Egypt: Outsourcing Champion
Oxford Business Group
The country was recently awarded the prize for best outsourcing destination by the British National Outsourcing Association (NOA). This comes as much needed encouragement, with the government trying to attract more investment to the sector at a time of international economic gloom.
Hazem Abdel-Azim, CEO of the Information Technology Industry Development Agency (ITIDA), who received the prize in the name of the Egyptian government, stated that it was "a source of pride for the Egyptian communications and information technology sector", local media reported.
Similarly, other rankings and reports have singled out Egypt among emerging IT services countries. A recent study by the Yankee Group, a US-based consultancy firm, compared several Middle Eastern countries' base for outsourcing services, concluding that Egypt "has the strongest position in the outsourcing market."
The report praised Egypt's IT services against those of countries such as the United Arab Emirates, Oman, Bahrain, Jordan and the Kingdom of Saudi Arabia, and put Egypt on equal footing with India and China, stating that Egypt had a huge advantage in terms of the versatility of its language skills.
"The country's multilingual capabilities make Egypt attractive to Europe-based countries", the report said. "By contrast, China does not have the same level of comfort with Western culture and traditions as Egypt. India's bailiwick is its strong English-speaking workforce, which works well for US-based and UK-based companies... but the lack of other languages is a disadvantage in India when it comes to EU-based countries."
These assessments reflect the government's efforts in recent years to attract investment and develop human resources to work in the outsourcing and offshoring sector. Egypt's IT exports sector has attracted local and foreign investments worth more than $8bn over the past three years according to ITIDA.
In a recent interview with OBG, Egyptian Minister of Communications and IT Tarek Kamel stated that the country's IT services exports were currently worth $700m, and that he expected this figure to reach $1.1bn by 2010.
"Egypt is appearing more and more in the international arena of IT services," he told OBG. "We help train the talent pool and provide low cost infrastructure and access to well equipped space. We will continue to do this."
In a bid to expand the attractiveness of its IT sector and create more room for foreign companies, the country is planning to open bids to build a new outsourcing business park in the Southern Cairo suburb of Maadi. The project will involve the construction of 30 to 40 technological facilities that will cater to Egyptian, Arab and international firms focusing on IT services, local media reported. Furthermore, the Yankee Group report also noted a deal that UK-based company SpinVox has signed to establish a business center in Alexandria.
Egypt will nonetheless face some challenges if it is to increase revenue from this sector. The Yankee Group report reckons that Egypt needs to upgrade some infrastructure as well as reverse a negative opinion about its level of business risk. "Egypt faces some hurdles, including outdated communications and transportation infrastructure, and the perception-especially in the United States-that it is a risky place to do work", the report stated.
The future of the sector also depends on how fast the government and the private sector can train its workers to join the country's growing IT force. "It's a question of the speed at which the country can educate the pool of talent," Adel Danish, chairman of Xceed, Egypt's biggest call centre, told OBG. "Human resources are the main challenge in Egypt. But the good thing is the government is aware of it and taking the right actions."
The country is also hoping that the global slowdown triggered by the credit crunch, which is affecting US and European economies, will not deter the growth of its outsourcing sector. As European and US-based companies represent the majority of Egypt's customers, a slowing in consumption might curtail the demand for support services from Egypt.
"It will be interesting to see what happens", Danish told OBG. "Some people believe the recession will make companies cut costs, and so outsource even more services to lower-cost countries like Egypt."