The outsourcing market offers a vast opportunity for regions that are able to capitalise on it. Business process outsourcing (BPO) is estimated to become a $90 billion market worldwide over the next six to eight years, and Egypt is well positioned to take a good share of that. India continues to lead the outsourcing market, both in IT outsourcing and BPO. Our aim is to position Egypt as the India of the Middle East. Indian IT outsourcing firms, including Wipro and Satyam Computer Services, and global IT companies such as Teleperformance, Cisco, Google, IBM, Microsoft, Valeo and Oracle have already recognised Egypt’s potential and invested here, but why should other companies follow suit?
Egypt has some unique advantages as an outsourcing destination, such as a broad talent base, lower labour costs than in surrounding low-cost regions, time zone proximity with Europe and relative familiarity with Western culture over traditional outsourcing destinations like India and China.
An abundant talent supply
Our large annual graduate talent pool of over 300,000 graduates, including a 20,000 strong specialist workforce with engineering and computing degrees, has excellent multilingual capabilities in English, French, German, Italian and Spanish, in addition to Arabic. This positions us favourably amongst other emerging outsourcing destinations thanks to the diverse regions we are able to support with local language outsourcing services. In fact, a global study carried out by Global Services-Tholons ranks Cairo 11th in its list of the top 50 emerging outsourcing cities, citing our multilingual skill set and government-led initiatives amongst our strengths1.
This talent pool is something that the government is keen to cultivate, and has set up a number of initiatives to support it. These cover training and best practice sharing, for example through our Information Technology Institute (ITI, www.iti.gov.eg) in Cairo, which trains up to 1,000 people every year. Also, these initiatives include curriculum reform in five universities with the aim of producing more than 5,000 people annually, thus preparing our workforce of the future. Almost half of Egypt’s 74 million inhabitants are aged between 15 and 39, meaning we have a talent surplus for the next five years, and government-led initiatives such as the Egyptian Education Initiative (EEI, www.eei.gov.eg), E-Learning Competence Centre (ELCC, www.elcc.gov.eg) and Mobile IT Club (http://mitc.ictfund.org.eg)will enable us to support the outsourcing industry in the long term. This is in stark contrast to many other outsourcing destinations that suffer from high levels of attrition within their talent base.
Investing in a world class infrastructure
The Egyptian government has invested heavily in achieving world class infrastructure facilities to support the booming outsourcing market. We realised the need to establish a specialised and modern business park to be the flagship hub for ICT. The Smart Village in Cairo stretches over 600 acres and accommodates multinational and local telecommunications and IT companies, financial institutions and banks, together with related government authorities. Currently, over 13,000 professionals run the operations of more than 100 local and international companies and institutions at the Smart Village, and the number is expected to exceed 40,000 by the end of 2014. A second park is under construction in Cairo – the Maadi Contact Centre Park – which will house a further 45,000 employees specialising in serving the call centre industry.
Egypt also has the potential to become a multi-city outsourcing location. In addition to the excellent infrastructure, services and talent pool provided by our capital city Cairo, other cities will ultimately support our outsourcing market. These include: Alexandria, the country’s second largest city, which benefits from excellent connectivity thanks to its two airports and two ports; El-Mansura, an important commercial and industrial city; and Asyut, the home of the University of Asyut, one of the largest universities in Egypt.
Providing cost-effective outsourcing services
Despite our world class infrastructure and talent pool, Egypt remains a cost-effective destination for outsourcing services. Our structurally low cost of operations is at least 20 percent lower than other leading locations in Eastern Europe, North Africa and Asia, and we also have the world’s lowest telecom costs. In addition, our low wage inflation of just 5 per cent annually, compared to 10-15 percent in other locations, and low currency fluctuation of the Egyptian pound with respect to the US dollar, means that the costs of operating in the region will remain stable.
Because the Egyptian government understands the importance of the IT industry to the health of its growing economy, we offer tax breaks and other financial incentives to attract international companies to set up call/service centre and BPO operations in the country. Our commitment to economic reform makes Egypt an increasingly attractive prospect financially. The recent economic reform programme has seen corporate tax rates cut from 42 percent to 20 percent, and thanks to our tax, customs and financial sector reforms, Egypt was named as the leading global economic reformer by the World Bank in its ‘Doing Business 2007’ report.
A leading outsourcing destination
The national ICT sector is emerging as a role model of deregulation and privatisation as well as a catalyst for reform in other sectors. The sector has managed to maintain growth rates of up to 20 per cent, and attract local and foreign investments of more than $8 billion over the past three years. In a study by AT Kearney, Egypt is ranked 13th in providing IT offshore services worldwide, above Eastern European locations such as the Czech Republic, Hungary and Poland, as well as other Middle Eastern and African locations such as South Africa and Tunisia.
Local, regional and international companies, including Unilever, Orange, Vodafone, Proctor & Gamble and Sun Microsystems are already investing in outsourcing services in Egypt. These provide valid evidence on the capabilities of the Egyptian outsourcing sector. With Egypt’s IT sector forecast to grow from $889 million in 2006 to $1.3 billion in 2013, we are confident that we will be able to cement the country’s position as a leading emerging outsourcing destination.
The Information Technology Industry Development Agency (ITIDA) is a government body affiliated to Egypt’s Ministry of Communications and Information Technology. It was established to encourage the development of Egypt’s IT industry, with a particular focus on outsourcing services. It is tasked with attracting foreign direct investments to the IT industry and maximising the exports of IT services and applications.
