Egypt’s low cost of living and highly skilled workforce is enabling it to challenge established outsourcing locations such as India.
This has been achieved in a relatively short space of time with the country now hosting global contact and service centres for a long and growing list of organisations, including IT companies such as Microsoft and Oracle, telecommunications companies such as Vodafone and France Telecom and banks such as HSBC.
According to the international research company Ovum, the level of IT outsourcing activity in the UAE has also been increasing steadily over the past five years, attracting companies such as Ericsson, Alcatel-Lucent and Wipro.
But, since the UAE has a narrow labour market and comparatively high wage costs, these facilities predominantly offer specific outsourced IT services to selected organisations within the UAE rather than providing international support facilities and global consumer call centres.
“Factors such as the stability and growth of the Egypt economy; a concentrated pool of talent in Egypt and our historically strong relationship with the Egyptian government have all led to a favourable environment for the technical support of Microsoft Xbox to be located in Egypt,” says Aly Kamal, a spokesman for Microsoft Egypt.
The France Telecom group considers its presence in Egypt to be both long term and strategic. Egypt is the site of one of the company’s leading network service centres for major business customers.
Orange Business Services employs 1,500 engineers in Egypt. In January 2008, the group opened a research and development centre in Cairo, which joins a global network of 18 Orange laboratories.
“Egypt, which debuted in the 2005 Index in 12th place, is now sixth,” according to the AT Kearney Global Services Index 2009. “American IT giants such as IBM and EDS have had operations in Egypt for some time now but companies like Wipro and others are aggressively expanding into Cairo, taking advantage of the availability of low-cost, qualified people.”
Analysts visiting the country today are reporting even more dramatic progress.
“Coming back to Egypt after a couple of years’ absence, I am struck by the country’s positive attitudes. And the contrast with five years ago when I first visited Egypt is like night and day. Then, outsourcing was in its infancy and today there are a host of blue-chip companies that have located here,” says Peter Ryan, a lead analyst at Ovum.
As an outsourcing location, Egypt offers similar value to India in terms of costs but also has a number of unique advantages. These include a high number of graduates seeking work, excellent language skills and a prime geographic location.
“From what I have seen on the call centre side, Egypt and India are roughly equivalent in terms of cost,” says Mr Ryan.
“There is a remarkably high standard of English spoken in Egypt. In my experience, Egypt is probably the most multilingual location in the world. In addition to English, multidimensional French is spoken in the sense that Egyptian staff can cope with European French and North American French, giving contact and support centres a much broader global platform on which to operate. Egypt also offers other languages such as Spanish, Italian and German.”
Egypt is aiming at growing its offshoring industry 10-fold by 2020 when it hopes it will be a US$10 billion (Dh36.73bn) industry.
The country sees itself as the gateway to the Arab world for western companies outsourcing support operations to offshore locations. According to ITIDA, Egypt’s IT development agency, the country is ideally located between Europe, Africa, Asia and the US, occupying a similar time zone to Europe.
But Egypt is not the only country now proving attractive to overseas companies. The Indian services provider HCL has signed a seven-year agreement with Saudi Arabia’s Al Majdouie Groupfor IT outsourcing. The vendor claims it is one of the largest deals it has struck in the kingdom.
However, analysts believe Egypt offers unique advantages, making it an ideal location for outsourcing support services.
“I think the advantages that Egypt has over the UAE and other Middle Eastern countries is a truly scaleable workforce with a huge number of educated people on which to draw,” says Mr Ryan. “According to ITIDA’s latest figures, there are 330,000 graduates a year coming out of Egypt. The outsourcing industry needs skilled people with good language skills. The price points are more effective given the number of graduates available.”
The high level of education and training provided by Egypt is increasingly recognised by global IT and telecoms companies, who are becoming actively involved in the entire process.
The Orange Foundation, part of France Telecom, supports several projects in Egypt as part of its corporate philanthropy activities in the field of education.
“What I would say in terms of helping the labour force develop appropriate skills is that it would be advantageous for companies that are outsourcing to Egypt to get involved and let educational institutions know what is required,” says Mr Ryan.
Industry observers are also impressed with the way Egypt has strategically planned the development of its outsourcing industry, ensuring its growth has been fuelled not only by a steady supply of skilled personnel but also by supporting infrastructure. The Smart Village technology park outside Cairo, for example, spreads over almost 300 hectares. The facility is eventually expected to host more than 500 companies and 100,000 employees.
A facility specifically designed for IT outsourcing and business process outsourcing, two areas in which Egypt hopes to grow, is being constructed in the centre of Cairo. Called Maadi Park, it will provide capacity for about 30,000 employees in 40 buildings.
According to Mr Ryan, the Egyptian government has learned from other countries’ mistakes and avoided building its outsourcing industry so fast that it resulted in increased costs in terms of staff and real estate.
“Egypt has a really strong opportunity to grow its outsourcing industry,” says Mr Ryan. “Egypt is also handling its outsourcing strategy sensibly by not trying to build Rome in a day. It has not built out too fast and there is little danger of it burning out too early.”
Source:http://www.thenational.ae/apps/pbcs.dll/article?AID=/20100725/BUSINESS/707259958/1058&template=columnists
