Egypt  - Readiness for the Networked World                             

Offshore Opportunities

Egypt has become the latest country to jump on the outsourcing business bandwagon. Egypt is pitching to be the next hot-spot for outsourcing, asserting their foreign language skills and low labor costs will put them in the competitive arena with India and eastern Europe (nearshore).

According to several headlines and publications, Egypt’s claim appears strongly convincing:

“Egypt Well Placed as the Next Hot Spot for IT Outsourcing”, Yankee Group, May 2007

“Egypt could become the India of the Middle East”, Offshoring Times, May 2007

“Experts say that Egypt offers a cheaper alternative to rival locations”, IT Week, April 2006

“Egypt touts itself as the next offshore outsourcing hot-spot”, Silicon.com, February 2006

“Egypt can be for Europe what India is to the US”, ZDNet, February 2006

“Emerging Opportunities – Offshore Outsourcing in Egypt”, DataMonitor, February 2005

During a recent study, Yankee Group concluded that Egypt is in fact the next hot spot for IT Outsourcing and business process outsourcing.  Within the report, Yankee Group notes the Egyptian government’s commitment to becoming a competitive force through setting an aggressive and determined goal to attract $1.1 billion of the global outsourcing market by 2010. However it is recognized this will not occur without overcoming significant hurdles.

Similarly, DataMonitor published a white paper further providing analysis on Egypt’s main competitors. Most importantly DataMonitor emphasizes the importance that Egypt must take advantage of what their competitors have learned and evaluate the strengths and weaknesses of each.

The following lists Egypt’s main competitors, starting specifically with India (per the fact that India currently holds over 60% of the market share) and those closest to Egypt based on proximity – North Africa, and Eastern and Central Europe.

India

Strengths

Weaknesses

ü       Market leader.

ü       History and experience in outsourcing.

ü       Availability of quality agents, skilled and educated.

-       Rising wages of agents.

-       Distance between India and other western countries.

-       Unilingual focus on English.

North Africa

Strengths

Weaknesses

ü       Morocco and Tunisia is close in proximity to Western Europe.

ü       Familiarity with French culture and language.

-       Primarily French speaking, non multilingual.

-       Limited to urban locations outside Casablanca.

 Eastern and Central Europe

Strengths

Weaknesses

ü       Strong commercial sophistication

ü       Investor attraction from the west due to use of western goods and services, ability to provide empathy to concerned customers, and political and economic stability within these countries.

-       Tightening of the labor market.

-       Increasing real estate prices.

-       Overall reduced government incentives to potential investors.

Based on DataMonitor’s analysis, investors now have Egypt as an outsourcing option to consider.   Although Egypt offshore outsourcing business is still emerging, it is a viable service choice and opportunity for companies concerned about reducing overhead costs and customer quality.  During selection analysis, investors will conclude Egypt’s as an opportune candidate as they are competitive in all of the following foundational areas that are key to success:

ü    Market Size: Annual growth rate over 50% = 3,775 Agent Positions by 2009.  By 2009, Egypt will exceed other nearshore markets such as Poland and Czech Republic.

ü    Costs: Agent Costs – Less than Central Europe, Canada, Mexico. Note: Except India, minimal differences. Agent Wages – Lower than Canada, Mexico, Poland, and Hungary. Note: Except India, due to India’s large labor pool.

ü    Workforce: Availability – Jobless rate low in Egypt’s call center hub Cairo.  Education – Over 200,000 university graduates a year. Linguistic Skills – Proficient in western languages, accent-neutral. Commercial Sophistication: Accustomed to using same goods and services as western countries. Stability: Egyptian’s known for being cooperative, non-confrontational.

ü    Business Climate: Economy stable and growing. Top management is westernized, multilingual.

ü    IT Focus: Rapidly developing sophisticated telephony network, modern and reliable fixed lines, mobile and internet. Reduced phone rates.

ü    Established Contact Centers established in Egypt:  Exceed, C-3, Raya, Ecco, and Tamima.

To continue with momentum, the Yankee Group recommends the Egyptian government address existing structural and perceptual issues to streamline the growth of the outsourcing market through investment in local infrastructure, promotion of technical education, encouragement to obtain appropriate training and certification, development of  an alternative location for ICT companies in Alexandria, and focus on the Middle Eastern market for business process outsourcing initially.

References:

 “Yankee Group News Release”, May 2007 http://www.yankeegroup.com/press_release_tile14.jsp

 “Emerging Opportunities – Offshore Outsourcing in Egypt”, DataMonitor, February 2005