Friday, November 25, 2005

X-Factors

Rational Technology for November 25, 2005

If you're investing your money someplace, there are two ways to go about deciding where. You can play it safe and take it to where everyone else has already invested. In this way, you can't go too far wrong with your decision. On the downside, the returns are likely to be lower precisely because costs are generally higher.

On the other hand, you can take a calculated risk and invest in a place where the market isn't quite ready yet and beat everyone else to the punch. It's a risk because it might happen, or it might not. The trick is to find the place with all the right factors which can converge given the right impetus.

Which is the right decision? Well, they both are. It's primarily a matter of understanding what your strengths are and how much risk you can absorb. Savvy investors with enough latitude will probably attempt for a mix of both: one for stability, and the other for its promise of higher returns.

These decisions run along the same lines that outsourcing companies are trying to make. The safe, established choices are Metro Manila and Cebu. The risky choices are all the other cities vying for a piece of the outsourcing pie, Dumaguete included.

At first glance, it's a terrible mismatch. How can a small town like Dumaguete compete with a big metropolis like Metro Manila? The answers to this is oft-repeated in our marketing campaigns. In summary: that we are a university town, that we have the fiber-optic capacity, that our cost of doing business is lower, and that our quality of life is good.

But is this all there is? We bank on our uniqueness as a university town, but when you get to the numbers, what we really have to offer in this regard is the density of a student population versus the population at large. Realize that our college student population is dwarfed by other bigger cities. In the end, the absolute number, not the density, is what outsourcing companies look for. Furthermore, most would only be too happy to be able to hire our graduates for employment in their existing facilities, without having to commit to an actual investment in the city.

In the same manner, lower cost of business and quality of life are relative and transient measures. There are cities which measure better than Dumaguete in these criteria. Likewise, as demand picks up, our own metrics will also change.

Our fiber-optic capacity is probably our main differentiator from the other runners-up in the outsourcing survey rankings. This is thanks primarily to Mr. Fred Dael's fortuitous decisions to land the cables here during his tenure as president of Islacom. Other cities are not likely to catch up in this regard, because this is capability that takes time and money to build.

So again, the question: is this all there is? If it is, then our window of opportunity is very small, and it won't be long before other cities start to catch up. On the other hand, I think this may not yet be the complete picture. There are three other factors that can be made to work in our favor. Allow me to explain briefly:

1) A returning talent pool. Outsourcing companies place Metro Manila and Cebu head over shoulders above other cities partly because of their extremely large populations from which they can select candidates. But this is very static thinking. One might ask: of the thousands of employees that they hire, how many hail from the provinces? How many will return to the provinces once the first movers present the opportunity? Remember that hometown connections run deep in the Philippines and the lure of returning is strong. Is this a significant factor? It certainly bears some looking into.

2) Old money. Contrary to the impressions painted by the contrast of conspicuous consumption in the metropolises against the no-nonsense laid-back attitude of the provinces, it's not true that there's no money here. There is, it's just that people here are a bit more cautious when it comes spending. Dumaguete, for example, boasts of large family enterprises in construction, transportation, and trading, not to mention the landed gentry. I would like to believe that they would rather invest their profits back into the city once the catalysts are in place.

3) Expanding horizons with neighboring towns and cities. I confess, being based in Dumaguete, my language tends to be a bit Dumaguete-centric. But deep down, I know that Dumaguete alone doesn't complete the picture once outsourcing goes into full swing. Given our infrastructure, it's not hard to expand outwards to include Valencia, Sibulan, Bais, Bacong, Dauin, and all other towns in between.

Even if it's not for outsourcing as yet, there are essential services that they can provide, such as housing, recreation, as well as an expanded population base from which to get candidates.

And really, why limit it to towns in Negros Oriental alone? If Siquijor and Santander (technically part of Cebu but closer to Negros) have something to contribute, then they should be part of the bigger picture.

These factors don't necessarily make a good fit into the capsulize marketing message that we send out, but I do believe that they play an important role nonetheless.

Can you think of more? Drop me a note!

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