EGYPT. Despite the global recession, and some would argue because of it, outsourcing continues to be a growing business. The world services outsourcing market was worth US$930 billion in 2006 and will grow to US$1,430 billion by end 2009, according to a study by global growth consultancy Frost & Sullivan.

Global outsourcing analyst EquaTerra’s research claims that the demand for information technology (IT) services and business process outsourcing (BPO) is increasing and is especially strong in the Europe, Middle East and Asia (EMEA) markets.

Gateway to Europe and Middle East

Established outsourcing destinations like India and China as well as several second-level outsourcing players like Russia, Ireland, the Philippines, Malaysia and Israel are moving away from recession-hit North American markets and seeking business in the European and Middle Eastern region.

Egypt, with its growing ICT infrastructure, cost-effective services, large talent pool and open business environment, is rapidly positioning itself as the gateway into the Middle Eastern and European continental markets. In fact, Egypt’s attractiveness as an outsourcing destination has grown in recent years along with an impressive development of its ICT infrastructure.

The Egyptian ICT segment has maintained a 20% growth rate and attracted local and foreign investments of more than US$8 billion over the past three years.  AT Kearney ranked Egypt as 13th in providing IT offshore services worldwide and the country was recently listed in Gartner's Top 30 global outsourcing locations study. The National Outsourcing Association (NOA) gave recognition to Egypt’s growing status as a global outsourcing location when it was named Offshoring Destination of the Year in 2008.

The Egyptian government has made the development of the industry a major priority and set up the Information Technology Industry Development Agency (ITIDA) to promote ICT in the country with a focus on the outsourcing industry.

Seeking Indian partnership

ITIDA representatives have often mentioned that Egypt has modelled its ICT development on the growth of the Indian outsourcing industry, taking advantage of some inherent common characteristics like demography, education and entrepreneurship. In fact, Egypt has strategically positioned itself as a serious outsourcing partner to help established players like India to effectively tap into the rapidly growing outsourcing demand from Europe and the Middle East.

ITIDA has continuously worked at improving collaborations between India and Egypt. A memorandum of understanding (MoU) was signed with NASSCOM to cement bilateral ICT relations between the countries and letters of intent have been signed with three of India’s top five IT-BPO companies demonstrating Egypt’s keen interest in partnering with India. In a sense, this takes forward a long-standing business relationship shared by the two countries. Indian FDI in Egypt stands at US$800 million and is distributed over 200 Egyptian companies.

Supportive policy environment

Egypt’s ICT industry is widely appreciated for its deregulated and privatised structure, which has been made possible by visionary policy decisions and a highly supportive government. The official target for Egypt’s global outsourcing market is to reach revenues of US$1.1 billion by 2010, over four times the 2005 figure. The government has worked systematically to develop an outsourcing-friendly infrastructure.

Nurturing the talent pool

Today, Egypt has a relatively large and rapidly growing pool of IT professionals, whose multilingual abilities are a distinct advantage in transacting business with global clients. It has an annual graduate pool of over 330,000 graduates and about 20,000 of these are in computing and engineering. Many professionals not only speak fluent English and Arabic but also German, French, Italian and Spanish.

The government has put in place many initiatives to cultivate the talent pool. The Information Technology Institute (ITI) in Cairo was set up by the government in 1993 and provides specialised software development programs to fresh graduates and professional training programmes and IT courses for the Egyptian Government, ministries, and local decision support centres. A corresponding private sector initiative supported by leading ICT companies like Cisco, HP, IBM, Intel and Microsoft called the Egyptian Education Initiative (EduEgypt) works at improving ICT education as well. In addition to that, Egypt now imparts ICT training to all students at undergraduate level, irrespective of the degree they are pursuing.

Infrastructure is key

Multinational corporations view infrastructure as the first priority when looking at offshoring destinations. The Egyptian government has invested heavily to create world-class facilities. Through public-private partnership, the Smart Village in Cairo was created. It is a specialised, modern business park spread over 600 acres and houses over 100 companies with big names like Ericsson, HSBC, HP, Orange, Teleperformance, SQS, and Vodafone alongside several Egyptian companies. The park boasts amenities like fibre optic network, multi-source power supply, district cooling and heating redundant network plan, in addition to community facilities and housing. Over 13,000 professionals work here and the number will go up to 40,000 by 2014. Cairo’s second business park—the Maadi Contact Center Park— is under construction and will house 45,000 employees. Egypt also boasts some of the world’s lowest telecommunication costs with ready access to VoIP at competitive global Internet rates.

Safe business environment

Large corporations are careful about sharing confidential and highly sensitive data and need to trust their service providers implicitly. The Egyptian government has worked to set up intellectual property (IP) and piracy legislation to make Egypt a safe environment for corporations to outsource their business functions to.

For instance, in Egypt, the government has approved deals with vendors since the early 2000s to provide legitimate software for government offices and educational institutions, causing the software piracy rate to drop three points to 60% in 2007, a full percentage point below the global median, according to the fifth annual BSA and IDC Global Software Piracy Study. This was achieved by the large-scale efforts made by the government to create awareness about piracy and IP issues through seminars, workshops and training sessions across the country.

Egypt’s Ministry of Communication and Information Technology’s (MCIT) also reformed the Copyright Law and introduced a new Intellectual Property Law in June 2002. The new IP Law addresses the major IP rights, encompassing patents, integrated circuit designs, trade secrets, trademarks and geographical indications, industrial designs, copyrights and plant variety rights. It brought Egyptian legislation in this area up to speed with global levels and followed requirements laid out by the World Trade Organization Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs). This move created immense positive feeling about Egypt worldwide and indicated the country’s willingness to modernize and change with the times.

Looking ahead

While location, IP, talent and infrastructure are areas where Egypt has gained positive mindshare, there are areas where laws need to be rationalized and systems simplified. Simpler access to land for development, improved access to finance for small and medium businesses, and reduced red tape and bureaucracy are some areas where pro-active policy steps need to be taken.

Outsourcing to Egypt is 20% cheaper than many other Middle Eastern destinations. For Indian companies, which are fast losing their cost advantage, positioning a delivery centre in Egypt would be a smart strategic move to service European and Middle Eastern markets with a skilled, multilingual workforce. The Egyptian government is going out of its way to attract companies from India’s IT-BPO industry and outsourcing the outsourced to Egypt could be the next big trend for this truly global industry.

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