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Growth on the Banks of the Nile - Outsourcing in Egypt

by James Tate,

The Egyptian ICT industry has remained resilient throughout the past five years, overcoming the political uncertainty that spread across the region in 2011 thanks in part to its infrastructure, pool of talented young workers and its proximity to the lucrative European market. The Egyptian government has realised the potential for continued growth in the sector with its Egypt ICT 2030 strategy supporting the industry and making clear to international markets the commitment that the Egyptian government can offer the sector.

ICT will continue to push the boundaries of every sector of business in the next decade as it has done in the last.  Egypt has plans to stay at the forefront of the ICT sourcing and business processing market, aware of the opportunities that the industry brings to an increasingly digital world economy. Having won the GSA European Outsourcing Destination of the Year in 2016, Egypt is demonstrating to the global market the success it has enjoyed over the past few years. Already the home of many IT success stories, with firms such as HP, Vodafone, SAP, IBM and Huawei operating in the country, Egypt is proud of its positive reputation for hospitality and reliability in the sourcing of IT operations.

Why Egypt you may ask, especially when competition for ICT sourcing contracts is growing globally. In A. T. Kearney’s 2016 Global Services Location Index, Egypt ranked a very respectable 16th, the highest country in the Middle East and Africa region. Gartner, an information technology research and advisory company, places Egypt among the nine primary locations identified for outsourcing, shared services and captives in 2016.Egypt thrives thanks to a skilled and abundant workforce, with enrolment for all levels of education rising considerably over the past five years. Statistics from UNESCO in 2015 suggest that the gross enrolment ratio in tertiary education grew by 20% between 2009 and 2015. Skilled graduates are flooding the Egyptian employment market, keeping the supply of labour high and wages cheaper than many rival destinations. The multilingual skills that the Egyptian workforce also acts as a fantastic selling point for the lucrative global market.

Of course, one of Egypt’s key attractions for the sourcing industry is its competitive costs. Egypt is cheaper than many Eastern European countries that specialise in the IT sourcing industry. Egypt has low running costs thanks to its abundant supply of workers, reliable energy supply and cheap rental costs, significantly lower than Eastern Europe and other North African economies with office space in major cities, such as Cairo, competitively priced. Egypt is host to contact centres for Microsoft, Teleperformance and Sykes in part because of the strong international infrastructure the country offers. After floating the Egyptian Pound in November 2016, the current government appears keen to help global and local business with support and advice from the IMF. Egypt ranks highly in areas such as starting a business, electricity generation and reliability and getting credit in the World Bank, Ease of Doing Business Report 2017, well above other emerging markets. The World Economic Forum notes that Egypt’s “upward movement (in its rankings) reflects recent reforms, including reform of energy subsidies, tax laws, and a strengthened business environment, as well as greater political stability”

Egypt does have issues that will affect the IT sourcing industry. Security remains an issue that will harm short term growth, however The Economist Intelligence Unit still predicts GDP growth to average 5.2% annually for the next five years. The government is working to improve the business environment with new bankruptcy laws and changes to the investment law. The government has also launched the ‘Next Tech Leaders’ initiative, to train and certify 11,000 Egyptian youth in the ICT field in collaboration with learning institutions (Coursera, Udacity, and edx) and MOOC (Massive Open Online Courses) platforms through online and interactive training.  This should push Egypt higher on the World Economic Forum rankings by increasing its score in openness and trade and generate a more favourable environment. Information Technology Industry Development Agency (ITIDA) and the International Finance Cooperation (IFC) have developed the National Competence Framework to further develop a sustainable approach to enhance the employability of Egyptian ICT talent pool.

Gartner notes in its ‘Evaluate Offshore/Nearshore Countries for Outsourcing, Shared Services and Captives in EMEA, 2016’ report “since the turmoil of the Arab Spring in 2011, (Egypt) has resumed strong economic growth, and its international credit ratings with Moody’s & Fitch have stabilized”. Egypt’s strong potential and reliable record with the sourcing industry make it a great sourcing destination. It’s reputation and skilled workforce have allowed Egypt to evolve from low-value to high-value services offering a full support system to international organisations. Egypt’s commitment to innovation clusters and its strong digital and physical infrastructure indicate the possibility of long term success for IT sourcing.

Egypt acts as a hub between Europe, the Middle East and Africa, offering a truly global destination for the sourcing industry, enabling quick access to lucrative markets. The GSA’s recognition of Egypt as the European Outsourcing Destination of the Year 2016 praises Egypt’s commitment to global sourcing standards and its potential offering to the sourcing community.

The GSA are hosting a locations strategy panel at their annual Symposium on June the 27th focusing on global destinations for the sourcing industry. To learn more about the locations that offer the best business join the GSA this June!

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