Number 03 2007 • Volume 1 In this issue: Africa • Is Offshoring an Opportunity for Africa? • Egypt – a Destination for BPO • South Africa as an Offshore Services Location • The Challenge to Do Business in South Africa • Mauritius – Business Hub for the Global Service Industry • News • Conferences Germany 29,90 €

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Publisher and Editorial Advisory Board

Publisher Soeren Dressler, PhD Professor of International Management Accounting at the University of Applied Sciences, Berlin Ulrich Blum, PhD President of the Halle Institute for Economic Research and Professor of Economics, Halle Editorial Advisory Board

John Kostolansky, PhD Associate Professor of Accounting at the Loyola Graduate School of Business, Chicago Knut Blind, PhD Professor of Innovation Economics at the University of Technology, Berlin Juanito Parbey, PhD Global Manager of the Intelligent Sourcing Office at T-Systems, Berlin Patrick Cogny CEO Genpact Europe, Budapest Ratnesh Mathur Center Head at Infosys BPO, Brno Arjun Sethi Vice President and Head of the Offshoring Practice at A.T. Kearney, New York

The Offshoring Journal (ISSN 1864-9130) is published quarterly by the Offshoring Institute, Hoenower Str. 35, 10318 Berlin, Germany. Please send all address correspondence about subscriptions to this address. Postmaster: Send address changes to this address. © 2007 Offshoring Institute. All rights reserved. Subscribers: If the postal services alert us that your journal is undeliverable, we have no further obligation unless we receive a corrected address within three months

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Welcome to the Offshoring Journal!

The wave of Offshoring has rolled through Eastern Europe, Asia and Latin America. Most of the potential service locations have been investigated in great detail – except the continent of Africa. So far, Africa has been left out in most location selections, there are only few operations with focus on IT mainly in South Africa and some call center activities in the French spoken countries established so far. It almost feels like that Africa has been forgotten in terms of ITO, BPO and Call Center business. Generally spoken, the macroeconomic conditions limit the continent’s potential. Violence, crime rates, below average educational conditions, ailing infrastructure, and corruption are today’s reality. In our issue on Africa we have a group of Africa experts to shed some light on opportunities and risks in Offshoring to Africa. Juanito Parbey provides an in-depth analysis on West-African countries and the Sahara region, an area which is booming and due to its multilingual capabilities has clearly the potential to play a role in the Offshoring business of the future. Devi Kencki is located on Mauritius, a very interesting location. This island off the coast of Eastern Africa has attractive living conditions and has become a great place to work for an international service community. Kalina Damyanova analyses Egypt. With its busy metropolitan area Cairo, this country has identified the service industry as a driver for economic growth. Last but not least we got an interview with Andreas Baumann, CEO of T-Systems South Africa. He provides some great insights into the daily life of an IT operation at the southern tip of Africa and also speaks openly about the challenges of expatriates there. Overall, we hope you enjoy the insightful and controversial discussion on Africa. As of today, it is vastly uncertain which position Africa will be able to claim in the global Offshoring business. Many large-scale global players are looking into Africa and those in search for the next low cost regions are analyzing Africa as well. From a political perspective, service Offshoring would be a great opportunity for Africa to participate in a globalized economy and bringing wealth to these countries. We wish you a happy reading. Yours SOEREN DRESSLER

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Contents News Section Articles Is Offshoring an Opportunity for Africa? by Juanito Dovi Parbey Egypt – as Destination for Business Process Outsourcing by Kalina Damyanova

South Africa as an Offshore Services Location by Sebastian McClintock The Challenge to Do Business in South Africa Interview with Andreas Baumann, General Manager at T-Systems South Africa Mauritius – Business Hub for the Global Service Industry by Devi Kencki, BD Executive at TNT Document Services Mauritius

Coming Events

Source: Fotolia

5 – 8

9 – 32

9 – 20

21 – 24

25

26 – 28

29 – 32

33 – 34

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News Africa becomes a service outsourcing location Africa has been discovered as a cheap and reliable location for the outsourcing of services such as IT, business processes and call centres. Since the labor costs in India and China have been increasing recently, western countries look even offer at the possibilities for African skilled labor. The most competitive African locations for outsourcing company services are Egypt, Mauritius, Tunisia, Ghana, South Africa, Morocco and Senegal, according to the A.T. Kearney Global Services Location Index 2007. One of the most interesting developments of the index is the steady rise of African nations in this ranking. While labor costs in Eastern Europe and Latin America are increasing, the African countries are improving their education, skills, infrastructure and business environment. One of the best presented countries is South Africa, where several provinces actively market their locations for outsourced services worldwide. In Gauteng province, where Johannesburg is situated, the local development agency is trying to become the world’s leading player in call centre provision. The South African call centre industry is already twice the size of Ireland’s and employs around 100.000 skilled workers. Source: afrol News; A.T. Kearney Genpact buys Citi Group’s BPO for $700 Mio Genpact is said to have won the competition to buy out Citi group’s call centres in India. The final step of negotiations consisted only of two companies – Genpact and Firstsouce. Due to its ability to raise the required finance of $700 Mio easier than Firstsource, Genpact is said to have won the deal. The Citi Group acquisition will add around 10.000 agents to Genpact’s current strength of over 20.000 employees spread in over 8 Indian cities. When Citi Group first put Citi Global Services on sale in June 2007, an estimation of over $1 billion for all businesses was expected by investment bankers. However, since the beginning of the subprime crisis, BPO stock have been trading weak in United States and shares of firms e.g. EXL and WNS have fallen considerably. That is why it is not known if Citi has sold its stake in the BPO entirely or still possesses a part of it. Source: The Times of India

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IBM acquires Nokia-Siemens IT outsourcing contract IBM acquired Nokia-Siemens IT outsourcing contract from Nokia Siemens Networks at the beginning of October this year in order to develop multi-media services. The company will research and develop a range of next generation voice and multimedia services, mobile internet products and voice over internet protocol offerings for Nokia-Siemens Networks. NSN is one of the world’s biggest telecommunication infrastructure companies. It operates in 150 countries and employs over 20.000 people. Source: ihotdesk.com Siemens wins £52m IT outsourcing contract Siemens IT solutions and services division, which is an international company providing consultancy services, system integration and management of IT infrastructure services founded in January this year, won a £52 Mio outsourcing contract with the Turkish government. The contract is about upgrading the IT infrastructure of over 1.000 tax offices in Turkey. In an attempt to centralize tax records throughout the country, Siemens will create a nationwide data warehouse to improve the way government institutions in different regions work together. The completion of the contract is scheduled for 2009. Recently Siemens signed a contract with British Telecom to provide joint end-to-end logistics data management solutions aiming at a wide range of sectors including retail, aerospace and defence. Source: ihotdesk.com Number of Outsourcing contacts decreased by 16% in 2007 A recent TPI study found out that the number of outsourcing deals in the first quarter of the year 2007 decreased by 16% in comparison to the last year. It means that in the first nine months of this year 44 less outsourcing contracts were signed up (272 outsourcing contracts in the first nine months of 2006 to 228 contracts in 2007). As a result, the Total Contract Value of the outsourcing contracts fell down to $47,7 billion in 2007 from $57,5 billion during the same time in 2006. The demand for outsourcing services in Europe and Middle East Asia increased dramatically while North and South America registered a sharp decline in the number of outsourcing deals. India is declared as the favorite Offshoring destination. About the character of the outsourcing deals Peter Allen, Partner and Managing Director, Marketing and Development, TPI, says: „The number of smaller contracts has picked up in the last three quarters, and the main reason behind the decline in the number of big deals is that customers are signing smaller contract with multiple providers. Customers are becoming more confident that they can now manage many providers at a time”. Source: TPI

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Mauritius will set 10.000 outsourcing jobs by 2008 Mauritius is set to have 10.000 outsourcing jobs by 2008, which will mean an increase of 44 per cent. Currently there are 185 outsourcing companies providing 6.960 jobs. The World Bank ranked Mauritius as the best country in Africa for business development this year. "By early 2008, it is expected that the industry would have created about 10.000 jobs," Amedee Darga, the head of Enterprise Mauritius, wrote in the daily newspaper L'Express. Since the Internet boom, Mauritius has become a favourite Offshoring destination, because of its good business environment, political stability, cheap wage base and workforce speaking English and French. The main outsourcing industry in Mauritius includes call centers, accountancy, human resource and payroll management. Source: Reuters

Accenture and Thomas Cook Group sign a $400 million outsourcing agreement

The travel agency Thomas Cook signed up a $400 million ten-year outsourcing contract in November 2007 with Accenture, which supersedes an agreement between the two parties from 2002. The new agreement was established to help Thomas Cook to integrate a range of My Travel functions, which was acquired by Thomas Cook in June, to existing outsourced operations. Accenture will perform services for the $17-billion-a-year through its shared services center in the United Kingdom and offshore delivery centers in India. It will also manage Thomas Cook’s SAP ERP system, network and technological infrastructure, finance, accounting and human resources services. The losing party of the contract is the outsourcing company Xansa, which had performed MyTravel finance and accounting services, meaning a loss of revenue run-rate of circa £6 million annually. Source: Fao Today News

Source: Fotolia

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Is Offshoring an opportunity for Africa? by Juanito Dovi Parbey

Which are the most favourite Offshoring locations in Africa and on which conditions Ghana, Egypt, Kenya, Mauritius, Morocco, Senegal, South Africa, Togo and Tunisia could develop to Offshoring nations? Though a location analysis tool the author compare eight African countries with India according to political, geographical, economical issues but also labor and social issue, infrastructure and cultural aspects and concluded on which conditions Offshoring is possible in Africa.

1. Introduction The ongoing globalization process is eliminating geographic and other barriers and has increased the pressure on business organizations to focus on activities that create competitive advantages and outsource the remaining externally. Due to increasing globalization, mergers and acquisitions, cost pressure and growing expectations of the customers related to prices and quality, companies have to reconsider their strategy and organizational structure in order to survive in this challenging world. Through improved telecommunication technology at lower cost Information Technology (IT) and Business Process Outsourcing (BPO) services can be provided from any location in the world. More and more companies in Europe and in North America turn this fact into a competitive advantage by outsourcing non-core processes to a specialized provider, who can be physically located at a remote location (Offshore or Near-Shore). The reasons which lead most organizations to offshore their non-core processes are the following:

• Improvement of competitiveness through: o The focusing on core competencies o An improvement in customer satisfaction o Access to relevant skills and expertise at lower costs o A quickly ramp-up of product and service offerings

• Increase of control through:

o The improvement of process performance o The monitoring of organizational activities o The transformation or restructuring of organization o An optimized Risk-Management

• Cost reduction through:

o Access to experts at lower costs o The acquisition of innovative concepts and products o Capitalization on provider low-cost structure o The decrease in fixed capital and the reduction of financial costs o The reduction of headcounts directly in payroll

The Globalization Process Reasons for Offshoring: Improvement of Competitive-ness Increase of Control Cost Reduction

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The rapid development of the Information and Communication Technology (ICT) offers African countries chances to take their rightful place in the global economy and to position their cities as ICT Offshore locations.

2. The current level of the African Information and Communication Technology (ICT)

Africa was not able so far to realize large-scale benefits from the technical revolution in IT and communication due to the lack infrastructure, process knowledge and trained skilled workforce. Africa is the most unconnected continent, in our connected world. Given the broad spectrum of development challenges, including fighting diseases, famine and poverty while striving for socio-economic, technological and industrial development as well as the promotion of its vast material and intellectual resources, ICT offer a remarkable opportunity for achieving substantive progress.

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The “digital divide” however, is still extreme in Africa. In absolute terms, the technological readiness is still in an early stage of development compared to other regions of the world. Of the approximately 816 million people in Africa in 2001, it is estimated that only:

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One in four has a radio (200 million); One in 13 has a television (62 million); One in 35 has a mobile telephone (24 million); One in 39 has a fixed line (21 million); One in 130 has a personal computer (5.9 million); One in 160 uses the Internet (5 million); One in 400 has pay-television (2 million). Currently, the average total cost for a local dial-up Internet connection is about US$ 60 per month. ISP subscription charges vary between US$ 10 and US$ 80 a month. In general, the prices reflect the different levels of maturity of the market.

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The average bandwidth cost /Kbps by sub region is still high (see figure 1).

Average Bandwidth Costs/Kbps by Region

0 1 2 3 4 5 6 7 8 9

West Africa

Average

Southern Africa

East Africa

Central Africa

North Africa

US University

Reg

ion

Mean Cost USD/Kbps

Figure 1: Average Bandwidth Costs/Kbps by region

Africa Is the Most Unconnected Continent Statistics Costs for Internet Average Bandwidth Costs/Kbps by region

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Highest capacity international hub cities for Africa in Mbps4

City 2002 2003 2004 2005

Cairo (Egypt) 555 1287 1293 2064

Johannesburg (South Africa) 207 342 710 1059 Rabat (Morocco) 152 167 312 624

Cape Town (South Africa) 136 284 171 469

Algiers (Algeria) 144 159 163 344

Dakar (Senegal) 38 84 315 315

Tunis (Tunisia) 79 200 200 310 Table 1: Internet bandwidth connected to African locations across international borders South Africa is leading on the African continent in IT and related businesses. South Africa’s infrastructure international exposure and talent pool- more competitive than other nations in Africa- has provided an edge. Being more culturally aligned to the West, in comparison to India or other South Asian nations, South Africa is coming up as location for English-based services outsourcing. As costs in India and China are rising, South Africa can establish itself as a preferred location, it is able to keep the costs down and strengthen its position in technical competence.

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3. The African Offshoring Market The global Offshoring market is valued at US$ 30 to 40 billion.

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Up to recently the countries that were running for a major piece of the Offshoring business were not located on the African continent. Some African countries like Benin, Ghana, Kenya, Mauritius, Morocco, Senegal, South Africa, Togo and Tunisia are about to join the list of service industry hubs. Example of Offshoring projects:

o A local service provider in Morocco is digitizing the National Library of France’s paper archives. They are scanned in France, sent to Morocco by satellite link, and are edited by keyboard operators in Rabat.

o In Benin, Ghana, Kenya, Senegal, Mauritius and Togo, call centers provide telephone support services for international companies with customers in Europe and North America.

o In Cape Verde “virtual security guards” provide web-based services by monitoring webcams in office parks on the east coast of the United States. They notify local rapid response teams if they see anything amiss.

Some Offshoring companies on the continent: Ghana

• Rising Data Solutions o The first outsourced call center in Ghana. The company circumvents

the country's limited telephone infrastructure by relying on voice-over-Internet protocol.

o Locations: Gathersburg (USA) and Accra (Ghana) o Provide outsourcing services to small and medium-sized businesses in

the USA o Web site: www.risingdata.com

• Affiliated Computer Services (ACS) o ACS is a fortune 500 company, quoted on NYSE o 40.000 employees in nearly 100 countries o Provide BPO and IT outsourcing solutions o Begin of operation in Ghana 2001 (with 200 seats), and expanded to

SA – a Leader in IT and BPO Examples of Offshoring Projects Ghana

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1.400 seats in 2004 o Web site: www.acs-inc.com/emea/

Kenya

• Preciss o Company registered in April 2002 in Nairobi o Liaison office has been opened in Massachusetts in USA in July 2002 o Provision of data processing services to customers based in North

America and Europe o Web site: www.precissinternational.com/clients.htm

Senegal

• Premium Contact Center International (PCCI) o French – Senegalese partnership o Started April 2002 o 700 seat call center serving France o Web site: http://www.pcci.fr/

South Africa

• Dimension Data: http://www.dimensiondata.com • Computer Sciences Corporation: http://za.country.csc.com/ • IBM: http://www.ibm.com/za/ • Lufthansa:http://www.callcentres.co.za/ • T-Systems South Africa: www.t-systems.co.za

Tunisia

• Teleperformance Tunisia o Teleperformance Tunisia was established in 2000 under the name of

Société Tunisienne de Telemarketing o Teleperformance Tunisia is one of the market leader within the

delocalized contact outsource provider industry for the French speaking market

o Operation of more than 2.500 workstations and management over 3.500 employees from 3 contact centers located in Tunis. (Charguia 1, Charguia 2, and Ben Aous)

o Provision of full-delocalized-service inbound and outbound teleservices via integrated processes tailored to meet the needs of European customers

o Key Services offered are: Customer Acquisition, Customer Care & Growth, Technical Support, Telesales

In order to gain a global overview of the offshoring potential of the continent, a location analysis of some chosen cities will be done in the next section.

4. Analysis 4.1 Part 1 A location analysis tool has been developed by the author. This tool will give an adequate overview of the position of the African cities on the Offshoring market and will allow the identification of further room for improvement. The methodology for analysis is based on a scoring model and information from the World Bank.

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The location model differentiates several categories. For each category various criteria have been applied. The different criteria have been weighted. The sum of all weights adds up to 100%. The evaluation of each criterion has been provided based on information from the World Bank.

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Kenya Senegal South Africa Tunisia Location Analysis Tool Evaluation of the criteria

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Criteria are assessed location-specific on a scale of 1 (very low) to 5 (very high). These values are automatically multiplied with the respective weight and summarized in a value per category. Summaries indicate the advantage and disadvantage of certain locations. The higher values are indicators for a very good position and lower totals are indicator for a weak position with a need for improvement. The considered key categories are:

• Political, geographical and economical issues o Well defined national vision and strategy to develop the ICT industry: Is

there a strong government commitment to develop the ICT industry? o IT Penetration: Does this country have an expanding market of middle-

income families who can afford a PC and internet access? o Special incentive packages: Does the government offer special expatriate

incentives or tax exemptions? o Business-friendly environment: Does political, economic and social stability

exist in the country? Is it an open economy with no foreign exchange control? Are double taxation avoidance treaties with a number of countries in place?

o Geographic position: Is the location safe? Convenient time zone (GMT+2 hours). Does this country enjoy a competitive edge against competitors for being located in a safe location? Can the country consider itself as a stable and safe haven for disaster recovery centers, for development, maintenance and BPO activities? Can the country work with Asia in the morning, with Europe at noon and with the US in the evening?

o Labor–related issues in terms of quality of labor and low attrition rates: Does the government provide a comprehensive legal framework for the development of the ICT sector? Is data protection and security guaranteed?

o Training/Education: Does a competitive educational infrastructure exist? Does the government invest in specialized educational programs such IT or accounting?

o Languages: French, English, other languages o Appropriate legal framework: Are defined legal frameworks in place and are

they pursued? o Financing: What are the interest rates for loans proposed by commercial

banks? Is venture capital available? And are the leasing costs high?

• Infrastructure o Cost of Telecommunication connection o Quality of telecommunication Network o Availability of Data center and Disaster Recovery Center o Availability Call Center infrastructures o Availability of satellite connection (VSAT) o Broadband Connection (WiMAX, Wi-Fi) o Power supply o Availability of technology parks or modern office space o Road, rail and air transport

• Labor and social issues o Cost and scarcity of skilled labor: Does the size of the population allow the

country to churn out large numbers of qualified labor in this labor intensive industry? Is the number of skilled labor for the high-end BPO services even more limited?

o Quality of Labour: Is there a well educated, skilled and multilingual workforce available?

o No clear career path: Does awareness exist for a career in the Service Industry?

o Refund of cost of training

Political, Geographical and Economical Criteria Infrastructure Labor and Social Issues

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o Lack of specialized recruitment agencies o Work culture o Support facilities: Are transport services arranged by the companies for

night shifts and does this represent an additional cost? Are a number of facilities available to the workforce near the office e.g. snack shops? Is the security in the night an issue?

o Labor laws: Are there specific laws and regulation for the Service Industry in place and pursuit namely employing workers on a contractual basis or employing part-timers and working during odd hours?

• Cultural aspects

Dimensions Criteria Weights Sample Metrics Location X

Political , geographical,

economical issues

Well defined national

vision and strategy

to develop the ICT

industry

10%There is strong government commitment to

develop the ICT industry.

5 0,5

IT Penetration 5%

There is an expanding market of middle-

income families who can afford a PC and

internet access. 1 0,05

Special incentive

packages10%

Office Rent, Expatriates, Tax exemptions

etc ….3 0,3

Business -friendly

environment10%

They have political, economic and social

stability; an open economy with no foreign

exchange control; Double Taxation

Avoidance Treaties with a number of

countries pleasant and safe living

environment.3 0,3

Geographic position:

Safe location,

Convenient time

zone (GMT+2)

10%

Enjoys a competitive edge against

competitors for being located in a safe

location. The country can thus position

itself as a stable and safe haven for

disaster recovery centres, for development,

Maintenance and BPO activities. The

country can work with Asia in the morning,

with Europe at noon and with the US in the

evening. 3 0,3

Labour–related

issues (Quality of

labour, Low labour

turnover)

10%

The governments endeavour to provide a

comprehensive legal framework conducive

for the development of the ICT sector.

Thus, data protection which is an important

issue for companies that are already

outsourcing and those that plan to

outsource in the near future is also

provided for. 3 0,3

Training 10%

Availability of Training infrastructure and a

good training environment (trainer with

expertise) The Governments invest

massively through in tailor-made courses.2 0,2

Appropriate legal fram 15%

Legal framework defined and available. The

governments endeavour to provide a

comprehensive legal framework conducive

for the development of the ICT sector.

Thus, data protection which is an important

issue for companies that are already

outsourcing and those that plan to

outsource in the near future is also

provided for 5 0,75

Strong support

services10%

High cost of

financing10%

The interest rates for loans proposed by

commercial banks are high. Furthermore,

there is a lack of venture capitalists and

cost of leasing is high. 2 0,2

Total Political,

geographical,

economical issues 100% 2,9 Figure 2: Scoring and weighting example for the political and economical issues

Cultural Aspects Evaluation of the Criteria

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The city of Bangalore (India) has been used as the prime Offshoring location and as a point of reference. It has been compared to:

• Accra (Ghana) – West Africa Accra shows the following characteristics:

� This city is emerging as “ICT gateway” to West Africa. � It has young BPO/call center industry history of approx. 5 years � Technology park/shared resources model: Ghana Technology Park,

which is expected to be West Africa's biggest IT infrastructure through the provision of infrastructure facilities for BPO, call centers etc

� Language – English � Low labor cost � Keen awareness of importance of ICT � Stable and democratic government � Government support and active involvement in industry

• Dakar (Senegal) – West Africa

Dakar shows the following characteristics:

� Language – French (“neutral French accent“) � Availability of young, educated labor force at low costs � Political stability � Good training in data processing and new technologies � Telecommunications ‘as good as Europe’ - fiber optic cable

• Nairobi (Kenya) – East Africa

Nairobi shows the following characteristics:

� A rapidly developing telecommunications infrastructure � Highly educated English-speaking population � A well developed education system, with the primary language of

instruction being English. � Easy accessibility from any part of the world � IT is one of the fastest growing sectors in Kenya and is in use in the

majority of economic sectors in the country. � Since 1993, the government of Kenya has been very keen to

implement economic liberalization and has instituted various reforms. This has led to better economic performance and an improved environment for conducting business.

• Rabat (Morocco) – North Africa

Morocco shows the following characteristics:

� Blend of Arab and European traditions and its geographical proximity to Europe made it a hub for French and Spanish companies.

� Qualified talent pool, young demographics, low wages and � A modern telecommunications infrastructure.

• Tunis (Tunisia ) – North Africa

Tunis shows the following characteristics:

� Blend of Arab and French traditions made it a call center hub for European clients

� Young demographics and low wages � A modern telecommunications infrastructure � Tunisia's government has invested significantly in a modern

infrastructure and a dynamic education system and the gains are gradually showing in the form of foreign investments into the country.

Point of Reference – City of Bangalore Accra Dakar Nairobi Morocco Tunis

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� The Tunisian state is keen on encouraging the relocation of foreign firms by offering investors’ tax exemptions and providing assistance to set up companies.

• Egypt (Cairo) – North Africa

Cairo (Egypt) shows the following characteristics:

� Cairo as the next hot spot in IT Offshoring and business process outsourcing (BPO) in the Middle East region

� Young demographics, low wages � A modern telecommunications infrastructure � Egyptian government has set a determined goal to attract $1,1 billion of

the global outsourcing market by 2010 � Global giants like Cisco, Google, IBM, Microsoft, Oracle and Orange

Business Services are already making use of the Egyptian IT talent pool

• Port-Louis (Mauritius) – South Africa

Port-Louis shows the following characteristics: � Young BPO / call center industry � Government actively involved in creating “Cyber Island”, Incubation

facilities and active government support for young entrepreneurs � Partnership with India to develop ICT � Languages – French and English � State of the art training and education framework

• Johannesburg (South Africa) Johannesburg shows the following characteristics:

� Languages: English, German, Dutch, Italian, Portuguese � Legal and financial infrastructure � Telecoms and transport infrastructure � Reliable and cheap electricity supplies (3rd cheapest in the world) � High level of domestic outsourcing High standards in quality of output.

4.2 Results Political, geographical and economical issues The governments of all selected African cities/countries have committed to develop the ICT industry. Overall, the business environment for Offshoring needs to be improved in all countries except Egypt, South Africa, Mauritius and Tunisia. Cities located in the Arab world (Egypt, Morocco, Tunisia) must work to overcome the instability and violence due to political tensions. The investment climate in general is limited by the fact that the majority of the countries only have a “micro-market”. Furthermore, business procedures are still not transparent, cumbersome and time-consuming. The interest rates for loans from local commercial banks are not competitive and not sufficient venture capital is available for funding. The leasing rates are very high. Most of the African cities in scope are missing appropriate ICT educational facilities. The availability of expert training in ICT is extremely limited on the continent.

Cairo Port-Louis Johannesburg Overcoming Instability and Violence Investment Climate Interest and Leasing Rates

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Political, geographical, economical issues

0

0,5

1

1,5

2

2,5

3

3,5

4

4,5

5

Accra

(Ghana)

Dakar

(Senegal)

Nairobi

(Kenya)

Rabat

(Morroco)

Tunis

(Tunisia)

Cairo (Egypt) Port-Louis

(Mauritius)

Johannesburg

(South Africa)

Bangalor

(India)

Figure 3: Political, geographical, economic issues Infrastructure The majority of the chosen cities are characterized by a general unstable power supply, and the lack of an efficient power generation infrastructure. Road, rail, and air transport networks need to be improved; they are currently costly to use, and often in poor condition. This does not apply for Rabat (Morocco), Tunis (Tunisia), Cairo (Egypt), Port-Louis (Mauritius) and Johannesburg (South Africa), where the power supply networks and the transport infrastructure are quite modern compared to others. The telecommunication charges are quite high. They are often up to ten times higher than rates for equivalent services in Europe or North America. As a result of the high telecommunication costs in Africa, especially in Accra, Dakar, and Nairobi private Internet Service Providers (ISPs) are discouraged from establishing multiple international links.

Infrastructure

0

1

2

3

4

5

6

Accra

(Ghana)

Dakar

(Senegal)

Nairobi

(Kenya)

Rabat

(Morroco)

Tunis

(Tunisia)

Cairo (Egypt) Port-Louis

(Mauritius)

Johannesburg

(South Africa)

Bangalore

(India)

Figure 4: Infrastructure Labor and social issues The size of the population of the chosen African countries (to those the selected cities are belonging to) cannot enable these countries to churn out large number of qualified labor like India. There is an accurate lack of well educated, skilled and multilingual labor force in all these African countries.

Infrastructure Telecommuni-cation Charges very high Lack of Well Educated and Skilled Labor

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The brain drain and the overall low level of education and literacy are limiting the talent pool of skilled labor. In the majority of the selected countries, specialized recruitment agencies are rare and it is difficult to find companies with a decent infrastructure for the employees such as transportation to and from work.

Labor and social issues

0

0,5

1

1,5

2

2,5

3

3,5

4

4,5

Accra

(Ghana)

Dakar

(Senegal)

Nairobi

(Kenya)

Rabat

(Morroco)

Tunis

(Tunisia)

Cairo (Egypt) Port-Louis

(Mauritius)

Johannesburg

(South Africa)

Bangalore

(India)

Figure 5: Labor and social issues Language and cultural aspects On the language and cultural level it is apparent that from all the selected countries Mauritius and South Africa are far ahead of India. Mauritius’ position is caused by the country’s bilingual character and also its culturally mixed environment.

Language and cultural aspects

0

1

2

3

4

5

6

Accra

(Ghana)

Dakar

(Senegal)

Nairobi

(Kenya)

Rabat

(Morroco)

Tunis

(Tunisia)

Cairo (Egypt) Port-Louis

(Mauritius)

Johannesburg

(South Africa)

Bangalore

(India)

Figure 6: Language and cultural aspects

5. The future of Offshoring in Africa In the past years Afro Pessimists did not believe that African cities could be a valid choice for ICT Offshoring, and generate growth in their countries. Today the situation has changed: a big part of the African continent is now ready to break free from centuries of socio / political struggle to start revitalization. The majority of the African countries show convincing promise and appears ready to climb out of poverty. ICT will play a major role in this revitalization process. Offshoring plays and will

Force Labor and Social Issues Language and Cultural Aspects Outlook

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play in the future an important role in the revitalization of the continent. There are already some BPO and IT Offshoring project and initiatives in place. This is the beginning of an enormous Offshoring wave. European, American, and Indian companies are looking into Africa to identify its potential, the opportunity is now to invest in Africa and make an immeasurable productive impact for the future. The results of the analysis show that in order to enable African cities to become more competitive in the field of BPO, especially in the area of IT services, and to stabilize the Offshoring environment, the states of the selected African cities need to put more efforts in the following areas:

• Development of programs to train a handful of individuals who in turn will train others or begin their own technology ventures.

• Get an ICT literate population and creation of several regional ICT Training Centers (West Africa, Central Africa, East Africa, North Africa, South Africa)

• Development and improvement of the ICT infrastructure and all related resources

• Implementation of committed ICT strategies. • Reduction of connectivity cost in remote areas. This could be achieved by the

installation of a large number of low-cost, two-way VSAT satellite-based data services

• Liberalization of international gateway operations • Establishment of procedures, which could enable Africans living abroad to set

up ICT Offshore (BPO and IT Offshoring service) companies. • Support the creation of sub-regional Offshoring companies (ECOWAS,

COMESA) Because of the fact that the Indian market is today no more able to satisfy the high demand for ICT experts with the required skill set and the rapid salary hikes, Indian companies may need to partner with African companies or set up local joint ventures to achieve their growth goals. Some Indian companies are already exploring partnerships with African countries such as Tunisia and Mauritius. European and North American enterprises should set up their local Offshoring companies or build joint venture with local companies. With the exception of South Africa (which has a different economic history from the rest of the sub-continent), the Sub-Saharan Africa so far did not attract major investments from European and North American computer and communication companies. Offshoring partnerships and alliances are important and would churn the development of the IT industry. European and North-American corporations could play an important role in the emergence of ICT clusters in African cities, providing expertise in niche sectors and at low costs. Eventually, it will reduce considerably the “digital divide” and enable the economic and social development of the African continent. African countries will become the world’s next Offshoring hubs.

The Beginning of an Offshoring Wave in Africa Joint Venture as a Possibility

1 MIKE JENSEN: ICT in Africa, a status report

HTTP://WWW.WEFORUM.ORG/PDF/GLOBAL_COMPETITIVENESS_REPORTS/REPORTS/GITR_2002_2003/ICT_AFRICA.PDF 2 MIKE JENSEN: ICT IN AFRICA, A STATUS REPORT

HTTP://WWW.WEFORUM.ORG/PDF/GLOBAL_COMPETITIVENESS_REPORTS/REPORTS/GITR_2002_2003/ICT_AFRICA.PDF

20

3 MIKE JENSEN: ICT IN AFRICA, A STATUS REPORT

HTTP://WWW.WEFORUM.ORG/PDF/GLOBAL_COMPETITIVENESS_REPORTS/REPORTS/GITR_2002_2003/ICT_AFRICA.PDF 4 Primetrica 2005 5 BHUMIKA GHIMIRE; http://internationalbusiness.suite101.com/article.cfm/itinafrica1 6 AFRO NEWS 11 JUNE 2007, Doing business 2007/: Online http:// www.doingbusiness.org/Download 7 Ibid. 8 Ibid.

The author Juanito Dovi Parbey, PhD is the Associate Director and Member of the Management Board at the Offshoring Institute. He is the Global Manager for Intelligent Sourcing at T-Systems /gedas. Before joining gedas Juanito worked for Siemens AG where he served as Account Manager Communications for Nigeria, Algeria and Morocco and as Account Manager for Intelligent Networks. He is a PhD in Engineering Sciences from the University of Technology Berlin and holds a Master Degree in Electrical Engineering from the same school. He also is a Diplom-Ingenieur from the University of Technical Applied Sciences Berlin.

Source: Fotolia

21

Egypt – as Destination for Business Process Outsourcing by Kalina Damyanova

Thinking about Egypt, pictures of pyramids, sun and desert first appear in one’s mind. But what about Egypt as a location for call centers or outsourcing Information Technology activities? This article provides an overview about the political and economical situation, the business investment incentives, and the availability and language skills of the work force in Egypt.

1. Introduction Egypt, officially known as Arab Republic of Egypt, is with 75.4 million the second most populous country in Africa after Nigeria

1. Situated in north-eastern Africa and south-

western Asia, the country borders the Mediterranean Sea and the island of Cyprus on the north, the Gaza Strip, Israel and the Red Sea on the east, Sudan on the south, and Libya on the west. Its geographical proximity to Europe, Africa and Asia gives Egypt a good prerequisite for attracting foreign investors. Cairo is its capital and one of the most modern cities in the Middle East and East Africa. With a population of over 17 million people in the metropolitan area and a large number of foreign universities (the British, the American, the Canadian, the German, and the Russian university) Cairo represents the cultural mix of the Egyptian heritage.

2. A Quick Overview Economic and Political Stability As an Arabic presidential republic, Egypt’s political system is characterized by regular multi-party parliamentary elections taking place every 4-5 years. Although the executive power is divided between the President and the Prime Minister, the reality shows that the power of the Egyptian President is bigger – he is usually elected in a single-candidate election and stays in power more than fifty years. Table 1 shows some key indicators of the Egyptian economy. The annual GDP growth and the inflation rate have stayed stable for the last 7 years, and the foreign direct investment net inflows have increased over five times. This is an obvious indicator for the country’s economic growth. Table 1: Overview of Egypt’s economic and political stability

2/3

2000 2005 2006

Nominal GDP at Market Price (US$ bn) 93,1 108,5 117,7 f.

Real GDP growth (%) 3,4 4,5 6,8

Real GDP per capita (US$) 1.285 1.520 1.653 f.

Inflation, GDP deflator (annual %) 4,9 6,2 7,4

Exports of goods and services (% of GDP) 16,2 30,3 31,3

Share of Private Sector in GDP 70.7 62.9 na

FDI, net inflows (US$ bn) 1,2 5,4 11,14

Geography Political Situation Key Economical Indicators

22

CPI1 (0 = corrupt; 10 = best) 3,4 3,4 3,3

IEF2 (0 = repressed ; 5 = free) 2,85 2,15 2,61

5

GEI3 (0 = worst; 5 = best) na na 2,14

Days to open a business na 22 19 The industry analyst Datamonitor points out in 2005 that Egypt can improve its business climate in taking care of the spread of corruption. As a matter of fact the Corruption Perception Index and the Index of Economic Freedom in Egypt have worsened since the beginning of the millennium. These are seen as the main obstacles for business to flourish. Business Environment Having realized the advantages of attracting foreign investors, the Egyptian government has come up with incentives to encourage the growth of business activities. The investment incentives are included in The Egyptian Investment Law and some of them are as follow

6:

• Reduction of the corporate and individual tax rates by half (20 %) for the fist 5-10 years

• Wide range of tax holidays and other fiscal exemptions • Exemption from rules on worker participation in management • No need for the majority of directors to be Egyptian • Exemption of foreign experts’ salaries from income tax if they stay no longer

than 12 months • Investor’s protections and guarantees (e.g. Guarantees against nationalization

and expropriation of projects) • Formation of nine free trade zones (Port Said, Nasr City/Cairo, Alexandria,

Suez, Damietta, Ismailia, Sixth October/ Media City, Shebin El-Kom, and Qeft) • Advantages of the free trade zones are exemptions from custom duties or

taxes, unrestricted nationality of capital, etc. • Guarantees that the established projects, buildings or establishments will not

be confiscated Workforce The unemployment rate in Egypt is one of the lowest in this region. While the unemployment rate in the whole country ranges between 12 and 15 %, the unemployment rate in Cairo is quite high at the level of 20 %.

7

Since Egypt does not take part in any custom unions

8, the emigration rate stays at the

level of -0,21 migrant(s)/1.000 population (2007 est.) relative stable. Based on this fact, wages stay cost-effective. Although the average labor costs in the service industry are higher than the average labor costs in India, they are still lower than in the most favorite Offshoring locations in Eastern Europe. Egypt offers a large talent pool in Business, IT and Call Center. According to Datamonitor, over 200.000 students graduate from university annually. The main part of the graduates (around 40 %) study information technology or other subjects related to it. According to the IMF, Egypt ranks 17

th worldwide in the number of university

graduates per year.9

The Egyptian population is known for its multilingualism. Although the official language is Arabic, 40 % of the population in Alexandra and Cairo can speak English. Moreover, 7 % of the population speak French and around 5 % speak German.

10 The reason for this is that

Corruption Business Environment Unemployment Rate Workforce Availability Language Skills

1 Corruption Perception Index 2 Index of Economic Freedom 3 Government Effectiveness Index

23

instructions in the universities are taught mainly in English, with some institutions in French and German.

11

BPO industry in Egypt In order to encourage the development of the Call Center sector in Egypt, a Call Center Association was founded in 2005.

12 According to Datamonitor its members support

mutually in the form of using each other’s services if extra capacities are required. Alexandria, Cairo and Giza are the most favorite destinations for establishing contact centers. Xceed, C-3, Raya, Ecco, Tamima are examples of outsourcing providers for BPO or call centers services:

13

They handle not only inbound and outbound call centers in Arabic, English, French, German, Italian, but also provide financial services and information technology customer care services. Some of their reference clients are Microsoft, General Motors, Net One, Wall Street Journal Europe, Tele-2, etc.

3. Outlook Whether Egypt will become a favorite BPO location in the near future or not is unknown. Adyasha Sinha, who is a reporter at Global Services Media

14 said last year,

“Misconception about political risks and stability are the major challenges faced by the call-center industry here, particularly while pitching as an outsourcing nation.” The first steps have been already done. Recently the World Bank released the report Doing Business 2008, in which Egypt is seen as the top reformer for this year. With reforms in five out of ten areas Egypt did another small step to the top.

Examples for Contact Centers in Egypt Future

1 WORLD BANK: “Egypt, Arab Reb. Data Profile”; World Development Indicators Database (2007); http://devdata.worldbank.org/external/CPProfile.asp?SelectedCountry=EGY&CCODE=EGY&CNAME=Egypt

%2C+Arab+Rep.&PTYPE=CP 2 Ibid. 3 AMERICAN CHAMBER OF COMMERCE: “EGYPT KEY ECONOMIC INDICATORS” (2007);

http://www.amcham.org.eg/BSAC/EconomicIndicators/EcIndicators.asp 4 MINISTRY OF INVESTMENT AND CENTRAL BANK OF EGYPT: “FOREIGN DIRECT INVESTMENT FY 2006/07”; http://www.investment.gov.eg/Moi_Portal/en-GB/Information%20Center/Publications/Reports_and_Indicators/

Foreign%20Egypt/ 5 THE HERITAGE FOUNDATION AND THE WALL STREET JOURNAL http://www.heritage.org/research/features/index/country.cfm?id=egypt 6 EGYPTIAN INVESTMENT LAW NO. 8/1997 7 DATAMONITOR: „OFFSHORE OUTSOURCING IN EGYPT“ (2005) 8 American Chamber of Commerce in Egypt: “General Information” (2007); http://www.amcham.org.eg/dbe/General_Info.asp 9 IMF; Tracey E. Schelmetic “Egypt Aspires to an Offshore Outsourcing Crown” (2006); http://www.tmcnet.com/news/2006/06/09/1676538.htm 10 OFFSHORING INSTITUTE: LOCATION SELECTION CRITERIA DATABASE (2007) 11 DATAMONITOR: „OFFSHORE OUTSOURCING IN EGYPT“ (2005) 12 Ibid. 13 Ibid. 14 Adyasha Sinha: “OUTSOURCING TO CAIRO” (2006) http://www.globalservicesmedia.com/Content/destinations-more200708272729.asp

The Author Kalina Damyanova is Researcher at the Offshoring Institute and Co-Editor of The Offshoring Journal. She holds a Master Degree in Business Administration from the Free University in Berlin. Prior to her engagement Kalina worked for Air Berlin.

24

25

South Africa as an Offshore Services Location1

by Sebastian McClintock South Africa is one of the most solid countries in Africa now, politically and economically. The success of the country is linked with Nelson Mandela who won the first democratic elections, got the first black president in 1994 and ended the apartheid regime in South Africa. South African culture is close to the English and European culture due to the colonial time. The inhabitants understand U.S. and European lifestyles very well and have no problem to deal with clients from these regions. The biggest problems of South Africa are the HIV infection rate as well as corruption and criminal violence, but the government actively tackling it. Due to the fact to be a British colony for nearly two centuries, many people have excellent English language skills. For most of the inhabitants it is no problem to communicate in English in a professional environment at a high level. English is the primary language of government, business and commerce. Besides English, there are 11 official languages spoken in South Africa. Another advantage is the well-educated labour pool with more than 100.000 graduates annually. About half of them are in the areas of business and commerce, as well as science, engineering and technology. South Africa tripled the investment in education during the last 10 years and it is among the highest in the world, now. Because of this money, the literacy rate is more than 85% and the country has a well-developed network of schools and colleges. As a result of the excellent English language skills and the well-educated labour pool, South Africa is a Hotspot for the BPO industry. Especially call centers and offshoring is one of the fastest growing economic sectors and employs about 80.000 people so far. Although call centers have a regular supply of sufficiently educated staff, but there is a lack of employees with higher IT skills who are difficult to locate. BPO and IT outsourcing salaries are higher than in other destinations, for example in Europe and the Middle East, but there are still about the half than in the United Kingdom or the United States. South Africa has a well-developed telecommunication network compared with other African states but telecommunications costs are one of the highest in the world and this can have a substantial impact, especially for call centers.

1 Statistic figures of the article are based on the Research paper of Gartner Inc. (21

st Nov. 2007): Analysis of

South Africa as an Offshore Services Location

26

The Challenge to Do Business in South Africa Interview with Andreas Baumann, General Manager of T-Systems South Africa Offshoring Journal: Which services are T-Systems providing and how many centers are in South Africa? Andreas Baumann: We operate in South Africa for 10 years now and have two business areas here. One is IT Operations and Systems Integration and the other one is telecommunications. Our Headquarter in Johannesburg is responsible for IT-Operations such as Desktop support, System development/ -integration (SAP) and Telecommunications. In Johannesburg is our biggest center with about 350 employees. In Cape Town, our second business center, we employ about 300 people in the in both business areas. 30 employees in South Africa are in charge as a SAP Offshore location. Our focus is to attract the local market. Offshoring Journal: Why are you just focused the local market? Andreas Baumann: In South Africa are not the resources to establish low-cost Offshore centers. We have almost the same salary level in the SAP field as Europe so we are not competitive enough compared especially to India. The second problem is the lack of IT-Specialists. It is very difficult to get qualified employees, especially Black South-Africans. But maybe it will change in the future. The South African government supports IT-students and T-Systems has a cooperation with “Cida University” in Johannesburg as well as an own specific training for our business centers. Offshoring Journal: Almost 14 years ago the apartheid regime ended in South Africa and the government launched the so called Black Economic Empowerment (BEE). How did it affect T-Systems? Andreas Baumann: Due to the BEE there is a reverse guideline now. Companies in South Africa should employ people who were discriminated in the past, e.g. women, Indians and Black South-Africans. Although there is no official percentage companies have to fulfill the established rules and T-Systems gets under pressure from potential customers. Because BEE is such a big issue, a lot of firms ask whether we signed the BEE assignment otherwise they would not do business with us. Unfortunately most of the formerly discriminated people are not qualified for the IT sector at this point of time which is a challenge for both the companies and the country. Offshoring Institute: Does T-Systems have a leading position in the Information and Communication Technology area (ICT) for companies in South Africa? Andreas Baumann: At the moment we are number 7 or 8 in South Africa. But we are very close to set up a deal. That would bring us in position 3 or 4. All global players e.g. IBM, Accenture, are more or less in the same position like we are. The leading company is a local one, called Business Connexion Group (BCX). Offshoring Journal: Is T-Systems well known in South Africa? Andreas Baumann: We are still working on our reputation and branding. We are the biggest sponsor of South Africa´s “Americas Cup boat THE SHOSHOLOZA”. This engagement has enormous marketing effects. Our brand got more famous and well

About 700 Employees in South Africa Same Salary Level like in Europe Black Economic Empowerment (BEE) Sponsoring Team “Shosholoza”

27

known since we support the “Team Shosholoza”. Offshoring Journal: Is corruption still a big problem in South Africa? Andreas Baumann: Corruption is not as bad as in other African countries. The government did and is still doing a lot to tackle it. The biggest issue and most important task for the future is, to decrease criminalization. Offshoring Journal: Have you been affected directly by this problem? Andreas Baumann: Yes, just some weeks ago I was a victim of a knife attack and got serious injuries out of it. It is not about discrimination in South Africa, not “black against white” it is because of the big gap between poor and rich. Every middle class family/ person can get a victim. It does not matter whether they are Black South-African, European or Indian. Many criminals are from Mozambique or Zimbabwe. Because of the problems in these states, almost 3 million people flew. They are illegal in South Africa now without anything. All in all the violence level has increased. Offshoring Journal: How would you describe in general the quality of life in South Africa in general? Andreas Baumann: As long as you are very careful and play by the rules, it is ok. But life circumstances here affected me already. On my last trip to Munich I was kind of afraid to get out at night and was very careful. Because I am used to dangerous streets and violence at night. I am glad that nothing happened in South Africa to my colleagues as far as I know because they know all the problems and act carefully, too. Other problems, especially for an IT-company besides the lack of qualified people are the infrastructure and the telecommunication market. There is no public transportation system, no stable electricity and it is necessary to have an own power generator. Due to the monopoly of “Telecom South Africa”, the cost of communication is too high and the service is unreliable. That affects the investment climate in a negative way as well. Offshoring Journal: Are there any efforts of the government to attract foreign companies? Andreas Baumann: Paperwork in South Africa takes a long time. The administration government works very slowly. And to extend a work permit or visa takes definitely too long. So I think all these factors don’t attract foreign investments in South Africa. For me, South Africa is not a potential Offshoring location for the high end IT sector. Offshoring Journal: What are the next projects of T-Systems? And were do you see T-Systems in the near future? Andreas Baumann: We tried to get in Uganda, Malawi and Nigeria but that’s very difficult. Although South Africa is in Africa, it’s not really the African culture here. It’s much Europeanized and all countries north of it are not like this. The real Africa begins north of South Africa. As I mentioned, due to the currently existing conditions South Africa is not an Offshore location that’s why we will focus on the local market. Especially the automotive industry, the banking as well as the insurance sector will be important for us in the future. A challenge will be the lack of resources (qualified employees) and the high labor costs. Offshoring Journal: Thank you very much for the interview!

Corruption Is not a Big Issue Anymore Criminalization Increased Unstable Electricity; High Communication Costs South Africa Is not a Potential Offshoring Location Focus on the Local Market

28

Please note that by registering as our special guest by March 15, you will benefit from a special rate of € 850 instead of the normal rate of €1,250. To take advantage of this pricing, please include the Special Guest Code OIGUEST in the online registration form or in other communication to SharedXpertise.

29

Mauritius - Business Hub for the Global Service Industry by Devi Kencki

1. Introduction With globalization, the world of international business has evolved at a fast pace and a new paradigm has been created. Initially large organisations looked for cost-effective solutions to outsource non-core business processes. India and various other Asian countries saw this as an opportunity to invest in infrastructure and education in order to obtain outsourcing deals. It was common knowledge that it would be cheaper to engage Indian software engineers than local professionals. This led to an enormous growth of IT-outsourcing projects in Indian/Asian countries. Over the past decade, Asian countries dominated the global BPO-market by offering cheap labour. However, today’s outsourcers have different criteria for selecting a BPO supplier. BPO suppliers can no longer win outsourcing deals based solely on cost considerations; the BPO industry has moved beyond these criteria. If BPO suppliers, especially those from Africa, want to obtain more outsourcing deals, they have to leapfrog into a new paradigm. This relates to the whole concept of bringing value to the outsourcing company’s business wherein the smart outsourcer can dictate his requirements. The outsourcer is therefore bound to examine other aspects such as proven track record, internal quality management processes, the legislative and economic environment, infrastructure and competitive skills such as language, labour pool and the flexibility to adapt to the fast paced global market. While Asian countries are facing difficulties such as high attrition rates, poor language skills and rapidly increasing costs, Africa is positioning itself as the next strong alternative outsourcing destination. With a population of almost a billion, where 50 percent are under the age of 20, Africa is able to provide a large pool of human resources at competitive rates. With large infrastructure investments, language capabilities, favourable time zones and governmental support, Africa can become a major player on the Global BPO map. The AT Kearney Global Services Location Index 2007 shows a steady rise of African countries as interesting and world class outsourcing locations. Countries such as Morocco, Tunisia, Senegal, Egypt and South-Africa are well established on the BPO-market but indications suggest that Eastern-African countries such as Kenya, Madagascar and especially Mauritius will become strong and interesting outsourcing destinations within the next few years. Mauritius ranks 25

th on the Global Services

Location Index 2007 as a preferred outsourcing destination1.

BPO History A new BPO Paradigm Africa – a strong alternative outsourcing destination Destination Mauritius

1 Source : http://www.atkearney.com/shared_res/pdf/GSLI_2007.pdf

30

2. Destination Mauritius Located in the Indian Ocean, Mauritius is a small island nation off the coast of East Africa and is well known for tourism, textile and sugar industries. Benefiting from its favourable time zone (GMT+4) and its strategic geographical location (on the crossroads of vital trade routes between Europe, Asia and Australia), Mauritius is well positioned to become the prime offshoring centre for global companies allowing them to operate on a truly global delivery model. With its strong democratic tradition and political stability Mauritius has developed into one of the most advanced economies in the East-African and Indian Ocean region.

3. ICT - the fifth pillar of the economy The economic success of Mauritius, characterized by an average growth rate of 5% during the last 20 years, is attributed to the four traditional pillars of its economy: sugar, textile, tourism and financial services. In the past, the Mauritian government protected the few dominant domestic players (Mauritius companies who had a pre-colonial oligarchy) by given them the preference and closing out on foreign companies. This was to the disadvantage of the growing capacity of entrepreneurship. Mauritius had to overcome this colonial legacy by adopting a new mindset. And by facing threats posed by globalization, 9/11, and, in particular, the drop in sugar prices, the traditional pillars were not robust enough to foster future progress and growth; Mauritius already transited into a post-industrial age which resulted in the island becoming less competitive in textile and sugar industries as it faces global competition from giants like China and India. As a consequence, the Mauritian government decided to invest in the rising opportunities in the Information Technology sector, laying the foundation for a new pillar in the Mauritian economy. In a global market economy where competitiveness is the principal driving force, it is imperative for a government to foster a favorable outsourcing destination by creating an efficient, low-cost, business-friendly and social environment in order to attract foreign companies. In the late 90’s the Mauritian government took the commitment to make Mauritius a ‘cyber island’, with ICT as the fifth pillar of the economy. The Mauritian government put in place a legal framework and financial incentives to attract companies to Mauritius such as signing a DTT (Double Taxation Treaty) with approximately 32 countries to stimulate economic growth via FDI, offering a low corporate tax of 15 percent and 50% relief on personal income taxes for two expatriate staff members (Income Tax Act 1995).

Strategically located Four traditional pillars Foundation of the fifth pillar The legal framework and the fifth pillar of the economy

2 Source : www.investmauritius.com 3 Source : http://www.e-cybercity.mu/ 4 Source : http://www.safe-sat.co.za and www.mauritiustelecom.com

5 Source : http://hdr.undp.org/en/statistics/

31

Today, Business Process Outsourcing (BPO) activities are at the forefront of the development of the ICT sector. It represents over 45% of the industry. BPO activities, outsourced by foreign enterprises to Mauritian-based enterprises, include not only the traditional tasks of payroll administration, processing of receivables and payables, document and data management, but also innovative projects in areas such as financial analysis, multimedia and web design. The sector has also seen the emergence of companies which specialise in software development, call centres for both inbound and outbound calls, web-enabled activities, disaster recovery centres and a number of other ICT-related services.

2

4. State-of-the-Art Technology Parks In the fast paced economy where quality, flexibility, and technology are important matters in establishing a competitive edge, the Mauritian Government created a vision to transform the country into a ‘Cyber Island’. 3In order to realize this vision, the Government invested

massively in the latest technological infrastructure. India offered its technological expertise and a $ 100 million line of credit for the development. This sounded the start of the construction of various high technological buildings such as Ebene Cyber Tower 1 and Cyber Tower 2. After year one, 90% of building was already rented. The private sector has also been party to this construction boom and recently private investors announced their plans to construct several state-of-the-art buildings. Apart from constructing technology parks, the Mauritian government paired up with the private sector to invest in the construction of commercial, residential and leisure facilities in order to become an international centre with a more global expatriate population like other countries such as Dubai, Malta, Singapore… The Mauritian government has put in place the appropriate legal and regulatory frameworks concerning the data protection act, copyright act and infringements to laws involving cyber crime. Mauritius also wanted to offer global connectivity at competitive rates. Since 1964 Mauritius started to invest in more sophisticated communication means such as SAT1. After years of ongoing expansions, in 2002 Mauritius was connected to the SAFE (South-Africa –Far East)/ SAT3 / WASC submarine fibre optic cable system. This resulted in high bandwidth, international connectivity and an alternative high-speed link to the existing satellite route from Asia via Africa to Europe. A major advantage of SAFE is that it provides an uninterrupted and secure connection to the Internet even during cyclonic season that may occur in the Indian Ocean. Therefore, Mauritius has proven to be a safe destination for business continuity services.

4

BPO Activities Cyber Island SAFE/SAT3/WASC- Fibre optic cable system

32

Mauritius has benefited from its colonial history. The benefits are not only linguistic and cultural richness (French and English), but also its well educated and talented workforce.The Mauritian government has made significant investments in education and training designed to cater to the global requirements in various sectors. The Mauritian educational system is free and is modelled on the British system. The private sector contributed its part by providing French educational systems leading to the French Baccalaureate. Furthermore, the Mauritian government has encouraged world class tertiary education by collaborating with reputed institutions/universities in UK, France, India, Australia, and South Africa to enhance the skill-level. Prestigious global companies like Infosys, Microsoft, Accenture, and TNT have BPO delivery center in Mauritius are now capitalizing on the local skills for their operations.

Level New resources available every

year

School certificate (with Finance & Accounting)

7,000-11,000

Higher School certificate (with Finance & Accounting)

2,000-5,000

Tertiary (Accounting, Admin, management, business…)

2,000-4,000

ACCA/CIMA professionals 500

Literacy rate Male : 94%, Female 87% 5

Mauritius has several competitive advantages. State-of-the-art infrastructure, country wide connectivity offered via a fibre-optic cable, linguistic wealth, skilled workforce and cultural links with Africa, Asia and Europe. Mauritius is therefore a reliable alternative for extended business centres to provide business continuity. Changes are to be expected in the next few years in services outsourcing industry. China and India are keen to invest to get a share of the Francophone offshore market and to do business with Africa; Mauritius is in an excellent position to serve as a bridge between these countries and the African continent. New models of cooperation with India, China, South Africa and Europe have started to materialize, confirming a new world order for Mauritius. Prestigious brands such as IBM, Microsoft, TNT, ORACLE, HP or Infosys have established a presence in the ICT sector in Mauritius. Mauritius has strengthened its position as a BPO-supplier on the global market after years of hard work and substantial investments. The Mauritian ICT sector is determined to move up the process-value chain by channelling all the efforts and competencies towards being an international business hub on the global BPO map.

The author

Devi Kencki is Business Development Executive at TNT Document Services Mauritius. TNT Document Services Mauritius Ltd. is a subsidiary of the TNT group based in the Netherlands. Incorporated in 1988 TNT Document Services Mauritius Ltd. evolved to the BPO Centre of Excellence of the TNT Group providing BPO-services with a strong emphasis on value add business processes and on processes requiring Pan-European language capabilities. Prior to his current position Devi was a Project Manager for a Benelux BPO-Accounting project for one of the biggest IT-Suppliers in the world. He graduated in Accounting-Law from a Belgian University and specialized later in Finance and Banking.

A skilled, bilingual and cosmopolitan workforce A regional hub for ICT in the Indian Ocean

TNT Document Services Mauritius

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Coming Events

March Outsourcing Conference 2008 March 1, 2008, Paris, France

Gartner Financial Services Africa 2008 March 5 – 6, 2008, Johannesburg, South Africa

Growth and Innovation Conference March 11 – 12, 2008, New York, NY; US

IQPC SSON First European Annual Meeting March 12 – 13, 2008, London, UK

2

nd Shared Service and BPO Summit 2008

March 12 – 14, 2008, Shanghai, China

8

th Annual Talent Management Strategies Conference

March 13 – 14, 2008, San Diego, CA

FT Global Outsourcing and Offshoring Conference 2008 March 18, 2008, New York, NY, US

Gartner Business Intelligence & Information Management Summit March 18 – 19, 2008, Sydney, Australia

IQPC, Shared Services Africa 2008 March 26 – 28, 2008, Johannesburg, South Africa

Customer Experience Management Conference March 27 – 28, 2008, New York, NY, US

The 12

th Annual Shared Services Week

March 31 – April 4, 2008, Florida, US

April

Six Sigma Leadership Conference April 3 – 4, 2008, Chicago, IL, US

2nd annual Offshoring Research Network Conference and Workshop April 3 – 5, 2008, Philadelphia, US

Gartner Symposium/ITXPO 2008 April 6 – 10, 2008, Las Vegas, NV, US

Customer Contact 2008, East April 13 – 16, 2008, Weston, FL, US

HRO World Conference April 15 – 16, 2008, New York, NY, US

Public Sector Transformation Conference April 15 – 16, 2008, Copenhagen, Denmark

34

Americas Sourcing Industry Conference April 21 – 22, 2008, Chicago, Illinois, US

SharedXpertise, Finance Transformation Europe Conference April 23, Copenhagen, Denmark Special rates for guests through the Offshoring Institute, mention code: OIGUEST

Strategic Outsourcing 2.0 Conference April 23 – 24, New York, NY, US

Gartner Business Process Management Summit April 28 – 30, 2008, London, UK

11

th Annual Shared Services APAC 2008

April 28 – May 2, 2008, Sydney, NSW

Americas Sourcing Leadership Exchange April 30 – May 2, 2008, Chicago, Illinois, US

May Gartner Symposium ITXPO 2008 May 11 – 14, 2008, Barcelona, Spain

FT Global Outsourcing and Offshoring Conference May 12 – 13, 2008, London, UK

HROA Europe Summit May 13, 2008, Germany

HR Transformation Conference May 14, 2008, Germany

Gartner Outsourcing Summit May 19 – 21, 2008, Washington, US

8

th Annual Shared Services Week

May 19 – 22, 2008, Barcelona, Spain

June

Gartner Outsourcing Summit June 2 – 4, 2008, London, UK

Gartner Outsourcing & IT Services Summit June 17 – 18, 2008, Sydney, Australia © 2007 Offshoring Institute. All rights reserved. All copyrights in this publication are owned by Offshoring Institute. No part of this publication may be reproduced in any form without written permission from the Offshoring Institute. This publication is for information purposes only. Its content can not to be taken as a substitute of professional advice.