseas vendors.
Today, Canadian firms and companies around the world rely on Philippines-based workers to perform voice and non-voice services such as data entry and analysis, customer service, document transcription, IT support, fulfilment of e-commerce orders, software development, sales and marketing, game development, payment processing, accounting, and other tasks, including creative services and design. Among the sectors that outsource activities to the Philippine BPO industry are IT, health care, legal, and finance. Hundreds of BPO companies operate in Metro Manila, Cebu City, and other Philippine urban centres like Clark, Davao, and Iloilo.
According to Jack Madrid, president of the Information Technology-Business Process Management Association of the Philippines (IBPAP), the Philippine BPO industry employs about 1.7 million people and will generate nearly US$38 billion in revenue in 2024. These figures do not include freelancers who provide services via platforms like Freelancer.com, Remotasks, UpWork, and Fiverr. According to Paolo Mercado, president of the Creative Economy Council of the Philippines, up to 1.5 million Filipinos are registered on international online platforms for freelancing services.
Yet the growing use of artificial intelligence (AI) technologies threatens employment in this dynamic industry. Many BPO workers are at risk of job loss as AI increasingly automates customer support tasks, including individuals who perform voice-based services and write social media and market content.
AI-driven technologies, including virtual assistants, chatbots, and automated customer service platforms, have begun to take over tasks previously handled by humans, especially for routine customer inquiries and screening and directing customers' calls. Indeed, the rapid adoption of chatbots to answer common questions threatens to suppress demand for entry-level customer service representatives. New technologies are being quickly adopted to improve efficiency, consistency, and quality while simultaneously lowering costs.
AI tools can now engage with customers worldwide without language barriers, thus diminishing companies' rationale for outsourcing their services to any single country. Therefore, emerging technologies could erode the Philippines’ competitive advantages, thereby posing a substantial risk to the industry's long-term sustainability. That will be especially the case if businesses in higher-income countries choose to invest in AI solutions instead of continuing to outsource services to humans abroad.
Disruption does not mean destruction
Notwithstanding the real threat that AI poses to the Philippines’ BPO industry, the IBPAP remains bullish. It estimates that the number of BPO industry jobs in the country will actually increase by 1.1 million between the end of 2023 and 2028. While AI has been displacing workers in the Philippines and in other countries, it has also created new employment opportunities. People continue to be needed to perform tasks like classifying content, coding, data editing, and annotating.
Individuals are also being employed to differentiate objects and living beings in videos that are used to formulate the algorithms for autonomous driving and to label images so that AI can, for example, generate representations of public figures. Technological solutions are not infallible, and many require — or at least benefit from — human involvement. For example, AI can be used to analyze large amounts of data quickly, providing initial insights that help BPO workers resolve complex customer issues more efficiently.
Yet, for the industry to comprehensively adapt to the coming wave of AI innovation, government and industry leaders need to co-operate to develop policies and practices that boost investment in AI education and training. Such collaboration is also important for nurturing opportunities that arise through a human-AI hybrid approach, which could help mitigate the negative impacts of AI on employment.
Policies that encourage investment in AI education and training could help mitigate the negative impacts of automation. Additionally, fostering partnerships between educational institutions, private companies, and the government to develop AI-related curricula could help equip the workforce with the necessary skills to thrive in the evolving job market.
As routine tasks are automated, the need for advanced technical skills — such as programming, managing, and maintaining AI systems — is growing. The Philippines’ BPO industry has historically prioritized a workforce with strong communication abilities over technical expertise. However, the transition to AI demands workers skilled in data analytics, machine learning, and AI system management.
AI represents both a threat and an opportunity for the Philippine BPO industry. The automation of routine tasks, cost-efficiency of AI, and changing skill demands pose significant risks to the industry and those employed within it. However, by investing in upskilling, embracing AI as a complementary tool, and adopting policies that foster innovation, the industry can adapt and continue to thrive in the future.
The key lies in being proactive, adaptable, and forward-thinking, ensuring that the Philippines remains a global leader in outsourcing services in an AI-driven world. Thinking more ambitiously, there is even potential for the Philippines to position itself as a hub for AI services, providing expertise in AI management, data annotation, and machine learning model training.
Opportunities for Canada
As BPO evolves with the rise of AI, Canada can contribute to shaping the industry’s future, particularly through training and education initiatives. Canadian institutions, known for their strength in AI research and development, can collaborate with partners in the Philippines to provide advanced training programs focused on AI skills. By fostering partnerships between Canadian universities, technical schools, and Philippine BPO companies, Canada can help address skills gaps that currently limit the industry’s growth potential. Canadian expertise in areas such as machine learning, data analytics, and AI systems management can be harnessed to enhance the capabilities of Filipino workers, positioning them as leaders in AI-enhanced outsourced services.
In addition, Canada can help build a global talent pipeline by facilitating educational exchanges and certification programs. Offering specialized AI-related courses to Filipino students and BPO professionals through online platforms and collaboration with Philippine institutions can help ensure that workers are equipped to meet the demands of an AI-integrated industry.
Canada’s investment in AI education could not only strengthen bilateral relations but also cultivate a larger workforce ready to handle complex AI tasks. Such efforts can create a new avenue for Canadian companies to collaborate with the Philippine BPO sector, ensuring that both countries benefit from the ongoing technological revolution.
