Curtain Raiser: Offshoring to Africa

The global sourcing location landscape is evolving rapidly, with over 150 cities that are potential location options for companies. Africa is a relatively recent entrant to this list. While some companies have been present for almost a decade in Africa (e.g., ACS in Ghana, CSC in South Africa), the region has witnessed a significant uptick in global sourcing activity in the past two to three years. Further, recent investments by leading global companies (e.g., Genpact in South Africa and Morocco, Aegis in South Africa, IBM and Vodafone in Egypt) are likely to favorably influence interest in the region.

Among the African destinations, Egypt, Morocco, South Africa, and Mauritius are the leading countries in terms of scale of direct employment in IT and BPO. Each of these countries has more than 10,000 offshore jobs in the IT-BPO sector. Further, these countries host delivery centers for a number of marquee global suppliers and captives.

Africa’s growth in offshoring services has been primarily driven by its low-costs and talent availability in meaningful scale that can serve both French and English-speaking markets. However, investors often perceive Africa as “high-risk.” In this feature, we explore African offshore locations across three key decision drivers in location selection, namely, talent availability, costs of operation, and operating risks.

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Exhibit: Includes cost of payroll, facilities, technology, and management and administration

Industry news

• HP establishes a delivery center in Panama City to provide... more
• TCS announced the opening of a new global delivery center in Buenos Aires... more

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Industry news

• HP establishes a regional delivery center in Panama City to provide IT outsourcing services such as application services, remote data center and network maintenance services. HP also joined forces with Panama’s National Vocational Training Institute for Human Development (INADEH) and the University of Technology of Panama (UTP) to build a new Technology Training Center
• TCS announced the opening of a new Global Delivery Center in Buenos Aires, Argentina. The center which will initially employ 250 professionals will provide consulting, advanced IT solutions, IT product implementation and BPO services
• Tech Mahindra inaugurates its new BPO centre in Chandigarh providing an end-to-end customer service delivery to global Telecom Service Providers. The facility will cater to both domestic and international clients and will have 500 seats in the initial ramp-up and later add another 500 seats by the end of Sep 2009
• General Motors opened its Customer Call Center in Toluca, Mexico leading to the generation of 73 new specialized jobs. The communication exchange has the capacity to receive 36,000 calls a month from its customers and suppliers
• China Ministry of Commerce signed a Memorandum on Promoting the Development of China’s Outsourcing Service Industry through a series of preferential policies in financing and direct cooperation with multinational companies including Procter & Gamble, Coca-Cola, Kodak, and Sony
• Standard Chartered plans to open an office of its knowledge process outsourcing network – Scope International – in Bangalore by October. The bank also plans to hire around 2000 employees in India in the current financial year

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