Tuesday, April 10, 2007

African countries vie for outsourcing business

Though South Africa leads the effort to expand business processing outsourcing (BPO) on the continent, other countries are also vying to attract foreign business.

There are common elements in the African countries' pitch: language skills, time zone/geographical location and an underemployed workforce with resulting low labor costs.

However, the only real competitor to South Africa in the BPO services market is Egypt, according to Albert Rossouw, chief executive of BPO consultancy Strategy360 in Cape Town. The big difference is the level of government support and the clarity of the country's BPO proposition, he said.

Egypt presently has 4,000 agent positions and is projected to grow to 12,000 in 2012, according to Peter Ryan, a technology analyst with consultancy Datamonitor PLC.

Egypt's strength includes scalability: With a population of 75 million, the industry has a huge talent to pool to source from, Ryan said. Its language quality is superb, and it has an array of languages on offer -- including Arabic, English and French -- and thus one call center can serve multiple destinations. Cheaper telecom rates also give Egypt an advantage over South Africa.

Otherwise, Kenya is in a unique position as an alternative to South Africa, according to Ryan. Within the last 12 months several outsourcing companies have been visiting Kenya, with a view toward locating facilities there.

Kenya boasts financial services companies, as well as relatively strong travel, tourism and telecommunications sectors. Kenya in 2006 had about 4,000 agent positions and Ryan projects that Kenya's agent positions will increase to 12,000 by 2012, given current growth rates.

Its investment in infrastructure and its stable business environment also have potential for fuelling the BPO sector. In addition, with a population of 30 million, Kenya has a big labor pool to draw from, compared to other destinations on the continent such as Botswana and Mauritius.

Other African countries, such as Ghana, are also working to have a BPO presence.

In November 2005, Ghana commissioned Hewitt Associates of India to probe the country's key strengths and weaknesses in the global services sector.

The analysis of Ghana, as benchmarked against 11 established and emerging offshore international and regional destinations, showed that the country scored high on the size of its English-speaking population and competitive labor costs. However, it ranked poorly on the quality of infrastructure and demonstrated government focus.

Overall, there is significant potential for Ghana to scale up offshoring activities and position itself in niche markets of the BPO sector. The Hewitt study recommended that the key vertical market niches Ghana should focus on include medical transcription, coding, billing, data processing and customer contact processes.

Hewitt recommended that Ghana sell itself as a primary offshoring hub for Europe and the U.S.; as a third-party or subcontracting hub for more established offshoring destinations; as a third-party hub to South Africa in particular; and as a regional hub to West Africa. The government of Ghana subsequently requested the World Bank Group's support in developing an IT-enabled services sector and was given a $40 million credit.

Link to African countries vie for outsourcing business | InfoWorld | News | 2007-04-09 | By John Yarney, IDG News Service