Egypt poised to loosen India’s grip on huge global outsourcing market

Dubai: Egypt is well on its way to establishing itself as an important player in the lucrative and fast-growing offshore outsourcing market. But it must take some steps to facilitate its ascendance in this market if it is to become the India of the Middle East, says a Yankee Group report.

India continues to be an outsourcing behemoth, leading the offshore outsourcing market both in IT outsourcing and business process outsourcing (BPO).

Currently, India holds about 60 per cent of the overall offshore market, with revenue climbing to more than $6 billion last year in the BPO sector alone, and $22 billion in overall revenue.

“Egypt, a relatively new entrant to this segment, has some unique advantages as well as some structural and perceptual problems which the government must address to facilitate the ascendance of this market if it wants to reap the economic benefits of outsourcing opportunities,” says Tony Marson, Yankee Group senior analyst and report co-author.

Ambitious plan

The Egyptian government has set an ambitious target for the country to reach $1.1 billion of the global outsourcing market by 2010, quadrupling from its 2005 revenue.

Companies such as Cisco, Google, IBM, Microsoft, Oracle and Orange Business Services are already exploiting Egypt’s IT talent pool.

Mindy Blodgett, Yankee Group analyst says if Egypt can see where India has stumbled, perhaps it can head off some of the same obstacles India is facing today in trying to keep pace with the fast-growing outsourcing demand. Both Egypt and India allow high levels of foreign ownership of ICT companies. The allowed foreign ownership level in India is 75 per cent, while in Egypt there is no limit. In both countries, this will have a positive effect on GDP.

“Although India is far ahead of Egypt in terms of the development of IT service outsourcing, the basic indicators suggest that Egypt’s ICT infrastructure is far ahead of India’s ICT infrastructure. The penetration of both internet users and telephone subscribers in Egypt is three times higher than in India. Egypt will need to use this significant advantage to accelerate its development in the IT services market,” says Marson. India is also grappling with several thorny labour and workforce issues.

Adding to the workforce challenges are the many infrastructure woes plaguing India like the poorly planned roads in the leading outsourcing centres.

New horizons

The Egyptian IT industry is between 15 and 20 years behind India in its development cycle and its outsourcing IT services. However, there is growing interest from Middle Eastern countries in outsourcing BPO to Egypt instead of India or Europe; this is particularly the case in the GCC.

According to the data by Mediterranean Investment Project Observatory, the GCC accounts for 29 per cent of all of Egypt’s projects by value – the largest group of newly announced investment projects.

The Egyptian government forecasts that foreign direct investment by year-end will reach $8 billion, an increase of 31 per cent.

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