Africa can seize share of IT outsourcing market

Outsourced IT labour has proved a massive boon to developing countries like India and the Philippines. Can Africa grab a share of this growing and lucrative market? BIANCA WRIGHT describes why experts think it can.

With the rising cost of local production and labour in developed countries like the United States, many companies, especially in the IT arena are looking to the developed world for answers - and finding them. Countries like India have successfully positioned themselves as niche providers of outsourced labour in IT and are reaping the benefits. And, as analysts continue to predict a growth in this type of outsourcing, the opportunity is ripe for other developing countries to tap into this lucrative market. The question is: Can Africa capture a share of the offshore IT market?

US research firm Gartner Ine is predicting that the outsourcing segment will continue to outperform the western European IT services market overall, growing by 3.1 % in 2004, then rising steadily during the next three years to an annual increase of 8% in 2007. Moreover, as a result of global outsourcing trends, Gartner predicts that up to 25% of traditional IT jobs in many developed countries today will be situated in emerging markets by 2010.

The move to offshore outsourcing is spurred on by increasing pressure on companies in the developed world to generate profits and reduce costs. Anton Groom of MBS Outsourcing says there is also a drive to follow the sun, to allow them to offer services 24/7 (24 hours, seven days a week). "It therefore makes sense to have offices located in the three primary time zones," says Groom.

He adds that with a client base expanding globally, it also makes sense to provide clients with a global delivery model. As the developing world gains momentum in creating pools of qualified, skilled talent, outsourcing to these regions becomes more attractive.

FOLLOWING INDIA'S LEAD

India has managed to create a niche for itself in this area, but it has not happened overnight. Amar Vakil, CEO of Lintas, a US-based management-consulting firm, and founder of the Foreign Investment Promotion Council, explains that there are specific factors that have enabled India to position itself in such a manner. These factors are predominantly a skilled workforce and appropriate infrastructure.

"Twenty to 25 years ago, India was an underdeveloped country. There was a brain drain of skilled labour to developed countries, where, for example there was a need for engineers," says Vakil. "Ten to 15 years ago, people like me, with similar backgrounds, decided to move back to India and there was a huge impetus from government to build world class communications networks. Government started dabbling with public-private partnerships, which now, after 10 or so years are proving very effective."

While this may not be easy to replicate, Vakil believes there are lessons to be learned from India and other countries like the Philippines which have attracted a strong outsource base. "The playing field is level. It is not India's game at all," he says. Although India was one of the first to position itself in this way, "there is an opportunity for other countries to tap into this potential".

Where India focused on information technology and software development, African countries wanting to tap into this opportunity will need to look at IP-enabled services.

Everdream founder and vice-president, Lyndon Rive, agrees that Africa can move into this arena. "Third world countries are getting educated enough to offer IT support, making them an untapped resource," he says. Everdream provides hosted IT software applications and services that protect, manage and support personal computers at medium and large organisations.

In fact, Rive says, many companies are moving away from India as the place to outsource, because of the labour churn that is taking place in India. And African countries have a whole lot going for them.

AFRICA'S STRENGTHS

Chief among the strengths of the African continent, says Rive, is the fact that English is really strong. "It is a different accent, but it is well understood. Sometimes Chinese or Indian speakers of English are not so easy to understand," he says. Everdream has had experience working with companies in Costa Rica and Rive stresses that in cross-border transactions the "language barrier is an issue".

Certain African countries are also making progress in positioning themselves as hubs for IT and thus attracting IT business to their shores. Mauritius, for example, is building on a concept similar to Dubai Internet City, with its own Mauritius CyberCity. In South Africa, Cape Town has worked hard to position itself as an IT hub on the continent.

According to Vakil, Ghana has the potential to tap into this market from the perspective that it has had a very stable government for the last 20 years and the workforce is fairly motivated. "For example, New York's parking ticket system is managed from Ghana. The challenge here is that government is not geared to capture this opportunity," says Vakil.