Professional Documents
Culture Documents
INTRODUCTION
The 21st century has been referred to as the age of Information Technology (IT).
Defined as the “collective term for the various technologies involved in processing and
Agenda for the 21st Century). IT is often used interchangeably with the term information and
Stewart (Fortune, 1994) wrote that in 1991, companies spent more on IT than on
industrial and farm machines. Indeed, Information Technology (IT) is emerging to be the
The Philippines earned only $349 million in 2001 from IT-enabled services such as
(PITON) said that the telecommunications here is “more cost-efficient than those of India
which is crucial when you have an offshore operation…” (PDI, October 2002). India is
currently the world’s largest producer of IT services and has the world’s most number of IT
manpower.
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Ellspermann also said that because of the country’s close cultural affinity with the
United States, the world’s largest market for offshore IT services, the Philippines is now
recognized for its work force which has world-class English proficiency. “It puts the
Philippines apart from China and other countries that may be cheaper to operate in, but
maybe not in the long run…” He further cited the Filipinos’ high level of service orientation
and caring nature, which are added values for the country’s call center industry.
(AIM), Dumaguete was top in the Quality of Human Resources category among small cities.
The City now has four large universities, an “anomaly” for a small city with just a little over
The local DTI identified education, together with IT, as the main engine of growth in
Dumaguete City (University Town Development Program of DTI Negros Oriental). This
thrust of the local DTI is borne out of the need to develop local economic factors that would
The City of Dumaguete has recently been promoted by the national government,
particularly the country’s Board of Investments (BOI), as one of the country’s IT investment
destinations. The BusinessWorld reported that the Subic and Clark in Central Luzon, Cebu
and Dumaguete City in the Visayas, have been identified by the BOI as potential hubs for
call center operations because of the abundant supply of quality human resources, good
2003).
This is starting to be realized. Last year, 2004, saw the birth of an IT industry here in
the province of Negros Oriental, with the start of operations of SPI Technologies, a 5 billion
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pesos American business process outsourcing (BPO) firm, in its technology park in Sacsac,
Bacong, seven (7) kilometers from downtown Dumaguete. Some other IT companies in and
To date, there are at least three (3) IT service companies operating in Dumaguete City
and its environs, one is in the process of hiring employees for its operations which will start
this year, while another 2 to 3 IT companies, most probably in the call center business, are
specifically in the Dumaguete City area. If plans do not miscarry, a major IT Park will also
RATIONALE
The Philippines has finally enjoyed a sustainable development in the last few years.
This is brought about by the stable political climate and the absence of major calamities. The
agriculture sector has performed very well, while other sectors of the economy such as
manufacturing and the services sector has contributed greatly to the improving economic
picture. The need of large corporations in highly industrialized countries to save on labor cost
and to earn more profits is driving the fast growth of the information technology (IT) sector
globally. Thus, this industry has contributed greatly to the sustainable development that the
country has enjoyed. This is brought about by the phenomenal growth of the callcenter
industry, one of the “sunshine industries” under the business process outsourcing sector, in
The Visayan region has enjoyed relative peace and order, and is growing very fast in
the last few years. A large part of the growth in the region is brought about by the fast growth
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of tourism, IT, and other economic sectors in neighboring Cebu province. Bohol has been
very successful in its tourism promotion efforts. Bacolod and Iloilo has been rivals in
catching up investments in the Western Visayas region, and both have been very successful
Dumaguete City and the province of Oriental Negros are endowed with natural and
human resources, and is the source of power in the Visayas region. It has also enjoyed a
better peace and order condition compared to its neighbors, and is blessed with a mild
climate the whole year round as it is out of the typhoon belt. Despite these very positive
attributes of Dumaguete City and its environs, it has not enjoyed fast economic growth
But this may soon change. IT companies are starting to locate in Dumaguete City and
its environs because of the presence of high-capacity fiber optic network in the area, in
The proliferation of the IT industry in Dumaguete City and its environs would
workers. It would be very beneficial as it would increase the income of both the local
governments and residents of the area. The researcher has always thought of coming up with
a study that has a great economic impact to his society. This is the reason why the researcher
The world has been transformed several times since the dawn of history. Human
civilization has undergone several revolutions. We passed through the agricultural and
industrial ages in the past two centuries. Toffler detailed that we have entered the information
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age in the 1950s when white-collar workers in America numbered more than the blue-collar
The agricultural age lasted until the late 1800s. During this era, society was
concerned with land acquisition and food production. At this time, lands and estates owners
The industrial age came in the late 1800s and lasted until the 1960s. Technological
advances occurred very rapidly during this age. Mechanization and mass production
characterized the era. Capitalists, or those owning equipment and machineries were the major
power wielders.
Information Technology (IT) brought about the information age. During this age,
human society is becoming more knowledge-driven. People do not anymore build things
with their hands, but with their minds. Education is very important because today’s business
environment needs people who can work with, manipulate and assimilate information and
the worldwide IT industry. IT and the electronics businesses are the fastest growing
industries in the world, and are the largest non-agricultural economic activities in recent
times.
Haag and Keen (1996) stated that in the United States, companies invested over $1
trillion in IT in the last twelve years. Since 1990, American spending on high-tech equipment
has accounted for over 35 percent of US’s economic growth. More people have been
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working in the IT industry than in the automobile industry. And exports of IT and related
services was more than double than that of aircraft, the previous biggest US export.
In the Philippines, IT is far from being the major economic driver. But the country
has gained headway in its goal to become the knowledge center and e-services hub in Asia.
The IT21 Philippine Agenda for the 21st Century states that the country in the 21st
century shall have found its niche among major knowledge centers in the world and become
the leading provider of knowledge-based products and services in the Asia and the Pacific
The documents of the Internet Strategy of the Philippines, or the ISP.COM, states that
in the early part of the 21st century, e-commerce worldwide will be valued at hundreds of
billions of dollars and Internet use will grow tenfold every five years. Both business-to-
vicinity of over a trillion dollars by 2004. To take advantage of this very great opportunity,
commerce growth, and for the country to be able to attract investments in e-commerce
The “Electronic Commerce Act of the Republic of the Philippines” states that the
State recognizes the vital role of information and communications technology (ICT) towards
nation building, and will thus create an environment conducive to the development of ICT
Republic Act 9239, otherwise known as the “Optical Media Act of the Philippines”,
importation and exportation of optical media in all forms (Optical Media Act of the
Philippines, 2004).
Republic Act No. 8293 otherwise known as “The Intellectual Property Code of 1997”
took effect on January 1, 1998. Under the code, provisions on trademark, the rights to a
mark, which includes trademarks and service marks, are acquired by registration (Intellectual
Arroyo states that her administration, together with the private sector, shall develop the local
ICT industry as an engine of economic growth and an instrument for poverty reduction. ICT
shall bridge the digital divide among regions and communities in the country, narrow the gap
between rich and poor, and shall be utilized to pursue accessible and democratic governance.
Among the e-services provided by the country to local and multinational companies are
design. The end result is the development of the country into becoming the e-services hub of
Asia (Medium Term Philippine Development Plan, 2002 of President Gloria Arroyo).
Gartner Dataquest projects that almost fifty percent of Fortune 1000 global
corporations will outsource their IT operations to external service providers (ESPs). It further
states that in the United States, financial firms lead the switch to outsourcing. In 2002,
Dataquest estimates that financial firms worldwide spent US $41.3 billion for business
process outsourcing (BPO). That was a 9.3 percent increase over BPO spending in 2001
(www2.cio.com).
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The callcentres.net states that the call center industries in India, Philippines and
China are the “most exciting” in the Asia-Pacific region. The Philippine call center industry
is expected to grow at a rate of 100% in the near term. Outsourcing industry here, on the
other hand, is also growing explosively due to high demand especially from companies in the
United States and Great Britain. Philippine call centers are among the cheapest to operate.
English proficiency of Filipinos, on the other hand, is among the best in the whole world
(www.callcentres.net) .
The Philippine IT Information Network (PITON) website states that the Philippines
has the highest growth potential in call center services in the next few years to come. This is
because of the Filipinos’ familiarity with Western business practices and accounting and
legal systems of the United States. The expenditure for offshore outsourcing is expected to
grow more than triple at the current US $5.6 billion to US $17.6 billion in 2005 (www.piton-
global.com).
The 2001 DTI Annual Report listed IT and IT-enabled services first among DTI’s ten
priority revenue streams. These revenue streams are economic sectors chosen for their
competitiveness and growth potential in the coming years (2001 DTI Annual Report). The
call center industry in the Philippines is expected to overtake India’s in 2008 as it is expected
to earn $3.6 billion against the latter’s $3.3-3.4 billion three years from now (PDI, February
18, 2005).
The local DTI document entitled “Negros Oriental: Unitown Development Thru ICT”
states that the main driver of the local economy of Dumaguete are the schools and
universities inside the city. The city is therefore known as a center of intellectual
Cebu which has export processing zones (EPZs). The document details that the DTI shall
mold the province, from its traditional role of supplier of quality workforce for the nation,
into a place which can generate ICT investments in the long term (Negros Oriental: Unitown
Development Thru ICT formulated by the Negros Oriental Department of Trade and
Industry).
The thrust of the local DTI is borne out of the need to develop local economic factors
that would create more value and viable industries in the global context. A niche, which
became the unique selling proposition (USP) for the province of Negros Oriental was
identified, taking into account the province’s strengths, opportunities and threats. The higher
education industry was seen as the most relevant because of the following factors: global
trend for ICT and knowledge workers, the magnitude of contribution of the sector to the local
economy, and prospects that it presents to the entire province in terms of investments and job
generation.
The presence of high quality telecommunications is one of the very important factors
that would help the flourishing of the IT sector in an area. Dumaguete City and its environs
are surrounded with high capacity fiber optics network with a capacity of 320 gigabits per
second (Gbps). This capacity would translate to 4.5 million high quality data and voice lines
– a capacity which can accommodate five million call center agents. The telecommunications
requirement of the IT hub being developed in Dumaguete City and its environs are being
The investment climate of the province would also affect the success of the thrust of
the DTI to generate investments in the ICT sector. In her thesis, Tejero (1997) found out,
moderately attractive.
2. Most investors prefer to invest in the City of Dumaguete, the capital of Negros
Oriental.
3. Some of the problems disclosed by the investors which can hamper the generation of
business permits, high taxes and poor direction towards generating more investments.
Tejero’s thesis, however, discounts the fact that the whole of Negros Oriental has been
included as one of the country’s economic zones or ecozones identified under “The Special
Economic Zone Act of 1995.” Under the law, investment incentives are given to ecozone
province, they are entitled to incentives enumerated in the “Guidelines for the Establishment
The following sections serve as models for the discussion in this thesis.
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Silicon Valley: The World’s Foremost IT Zone. Formerly called the “Valley of Heart’s
Delight” when fruit orchards predominated, Silicon Valley radiates outward from
Stanford University to the adjacent cities of Palo Alto and Menlo Park; northwest to
Redwood City and San Carlos; southeast to Los Altos, Mountain View, Sunnyvale,
Cupertino, Santa Clara, Campbell and San Jose, and is gradually expanding to Alviso,
Milpitas and Morgan Hill. It is contained by the San Francisco Bay on the east, Santa
Cruz Mountains on the west and the Coast Range to the southeast.
Semiconductor chips, made of silicon, are the principal product of the local high-tech
with numerous service and supplier firms, are clustered in the area. The valley contains the
densest concentration of innovative industry that exists anywhere in the world, including
lasers, fiber optics, robotics, medical instrumentation, magnetic recording, and educational
and consumer electronics. Some are branches or subsidiaries of bigger corporations that felt
obliged to establish research facilities in the area, even though their headquarters may be
located elsewhere. Most of the new industry is home grown, however (Tajnai, 2001).
Bangalore: The Silicon Valley of India. Situated at an altitude of 920 meters above sea
level, Bangalore is the principal administrative, cultural, commercial and industrial center of
the state of Karnataka. The city, which is spread over an area of 2190 square kilometers,
enjoys a pleasant climate throughout the year. Its tree-lined streets and abundant greenery
have led its being called the 'Garden City' of India. However, since local entrepreneurs and
the technology giant Texas Instruments discovered its potential as a high-tech city in the
early 1980s, Bangalore has seen a major technology boom. It is now home to more than 250
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high-tech companies, including homegrown giants like Wipro and Infosys. Consequently,
Bangalore poses many advantages for IT companies, some of which are readily
As of March 2001, there are 64 telephone exchanges and 60,000 Internet connections
in Bangalore. The Software Technology Parks of India (STPI) in Bangalore was started by
has a microwave network with 140 radios providing services to about 400 customer projects.
Nortel, one of the major telecommunications equipment supplier in the world, has
located its hub in STPI - Bangalore since 1997. Frame Relay, asynchronous transfer mode
(ATM), integrated services digital networks (ISDN), very small aperture terminals (VSAT),
fiber optics, microwave, and a host of other technologies, are being used in the STPI.
The entire STPI system is run on intranet-based process, meeting ISO 9001 standards.
On the Internet, STPI maintains a very healthy quality of service and has touched 100
customers as of April 30, 2000. Today STPI counts among the premier and oldest ISPs in
India.
The bandwidth operated from STPI - Bangalore is about 28 Mbps and it is likely to
increase to about 48 Mbps shortly. They have 18 carriers to multiple countries across the
world.
A unique thing about STPI - Bangalore is the presence of a large Earth Station facility
and VSAT Hub of ERNET. This VSAT network is connecting 125 education and research
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institutions across the country. This is the only facility in the country which has an
between Bangalore and Mumbai to carry services using optical fiber media and STPI is also
Eastwood Dreams. Eastwood City, located in Libis, Quezon City, is a sprawling 15-hectare
complex that boasts of being the first IT ecozone in the country. Accorded special status by
the Philippine Economic Zone Authority (PEZA), it has attracted major players in the IT
industry, both local and international. One third of the space is dedicated to office space for
the technology-oriented companies that bestow on it the title of IT ecozone. This area is
made up of Citibank Square, Eastwood Corporate Plaza, IBM Plaza, Cyber One,
Technoplaza One, and a couple more planned buildings. Over 6,000 people work in
Eastwood, and it truly is a city that never sleeps, as it is the base of operations of several call
centers.
Another third of Eastwood City is dedicated to restaurants and shopping centers. City
Walk takes up the bulk of this space, followed by the Home and Lifestyle Center and some
Finally, the condominium row takes up the last third. These are upscale living
The developers of Eastwood City made great pains to woo anchor tenants, big names
like IBM, Citibank, Canon, and Trend Micro. Just like you need well-known brand names in
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a mall, so goes for an IT park as well. They lend credibility to the project and attract other
Eastwood City also capitalized on the call center boom. In a way it was a matter of
being in the right place at the right time. With DTI heavily pushing for call centers early on,
Metro Cebu: An Emerging IT Hub of Southeast Asia. Ready-to-use IT facilities were put
up in Cebu to attract foreign investors. One of these is the 24-hectare Asiatown IT Park built
by Ayala Corporation. As an IT special economic zone, companies located there are granted
tax holidays. It was provided with world-class infrastructure and facilities, including high-
speed Internet access and offices for rent. Some of the companies that have located in the
There are a total of 17 Internet service providers (ISPs) operating in Metro Cebu.
Most of them are small and have to compete with the large telecommunication giants such as
Globe and PLDT, and with nationally operating ISPs as Sky Internet and Mosaic
Communications.
Complaints about quality of Internet services are widespread. This includes slow
speed, inability to dial in, and very poor after-sales service. Broadband Internet is one of the
channels of data over a single communications medium, typically using some form of
frequency or wave division multiplexing. This includes, for example, digital subscriber line
(DSL), cable modem or satellite. It is targeted for business users, and is relatively expensive.
links the academe, research, and government institutions through a nationwide broadband
3. High quality human resources supplied by four universities and four colleges
4. Has one of the highest hiring rate for the call center industry in the Philippines
-Less traffic
2. Transportation infrastructure and real estate are not as developed as metro cities
6. Metro areas are given priority when it comes to power supply, even though the
Theoretical Framework
This study is based upon the theory presented by John Naisbitt in his book
“Megatrends” and corroborated by Alvin Toffler in his book “The Third Wave” which states
that the world is now moving from the industrial to the information age. Naisbitt’s book
states that wealth nowadays means information and knowledge while in the past, it was
capital and tangible things. Information workers such as teachers, lawyers, accountants, and
other professionals, now make up the biggest chunk of the American labor force, where
before it was the laborers. The satellite also collapsed the world into becoming a global
village.
Toffler states that more and more workers are now moving away from offices, and
into their homes. This is caused by the skyrocketing costs of real estate properties, parking
spaces, and of maintaining roads and highways (which are already clogged). With
workstations provided with videoconferencing facilities, fax machine, and computers, the
possibility of working away from offices in major urban centers is greatly enhanced. The
reduction of cost of long-distance transmission to near zero per signal also allows “distance-
independent” communication.
Naisbitt further added that cities, states and companies prepared to take advantage of
the great opportunities would be in a position to reap the rewards that this new era brings.
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workers. Every year we export workers to the Middle East, the United States, Europe, and
many other countries. It is also not uncommon to find Filipino managers in top positions in
multinational corporations around the world. Studies conducted in 1999 and 2000 showed
that the Philippines is number one in the whole world when it comes to quality and
Dumaguete City is among the country’s top producers of quality human resources. It
topped the survey of the Asian Institute of Management (AIM) for competitiveness of small
Philippine cities in the area of availability of quality human resources. That is why the DTI is
promoting this place as a destination for IT investments. The success of this thrust to
generate investments in the IT sector, however, is greatly affected by the general investment
Aside from its abundant human resources, Dumaguete City has a world-class fiber
optics backbone comparable to the best of the world, and even better than those installed in
Bangalore, India. This fiber optic backbone has a capacity of 320 gigabits per second, which
translates to 4.5 million high quality data and voice lines – a capacity which can
accommodate five million call center agents. It also has quadruple redundant connectivity, as
Dumaguete is a landing site for the fiber optic backbone networks of Globe
service businesses need not fear outages caused by a downed cable (Philippine Business
Magazine, 2004).
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The AIM “Philippine Cities Competitiveness Ranking Project 2002” ranked metro,
medium and small cities in the Philippines according to seven (7) drivers of competitiveness.
These drivers are linkages and accessibility, dynamism of local economy, quality of life, cost
1. The capacity of the city to provide and environment that nurtures the dynamism of its
Thus, the study is also a good indicator of the general investment climate of the City
In the AIM study, it was also found out that the city has the highest cost of doing
business among small cities included in the survey. Over all, the city is 9th among 12 small
This study examines the readiness of the City of Dumaguete to take advantage of the
many opportunities that the 21st century – the information age – brings.
For a place to become an IT hub, there are certain conditions or factors that has to be
present prior to the development of its IT industry. These factors are policy environment,
by the government, is an important factor for the development of the IT industry in a country.
Openness to trade in ICT products. A country supporting the free trade mechanism will have
easier access to IT products than a country that is more reluctant to free trade.
Even if a place satisfies all these factors and is ready for IT investments, getting all
those investments and be successful in promotion would again depend on the aggressiveness
of the leaders. The investment promotion process involves many steps. First of all, the
leaders must have contact with investors who become interested after promotional activities.
Meetings are then arranged with these prospective investors, then inspection of the
investment site by the prospective investor will occur. If satisfied, the investor will then
apply to proper authorities to invest in the place. If approved, the investment will then form
part of the achievement of the goals of the investment promotion center of the area.
These steps are detailed in a diagram on page 24. In the diagram, the assumption is
that out of 10,000 contacts with investors generated after promotional activities, there are
only 10 new investments generated creating 1,000 jobs. It shows that after each step, only ten
percent (10%) of what was generated in the previous step is carried on to the next level of the
investment promotion process. That means that after each step, there is 90% diminish in the
Conceptual framework
The Dumaguete City IT environment involves several sectors. This includes the
government, academe, business sector, local investors, IT service providers, and others in the
society that do not belong to the previous five sectors. These sectors are the stakeholders of
the Dumaguete City environment, and only with their concerted efforts can the IT industry
here flourish. This study attempts to ascertain whether the government, both local and
national, is implementing policies conducive to the development of the local IT industry, and
whether the respondents perceive them to be seriously supporting the development of the
latter. This study will also find out, through the respondents, if the government is serious in
implementing laws and policies supporting the development of national and local IT
industry.
Human resources are the very basis for the development of an IT industry. Whether
the academe is implementing policies and programs supportive to the needs of the industry is
very vital to the health and competitiveness of the emerging IT industry of Dumaguete City.
The business sector is user of IT services and products. Some of them will be
cooperation is very vital to the development and health of the emerging IT industry in
Dumaguete.
Local investors provide the funds to put up IT businesses and link them to domestic
and international markets. They can also provide the technologies and logistics needed by the
industry.