Guest blog: Outsourcing destinations: South Africa vs Philippines – by Steve Holdsworth

Having embarked on several journeys to implement outsourcing strategies, one of the very first, and arguably most important decisions is where “offshore” is actually going to be. The decision of where should in fact, come before decisions on what will be outsourced.

The reason for this somewhat illogical order of thought, is that every major outsourcing destination has strengths and weaknesses with regard to its capability for the business processes that corporations usually pick off as opportunities. Either to save money, increase efficiency or simply to take it out of the purview in order to focus on more strategic imperatives.

As an example of this, it would be a tough sell not to choose India for high volume back office exception processing in the same way that you would struggle to convince the board that your ultra high value, platinum, must keep customers should also have their calls answered there. That is most definitely not a slur on India as a destination for high end Customer Service, but it would be foolish not to think that an onshore or even near shore solution may produce more customer value, even if the cost per transaction is much higher in comparison.

Of course, in reality, the decision of where almost always comes after what. In practice, once the decision is made about the future of the  specific business function or process, an immediate shortlist of possible locations surfaces, usually from the procurement team. It’s generally made up of one or two of the most popular global locations with a near-shore, on shore or simply left-field option to keep things interesting.

It is the ensuing process which we’ll focus on in this article and even more specifically we’ll be comparing contact centre based processes in two of the most closely matched destinations in outsourcing right now.

Ladies and Gentlemen, in the red corner,  weighing in at 1.4 million outsourcing jobs and  over £26bn / $29bn / AU$45bn in annual outsourcing revenue, the flotilla from Manila, the emblazoned from Quezon…’s the Philippiiiiiines!

And in the blue corner, challenging for the title, the new kid on the block with just 300,000 outsourcing jobs and annual outsourcing revenue of over £400m / $450m / AU$700m,, it’s  the Jo’Burg Iceberg, the Cape Town Crusader………’s Soooooouth Africa!

Let’s get ready to rumble!

Why These Locations and Why Now?

Whilst there are some very obvious differences between the two locations, namely time zone, culture, maturity and a massive difference in size, things are changing, and they actually have more in common than you would think.

If we go back a few years, South Africa, possibly unknowingly, quickly became to the UK what the Philippines had been to the USA in outsourcing terms for years, and that is, an obvious and fairly easy to justify choice for offshoring.  

For many years now, the Philippines outsourcing industry has been dominated by US clients mostly in the contact centre space with India receiving the lion’s share of the back office work. Going back to my earlier point, this may be that this combo plays to each of the countries strengths whilst unlocking the maximum savings for clients. The relationship between the US and Philippines goes back a long way but the US has definitely in some part become embedded in Filipino culture and if you’ve spent time interacting with the BPO agents there, you can detect a definite American twang and a naturally empathetic and caring tone from call centres servicing the US. Think “Have a great day!” or “You are so welcome!”

Comparatively in South Africa, there is a strong cultural affinity with the UK, particularly as English is the language that spans across most South African cultures despite there being eleven officially recognised languages. British soccer stands toe to toe with Rugby & Cricket as one of the nation’s biggest infatuations and the fact that the time difference between South Africa and UK is only 2 hours in the British winter and 1 hours in the summer makes it a great outsourcing destination for the UK and even European corporate engines.

These bonds are strong and are likely to make sure that the Philippines makes every short list for contact centre outsourcing from New York to Los Angeles and equally puts South Africa in pole position for every boardroom outsourcing discussion from London To Edinburgh.

But what is interesting to me, and is changing at pace, is that the number two spot is increasingly including the other contender, where previously everyone seemed to stay in their lane with their aligned country plus India as offshoring locations. We’re seeing less of that and more of India being a no-brainer for non-contact work and both South Africa & Philippines being considered for the customer interaction processes regardless of where you are in the world.

Another catalyst to this has been Australia who also traditionally favoured the Philippines as its outsourcing destination of choice. The US and Australia are now major growth areas for South Africa  and whilst there seem to be a whole wealth of theories as to why that might be, there is a definite shift going on that is pushing South Africa to be a real alternative option for countries outside of Europe looking to outsource.

So how does each country stack up?

We’re not a team of data scientists but we talk to a lot of people on both sides of the outsourcing fence who are the experts living in and breathing life into the offshoring industry so they often know what they’re talking about even if the theories are often anecdotal or based on crowdsourcing of opinions from their clients or outsource partners. We’ve also seen some economic alignment between the two locations as well as some complicated but nevertheless significant movements on the political landscape.

Let’s look at some of the major factors for consideration if you were about to outsource your contact centres from the US, UK or Australia:

Time Zone

Clearly this is a constant and can have a profound effect on the success (or failure) of an outsourcing operation:

USA – Philippines is 12 hours ahead and South Africa is 6 hours ahead

UK – Philippines is 8 hours ahead and South Africa is 1 hour ahead

Australia – Philippines is 2 hours behind and South Africa is 8 hours behind

Verdict – This one was never going to be particularly scientific but if we assume that less difference is better, as a global location, South Africa wins with a total of 15 hours difference against Philippines’ 26 hour differential.


This one is very interesting as traditionally Philippines has trumped South Africa on price but that seems to have changed in the last few years and depending on the exchange rate at the time, either destination can be had for cheaper than the other. As a guide and whilst it’s highly subjective, a good quality contact centre hourly rate in both locations can now be had for somewhere within the following price ranges:

GPB – £11.00 – £13.00,

USD – $13.00 – $15.00 

AUD – AU$20.00 – AU$22.00

Verdict: Draw – both countries have slightly volatile currencies so always look before you leap but there is not a great deal of variance most of the time.

Skills Availability & Maturity

This is a complicated debate as both countries have extensive skills development programmes so that’s hard to compare, but things get insightful when you look at the youth unemployment rate for each country. The Philippines rate for 2021 was 7.3%. In South Africa that statistic was a very different 64%. This would back up some of the theories that we hear that Philippines outsourcing is becoming saturated. However, the maturity of outsourcing in the Philippines compared to South Africa means that access to specialist and managerial talent is likely to be more readily available so there would be less competition for it.

Verdict: Philippines – Our deciding factor is that it is possible to deliver good quality contact centre operations in both countries at a similar price. Philippines being the more mature would indicate access to specialist and leadership talent will be easier and that is backed up by our anecdotal evidence, however, you can’t ignore that South Africa has much more capacity to support large volumes of incoming contact centre jobs, where many are suggesting that Philippines may be becoming saturated (although that tune has been playing for some time now)

Accessibility & Visitor Appeal

We’ve been around long enough to know that whilst this shouldn’t be a high priority, how long it takes for the CEO to get there and how troublesome travel is on the ground as well as the ability to spend time outside of the office is actually a big deal for most organisations (even if they don’t always admit it)

Flight time to South Africa

UK – 11 Hours (Direct)

USA – 15 hours (Direct)

Australia – 14 Hours (Direct)

Flight Time To Philippines

UK – 16 Hours ( 1 Stop)

USA  – 14 Hours (Varies by Departure Location)

Australia – 8 Hours (Direct)

Cape Town is number 9 in the “Lonely Planet Top 100 Best Cities” and number 11 in the Forbes “Best Cities in the World”

Manila is number 69 in the “Lonely Planet Top 100 Best Cities”

Verdict: South Africa just edges it with direct flights for all locations and a better city rating as both cities are leading international outsource destinations.

Other Considerations

Political & Environmental Stability

Clearly this is a snapshot in time assessment but we decided to include it as we honestly hear it from a number of clients visiting South Africa and considering it as an alternative to the Philippines.  The recent political unrest in the Philippines is on the radar of large corporates who outsource, both from a business continuity and brand perspective. 

South Africa has also been subjected to some civil unrest and natural disasters in recent years and both countries had local challenges during Covid-19. We’re probably not fully qualified to comment but it is definitely a topic of conversation that shouldn’t be shied away from in your decision making.

Economy & Incentives

As we’ve seen with the Youth Unemployment rate, the South African economy is in a slow and drawn out recovery phase after dropping to “Junk” status in recent years.  This means that foreign investment is incentivised and the South Africa DTI is offering a job creation grant to companies willing to move their work to South Africa. This grant is significant and can materially reduce your operating costs.

Philippines also provides government incentives for job creation but due to its maturity, these are focussed mostly on certain “economic development zones ‘ which tend to be the less developed or harder to access areas. These can still make good destinations if you have low complexity activity to outsource but they’re not always a great fit for customer interactions.

In Conclusion

Based on our assessment, we strongly believe this is a textbook David and Goliath story and while the Philippines will continue to be an outsourcing powerhouse for many years to come,  up and coming destinations like South Africa are doing a great job as “Champion Challengers”.

Whilst the Filipino outsourcing fraternity may consider South Africa as little more than an annoying ankle-biter that it can largely ignore, if they’re not careful, it may just be too late when they realise that their lunch is being eaten.

No two companies, destinations, BPO or set of business processes are the same but we believe that the days of “Philippines/India is the answer, what is the outsourcing question?” is already over and regardless of if you’re in Chicago, Sydney or Manchester you might find there are better opportunities outside of the tried and trusted. While locations like South Africa have long since said goodbye to giving first mover advantage, what has replaced that is experience, stability and the capability to deliver to challenges that large corporations perhaps haven’t given them credit for in the past.

About the author

Steve Holdsworth is the founder of BPM Advice, an independnent outsourcing advisory firm. Originally from Leeds in the UK and now based in Cape Town, South Africa, Steve has worked in the global BPO industry for over 20 years, both on the client side leading outsourced vendor management functions and also on the BPO side leading multi-geography operations.  He now enjoys working with companies and outsourcers to develop win-win relationships and unlock the true value of outsourcing. You can find Steve on LinkedIn.


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