Why the Philippines is shaping up to be the next global tech hub

Outsourcing and home-grown start-ups are boosting the Philippines’ tech industry

This is a contributed piece by Nick Hargreaves, co-founder of Cloud Employee

While some commentators - albeit ones with a clear vested interest - are claiming thatLondon is now the place to go if you want to get the best tech talent, there are many businesses across the globe who are struggling to find the right talent to grow their companies.

The media tends to focus on the big name tech start-ups that have managed to quickly grab hundreds of millions of dollars in investment or even managed to IPO, but the reality for the vast majority of firms is hard graft and intense competition - not only for customers, but for skilled staff members, with developers in particular being able to command very high salaries.

There are many reasons why some established tech hubs could falter in the near future. For example, London is hampered by high living costs and restrictive policies that limit the ability of UK-based companies to hire talented developers from outside the EU. UK SMEs - with restricted budgets - are finding that it makes more sense to send some of their operations overseas, rather than try importing the right talent to meet their needs.

Evidence suggests that Britain will require750,000 digitally-skilled workers by 2017; yet there are only some 56,000 IT graduates coming out of British universities. If this shortfall cannot be met, then London needs to look elsewhere, and fast.

Outsourcing is something that might only be considered when a company needs to move an entire department - for example IT support - overseas to reduce costs. However, it is now a realistic option for companies that need to employ just a handful, or even a single person, thanks to reliable, fast internet connections.

So far outsourcing has become a word that many would associate with India, and perhaps Eastern European nations like Romania and Hungary. Yet given the lacklustre economic performance of the BRICS countries that have performed dismally since 2008, it’s now worth looking elsewhere to find skilled IT workers.

There are other countries that have skilled workers capable of providing the kind of support that many UK and US companies require. One of the best suited right now is the Philippines – the outsourcing industry is growing by 30% every year – where Manila and Cebu (the country's ‘second city’) have become massive outsourcing hubs and which has a culture comparable to Western society, largely due to over 500 years of Spanish and American influence.

More than 80% of the population speak English fluently making the Philippines the fifth largest English-speaking country on the planet; over half the population is under 30-years-old. The country leads the region in social media use, with its 34m social networkers spending an average of four hours a day online. Research from Global / Web Index indicates that internet usage in the Philippines tops the Asia Pacific (APAC) region with people spending 6.2 hours per day online and 2.8 hours on mobile devices. The Philippines is also set to become a start-up hub in its own right, with home-grown companies on the rise; SMEs comprise 99.6% of all registered firms and employ 70% of the country’s workforce.

And there’s no debate about the IT skills of the workforce in the country. The Philippines are the world’s second fastest growing economy in the world. The presence of tech giants, such asBlackBerry and Google, has bolstered the pool of programmers that the country is producing. Universities in the Philippines are producing 130,000 IT And Engineering graduates each year and most IT graduates are skilled in the most ubiquitous programming languages, ranging from Java to Python and from Ruby to PHP. IT Computer Software Development is the best paid sector in the country, closely followed by Computer Network Management and Database Administration.

Despite this, Western companies that choose the Philippines as an outsourcing destination are likely to pay significantly less than they would in India or Eastern Europe. A great web developer with at least five years’ experience can cost less than $25,000 a year. The same developer in Eastern Europe might cost double that.

There have been plenty of initiatives in recent years that have spottedthe potential of the Philippines. For example, Impact Hub, an accelerator programme established in London more than 10 years ago, has this yearset up in Manila to promote entrepreneurship and help members develop startups in different fields of business; it also organises its now famous workshops called “Mentor Mondays”.

Manila sees new incubators and seed funds sprout like Kickstart Ventures (seed-stage funding of $30,000 for 15% equity). The Founder’s Institute, the world’s largest pre-seed funding incubator also operates in Manila and currently accepts applications for its new batch by early November. Just like other metropolitan hubs in the US and Europe, pre-seed business angels like Manila Angels are now starting to form business networks to spot early opportunities and diversify their risk.

Some of the local startup stars already made their way into Paul Graham’s prestigious Y Combinator in San Francisco, and local Telecoms Service Provider Xurpasrecently raised more than $30m in capital. Rocket Internet’s $445 million partnership with local Telco company PLDT is yet another illustration of the emerging “Manila tech tiger”.

The Philippine culture is built on loyalty, integrity and hard work. So with the wealth of talent available and the cultural similarities, the Philippines is set to be an exciting place to work in technology in the near future; not just because it will be contributing to the success of tech start-ups all over the world, but because it will have plenty of home-grown success stories to shout about too.