July 2, 2025
Manila – Does Artificial Intelligence (AI) Kill the Outsourcing Sector of Business Processes? The revenue from BPO, along with overseas remittances, has been an essential boost to our forex inflows and helped to compensate for the poor, low-commodity export performance to our neighbors. Our country has an extraordinarily high level of both. Each of them generated $38 billion in revenue in 2024. The multiplier effect of BPO extends to a vast network of secondary industries, including real estate, retail, transportation and food services, providing direct employment to around 2 million university-educated youth. However, the global outsourcing landscape is dramatically shaped by rapid advances in automation and AI. This is not to mention President Donald Trump's move to re-shore from his hometown occupation.
BPO covers a wide range of services, including customer support. IT Services; Finance and Accounting; HR Management. Medical coding, billing, and telemedicine. Legal procedures; and increasingly, high value knowledge process outsourcing (KPO). The majority of the sector's workforce is in voice-based services (customer service, telemarketing). Traditionally the backbone of the industry, these services are now one of the most vulnerable services to the AI revolution. Amazon and Microsoft's Google Duplex and AI platforms can now simulate human conversations and replace live agents for basic customer inquiries and transactions.
The most immediate threat lies in repetitive and rule-based tasks, particularly those with multiple low capacity and large amounts of features, such as customer service and data entries. Robotic process automation can take over routine data processing tasks. Jobs that involve entering, sorting, or verifying structured data can now be done faster and more accurately by the machine. First-level IT troubleshooting, including password resets and software configurations, is increasingly being performed through AI-driven service desks and knowledge management systems.
Unfortunately, these are the tasks that make up most of what our BPO workers do. Survive the onslaught of AI in the industry requires a deliberate shift to higher-order capabilities that cannot yet be automated. Employees need to be equipped for jobs that require increasingly critical thinking, data analysis and programming. This appears to be the future shape of BPO. They fear that long-standing job skills discrepancies among university graduates may appear to be growing rather than easing, and it is difficult to be optimistic about the BPO outlook due to the gloomy rankings of students in international educational performance assessments.
And there are infrastructure that is inferior to internet connectivity and digital systems, energy validity and reliability, transportation and other support infrastructure issues, which remain uneven across the country. This limits the growth of BPO operations across major urban areas such as Manila, Cebu and Davao. It also hampers persistent governance issues such as inconsistent policies, sudden changes to tax rules, and data privacy issues. All of this will thwart new investments and destabilize the operations of those already here. Meanwhile, even other countries, such as India, Vietnam and even Eastern European countries, are actively competing for outsourcing contracts with more advanced technical capabilities and more attractive investment incentives.
As long as we act quickly, as we may see the photos, we cannot abandon the fate of the sector in an inevitable, unnecessarily necessary decline. Emergency actions and investments to upgrade the capabilities of our workforce are extremely important. Business and government must work together to equip workers with the necessary higher-order skills, including data analytics, AI model management, cybersecurity, and business intelligence. Education and training programs need to be astuned to closely track the rise of KPOs and other IT-enabled services and enable the BPO industry to move into more complex and less automated roles. The demand for services that require human judgment, contextual understanding and specialized expertise is growing. These include health information management (including medical coding, transcription, and clinical data analysis). Finance and accounting beyond basic bookkeeping (more complex financial analysis and standard compliance). and outsourcing legal processes (parallegal support, document review, contract analysis).
The next step in BPO evolution is said to be about capacity, agility and innovation, although not so much about cost reduction. In another article I will discuss and explain why there is hope. AI and robotics do not need to spell out the end of the Philippines BPO sector.
