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[June 04, 2006]

PeopleSupport's local arm to lead global BPO foray

(Business World (Philippines) Via Thomson Dialog NewsEdge)Nasdaq-listed PeopleSupport, Inc., which started as a pure call center provider, is setting its sights on becoming a global business process outsourcing (BPO) player, with the Philippine operation taking the lead.


"Looking forward, People-Support will look much less like a pure call center company and more like a global BPO business. We will have a cross- functional operation where all services will be very well integrated in large-scale centers," PeopleSupport Chairman & Chief Executive Lance E. Rosenzweig said.

Mr. Rosenzweig took time to sit with BusinessWorld last Friday during his brief visit to the country. Within the next five years, Mr. Rosenzweig said PeopleSupport plans to extend its operation to other countries.

In January, the company completed its acquisition of Newport Beach, California-based Rapidtext, Inc. and its subsidiary, The Transcription Co., followed by its foray in March into Costa Rica for captioning support.

"[But] the Philippines would continue to be our largest and most predominant location. There are still a lot of opportunities here, and the Philippines could still represent more than 50% of our business," Mr. Rosenzweig said.

Here, PeopleSupport maintains a five-storey PeopleSupport Center in Makati City and a provincial operation in AsiaTown IT Park in Cebu City. It opened last Friday an additional two-floor and 2,000-square meter facility in Cebu City, increasing the total seats and workforce in the city to 1,500 and 1,600 respectively.

For the last three quarters of this year, Mr. Rosenzweig said the company has projected some $8.2 million to $9.2 million capital expenditure (CAPEX) for expansion of its local operation. Total CAPEX forecasted for this year is $11 million to $12 million, and PeopleSupport used just $2.8 million in the first quarter, Mr. Rosenzweig said.

"Looking forward, I see PeopleSupport opening more sites in Metro Manila, in Cebu, and in other locations in the Philippines as well. I think we will probably have more capacity on line in late 2006 or early 2007," Mr. Rosenzweig added.

In the second quarter ending this June, PeopleSupport plans to complete a 60% increase in total capacity to 5,000 seats.

'Tremendous opportunities'

With the recent acquisition of Rapidtext, the Philippine office has begun to venture into the nascent transcription business, for which it has over 100 transcriptionists to date. The company has hired Evelyn S. Abat, former managing director of medical transcription firm eDATA Services Philippines, Inc, to lead the growing team.

Mr. Rosenzweig said that there are "tremendous opportunities" to grow its transcription business organically and via additional acquisitions of transcription and captioning and other BPO companies. "We are particularly interested in service offerings where we could utilize our capacity during the day-time hours in the Philippines. If you walk through our production floors, they are pretty empty during the day and very packed at night," Mr. Rosenzweig said.

For future acquisitions to expand its data processing business, he said the company is interested in businesses that would have a "good fit" with its current operations, considering both local and US companies.

"The medical transcription business is constrained in the US by our ability to hire enough qualified transcriptionists, which is really slowing our growth. This is an area where the Philippines can supplement our US team and increase our growth potential," Mr. Rosenzweig said.

Asked on the impact of the increasing competition on the local front - where Philippines is now a home to some 105 call centers - to his businesss, Mr. Rosenzweig said: "There are a lot of competitors in the Philippines, but PeopleSupport is different. We are in different niches. Many companies for instance are in outbound telemarketing, and we are not in that business."

He also brushed aside the threat from other outsourcing destinations, particularly from China and India. "The Philippines is the best location in the world for these voice-based services. The people are culturally similar to Americans, and the accent is very similar to American as well. The Filipinos have a flair for both customer service and sales," Mr. Rosenzweig said.

Unlike the Philippines, Mr. Rosenzweig said the the company's strategy for China is to support large American and multinational companies that are increasingly selling products and services in China, using Mandarin.

On the other hand, he added that India has an edge over the Philippines in very complex software development and technical support and in certain back-office processing areas "where accent and cultural differences are not as important."

"The attrition rate in India is much higher than [in] the Philippines. And there's no public transportation in India, so companies literally need to use fleets of vehicles to drive their employees to and from work," Mr. Rosenzweig said.

Asked on cross-listing or pursuing an initial public offering in the local bourse, Mr. Rosenzweig said: "We haven't been looking at that. If that will make sense to us, then, certainly, we will have to take a look," Mr. Rosenzweig said.

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