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Next big things for Philippine tech industry

By ADRIAN PAUL B. CONOZA Published May 20, 2022 3:00 pm

The Philippines' technology industry has seen recognizable growth in the past few years, especially with the boom of the country's information technology and business process management (IT-BPM) sector. Yet, with the acceleration of digital transformation amid the coronavirus (COVID-19) pandemic, coupled with the promising expansion of the Philippine startup community, the growing push for innovation, and the further spark of the Fourth Industrial Revolution (FIRe or IR 4.0), the Philippine technology industry can expect to take a newer shape for the greater benefit of micro, small, and medium enterprises (MSMEs).

To recall, the Philippines has been recognized as a top destination and market leader for IT-BPM services. As the IT & Business Process Association of the Philippines (IBPAP), together with Frost & Sullivan, noted in its "Philippine IT-BPM Sector Roadmap 2022," the IT-BPM sector has achieved significant growth in global market share for many years, particularly taking the lead in voice-related services while growing its capability in non-voice IT and BPM services.

Moreover, ResearchAndMarkets.com, in a report in 2019, noted that the Philippine information technology-enabled services (ITES) sector "has showcased tremendous growth in terms of revenues," driven by increasing foreign direct investment from foreign players and multiple employment opportunities available then for Filipinos. The country's hardware subsector (i.e., personal computers, laptops, smartphones, tablets, etc.), the firm said, was witnessed to increase over the years both in terms of sales volumes and revenues. Software development, meanwhile, is observed to have become "one of the more established sub-sectors of the country's IT and IT-ES industry," and it is projected to grow due to "the increasing number of software-centric startups within the country."

Nonetheless, the progress that the Philippines' technology industry at present and in the so-called new normal will be further boosted by emerging technologies.

Technologies that have to do with boosting connectivity such as 5G and the Internet of Things (IoT) are among the growth engines projected to power the country's digital economy.

A continuing FIRe

Nonetheless, the progress that the Philippines' technology industry at present and in the so-called new normal will be further boosted by emerging technologies. Having been introduced mostly by IR 4.0, these technologies are becoming among the "next big things" that are set to shape industries and the economy in general.

Another "next big thing" for tech is distributed infrastructure, particularly cloud and edge computing. With the anticipated growth in enterprise-cloud spending, plus the growing adoption of the cloud, distributed infrastructure is accelerating in the Philippine market.

Technologies that have to do with boosting connectivity such as 5G and the Internet of Things (IoT) are among the growth engines projected to power the country's digital economy, as Jon Canto, currently the acting managing partner for Philippines at management consultancy McKinsey & Co., noted.

"Today, the industry is looking to incorporate sensors and other devices across networks as part of the Internet of Things (IoT). It is accelerating the 5G rollout, enabling networks to bring new applications to customers," Canto wrote in a BusinessWorld column last November, citing the country's first 5G-powered bank and the testing for console-less gaming as some of the outcomes of advances in 5G infrastructure.

Artificial intelligence (AI) is another technological development that is shaping sectors and so will be an important driver of the local technology industry.

"Our research suggests that, by 2024, more than 50% of user interactions will be augmented by AI-driven speech, written word, or computer-vision algorithms. Rapid adoption of AI and its applications has gone hand-in-hand with the accelerated digital uptake spurred by the pandemic as organizations have sought to identify levers to spark their next wave of growth," Canto explained.

Further boosting support for such emerging technologies is the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Law.

In 2021, the government started recognizing the value of AI when the Department of Trade created a roadmap that aims to maximize AI's potentials in the country. Central to this roadmap is the creation of National Center for AI Research (NCAIR) for spearheading AI research and development and nurturing local AI talent. At the same time, industries such as high tech and telecom, financial services, manufacturing, transportation and logistics, healthcare, and education are observed to have started adopting AI.

"To help firms adjust, develop new technologies, and use computational tools (especially AI), the NCAIR has been created to support MSMEs," Canto noted.

Another "next big thing" for tech is distributed infrastructure, particularly cloud and edge computing. With the anticipated growth in enterprise-cloud spending (from $1.8 billion in 2020 to $2.6 billion in 2024, according to data analytics and consulting company GlobalData), plus the growing adoption of the cloud among organizations and recognizable growth of data centers in the country, distributed infrastructure is accelerating in the Philippine market.

"Although far from mature here in the Philippines compared to other countries, the switch to cloud and edge computing looks set to accelerate, given recent government initiatives, a young talent pool, and infrastructure developments," Canto noted.

Completing these "growth engines," process automation and virtualization technologies (i.e., Industrial Internet of Things (IIoT), robotics, digital twins, and additive manufacturing) are making disruptions in employment as automation is anticipated to replace some jobs while new roles can be given to those who used to perform those previous jobs.

Further boosting support for such emerging technologies is the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Law. Under this law, fiscal incentives are given for investments in new technologies, namely: robotics, industrial biotechnology, additive manufacturing, photonics, advanced materials, nanotechnologies, advanced manufacturing, AI, mobility, blockchain, cybersecurity, satellite technology, big data, IoT, augmented and virtual reality, micro and nanoelectronics, and cognitive technology. The incentives include a long period for income tax holiday, special corporate income tax of 5% for export enterprises, and enhanced deductions.

Startups

Aside from these devices, startups, particularly those providing digital solutions, are showing up as well to be the next big things for the country's technological landscape.

Rene “Butch” Meily, president of startup incubator IdeaSpace Foundation, Inc. and of the public-private QBO Innovation Hub, noted in a BusinessWorld Insights online forum in May that the digitization of MSMEs opens an opportunity for the country's startups to have the best chances of birthing the country's next unicorn.

Unicorn is defined as a privately-owned startup with a valuation of over $1 billion. Mynt, the operator of electronic wallet GCash, is considered to be the Philippines' first unicorn.

"There are human resource platforms that are promising, but there are also startups that are helping businesses export products. There’s a number of these ideas and companies that are out there that have a lot of potential for growth," Mr. Meily observed. "About 98% of the Phillippine economy is MSMEs. So, if you’re going to find a way to digitize them and to help them export their products on a global scale, you’re going to be a winner."

PHL's own 'Silicon Valley'

Another development the Philippine technology and startup sectors can look forward to are continuing initiatives that intend to further boost innovation in the country, foremost of which is the Innovative Cities program of DTI's Board of Investments, in partnership with the private sector. The program intends to link the local government units, the academe, and the private sector in creating multiple centres of excellence.

With this program, Makati City as the chosen pilot of the program, is aimed to be the country's version of the globally-known Silicon Valley, as innovation and technology-oriented platform OpenGov Asia reported earlier in March. Part of this initiative is the Resilience Innovation Sustainability and Entrepreneurship (RISE) Certification Program, an incubator program offering cash grants, 12-week entrepreneurship training, and a chance to pitch to qualified investors.

"The program should find greater success by involving itself in the Innovative Cities Initiative. On the other hand, the initiative should make a huge example of Makati for the whole country to follow," OpenGov Asia noted.