The world’s call centre capital is gripped by AI fear

While the rest of the world is still debating what artificial intelligence might mean for jobs, citizens in the Philippines are already living in the new reality, reports Bloomberg.

The same relentless drive to cut labor costs that saw back-office roles shipped to the archipelago in the first place is now starting to turn over some of their duties to bots. All of the major players in its vast outsourcing industry, which is forecast to cross $38 billion in revenue this year, are rushing to rollout AI tools to stay competitive and defend their business models.

Over the past eight or nine months, most have introduced some form of AI ‘copilot’. These algorithms mainly work alongside human operators, doing tasks like summarizing all previous contact a customer has had with the company, whether that’s via call or email to prevent the need for a lengthy explanatory conversation -- theoretically at least. Such a process requires the chaining together of advanced speech recognition technology, content processing, sifting through vast amounts of data, analyzing sentiments and providing contextual responses -- all in real time. It would have been the stuff of science fiction only a few years ago.

For some, the rapid deployment of such tools has been a harsh awakening. Christopher Bautista, 47, had worked in the call center industry for nearly two decades. In his last job on a tech support desk he’d watched as AI took on more responsibility in gatekeeping customer calls and asking questions before routing to human agents. Then last November, along with about 70 other people, he says, he was abruptly put on so-called floating status -- no work, no pay, but still on the books -- after the client pulled the contract. He quit six months later for a job in sales while still waiting for reassignment. “AI will take over our jobs,” Bautista said. “It’s cheaper and more efficient.”

Tales like Bautista’s remain relatively isolated, with headcount in the industry still on the rise. But they might not be for long. Avasant, an outsourcing advisory firm that works extensively in the Philippines, estimates that up to 300,000 business process outsourcing (BPO) jobs could be lost in the country to AI in the next five years.

“This poses a once-in-a-lifetime risk and opportunity for the industry in the Philippines,” said Akshay Khanna, managing partner at Avasant, whose analysis estimates AI could also create up to 100,000 jobs in new roles like training algorithms or curating data. “It’s not all doom and gloom.”

It’s hard to overstate the importance of the BPO sector to the Philippines. It’s the country’s biggest source of private sector jobs and the biggest sectoral contributor to gross domestic product. Socially, the centers are a source of decent money for non-university-educated Filipinos that doesn’t require them to work abroad. The government had been banking on the industry to help it move up the value chain, propel its 100-million-plus citizens into the middle class and kickstart the creation of other white-collar jobs. But AI arrived before that’s happened.

While there’s been plenty of obituaries written for the call center industry over the years, historically the real-world technological solutions were underwhelming, to say the least. There were annoying text bots on websites that simply regurgitated an FAQ page you’d already read, or voice menu systems that couldn’t cope with even the slightest off-script query.

But things are changing rapidly. In February, payments company Klarna Bank AB announced AI bots were conducting two-thirds of all customer service interactions, equaling the work of 700 full-time agents, sparking a plunge in the shares of a number of major call-center operators. In May, OpenAI Inc demoed a sighing, chuckling ChatGPT-4o that adroitly troubleshot a call to customer support about a new iPhone that wouldn’t power up.

The threat to the sort of back-office jobs like customer service agents and tech support that the Philippines specializes in is obvious. Experts like Carsten Jung, head of macroeconomics and AI at the London-based think tank the Institute for Public Policy Research, say that policymakers need to be preparing now to avoid a disruptive transition. “Social security and tax systems need to evolve to make sure the benefits of AI are widely shared,” he said.

Rather than going down this route though, the choice the Philippines has made is to try and lean into the tech revolution. As the world’s second-biggest outsourcing center after India, it’s already where many of the new AI tools are being tested. The government has set up an AI research center and multiple training initiatives are underway, some government supported, others industry backed, to try and boost the capabilities of the sector’s 1.7 million employees. “If you don’t upskill, obviously, AI will replace you,” said National Economic and Development Authority Secretary Arsenio Balisacan. “That’s the challenge for us.”

AI in Action

At [24]7.ai’s busy contact center in Manila’s Bonifacio Global City tech hub, the current slightly uneasy coexistence between the old and new is on full display. On one floor are old-school agents, many dressed in customer-branded polo shirts. They’re tasked with trying to persuade customers not to cancel their mobile plans. From time to time, the floor reverberates with hooting and hollering, as agents cheer themselves and colleagues on for hitting their daily targets.

But on another floor, ChatGPT is training customer agents. It’s being used to provide the other end of roleplaying calls for new hires, as they learn how to handle a tense or distressed customer on the verge of canceling. And it does so in the guise of many different personas, whether that’s a Gen Z female, a boomer male, an irate caller or a tough bargainer. Company co-founder and Chief Executive Officer PV Kannan said the AI training has slashed the time it takes new staff to get up to speed with what they’ll have to do on live calls to about a month, compared to the previous 90 days. He’s sure there will always be a need for some agents because the world is too messy for bots to handle on their own whether it be travelers frantically calling to cancel flights amid severe weather, extreme situations like the pandemic or simply clients introducing new features, new pricing models or new bundling.

But the future for humans, Silicon Valley-based Kannan said, is now more as “middleware” -- and he for one is sure that redefined role means fewer jobs.

“The unknown is at what speed AI will disrupt the industry. Two years?” said Kannan, whose company employs 12,000 people globally, with 5,000 in the Philippines. “Half the players are in denial and pretending there will be zero impact.”

Other major players have also undertaken extensive AI rollouts. At Nasdaq-listed Concentrix Corp’s 23-floor main Manila office, its AI assistant is operating alongside tens of thousands of agents. It listens to conversations, summarizes chats for other agents, analyzes negative sentiments and stands ready to flag to managers any non-compliant staff utterances, or caller requests to speak to the legal department.

Chris Caldwell, chief executive officer of Concentrix, which employs 100,000 workers in the Philippines across 51 sites, says it’s just the start. “This technology isn't waiting for anyone,” he said. “And I'm not sure many countries are moving as fast as the tech companies are moving.”

Caldwell, like many executives in the industry, doesn’t want to talk in terms of jobs lost. He says AI will create different roles, such as in data annotation or correction, which many of the existing talent pool of workers would be well suited for.

Indeed, local trade association forecasts are still for outright growth in both headcount and revenue over the next few years. Jack Madrid, president and CEO of trade body IT and Business Process Association of the Philippines, says he’s met with at least 80 companies interested in setting up or scaling up BPOs in the Philippines, largely because of the rising costs of operating in the US.“We are at an interesting juncture,” Madrid said. “The uncertainty and paranoia over jobs has been replaced with a realization that the cost of integrating genAI [generative AI] is still steep, and we need to grasp the one- to two-year window and get our workforce skilled.”