MANILA, 29 AUGUST 2008 - The creation of the much-awaited Department of Information and Communications Technology (DICT) is expected to dramatically hasten the growth of the Philippine technology industry.
"If DICT is created it should rally the ICT economy around a maximum of four capability areas, aiming to create high-value businesses rather than commodity outsourcing capabilities," said David Mitchell, SVP for IT research at Ovum, a global advisory and consulting company.
Mitchell, in his latest analysis, reported that there are plans in the Philippine ICT sector, whose growth is currently being driven by contact centres, to move up to higher-value outsourcing lines such as medical and legal transcription, engineering and software-as-a-service (SaaS), including building businesses around open source technology.
He said while the Philippines is trying to position itself as the next major global outsourcing destination, there are still major challenges to be faced. "There needs to be a major investment in the education system in the Philippines, to deal with the anticipated skills shortfall," he noted, citing one example.
Mitchell added that the needed support for education will be much more readily provided "if the proposed DICT is created, with an eye to increasing the level of effectiveness of policy development in the country."
He advised that smaller economies in emerging markets need to have a clear focus and avoid competing with larger economies on the basis of cost alone.
"The reason for the exhortation that the Philippines needs to focus is two-fold. Firstly, the country is not large enough to compete against India and China on the basis of scale, and so the country needs to carefully select its battles," Mitchell explained. "Secondly, focus brings the ability to charge premium rates for skills that are rarer. This means the Philippines can avoid being dragged into a low-wage, low-investment spiral."
Mitchell, quoting Oscar Sanez, CEO of the Business Processing Association of the Philippines (BPA/P), said the country is targeting annual revenues from outsourcing of about US$13 billion by 2010. But to reach this goal, the industry needs to find an estimated 420,000 additional workers to serve the anticipated growth in outsourcing contracts.
According to BPA/P, one focus area in the Philippines today is the development of SaaS businesses, which is led by such companies as Morph Labs. It also cited one of the technology parks in the Philippines as an emerging hotspot of SaaS activity.
"Open source is set to be another area of focus," Mitchell said. "A new technology park, located at the University of the Philippines is due to open in December and will focus on developing businesses around open source."
He pointed out, however, that "the key will be to ensure that the open source businesses that are created develop high-value assets, rather than turn into low-value services businesses."
Mitchell added that the planned creation of two additional technology parks creates further opportunities to extend the "areas of focus." He warned though that if too many areas of focus emerge in the Philippine ICT economy, it may become difficult to gain the depth of skills required to develop globally competitive business that can sustain premium rates.
Secretary Ray Anthony Roxas-Chua III, chairman of the Commission on Information and Communications Technology (CICT), recently announced his plan to hold one-on-one private sessions with senators to convince them to approve the proposed bill creating the DICT.
Once the draft of the new version of Senate Bill No. 920, which seeks to create the DICT, is finalized, Roxas-Chua said he would personally meet with the senators individually to address their concerns.
House Bill No. 3218, the first bill seeking to create the DICT, was filed in the House of Representatives seven years ago.
