Outsourcing may be a taboo word in much of the developed world, but for places like Egypt it spells possibility. Tucked in the corners of two continents, Egypt has become the destination of choice for high-skilled jobs, particularly in information technology (IT) and communications.
Looking to maintain their own competitive advantages, firms are seeking suppliers with the best resources, lowest labour costs and highest potential. According to research firm AT Kearney, Egypt ranks 13 on the list of the most attractive destinations for outsourcing and is the most attractive in the Middle East/North Africa (MENA) region.
A major factor in this is the development of high-end technology “business parks” surrounding the capital, including “Smart Village” located in the City Stars complex in the north-eastern suburb of Nasr City, and “Smart Village 2,” to be developed in the south-eastern suburb of Maadi. Demand is high in all locations.
“Three years ago when our operation started, we were considering Smart Village as an option,” explains Yasser Radwan, the vice president of Customer Services Operations at Orange Business Services (OBS). A venture between France Telecom and Orange, OBS has both a technical support centre and a research and development centre in Cairo. “But we had to wait 12 months to get the facility we needed, as demand is very high in the Village; this never worked for us. So our second option was City Stars, which satisfied our infrastructure and physical size needs, and it was available immediately.”
Even India — considered the birthplace of IT outsourcing — has seen giants such as Wipro and Satyam set up shop in Egypt.
“In search of good, quality manpower, we found that Egypt has a large population with a high number of graduates with good computer skills,” says Virender Aggarwal, Satyam’s director and senior vice president for Asia and Middle East Africa regions. “[Egypt] can also serve as a good market for Europe, Africa and the Middle East because of its multilingual capabilities.”
The growth in outsourcing is good news in terms of job opportunities. Smart Village, which opened for businesses in 2001, expects to host 80,000 employees by 2014, more than six times the current number. The first phase of Smart Village 2 is due to be completed by the beginning of 2009; officials anticipate that it will host 100,000 employees by 2012.
Counting seats is easy; estimating the actual size of the outsourcing market is more difficult. The Egyptian government gauges the market at $450 million [USD]. Business Monitor, an independent online publisher of business information, says the market is $899 million. Wael Amin, president and founder of ITWorx, the biggest local outsourcer for programming and software design, believes the market stands between $500 million and $1 billion dollars.
That, according to Amin, “the current law only looks at products and commodities, not services,” helps to explain the discrepancy between official figures and outside estimates. This lack of regulation has advantages and disadvantages.
“The advantage is that it is a lot easier to export services for companies that slip under the radar,” Amin notes, “but more difficult to track trends, which affects marketing activities and sector surveys.”
Regardless of which numbers are used, the outsourcing market is a highly fragmented one. IT, communication and call centre services take precedence with names such as OBS, Xceed and Vodafone call centres leading the pack. Software outsourcers like Microsoft and Oracle come in a solid second. The growth of the outsourcing market has been huge, with a 20 percent increase in IT and call centre market operations recorded in 2007.
However, other less-global outsourcing sectors have also achieved considerable success and recognition in their respective markets. Speed Spend provides office supplies using a web-based business model that allows tenants at a business park like Smart Village to purchase as a single entity, ensuring bulk rates. The company’s rapid growth caught the eye of Lyreco, a U.K.-based office supplies expert, which in 2007 acquired 15 percent of Speed Send in 2007. Valeo, a French manufacturer of spare car parts, has also commenced operations in Smart Village to feed the growing automotive sector.