West Africa wants a slice of the lucrative Global Outsourcing market

Mergers, Acquisitions and Financial Results

West African countries hoping to position themselves as future global IT hubs face an uphill struggle, according to new research from Yankee Group. Serious labour and infrastructure problems, plus a growing power shortage, need to be addressed if they are to succeed in this potentially lucrative market.

Thanks to globalization, the outsourcing market has continued to grow worldwide as enterprises adopt IT and business process outsourcing, lifting the fortunes of the developing countries able to plug in and provide services. Having witnessed the outsourcing success of India, West Africa would like to get on-board too.

Nigeria is making a big noise here at Telecom Africa, setting itself up as a prime outsource and offshoring location. “Outsourcing would have a huge impact on the ecomony,” says Tony Marson, Senior Research Analyst with Yankee Group. “Nigeria’s taken the first steps – it has achieved some stability in terms of government, and got rid of military intervention within government. But it must ensure things happening in the Delta region must stop (namely attacks on oil companies, and kidnappings of overseas workers), to ensure Western companies feel their staff are safe in Nigeria.”

“Outsourcing provides good jobs,” adds Mindy Blodgett, Yankee Group Research Analyst. “It can lift the economy. These are jobs that people can take a lot of pride in and aspire to. Look what it has done for India; Tata and Infosys are now global powerhouses, thanks to outsourcing. So it’s smart that Nigeria aspires to attract this kind of work.”

In contrast to the West African countries, Egypt could be better placed to benefit. During Sunday’s opening ceremony, Dr Tarek Kamel, Egypt’s Minister of Communications and Information Technology, underlined the importance his government was placing on attracting outsourcing companies, claiming that the business will double by 2010.

“It’s a realistic goal,” commented Blodgett, “mainly because the market for outsourcing in Egypt is so small right now.”

Marson echoed her comments, adding that an educated workforce was of paramount importance; “Egypt has a big opportunity, as they have taken care to extend the graduate pipeline. IT graduates account for about 30 per cent of the total graduates in Egypt and are of high quality, especially from the Nile University, and you also need multi-lingual students.” Yankee Group conducted research last year that showed language skills in Egypt are the best in Africa – thanks in main from the country having a good tourist industry, and therefore lots of languages spoken.

Yankee Group concludes that West African governments need to form closer partnerships with outsourcing service providers, power companies, universities and also each other. Education and worker training are key, and the outsourcing market will never grow in a country that does not have an adequately sized and educated workforce.

Energy efficiency is a further factor. “For example, South Africa has a huge power shortfall,” says Marson. “There has been no investment in power supply infrastructure in the last 10 years, despite warnings. Eskom [the national power utility company] actually exports power to neighbouring countries, but it can’t get out of these long-term agreements and help its own industry. So there is now an opportunity for South Africa to become a world leader in power-reduction technologies, which is an attraction to firms looking at lowering the cost of their outsourcing.”

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