Rural Philippine Call Center Shows Promise of New Business Model

TANJAY, NEGROS, the Philippines—Little stirs except the occasional stray dog after midnight in Tanjay, a sleepy town on the central Philippine island of Negros. But one place is bustling.

Through the night, in a converted schoolhouse, dozens of agents handle queries from American clients in a unique experiment—the Philippines’s first rural call center.

The center’s youthful team has grown to enjoy their nocturnal routine, said 21-year-old Katherine Valdez, despite some disorienting effects. “We get an hour’s lunch break at 3 a.m.,” she said. “Or maybe it’s early breakfast.”

Outsourcing is the runaway success story of Philippine business. Second only to India in terms of scale, Philippine outsourcers just hired their one millionth employee, according to the Information Technology and Business Process Association of the Philippines, having started from scratch a decade ago. The sector posted revenue of $16 billion last year—6% of national GDP—and is targeting $25 billion by 2016, as Australian, British and U.S. companies entrust their customer services and back offices to Filipino teams who speak fluent English and come cheap.

The challenge is that companies are now struggling to hire qualified people in the industry’s main hubs, especially Manila, the country’s capital.

“We reached the point where 75% of college graduates were outside Manila, but 75% of the work was in Manila,” said Jose Mari Mercado, president and CEO of Information Technology and Business Process Association of the Philippines.

Historically, the mismatch has driven millions of skilled professionals to migrate to Manila and beyond.

The Tanjay center is an experiment in taking some jobs out of the urban centers, testing whether rural call centers—which have proven successful in India—can work in the Philippines.

In a year and a half, the center—run by Visaya Knowledge Process Outsourcing Corp., a small outsourcing firm based in Manila—has grown into the largest employer in a town of 80,000 people. Its near-100 workers—half of them urban migrants who jumped at the chance to move back home—field clients’ customer-service calls, and handle back-office tasks such as billing and invoicing, at about 70% of the cost of similar businesses in the capital. Meanwhile, wages—at roughly $335 a month plus health care—are about triple what most people in the town earn.

“I’d never heard of Visaya KPO, but because it was in Tanjay, I took a risk,” said Venice Manso, 26, who was working at a call center in Cebu City—about 100 miles northeast, on the island of Cebu—when she heard a new center was opening in her hometown. “It’s amazing to be close to home.”

The center’s success has industry leaders dreaming of replicating the idea in hundreds of other small towns across the Philippines.

“There are high-quality people in those provincial towns,” said Butch Valenzuela, the president and CEO of Visaya KPO, which he launched in 2006. A native of Negros, he sees the Philippine regions beyond the big cities—Metro Manila has around 12 million people, while Cebu City is just under 1 million—as a gold mine of untapped human capital. The outsourcing sector has already expanded into second-tier cities, including Iloilo and Bacolod, but even some of these may soon reach saturation, according to Mr. Valenzuela.

Mr. Valenzuela stressed that he sees the operation as a business opportunity. “This is not philanthropy,” he said.

Mr. Mercado said the Tanjay pilot project had proved the rural call center concept, but that the challenge would be finding enough foreign clients who were willing to outsource to small towns they had never heard of.