Tag: Africa

Surprising Sub-saharan Africa and the Continent’s Growing Relevance for Service Delivery: What You Need to Know to Select Your Next Offshore Location | Blog

Looking at offshore destinations for service delivery, Sub-Saharan Africa – particularly Nigeria – is emerging as a surprising location with the potential for forward-looking providers and customers to seize. But what risks come along with the opportunities for doing business in this part of the world? To learn what you need to know to make the right site selection, read on.   

Africa does not immediately come to mind as an offshore destination for service delivery. In the past, the main destinations for low-cost offshore centers, both in-house and outsourced, have been India (for broad BPS operations including customer-facing CXM) and the Philippines (for CXM), particularly when the operation requires a good level of English language proficiency.

However, in recent years, the level of interest in Africa as a destination has been growing as enterprises look for cost-effective alternatives to traditional locations and to balance their risk from too much activity in one country/region.

Within Africa, South Africa has been strong for several years, especially for CXM. North African locations such as Egypt, Tunisia, and Morocco have also experienced growth for IT, back office, and language support for French and other EMEA languages. Up until now, there has been less activity in Sub-Saharan Africa (outside of South Africa), but this is starting to change.

Advantages of Africa

Enterprises are now starting to seriously look at Africa as a destination for outsourcing for many reasons, including:

  • Population – Its huge and youthful population of 1 billion, with over half of the talent pool projected to be under the age of 25 by 2050, makes it a great resource for BPS activities
  • Government support – In many countries, the government helps to enable global services delivery
  • Market potential – Many of the large service providers are yet to enter the market or have small scale operations supporting the local market
  • Infrastructure – Internet and other capabilities are improving. For example, CSquared (a Google subsidiary) announced a four-way partnership in 2017 to build out the shared fiber networks in sub-Saharan Africa
  • Spending growth – The latest African consumer trends show that consumer spending growth in Africa is projected to rise to $2.1 trillion by 2025 and $2.5 trillion by 2030, according to market forecasts

While interest in the continent is growing, enterprises also should be aware of the following risks:

  • Talent – Companies will need to invest in growing and developing talent locally by training recent graduates, building a recruitment engine from the ground up, and other activities to create an experienced talent pool. The low talent availability, limited language support beyond English, and high premiums commands also are concerns
  • Business environment – In comparison to other nearshore European locations, the quality of infrastructure, digital readiness, and safety and security are among the concerns for East and West African countries
  • Low market congestion – While key players supporting global services in most African countries is currently limited, the entry of a few large companies could easily congest the market and quickly increase costs
  • Delivery enablers – Limitations with utilities, transportation, meals/catering, stationery providers, office infrastructure quality, and poorer connectivity to domestic and international locations all present risks

Location selection is key

If an enterprise can balance the opportunities with the risks, we believe sub-Saharan Africa could be a wise choice. But selecting the right location is key. In our report from 2020 Africa: Emerging IT-BP Delivery Force, we reviewed ten of the most mature locations assessing talent availability with the financial attractiveness.

The key takeaway: Egypt and South Africa, the two most mature markets, scored well in terms of both talent availability and financial attractiveness. But a surprising entrant in the top right of the chart was Nigeria. While still relatively immature when it comes to BPS, Nigeria’s high level of talent availability makes it a financially attractive destination.

As an example of recent investments in the region, Microsoft invested $100 million to open a technology development center with sites in Kenya and Nigeria in 2018. Three years later, it released a joint announcement with the Government of Nigeria, detailing several projects aimed at intensifying the nation’s move to become a more digital economy.

Other locations driving conversations with enterprises are Ghana and Kenya, both presenting a high level of financial attractiveness but scoring lower than the leaders in terms of talent availability.

locations

        1    Reflects market average annual costs for English language delivery for steady state of operations blended across the delivery pyramid and excludes capital expenses related to set-up, transition, expat costs, and of economies of scale for large-scale operations

          2    Represents presence of entry level and experienced resources for specific functions blended in a 60:40 ratio

          3    Combination of maturity for services delivery, presence of global / regional GBS and service providers, scaled operations, and other related aspects

Source:   Country-/city-level investment promotion agencies and global services organizations

All the other locations we assessed, apart from Tunisia and Morocco, rated well in terms of financial attractiveness but were less strong when it comes to talent availability, presenting an issue for any enterprise looking to scale.

Talent forecasts

We believe the level of talent available in Africa, particularly in sub-Saharan Africa, will improve over the next few years as global service providers and enterprises begin operations there, and talent from local operators accelerate their development by working for experienced operators. But it may take several more years to reach similar levels to those seen in North Africa or the country of South Africa.

In summary, sub-Saharan Africa is likely to grow in relevance as an offshoring destination for BPS, and forward-thinking service providers are already investing. As an enterprise, if you are considering the use of sub-Saharan Africa as an offshore delivery location, we would recommend several approaches:

  • Undertake a detailed assessment of the location to better understand talent availability and how it aligns with your future business and talent needs
    • Assess talent scalability as well as the capabilities needed to deliver process or skill-specific requirements
  • Understand how it aligns with your corporate strategy and CSR commitments
    • Africa is the main source of impact sourced workers, a growing area of interest for many enterprises
    • Understand how the potential location aligns to target markets for business development. Consider whether the potential location is a key target to grow your business
  • Conduct a detailed review of the service providers with delivery locations in the region to ensure they meet your requirements, especially in terms of talent and skills availability, cost, and business continuity

For more findings from our recent report, 2020 Africa: Emerging IT-BP Delivery Force, and to discuss Africa as a service delivery destination, please reach out to David Rickard ([email protected]) or Anurag  Srivastava ([email protected]).

Africa: On the Frontier of IT-BP Services Delivery | Blog

In the last few years, for a number of reasons, there’s been a major uptick in global services delivery from Africa. The most significant driver of growth is Africa’s emergence as the next frontier for small-scale delivery centers. Another is strong government support that enables global services delivery. But there are a variety of other key forces that are making Africa a destination of choice for companies of all sizes, including some of the world’s biggest brands, such as Accenture, Daimler, Google, Microsoft, Standard Chartered, and Teleperformance.

There is less competition for talent in most locations in Africa compared to key offshore/nearshore talent hubs across leading geographies. Expansion into African cities helps organizations diversify their delivery location risk, as most locations have the ability to serve as Business Continuity Planning (BCP) locations to nearshore/offshore centers. Moving services to Africa also helps organizations differentiate themselves by capitalizing on early-mover advantage.

Other factors, such as an attractive talent-cost proposition, strong domestic demand across East and West African countries, and improving infrastructure capabilities (including rapid adoption of Work From Home (WFH) / remote working models), have improved the business case for new center set ups. For example, there’s been an increase in services maturity for delivery of key services across the region, including voice- and non-voice-based BPS services, IT services, and engineering/R&D delivery. And while most locations have low operating costs, ongoing currency depreciation and lower attrition costs across leading countries like Egypt and South Africa have helped bolster overall growth.

Trade-offs and risks

As market players prepare consider options for service delivery from Africa, they need to be cognizant of the key tradeoffs and associated risks for operating in the region, including:

  • At present, Africa is best suited to deliver transactional services. Companies seeking to support more specialized operations or judgement-intensive processes may find it difficult to operate, or they may find that they need to make substantial investments in the talent market
  • There’s a limited pool of experienced talent. Companies will need to invest in growing and developing talent locally, by training recent graduates and building a recruitment engine from the ground-up, among other options
  • The region poses potential challenges with delivery enablers (including utilities, transportation, meals/catering, and stationery providers), low quality office infrastructure, and comparatively poor connectivity to domestic/international locations
  • The business environment in East and West African countries is less favorable than nearshore Europe locations, including infrastructure quality, digital readiness, and safety and security
  • Given low talent availability, language support beyond English is limited and commands high premiums
  • The presence of key players supporting global services is limited in most African countries; the entry of a few large companies could easily congest the market and quickly increase costs

Most leveraged African countries for IT-BP delivery

Exhibit 2

Here’s a quick look at the top four global services delivery locations in Africa, by market size – largest to smallest.

#1 Egypt

Companies leverage Egypt as a hub location for multi-lingual delivery to the EMEA region, as well as delivery to the US, UK, and Australia markets. It offers an attractive cost and talent proposition to support to a wide range of functions – including voice- and non-voice business processes, IT application development and maintenance, and digital services – and high availability of talent to support English and some European languages. While it offers a favorable business environment, it has some geopolitical stability challenges.

#2 Morocco

Companies largely leverage Morocco as a spoke location for multi-lingual contact center and IT services delivery. It provides extensive support to the North Africa markets. While organizations extensively leverage Morocco to support IT services delivery, it also increasingly supports business process delivery as well, including sales, client support, HR, and F&A. French and Spanish language services continue to be in high demand, and are the most widely used for services delivery. The country offers a favorable business environment but has some geopolitical stability challenges.

#3 South Africa

Organizations continue to leverage South Africa as a global hub to support the UK, US, and Australia markets, and – in many cases – South Africa serves as a regional hub for Africa and Middle East countries. It offers an attractive talent proposition to support both transactional and judgement-intensive processes, including customer analytics, actuarial modelling, fund administration, HR, and procurement. IT services delivery has gained traction over the years, and the country boats a large talent pool to support English and multiple European languages. It has a favorable business and operating environment with no significant challenges.

#4 Mauritius

Organizations primarily use Mauritius as a spoke location to support French language delivery and a suite of services including IT services (application development, maintenance, infrastructure services), voice and non-voice transactional business processes (e.g., F&A, HR, and procurement), and analytics. French language talent availability continues to drive overall demand. The country is highly favorable from a business and operating environment standpoint and has no significant challenges.

While the global services market in Africa is relatively less mature than leading offshore geographies such as India and the Philippines, there is significant potential to tap into the domestic market across the top locations. Industry verticals including BFSI, telecommunications, and IT services continue to drive overall domestic demand. Further, with the strong government support, offshore advantage, growing talent pools, and infrastructure capabilities, several African countries offer a multi-pronged value proposition to enterprises seeking an IT-BP services delivery destination.

To learn more about the dynamics in the region, please read our recently published report Africa: Emerging IT-BP Delivery Force, which highlights the relative attractiveness and talent-cost proposition of key African locations to support global services delivery, based on our holistic and multi-faceted assessment across 10 key parameters parameters.

For more information on Africa as a global service delivery location, please contact us at [email protected] or [email protected].

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