In June 1991 U.S. airmen at Clark Air Force Base in the Philippines felt the earth shake as Mount Pinatubo, just nine miles away, erupted in the fourth worst volcanic disaster in the 20th century. Volcanic ash fell like snow; mud and rocks rained like cats and dogs; and the raging volcano clashed with a thundering typhoon. When it was all over, the volcano dumped 10 inches of ash on the base, which was one of the main staging areas of the Viet Nam war. The extensive damage to the buildings caused the U.S. to close the base. Nearby Subic Bay Naval Station, the homeport for many ships of the Navy’s Seventh Fleet, suffered the same fate.
Both Clark Air Force Base and Subic Bay Naval Station needed cutting edge telecommunications to stay battle ready. Telecomm equipment was cutting edge. When the U.S. military pulled out in 1992, the telecommunications equipment stayed. The result: today’s infrastructure in the Philippines is very dependable and fairly fast.
“The telecom capability is more reliable in the Philippines than any other Asian country. And the cost is comparable to the U.S,” says Kevin Coleman, founder of the Coleman Group, an outsourcing contractor based in Washington Depot, Connecticut. The firm specializes in IT and back office functions.
The Coleman Group has developed a unique outsourcing approach. The firm always assigns two teams to each client. Team A takes up residence at the client’s home office and handles day to day operations up close and personal. If the assignment requires software development, this team develops the initial architecture and then handles the application’s installation.
Fishing in the Deep Talent Pool
Team B is halfway around the planet in the Philippines. “If the software programmers in Manila have comparable skills, we let them do the work because of the cost savings,” says Coleman.
Currently, Coleman is able to tap into a deep talent pool overseas. One of the chief benefits is speed. The sheer numbers allow him to assemble a development team quickly. “If you want to find good Java programmers in Connecticut, you first have to hunt for them. Then you have to compete with three other jobs to get their attention,” he reports. But in the Philippines, he can chose from 300 capable candidates right now. That speed allows Coleman to meet tight customer deadlines.
Coleman has also assigned software development to Indian programmers. And he travels to China to hire the Chinese, known for their attention to detail, for data entry. He turns to the Brazilians when he needs banking help. “You can find good talent all over the world today,” he says. But the Philippines is his favorite source for source code writers.
The quality of education is high, in part a legacy from its U.S protectorate days. The Philippines has the highest number of MBAs per capita, Coleman reports. “There is a lot of skilled labor that is under utilized,” he says.
Up to 50% Cost Savings
Even though English is not the native tongue, Coleman says everyone in the business community speaks English fluently. That removes communication difficulties. And the culture between the two countries is similar; closer, he says, than with the other countries he works with.
Finally, it’s hard to argue with the numbers. Coleman says he can generate net cost savings between 30 and 50 percent over American labor prices for high quality work.
The Coleman Group is not the only American firm that has discovered the Philippines. Coleman points out that both Barnes & Noble Online and AOL have set up call centers in Subic Bay. FedEx also has a facility at the old Subic Bay Naval Air Station.
Coleman notes working with offshore outsourcers has its difficulties. Times zones can complicated telephone communication, but email is relieving some of that pressure. Even accented English can be a problem for American workers. Sending in a local team “keeps strain out of the relationship,” explains Coleman.
The Coleman Group learned this lesson through trial and error. The company started in 1986 by outsourcing employee benefit programs for insurance companies. To remain competitive, the company had to go overseas to find affordable labor rates in 1993. Coleman was so satisfied with the results of his offshore relationships he continues to expand his horizons, seeking new countries to meet his clients’ growing needs.
Lessons from the Outsourcing Primer:
- When outsourcing offshore, select a country with advanced telecommunications equipment. The Philippines is a good choice because the U.S. military created the current infrastructure.
- The Philippines has a highly educated but underutilized labor pool.
- Offshore outsourcing can save between 30 to 50 percent of a project’s cost.
- Even if you are going offshore, have a team in place at the client’s headquarters. They need to create the software’s architecture and do the installation.