The Software Outsourcing Show, Episode 12: Your Definitive Guide to Outsourcing to Southeast Asia

June 6, 2019

By Lea Jesserer

In this week's episode, Bobby Dewrell, SVP of Delivery at Accelerance speaks with Michael Lim, CEO at Exist, about outsourcing your software development to South East Asia, (specifically the Philippines), the risks associated with outsourcing and how a deep talent pool has attracted IBM, Oracle, Accenture to the Philippines.

Michael Lim is a software development veteran with over 20 years of experience in the software and information technology industry. Mike directs the overall corporate direction, business strategy, technology, and product roadmap of Exist.  In the past few years, Southeast Asia has experienced high economic growth, improved focus on technology programs and a highly educated young workforce. The technology sector has rapidly grown throughout Southeast Asia, with a rise in startups as well as entrepreneurs. Despite all of the positive growth in the Philippines, it still faces its own unique advantages and challenges when it comes to software outsourcing.

The Software Outsourcing Show is the #1 source for information, lessons learned, and exclusive insights into outsourcing. The show is produced by Accelerance, the leading consulting firm dedicated to helping companies reduce risk with software outsourcing.

Transcript: 

Bobby: Hello, and welcome to the "Software Outsourcing Show." I'm your host Bobby Dewrell, and I'm happy to have you joining us this week on the show. Today we're talking about outsourcing to Southeast Asia. Now, Southeast Asia has experienced some high economic growth recently. The technology sector has rapidly grown with a rise in startups and entrepreneurs. And even though there are some frequent political disputes that we always hear about, the governments are stable, the countries are globally competitive, and English is widely spoken. Now, joining me in the studio today to talk about Southeast Asia is Michael Lim. Michael Lim is president and CEO of Exist and is responsible for leading Exist's corporate strategy and operations.

He's a veteran with over 20 years' experience in the software and information technology industry. Mike directs the overall corporate direction, business strategy, technology, and product roadmap of Exist. Prior to being named CEO, Mike served as COO and CTO respectively, where his work and dedication delivered the engineering team to where it is today. He has played an instrumental role in making Exist stay ahead with technology, tooling, and development methodologies. Mike holds a BS in computer science from De La Salle University, an EMBA from Northwestern University, Kellogg School of Management. And he's completed the digital transformation course at MIT in Cambridge, Massachusetts. Hello, Michael. Hey, welcome to the show. Thank you for joining me today.

Michael: Hi, Bobby. It's great to be here. Thank you for having me.

Bobby: You know, I really enjoy it. And I know as we work on the little bit of a time zone difference, I know it's good evening for you. It's kind of good morning for me, but I think that's what makes the world a little bit more fun, right?

Michael: It's a small world anyway. So things has gotten really quickly to communicate with everyone. So it's great.

Bobby: It is great, right? You know, one thing and not to go too far off script here, you know, kind of early on. But have you found that some of the advancements with telecommunications, video conferencing. Has that made the world a little bit easier?

Michael: Oh, definitely, definitely. I mean, I've been in the industry, in the IT industry for 20 plus years, and seen how it grew so fast. It used to be very hard to work with U.S. clients way back in the early 2000s. But now it's like, you know, you have a lot of tools to use for communication. So there's no excuse for not being able to have business outside of our region. So it's really great. Technology has really helped a lot of business, especially for companies like us who are in Southeast Asia, would like to grow. It's really amazing. I mean, the telecommunications has really been great. I can't ask for more.

Bobby: Yeah. Yeah. And one thing that I do like to ask and bringing up, Southeast Asia and telecommunication. One of the first questions I always like to ask people when I speak to them is ‘why would I consider Southeast Asia as an outsourcing location?’

Michael: Southeast Asia as a region has been growing rapidly, past probably three, four years, or maybe even more. I mean, Singapore spearheaded this kind of growth. And even during that time, I mean, Singapore as a country has really been very diverse. A lot of eastern companies or western companies rather, has heavily invested there and has grown their business in Singapore. And I think that's a great way to be able to have a grasp of how Southeast Asia, maybe even Asia as general, can be a great partner for them.

So, I've seen Indonesia as well because we've had clients there in the past. And I've seen how much they have grown and have been very aggressive. Here in the Philippines is amazing. A lot of tech startups. A lot of innovation that's happening even in legacy companies, as I call them. They're like the traditional companies are embracing technology as well. So in that regard, there's a lot of demand for technology, for talent, for resources in the Philippines to make these companies grow really quickly. Unlike before, they're very conservative. And in the past, maybe 10, 15 years ago, Philippines is a very conservative country.

It's always late in technology, late in adopting new ideas, but now, they're like almost at par with the West, like, in the U.S. They really look at how technology and ideas are being formed there. And they're really looking at it seriously. Unlike before, they were just like reading it and ignoring it. And they're like let's see what happened kind of approach. But now, it's not yet as fast as I wanted it to be because there's still a lot of things that I think companies here in the Philippines could really learn and adopt well, but I think we're getting there. And as we...

Bobby: Yeah. And there's been a huge rise, you know, just kind of looking at the region and that segment of the world in the Philippines. There's been a huge rise in entrepreneurship. There's been a ton of technology startups and innovation that's really starting to kind of come out of the area. I know, historically, the Philippines has been a rich market for call center, right? And that type of outsourcing. So I know there's a lot of a closeness with the United States from there. But, you know, on the software development side and the technology side, I think it's like you said in the last three to five years, there's been really some exponential growth and people getting into that segment, right?

Michael: Yeah, yep. I mean, the fact that the BPO sector, the IT-BPO sector here in the Philippines has grown exponentially, as you said, shows the interest of Western companies really trying to work with the Southeast Asian people, or even most here in the Philippines, because they've seen the talent here. They've seen the capabilities, the ability for them to have great talent here to be able to serve not only their own internal business, but their clients, you know. So that's amazing. I mean, they trust us to talk to their clients. They trust us to be able to deliver or even perform work that they have internally and trust it to us. So that says a lot. I mean, and then that's amazing for the Philippines and for people who are into that kind of profession. And so it's something that I think people take pride into. And so, for me, I mean, I've seen it grow, like I said, and we tap that kind of business as well in Exist. So, it's great. I mean, I think there's a lot more growth to happen in the next coming years.

Bobby: Well, that's good. So, the outlook is even better than the story that brought us here, right?

Michael: Yeah.

Bobby: That's always good to hear. You know, one thing too kind of just to talk about it, because we kind of mentioned it right at the top of the show. We were talking about technology and how that brings the world a little closer. You know, I know one thing when we talk to clients sometimes, they're concerned when we look at Southeast Asia as the time zone offset? Could you talk a little bit about that? Maybe some of the strategies that...some of those concerns?

Michael: Yeah. I mean, for... So there are two things here. I mean, BPO companies here in the Philippines really work like 24/7. They have like three shifts of workforce. And I call it like 24/7 execution of your work, right? So it really helps companies abroad who are investing in this kind of business here in the Philippines. It means that there's like non-stop work for them. It's like you always have outputs. I mean, efficiency is key for them to be able to compete in their own sector. So, it hasn't been really a challenge. I mean, Philippines, I guess, has been really flexible. I mean, people here they know the fact that they have to work off hours, you know, like in the nights and have three shifts. And they keep changing, like, every maybe three months.

So there's, like, you get to work at a specific period of time in between two or three months, right? So it's not like you're always working at night. So companies knows how to shuffle the schedule of their resources, and it really helps them. And it helps the people here because they get extra pay. They have better benefits and that's really key for companies who are into that kind of business to retain such. And I don't think it's a problem at all. I think we know, I mean, those companies know what they're getting into, and they know all the benefits and stuff. And there's...I haven't heard any problems. And if there were any problems, they would have stopped. I mean, they are growing and growing every year so I guess it's not really a problem.

Bobby: And it sounds like too, I think what I heard you say a little bit and I don't want to put words in your mouth. But it seems like the job market, the talent pool understands that, "Hey, this isn't the quintessential American 9:00 to 5:00." Right? Like, I may get this, I may work overnight for a couple of months. I may work swing shift for a couple of months. So that's not unexpected, not unwanted. That's what the market is, right, for employment. Okay. That sounds good. I always like to kind of address some of these things that I know our listeners are going to wonder and want to know about. So, let's talk a little bit about politics. I know this is as I talked to technology leaders in the different regions, I know, you know, they usually bring up politics, but we can't not talk about it. I know that governments are really kind of stable within the region. However, it does seem like there's sometimes some political disputes, some disruptions. You know, what's the impact on daily life there with some of that?

Michael: Yeah. I mean, in the Philippines, it's sad to know or maybe good to know that we're used to it. I mean, ever since the Marcos era, people have hard time coping up with the dictatorship kind of regime during that period. And having overcome that region and coming into where we are right now. I mean, Filipinos are very resilient. You know, they fight for what we think are right. But at the same time, you know, it happens. I mean, there's always debates over how to run the country and all. At the end of the day, Filipinos would still go on with their lives. They would work whatever they're doing and they do...they want to be successful.

They want to look for the proper job, hopefully, within the Philippines because that's, I mean, we want to be able to keep the talent pool within our country so the country can grow, right? So...but that's the point. If they cannot have what they're dreaming of, they go out. So, for them, it doesn't matter if the country is in a very unstable or stable state as long as they know that they're having the opportunity to be able to work within the country or outside of the country, that freedom of having to have a choice, life goes on. I mean, I guess that's one form of democracy if you like to say that way, that we like to embrace. So, for us to give a choice where to work, where to live, how to live our lives, and correctly, and properly, and within order, then that's what we're aiming for.

I still hope for... I mean, I'm hopeful for the Philippines, I mean, even with the fact that there are a lot of still political tension happening still, there is still a vast majority who would like the Philippines to be the best country in Southeast Asia, maybe, in Asia to live in. And I'm one of those people. So, for me to help, I mean, for me, as an individual, help as much get people have jobs. You know, try to train younger generations to work in the IT space, develop software, contribute to the growth of the economy, the Philippines. You know, share your talent here. That's something that I'm hopeful for the future.

Bobby: And it sounds a little bit too, like, you know, politics for politics, and they don't necessarily affect business, right? I mean, it's nothing like that. Yeah.

Michael: It's nothing like that. If you look at the economy of the country, it's growing. I mean, it's not me saying that, you can really search for that. I think World Bank stated that the Philippines is one of the fastest growing economies. So in excess, despite the political tension, political conflict that we're having here, the Philippines still continues to grow. And, like I said, you know, it's like saying business must go on. Business is business and politics is politics, and it doesn't really affect. And there's still a lot of confidence for foreign investors coming in and helping us out here, infrastructure, putting up factories here, putting their BPO centers here, and outsourcing software development here. So, you can't feel it. I mean, at least in my field, I don't see any of that...any problems that affects our business. Yeah.

Bobby: Well, and I know you spoke a little bit about the economy. And I know looking at the economic outlook I think on a global competitiveness score, the region's about a 4.36 out of 7, which, you know, is a good, strong, stable right there in the middle. I know that Fitch Ratings recently upgraded the Philippines credit rating. And, you know, they cited that it was strong macroeconomic performance, which also included a reduction in debt to GDP ratio. So I know things are there and I think I saw that for 2019, GDP is forecasted at like 6.5% growth. So, economically, the Philippines are strong. The region is strong, right?

Michael: Yeah. I mean, like I said, you don't have to look at or just ask. I mean, countries outside of Philippines are looking at the Philippines as something that there's potential, and so. Yeah.

Bobby: So let's talk a little bit about language proficiency. I believe English is fairly widely spoken and I think some of that comes back to the call center and the BPO, right?

Michael: Well, way, way back than that. Philippines historically used to be one of the U.S. protected countries, you know, I mean, a U.S. base here back in the days and way, way back. So, it really I think originated from there. And in the academic sector, English is widely taught. Currently, I think English is the second almost like an official language for us. So it's like maybe 70%, 80% of Filipinos can speak English. So that's something that's one of the advantages of having some foreigners putting up their business BPO call centers and then such like we mentioned before because of the proficiency of the English language, and that really helps us, you know, gather more investors here and have partner companies from abroad working with us. So it really helps. Yeah.

Bobby: Yeah. Okay. And let's talk a little bit about the talent pool. I know from a higher education ranking when we look at...you know, we usually look at about 138 countries when we look at that ranking, and I think the Philippines ranks 58 out of 138. So, again, kind of above the fold, I like to say. Talk a little bit about that. I mean, I think English is, like you said, it's widely taught in universities and how's the education system?

Michael: In the Philippines, education is really important. I mean, it's...how do you say? It's something that's very important in a way that it's something that's valuable even for the poor. It's not accessible only for those who can manage it. We have public schools and education is always promoted across the country. So, I mean, the Philippines produces around 400 to 500 new college graduates annually. So, there's a lot of talent pool coming up from the academe section. So it's a tool for us, I mean, education for Filipinos, it's a tool for us to be competitive.

That's how, you know, train to think. Education is very important for us to be competitive to be able to get jobs, to be able to go out and share our talents with the world. So you've seen nurses, you've seen caretakers, you've seen engineers, software developers across the world, I mean, working for other companies. And we really hope to have them work here regionally in the Philippines so that we can grow, like I said, a while ago. So, in terms of talent pool, it's abundant. It's very abundant. I mean, and we hope to be able to take advantage of that. I mean, the Philippines, we should be able to take advantage of that.

Bobby: Right. Yeah. And I think I saw too, that the Philippines has one of the highest graduation rates in the world. That's a fact.

Michael: I know. I know. So that's the thing, right? And that's what attracts foreign companies. You know, the U.S., Australia, some European companies are looking at the Philippines as their partner for them to be able to grow their business. So that's a big thing for us.

Bobby: Yeah. Okay. Let's talk a little bit about the IT sector and just a couple of things, maybe some logistics is what I usually like to get out of the way. I know, you know, regionally, hourly rates average somewhere around like $25 to $35 an hour. I know we are talking about a 13-hour time zone. You're actually 13 hours ahead of U.S. time.

Michael: Yeah.

Bobby: And it's about 20 hours, I think, to travel from New York City to the Philippines. As far as logistically, but I think it's quite easy travel, right? It's not like it's hard to get there or hard to get from there to here, right?

Michael: Mm-hmm.

Bobby: And so let's talk about some of the growth within the IT sector just in the recent years. I think it's been growing quite rapidly. And there's, I think, like you said earlier, there's still a lot of potential, right?

Michael: Yes. There's a lot of inputs coming in. There's the organization here in the Philippines called Philippines Software Industry Association. It is the association of Philippine IT software companies, you know, who work together. The objective of which is to be able to attract, I mean, how do we work together to attract a lot of foreign companies to, you know, outsource their work here in the Philippines. So, we discuss about how we can be competitive, how we can join events, how we can promote our talent, and all, so.

And because of that initiative and the government supports that initiative, we're able to really reach out frequently to foreign companies and showcase our talent. So that's really something and that shows a lot of the, I may call camaraderie here in the Philippines to, you know, take a big chunk of that market, outsourcing market in IT sector, and software development, game development, and such, to the Philippines. And because of that, there's a lot of part of like the 400,000, 500,000 graduates annually, produces like maybe 50,000, 60,000 software developers coming from computer science degree. So there's a lot of talent there. So, that's what we're promoting.

That's something that...and because of that, we've seen the likes of IBM, Oracle, Accenture setting up their shops here, looking for a lot of opportunities here in the Southeast Asia and having their hub here in the Philippines, and getting a lot of those talent pool. So that's something, and I'm seeing a lot of financial institutions as well setting up shops here and hiring all those kinds of different IT skills from infrastructure, software development, graphic design, web design, and everything. It's amazing. And I see that growing in the coming years.

Bobby: Good. I mean, it sounds very positive and definitely very growth oriented. And, you know, it's always good to hear that something is growing and it's right there at the precipice of opportunity.

Michael: Yeah.

Bobby: Right. Let's talk a little bit about Exist. How long has Exist existed? I guess, I could say.

Michael: Yeah. I mean, I'm part of the founders of this company. We've been in the industry for 18 years, 18 years this year. I joined this company and before that I had been in this industry for like 20 plus years before joining this company. I've worked with the Asian Development Bank and MERALCO, which is the biggest electricity provider here in the Philippines. And having worked with those companies, me and some of my colleagues thought of building a company, a software company. What's unique about it is that we didn't thought of it as an outsourcing company. We thought of it as a software company where we build a product. So we did that and we were called back then Gluecode Software.

Gluecode Software, we built products that competes with the likes of JBoss in the open source space. We built a product called Apache Geronimo as part of the open source community contribution. And we kind of built on top of it and attracted IBM. So back in 2005, our company was acquired by IBM. So after the acquisition, we changed our name to Exist. So Exist then, we were still building a lot of technology around open source, and we thought, "You know, maybe we can use these skills to build enterprise solutions for businesses." And that's kind of like how it started, the outsourcing. We kind of like, you know, we're looking for companies. You know, you might want to look at open source and build something around it and help your business. And so that's how it kind of started us being hired by U.S. companies to build solutions for them.

And 2008, we thought, "Maybe we can have this talent here in the Philippines and help local companies build IT solutions that are cheap, that are...you don't need to buy proprietary software and still grow your business through IT." So that's how we, again, that's how we grew. In a way, it's not really outsourcing, it's more like technology sharing, business ideas sharing, and try to solidify ideas through software development to help your business. So, we see such in that way, in that kind of perspective rather than...you know, we have like 10 people here you might want to hire and join you, versus, you know, us being part of your team, being part of developing the product, developing the solution, you know, creating the ideas and using the right technology to build it. So, that's something that we have been doing and we have been really successful in doing that. And we're still here. I mean, 18 years and still growing.

Bobby: That's a huge testament, right, to be around in this climate and this day for 18 years.

Michael: Definitely. Yeah.

Bobby: Well, Michael, listen, I really enjoy you taking the time to talk with me today and to talk about the Southeast region. We'll definitely have to have you back. And I want to talk a little more about Exist's future and that company story there, by all means. But for today, I think, we're going to need to go ahead and wrap up. And I'll tell you, for those of you that are listening, we've definitely got our Southeast Asia region guide that will be available for download through the show notes. As always, you can link to the article from the show notes. We'll have a blog post out about the Southeast region guide and this area. I really want to thank everyone for listening to the "Software Outsourcing Show," and to remind you that you can always find the latest podcast episodes and show notes at iTunes, and SoundCloud, and in all of your favorite podcast aggregators that are out there. And as always, you can always go check out the softwareoutsourcingshow.com. So, Michael, again, thank you very much for joining me. And I look forward to having you back in the future.

Michael: Thank you again, Bobby, for having me. And it's great talking to you.

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