How the Philippines became a major BPO player

Darlow Parazo FCPA’s Philippines-based accountancy firm, DBA Global Shared Services, has always had a deep engagement with Australian industry.

Based in Subic Bay, about 150 kilometres northwest of the capital Manila, the firm’s original business model sought to provide outsourced processing and administrative services to Australian accounting firms.

Over time, it has evolved. In addition to keeping the BPO operation going – servicing about 80 Australian accounting firms, 30 financial planning practices and thousands of self-managed super funds – DBA has been in acquisition mode.

The company has been buying small Australian accounting firms and keeping the head offices and client engagement in Australia, while leveraging its back office and administration capabilities in the Philippines.

“These are typically firms with A$1 million or so in annual turnover and are often headed by founders who lack a succession plan,” Parazo says, who lived in Australia for more than 10 years and worked as a practitioner for small-to-medium-sized businesses.

“We’ve acquired about five firms this way, and the Australian leads have been happy to stay on and work with us to ensure a smooth transition as they transition themselves into retirement.”

The firms that DBA has been acquiring and servicing share a similar profile – they are typically small practices that have strong personal client connections and engagement but need assistance with administration and compliance.

“We thought that the concept of helping the small accounting firms in this way would give them some leverage, enable them to compete with larger firms and level the playing field,” Parazo says.

“We are strong believers that there should be the utmost care and a strong relationship on the ground in Australia, and we see ourselves as supporting practices to help them add capability and scale.”

BPO in the Philippines has evolved beyond firms taking advantage of English language skills in call centres and the lower cost base for data and IT facilities.

DBA’s strategy, for instance, leverages the skills base of the Philippine accounting profession – expertise that can help to fill the skills gap faced by Australian firms due to the tight job market.

Joel Tan-Torres FCPA, the former dean of the Virata School of Business at the University of the Philippines, says the strong level of undergraduate education in the Philippines is complemented by a long tradition of accounting graduates undertaking the CPA Program.

 

"I am really excited about 2025. This is when we will cross the 2 million jobs level. That is why it is significant. It took almost 20 years to hit 1 million jobs, and we are attempting to do the second million in less than six years."

 

This puts Filipino accountants in good stead to work with foreign firms, particularly those in countries such as Australia, adds Tan-Torres, who is now a tax consultant at JL2T Consulting in Quezon City.

Tan-Torres, who has worked with the Philippine Government to administer professional examinations for accountants and auditors, has high respect for the competency of locally trained accountants and their knowledge of international financial reporting standards.

Signs of growth

The economy of the Philippines is one of the region’s best performing, Tan-Torres says. This provides context for some of the optimistic expectations for the BPO industry.

The country’s GDP grew by 5.5 per cent in 2023, according to the Philippine Statistics Authority, with government forecasts of up to 7 per cent growth in 2024.

Inflation has been trending downwards, hovering at 3.7 per cent in June 2024, but this is up from January’s three-year low of 2.8 per cent.

Information technology – business process management (IT-BPM), a subset of BPO, contributed over US$35 billion (A$53 billion) to the economy in 2023, says Jack Madrid, president and CEO of the IT and Business Process Association of the Philippines (IBPAP).

Madrid predicts that IT-BPM will generate more than US$59 billion (A$89.7 billion) in revenue and comprise 2.5 million full-time equivalent roles by the end of the decade.

“I am really excited about 2025,” Madrid says. “This is when we will cross the 2 million jobs level. That is why it is significant. It took almost 20 years to hit 1 million jobs, and we are attempting to do the second million in less than six years.”

While adding jobs, Madrid also says the industry will leverage generative artificial intelligence (AI), which he claims has the potential to boost productivity by at least 50 per cent. IBPAP has created an AI Council to help drive the opportunities from the technology.

Companies with 100 per cent of their staff onsite can take advantage of tax incentives under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, a major piece of legislation that took effect in 2021.

Another growth driver is the the Agreement Establishing the ASEAN Australia-New Zealand Free Trade Area (AANZFTA) (FTA) – to which the Philippines is a signatory – which has progressively done away with import and export tariffs between participating nations.

Looking ahead

At DBA Global, Parazo says that developments in technology to facilitate remote learning give Filipino accountants the opportunity to understand and work with the Australian regulatory environment.

Ultimately, Parazo says that as the company matures the goal is to “reverse rebrand” the firm, so that it is seen not as a BPO outsource provider in the Philippines but as a “proper international practice”.

 

"We thought that the concept of helping the small accounting firms in this way would give them some leverage, enable them to compete with larger firms and level the playing field."

 

In turn, this will help the firm attract higher calibre staff, because – like in Australia – there is a battle to attract the best accounting talent in the Philippines, and reputation and brand are becoming increasingly important.

“We have coined the term ‘practitioners without borders’, and I think that is a good description of what we are aiming for,” Parazo says. “We think that is the future of professional services.”

Growth strategy

Liston Newton Advisory is an Australian firm that has gone beyond accessing the Philippine BPO capability to make a deeper investment in the country.

The Melbourne-based firm is on a growth path with plans to double its revenue to at least A$16 million by 2027. Investing in the Philippines is part of a strategy that includes the acquisition of smaller Australian firms.

CEO Peter Antonius CPA says Liston Newton began its engagement with the Philippines through the traditional BPO route. As its needs have increased, so has reliance on the capabilities provided by BPO, and Liston Newton has now established a subsidiary firm in the Philippines.

Antonius says the decision was driven by scale. A wholly owned subsidiary was the chosen model, though several options were considered. It is this entity that now employs 11 Filipino staff, with an Australian headcount of about 40.

Liston Newton also takes advantage of working from home and does not maintain a physical office in the Philippines.

Most employees work within a 20-kilometre radius of Manila, with some in the southern part of the archipelago around Davao.

Liston Newton functions from several offices outside of its Melbourne head office, so the Philippines operation “feels no different” from other staff who work locally, Antonius adds.

Like Parazo and BPA, Antonius says his firm sees the Philippines as a location for skills and talent.

“When we first started, the roles we were filling were typical back-office functions, but as we increased our presence, we found that our growing brand gave us access to better talent,” he says.

“Some of the people we employ are CPA qualified, and some have worked for the Big Four or for other Australian accounting firms, so they know the Australian regulatory outlook as well.”

Antonius says the other side of the equation is the “ongoing challenge” around talent within the accounting profession in Australia.

This means that firms wanting to grow rapidly have to look at how they can augment their talent base, and the Philippines is a natural fit.