BPO has been a great business driver in the Philippines for the BPO business itself office buildings for the BPO, transportation, rental housing units for the workers, for leasing companies (for computers and office equipment) and real estate companies.
Many of the billionaire companies have huge office complexes for the BPO especially RLC and SM
Why, what are the benefits for BPO
1. Lower cost as much as 100% cost reduction for labor. A P20,000 starting pay for call center agent is less than $400.00 at P58+ exchange rate
2. The one outsourcing is freed of the increasing cost of labor: health insurance, retirement
3. It can focus on its core business.
4. It frees up real estate in the expensive properties for other more value added activities. For example
in a hospital, a laundry room will be used for board and lodging if laundry was outsourced
5. Above all, it window dresses the ROI as per Du Pont Formula
Net income/Sales / Total sales/Total Assets x Total Assets/Total Stoch holders Equity
As you can see, reducing the total assets increases the quotient for Total Sales/Total Assets
Resulting in over all ROI
The method for the asset reduction would be something like this
An FMCG company just bought a computer system worth $300 million. It sells back the
computer to the supplier and enters into long term contract to outsource the computer work
at an X amount per transaction say $050 or $1.00.
How much increase in ROI (the Du Pont formula would result if $300 million were removed from
its books. It would be $300 million wealtheir
How would this affect the analysts perception of the company? How would it affect the valuation
of the company if it was cash rich
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