Everest Group is a proud sponsor of the IT Procurement & Sourcing Summit Nordic, which takes place from 8 – 10 June at the Radisson Blu Scandinavia Hotel, Copenhagen.
David Rickard, Vice President, Sourcing Vendor Management & Business Process Services and Ricky Sundrani, Vice President, Pricing Assurance will be leading a Challenge Your Peers workshop on “How sourcing can impact your ESG strategy.”
David and Ricky will also be joining the pre-event ice-breaker, the networking dinner and all interactive sessions and presentations on both days.
Financial services organizations are digitizing and automating more processes to keep up with competition, and intelligent process automation (IPA) — which has been growing in use about 20% across all fields — is now becoming ubiquitous. Market research firm Everest Group in a recent report ranked IPA technology vendors and looked at the market for process automation.
While not a newcomer to service delivery, Africa has recently been experiencing a surge from buyers and service providers in adoption and investment, making this a region to watch for technical support and other value-added IT and business process services (BPS). Read on to learn why perceptions of Africa have changed, and explore six factors fueling Africa’s growth and its emerging delivery locations.
Africa has been part of the sourcing strategy of numerous Information Technology (IT) and BPS leaders in Europe, the Middle East, and Africa (EMEA) for quite some time. Lately, Everest Group has witnessed a sudden uptick in interest and adoption of Africa by both buyers and service providers.
More importantly, Sub-Saharan Africa has moved from primarily being leveraged for transactional services and low complexity customer experience (CX) queries to accelerated adoption of specialized operations and judgment-intensive processes as part of the region’s delivery portfolio mix.
Enterprise (business-to-business) technical support is one such area where buyers and service providers are proactively investing in Africa. We have noted several new technical support locations being set up in Sub-Saharan Africa by third-party outsourcing providers serving European and other English-speaking global markets.
Let’s take a look at what is contributing to this increased higher-level activity.
What factors have changed the perception of African talent and delivery sites?
STEM-focused education – The African Union (AU) has repeatedly reinforced its commitment to science, technology, engineering, and mathematics (STEM) education among member countries. The High Level Panel on Innovation and Emerging Technologies (APET) encourages AU Member States to implement STEM education regionally. Some emerging and nascent sourcing destinations, like Rwanda, have taken significant steps in this direction by introducing STEM education in 2019 at all education levels through its “New Competence-Based Curriculum,” focused on STEM and Information and Communications Technology (ICT)-led education
Investments by leading technology players to develop a local talent pool – Several multinational companies have set up delivery centers in the region to deliver services to Europe and North America, and tech giants including Google, Microsoft, and Netflix are leveraging it for global services delivery. These companies have invested heavily through well-designed upskilling programs with a focus on technology and digital services, creating a pool of managerial expertise as well as technology delivery capability for complex technical support and other value-added services in BPS and ITS
Acceptance of the remote work environment and related experience – The past two years have proven the remote and distributed work environment is as effective as traditional on-premise office setups. Service providers now have greater flexibility to enable their agents and managers to gain experience by working with global teams while delivering from Sub-Saharan Africa. This has significantly lowered the talent barrier for agents and supervisors
Six factors fueling Africa’s adoption
While the above factors have been instrumental in changing the perception and quality of the region’s talent pool, the following additional macro factors are driving the increased adoption of Africa:
Favorable demographic – As one of the youngest regions in the world, Africa boasts the greatest youth population in the world, with more than 60% of its population younger than 25 years of age, according to the World Population Perspectives of the United Nations. By 2035 the working population in Sub-Saharan Africa is expected to be larger than the rest of the world combined. This becomes even more relevant when viewed from the prism of the aging population elsewhere, including India
Cost arbitrage: Some countries in Africa offer highly-attractive cost arbitrage compared to onshore locations in Continental Europe (CE) and North America (NA). For example, Egypt, Nigeria, and Kenya’s pricing come in at 70-80% less compared to onshore locations in CE and NA, although Nigeria and Kenya are primarily leveraged to serve domestic markets. South Africa (for non-voice Finance & Accounting) and Morocco (for voice-based services) offer cost savings of 40-60% over onshore locations
Strong domestic market: The latest African 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. This is expected to create a fast-growing and lucrative local market for contact center and ancillary services, further fueling growth in Africa’s CXM delivery landscape
Increased confidence due to the presence of global enterprises: Some of the world’s largest brands from across industries, such as Accenture, Daimler, Google, Microsoft, Standard Chartered, and Teleperformance, are leveraging Africa as the destination of choice for global service delivery. This has given a lot of confidence to prospective companies as they look at Africa while exploring new delivery locations
Proximity to Europe: Proximity to various European countries is a big selling point of many African locations. Companies are increasingly leveraging Morocco for French and Spanish voice-based BP services because it offers both cultural and geographical proximity to France and Spain. Additionally, since most African countries share similar time zones with Europe, delivery and client teams can collaborate in real-time, optimizing work in both geographies
Business Continuity Planning (BCP) measures: Expansion into Africa further diversifies delivery location risk, which has become even more important in light of COVID-induced disruption in traditional delivery locations in Asia. Enterprise buyers of CX services are keen to balance their locations portfolio to manage business continuity risks for nearshore and offshore services
Government and regulatory support: African governments have progressively aligned the local data security laws with global standards, particularly the European Union General Data Protection Regulation (EU GDPR). For example, Nigeria released its Nigerian Data Protection Regulation 2019, which is aligned with EU GDPR. Similar laws, with regional variations but common intent, have been implemented by countries such as Egypt, Kenya, Rwanda, and Mauritius, providing potential investors and customers comfort around data privacy standards. Besides regulation, the government has also invested in infrastructure and security measures to boost outside investment
Emerging delivery locations in Africa
The map below highlights key locations leveraged by global enterprises and service providers for global service delivery. Of these, established locations such as Egypt, South Africa, and Morocco are quite mature and may house 20,000 to 100,000 full-time equivalents (FTEs), while emerging/nascent locations may have less than 20,000 FTEs.
Illustration 1: Emerging delivery locations throughout Africa | Source: Everest Group
Below is a snapshot view of key emerging/nascent delivery locations:
Nigeria: Boasts a huge graduate talent pool with 460,000 to 465,000 graduates every year. It has significant IT services delivery in addition to inbound/outbound customer services. Nigeria has the potential to support multi-lingual contact center delivery in French and English as well as meet significant domestic demand for CX services
Rwanda: Utilized for both voice and non-voice business process services and French and English language support. It is increasingly being leveraged for IT service delivery across global markets with a strong government focus, excellent infrastructure, and educated talent pools
Uganda: Used extensively to support African countries and also to provide some support to US markets. Uganda supports both voice and non-voice service delivery (inbound and outbound customer service, Finance and Accounting Outsourcing (FAO), etc.). It has the potential to deliver complex IT skills, given the huge ICT talent availability Mauritius: Leveraged for IT (Application Development & Maintenance (ADM) and infrastructure), non-voice business process services, and R&D services to serve French and Canadian markets. This location offers a favorable business environment, with government incentives for the IT-BPS sector, such as tax-free dividends and foreign tax credits
Kenya: Leveraged primarily for voice-based services and providing support to the US and Canada. While it has relatively low maturity for IT-based services, it can serve as a gateway/regional hub for organizations looking to expand in the East/West Africa region
With these positive conditions shaping its future, it will be interesting to see how the next decade fares for Sub-Saharan Africa. If the current trends continue, many countries in Africa are set to emerge as a close competitor to India and the Philippines for technical support and other value-added services delivery as long as it can successfully overcome misconceptions about safety, security, and talent. Continued public-private partnerships like the ones described in some countries above will need to continue for the region to accelerate its growth in this vibrant sector and positively impact Africa’s broader industry.
If you have any questions or would like to discuss global service delivery in Africa further, please reach out to Rananjay Kumar, [email protected], or David Rickard, [email protected]
Nitish Mittal, Partner in the digital transformation practice at Everest Group, commented on this, he said: “I can’t stress this enough: data or the lack of the right data strategy is the number one bottleneck to scaling or doing anything with AI. When clients come to us with what they think is an AI problem, it is almost always a data problem. AI depends on viable data to prosper. That’s why it’s important to think about the data first.”
Big changes are coming as Europe moves toward digital empowerment by 2030. Governments are building frameworks for the regulation of emerging technologies to protect consumers and companies while promoting innovation and digital leadership. What impact will the drive toward technology sovereignty have on BigTech providers, buyers, and investors? Read on for the latest in our series ontechnology sovereignty.
In our last blog, we explored the emerging and growing focus on technology sovereignty in the United Kingdom and Ireland (UK&I) and European markets. Let’s continue our discussion of this important topic.
The focus on Europe’s data sovereignty is back in the spotlight as a result of new European Union (EU) rules to limit big online platforms’ market power. The risk of global cyber-attacks by Russia as retaliation against Ukraine also has made this an issue to watch.
Europe’s latest moves for technology regulation are not in isolation. Representatives from business, politics, and science from Europe and around the globe have already been working together since 2019 to create a federated and secure data infrastructure through the GAIA-X initiative.
With data security, privacy, and technology sovereignty becoming key issues for the region, Europe is setting up new regulatory frameworks to protect consumers and companies, while trying to ensure a competitive market and encouraging innovation.
What does the Digital Markets Act (DMA) entail?
Under consideration by the European Commission, the DMA intends to ensure a higher degree of competition in the European Digital Markets, by preventing large companies from abusing their power and by allowing new players to enter the market.
Beyond the hyperbole that surrounds any technology regulation, the DMA provisions include:
New regulations on BigTech companies providing “core platform services” that are most prone to unfair business practices, such as social networks or search engines. These companies that have a market capitalization of at least €75 billion or annual revenue of €7.5 billion are considered gatekeepers
To be designated as gatekeepers, these companies must provide services such as browsers, messengers, or social media, which have at least 45 million monthly end users in the EU and 10,000 annual business users
Sizable messaging services (such as WhatsApp, Facebook Messenger, or iMessage) will have to open up and interoperate with smaller messaging platforms, if users ask, promoting more choice
Combining personal data for targeted advertising will only be allowed with explicit user consent from the gatekeeper. Similar to instant messaging, allowing users to freely choose their browser, virtual assistants, or search engines will be required
If a gatekeeper does not comply with the rules, they can receive fines of up to 10% of total worldwide turnover in the preceding financial year and 20% for repeated infringements. Companies who systematically violate the regulations could be banned from acquiring other companies for a certain period
In addition to DMA, the EU reached a consensus on the Digital Services Act (DSA) in April, which focuses on setting up a standard for the accountability of online platforms regarding illegal and harmful content. If voted into law, the DSA will apply across the EU within fifteen months or from January 1, 2024, whichever is later. Meanwhile, the DMA likely will go into effect next summer.
The battle for sovereignty and security is just getting started
While these acts are significant steps in Europe’s focus on curbing the perceived monopolistic power of BigTech, they are part of larger movements such as:
A growing global reckoning exists around BigTech companies that control multiple industries, such as enterprise cloud computing, consumer-oriented economies, and media and advertising, to name a few. Complicating this further is the way their roles (especially social platforms such as Meta, Twitter, etc.) are evolving into digital town squares, and the subsequent impact on democracy, free speech, and bullying
Most BigTech companies originated in North America but are now global businesses. There’s a degree of circumspection in how Europe views this shift in innovation and control and reining it in. These acts are a natural successor to Europe’s previous foray into data protection through the General Data Protection Regulation (GDPR), which came into force in 2018. It subsequently inspired other acts globally, including the California Consumer Privacy Act (CCPA)
The region’s increasingly fragile geopolitics is creating new implications for cyberwarfare and rogue state actors, fueling the desire to shore up digital resilience. We can also expect this to have a knock-on effect on other regions (the US is considering similar steps and Australia took measures to regulate the relationship between BigTech and traditional media, to name a few)
We expect this conversation on the regulation of emerging technologies to evolve and shape the future of technology spending and strategies in the region.
Implications of technology regulation for the European ecosystem
Owing to these triggers and the broader conversation around technology regulation, sovereignty, and BigTech reach, we expect the following three implications for buyers, providers, and investors in the European technology space:
Buyers should include sovereignty requirements in sourcing decisions: We are starting to see enterprise buyers of technology and services embed sovereignty of the tooling and service providers they choose in RFPs. Expect this to continue and become a hygiene factor for technology providers to showcase in the sourcing process
Establish regional market partnerships: BigTech companies are smart and understand they can’t be upstaged overnight. They are already establishing partnerships and tweaking their business model to ensure compliance with the evolving European regulatory environment. Look for more partnerships with specific players in the region to play by these rules (for instance, Google Cloud and T-Systems partnering on cloud sovereignty in the region). IT service providers will also train more people on BigTech technologies as a result
Look beyond sovereignty-washing: As with any big shift and trend, new and existing competitors to BigTech will latch on to this market theme. We foresee more press releases announcing the amped up focus on sovereignty. Investors, buyers, and partners should look beyond this marketing hype and truly understand how these firms are solving these issues. For instance, are they embedding sovereignty at the application or data layer? Where does the data reside, and who owns it? Answering these questions can help buyers spot the real innovators
We anticipate a floodgate of activities as we approach implementation timelines in the next 12-18 months. This will create a one-time discontinuity in the market and result in additional spending on compliance. However, market participants will be wise to consider the long-term impact of technology regulation in Europe on their strategies.
Europe technology and data sovereignty are back in the spotlight because of two recent events, the war in Ukraine and its cyberwarfare implications and EU lawmakers agreeing to new rules to limit the market power of Big Tech platforms through the Digital Markets Act (DMA) and Digital Services Act (DSA). Everest Group Partner, Nitish Mittal, discusses this topic in his article, What You Need to Know in Europe’s Next Wave of Technology Regulation.
While most Indian IT companies have moved their limited operations out of Russia in response to its invasion of Ukraine, they continue to expand in other Eastern European countries despite uncertainties and analysts warning of slowdown in business momentum.
Nitish Mittal, Partner at Everest Group, concurs with the views. “I expect them to expand talent efforts in India, Asia Pacific, Latin America, UK & Ireland, and Continental Europe, through a mix of delivery center expansion and M&As.”
In an article published on Business Reporter, Everest Group talks about how the world of work needs an upgrade to remove the gap between the legacy system of work and a new paradigm enabled by digital technologies.
Analysts believe SMBs in India are increasing their investments in technology through the SaaS model.
“A primary reason is that SMBs don’t have a large internal IT team to manage their technology backbone and need integrated as well as easy-to-use solutions which SaaS offers through opex-led models. For instance, Cisco has brought a range of SMB-centred solutions through Cisco Designed, a suite of tools to help SMB clients across network, collaboration, compute, and security,” said Nitish Mittal, Partner at Everest Group.
According to Everest Group, 43% of service providers are actively seeking to increase prices on existing contracts. Globally, there has been an average of a 6% increase in price requested by service providers.
Join Ricky Sundrani, Vice President at Everest Group, in this webinar hosted by GSA to explore:
What are the increased pricing trends across technology and business services
What does the future of pricing look like
How to best address inflation in contracts
How to best negotiate price increases
How can we ensure that price increases are reaching the employees of service providers
Should there be industry standard guidelines on how to approach this subject