Global Staffing Policies Overview

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As an enterprise resource software (ERP) software developer, the need for outsourcing core functions is undisputed owing to the complexity of tasks associated with the process. The viability for outsourcing ERP to the Philippines is safeguarded by the fact that the latter is one of the biggest outsourcing markets in the world. Its success is partly pegged on decades of pro-investment government policies, which have improved the attractiveness of the outsourcing market as investors feel that their investments are secured (Oxford Business Group, 2020). For example, the Philippines has investor holidays and tax incentives provided by the government, which are aimed to improve the investment climate.

These changes have been further supported by policy changes initiated by the government to improve the investment climate. Relative to these findings, some of the most significant changes happened in 2002 and beyond when the Philippine government chose to amend the Republic Act 7916 to allow investments to convert office buildings into “eco-zones” – a move that would provide them relief from paying a 5% gross income tax (Oxford Business Group, 2020). Such legislative changes have improved the attractiveness of the Philippines as an investment destination for outsourcing. Furthermore, they have increased the appeal of the Asian economy’s ability to manage large-scale tasks because foreign firms can scale operations due to government support and a conducive legal environment. Researchers have affirmed the success of outsourcing in such conditions but most of them have done it from an IT perspective. For example, a report authored by Trusson and Woods (2017) highlighted the need to focus on a value-based model for delivering the advantages and benefits of outsourcing to companies. The authors particularly draw attention to the persistent quest by some managers to pursue the shareholder value rhetoric at the expense of all other considerations as a dangerous approach to the pursuit of outsourcing goals. Instead, there needs to be a balanced view of outsourcing value outcomes with a keen emphasis on how some of its benefits will be offset by the advantages of adopting ICT tools in maximizing outsourcing values.

More targeted incentives aimed at attracting foreign capital in the information communication technology sector (ICT) have further seen the Philippines create tax holidays of between six and eight years for companies wishing to set up business in the country. For example, a report developed by the IT and Business Process Association of the Philippines (IBPAP), found that companies that outsourced their operations to the Philippines could benefit from a tax holiday of four years which is characterized by the non-payment of income taxes during the above-stated period (Oxford Business Group, 2020). This view was developed after sampling the organizational behaviors of more than 330 companies that took part in the exercise. These policy reforms have made the Philippines an attractive destination for dozens of companies that are looking for a safe destination for outsourcing some of their operations.

From a performance management perspective, the Philippines has also been able to demonstrate to its partners that it can perform exceptionally well in cultivating a profitable market for business process outsourcing. For example, the Philippines closely trails India as one of the most successful destinations for business process outsourcing. Particularly, its greatest strength has been in voice and call center solution services. Relative to these findings, the Philippines has created 350,000 jobs in this sector, while India only has 330,000 employees working in its outsourcing field (Oxford Business Group, 2020). These figures have translated to the Philippines getting more than $11 billion annually from its sourcing processes. The number of employees in the sector is also estimated to have nearly doubled to 686,000 people, thereby adding to the confidence that international payers have in improving the company’s profile as a sustainable outsourcing destination (Oxford Business Group, 2020).

Stemming from the need to focus on the Information Communication Technology (ICT) field because software development is domiciled within the sector, it has been established that the Philippines has been posting significant year-to-year profitability increases in the last few years. For example, the outsourcing sector has reported an annual revenue increase of about 18.7% to generate about $18.4 billion in annual revenue (Oxford Business Group, 2020). In some cases, it has been reported that capital inflows from the ICT outsourcing operations have hit $22 billion. As of 2015, it was estimated that 1 million people worked I the IT outsourcing sector (Oxford Business Group, 2020). The additional jobs were mostly created in knowledge-intensive sectors of the digital economy and outsourcing has been a key driver of the change.

The Philippines also has a young and educated workforce that is a significant source of labor for business process outsourcing services. This employee pool is regarded as one of the most competitive in the world and a significant source of competitive advantage for Filipinos relative to their Asian neighbors. The Oxford Business Group (2020) explains this key competency by saying that the main reason for Philippine’s competitive labor market advantage is the alignment of its educational policies with those of western countries, such as the United States. I this regard, it is estimated that about 74% of the population can speak English fluently, while about 95% of the population has high literacy rates (Oxford Business Group, 2020).

Additionally, unlike other Asian countries, its students are mostly taught in English, thereby providing a platform for integrating its workforce with jobs that require English proficiency. Therefore, its educated workforce means that it can provide quality outsourcing services for software development tasks, mostly because they are provided in English and most coding programs are similarly designed using the same language. Additionally, maintaining ER software requires some formal training and education in the respective subject areas. For example, it is common practice that employees who manage such tasks should at least have a bachelor’s degree in a business or IT-related field. Therefore, the English-language proficiency associated with the Filipino workforce makes them a conducive workforce for completing organizational tasks. Particularly software development is a technical and elaborate process that requires employees who have digital management skills. Outsourcing operations to the Philippines would be to tap into this competence in the Philippines because a young and dynamic force would sustain the supply of labor.

The presence of a young and dynamic workforce is not the only advantage that the Philippines can over its outsourcing partners because it can also provide this labor at a cheaper rate than its competitors can. For example, China, which is one of the world’s biggest sources of labor, has a labor force that is between 1.9 – and 2.2 times cheaper than the Philippines (Oxford Business Group, 2020). The labor costs that can be offered in the Philippines are also cheaper than what Mexico or Malaysia could offer. Overall, the above findings suggest that there is strong viability of outsourcing the company’s services to the Philippines. However, to effectively serve the purpose for which the outsourcing process has to be done, it is essential to appreciate the threat of automation that could undermine the efficacy of this plan. Particularly, the use of new and advanced technologies, such as artificial intelligence (AI) in ER software development poses a real threat to the overall strategy of outsourcing overseas as technologies can be empowered to perform the same functions as human beings can. Although it is estimated that the full effects f automation are only realizable years away, current estimates suggest that about 74% of the total workforce in the business process outsourcing segment could be wiped out by automation. Therefore, there is a need to conceptualize current plans to outsource to the Philippines using a short-term or medium-term lens. In the long term, it would be prudent to consider the effects of automation on the overall strategy.

Additionally, it is important to understand the cultural differences between gulf nations and western countries, in lieu of the educational systems adopted in the Philippines. As alluded to in this paper, the educational system in the Philippines is largely inclined toward meeting western standards of education. However, the UAE and most gulf countries have alternative education systems and teach in Arabic. This conflict in education systems may cause knowledge loss or gaps that would influence the outsourcing process. Alternatively, it could mean that the process of merging both cultures and systems has to be done in a lengthy and protracted manner that would eventually increase the outsourcing costs or make them unnecessarily lengthy to complete.

The Extent of PCN Use

Different organizations pursue varied strategies for staffing their outsourced operations. In some cases, companies chose a localized approach whereby they chose to selectively recruit employees for the host communities who are conversant with the operations of the company. Alternatively, some companies choose to bring foreign employees to manage overseas operations through the Parent-country nationals (PCN) model. It refers to a group of employees working overseas for the host company. Therefore, they share the same nationality as their home country. It would be best to use PCNs all the time as a software developer for a Middle Eastern company that is outsourcing customer service operations in the Philippines. This is to ensure compliance and service quality requirements for GCC customers are met, regardless of cultural differences that may exist between the parent company and the outsourced partners.

The extensive use of PCN in facilitating the outsourcing process is occasioned by the significant cultural differences between the Middle East and the Philippines. These variations in norms and values may significantly affect the customer experience of GCC customers if they do not get the same level of service quality they are accustomed to.

A PCN model would ensure that the outsourced customer service representatives are well-versed with the cultural differences between the Middle East and the Philippines and adjust accordingly. This justification for the use of PCN is consistent with the views of Kim, Baik, and Kim (2019), which suggest that PCN is helpful to organizations that want to pass down their histories or cultures. At the same time, additional studies have noted that responses to PCN strategies should take into account relational and general workplace adjustment procedures at would influence employee performance.

The PCN model would be used because it offers managers a lot of flexibility to manage any new emerging issue that may affect the quality of customer service provided by the outsourced parties. Some researchers have explored the relationship between flexibility and organizational processes by suggesting that the extent that which organizations adopt flexible business practices ends on their motivation to outsource in the first place. In light of this statement, the researchers also suggest that two main motivations drive the need for organizations to look for third parties: access to expatriate knowledge and cost reduction (Asatiani, Penttinen, and Kumar, 2019). Each of these motivations determines the extent of outsourcing operations a company will adopt. For example, those that are motivated to access expatriate knowledge may only outsource those functions that are integrated with tasks requiring specialized knowledge. Therefore, all other processes that do not involve such knowledge remain integrated into the organization’s internal processes.

Comparatively, organizations that are motivated to minimize their overall operational costs through automation may decide to outsource all their tasks to achieve this goal. These firms may want to benefit from enjoying economies of scale and maybe primarily focused on maximizing shareholder value at the expense of all other considerations. Therefore, the motivation for outsourcing plays a pivotal role in determining the extent that which a firm would be willing to outsource its operations. The relationship between flexibility and outsourcing processes has been explored by researchers, such as Lair (2019), who have tried to establish a link between outsourcing practices and organizational flexibility, as a function of its productivity.

In light of the above concerns, the opportunity to outsource customer care services for the software development services depends on the ability of the outsourcing agency to be flexible enough to accommodate the varying cultural dynamics of both Filipino and GCC customers. In other words, the desired flexibility of making decisions is enough to qualify the process as a functionally relevant framework for making outsourcing decisions. Lair (2019) affirms the competency of outsourcing practices that are implemented in this manner because it advocates for the pursuit of corporate policies in a more self-directed manner without caring too much about the organizational dynamics of the outsourcing process. Instead, it focuses on the value that will be created from pursuing such a philosophy. Therefore, the authors caution that although outsourcing may offer a unique type of autonomy in the pursuit of organizational goals, it is a hill risky strategy to follow.

Impact of New Initiative on Major Functions of HRM

As highlighted in other sections of this paper, HRM plays an important role in helping organizations to achieve their overall goals and vision. However, outsourcing key customer service functions to subsidiaries in the Philippines would particularly affect human resource planning as a core function of HRM. Human resource planning is preoccupied with the identification and quantification of necessary resources needed to maximize a company’s labor output. Outsourcing a company’s customer services from Dubai to the Philippines would mean that the organization has to reassess or reexamine its human resources to make them more responsive to the new workplace climate.

The outsourcing plan would also have an impact on performance management as a core function of HRM. Particularly, there would be new issues emerging regarding which performance metric to use to evaluate the performance of both Dubai and Filipino-based employees. For example, will they all be entitled to the same disciplinary procures and how would they be enforced in an environment where some employees are miles away?

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