Knowledge process outsourcing

SAN FRANCISCO – Last week, I wrote about my conversation with Rey Untal, President of the industry association of our BPO industry. The threat of Artificial Intelligence was a key topic of our conversation.

Mr. Untal reassured me that they are doing a number of initiatives that would minimize the threat of AI on the job creation and job preservation in the industry’s future. Indeed, he said, they are future proofing our local BPO industry by moving into KPO or knowledge process outsourcing. Knowledge process outsourcing refers to services they offer that require higher skills and expertise. Some KPO services are in legal services, banking and finance, healthcare services, animation, design, marketing, content creation to include editing, proofreading, and publishing.

To differentiate, traditional BPO is about basic, low-end processes, while KPO demands highly specialized skills and expertise in particular fields. Enterph.com estimates that KPO already comprised 34 percent of the country’s outsourcing industry, and the industry wants to increase that to 42 percent.

There are notable examples of progress made by local companies in some highly specialized segments of the industry. One good example is animation. Local work in, but not limited to, either 2D or 3D animation has created an identity for the Philippines as among the preferred countries servicing the animation industry.

The other has to do with the creation and publishing of interactive games and entertainment content for various platforms. Our local digital game creators have strong ties to the international community of game developers through the International Game Developers Association.

Then there is the business of a good friend, Toti Chikiamco. His company’s output is music. He runs a digital musical services company that started offering ringtone production to companies from the US, UK, Sweden, Mexico, South Africa, etc. When ringtone popularity waned with the advent of smartphones, he pivoted to karaoke production for the Japanese market.

Toti’s company employs about 40 musicians in-house and outsourced a portion to work-at-home musicians (including a veterinarian moonlighting as a midi arranger). Toti’s company provides steady income and benefits to musicians who otherwise face uncertain incomes from gig to gig. It’s a registered enterprise under the Philippine Economic Zone Authority (PEZA). It’s a 100 percent service exporter. They don’t do local. It’s all global.

Toti admits his business isn’t easy. High quality production depends on recruiting and training musicians with both musical and technical skills. Only one out of six applicants can make it through the rigorous process of screening and training.

“It may take as long as six months to train an arranger capable of meeting the exacting standards of Japanese karaoke music production. Creative people also tend to be restless. Even now, we still can’t expand because we can’t find enough qualified people,” Toti reveals.

Still, the industry is focusing their efforts on pivoting to higher value services or KPO. As I reported last week, the IT-BPM Roadmap 2022 sees low skill jobs accounting for only 27 percent of the IT-BPM careers, while mid-skill and high-skill jobs will take 46 percent and 27 percent, respectively.

But to ensure smooth transition to higher value services, the industry has recognized the need to intensify skills training. Some are quite basic like language skills. The declining ability of young Filipinos today to communicate in English has been a long time problem even with basic call centers.

That’s why the BPO industry association is supporting activities to enhance language skills. Under their auspices, over 922 faculty have completed either the Basic English Skills Training (BEST) or the Advanced English Proficiency Training (AdEPT).

Last week, Trade and Industry Secretary Ramon Lopez also emphasized the need for training programs. He estimated a demand for 800,000 workers with augmented intelligence skills within the next few years, higher than the projected 500,000 jobs that are seen to be lost due to robotics and AI.

ANC’s Warren de Guzman reported on Twitter that Dado Banatao, a Silicon Valley veteran, said India and a lot of countries are spending a lot of money now on automation. We need to learn fast. We can’t rely on the university system. We must ask for help. We are about to lose $23-B-$25-B from BPO unless we are ready.

The Department of Trade and Industry (DTI) has partnered with local augmented intelligence-solution company AI Pros — founded by George Yang (no relation to the McDonalds Philippines founder) — and the Department of Information and Communications Technology (DICT) to train Filipino talents on operating AI system. It is supported by Henry “Big Boy” Sy Jr., and technology entrepreneur Dado Banatao.

Augmented intelligence uses AI, but still requires human intervention to operate the system. AI Pros has built a voice-based natural language software, able to speak with customers using spoken English and pitch them a sale. The workers monitor the calls and intervene when the software can’t understand some words uttered by a potential buyer.

DTI is apparently hoping this technology could help Philippine call centers cope with the rise of job-threatening robotic process automation (RPA). But it is still not quite KPO.

In the end, it will still be our KPO companies that will be the future face of our BPO industry. But augmented intelligence has a market and can fill more than a transitional need.

The industry is confident they can deal with the technology threat. But they are more afraid of government inflicted wounds. Mr Chikiamco, for instance, is questioning some provisions removing incentives under TRAIN 2.

Congress must make sure TRAIN 2 isn’t a bigger threat to our BPO industry than AI. We need them to continue creating and providing jobs that keep Filipinos working in the country rather than abroad.