Numerous locations in the Middle East and Africa (MEA) are emerging as upcoming destinations for global services delivery. Several multinational companies have set up their centers in the MEA region to deliver services to Europe and North America, and tech giants including Apple, Facebook, Google, Microsoft, and Uber are leveraging it for global services delivery.
What’s the appeal?
Availability and quality of talent pool
There’s been a consistent increase in the pool of entry-level talent and experienced professionals with domain-specific skills. Egypt is the leader in the region; due to various government measures to improve education quality and a significant rise in contact center operations in multiple languages, including English, French, and Arabic, the country posted an enormous 35 percent increase in the headcount for global services exports in 2018.
There’s also been a considerable rise in R&D centers and Centers of Excellence (COEs), where talented professionals with relevant and often advanced technological skill sets work to develop state-of-the-art solutions.
Less competition for talent
Because there’s a relatively large population base, limited jobs, and high unemployment rates throughout much of the region – for example, South Africa is at 27 percent and Nigeria is at 23 percent – organizations can procure talent easily and train the workers as per their specific business needs.
Some of the countries in the MEA region offer highly attractive cost arbitrage compared to source geographies. For example, Egypt, Nigeria, and Kenya come in at 70-80 percent less (although Nigeria and Kenya are primarily leveraged to serve domestic markets), and South Africa (for non-voice F&A) and Morocco (for voice-based services) offer cost savings of 40-60 percent over source geographies.
Proximity to Europe
Proximity with various European countries is a big selling point of many African locations. For example, because Morocco offers both cultural and geographical proximity to France and Spain, companies are increasingly leveraging it for French and Spanish voice-based business process services. Because the English language was introduced by British colonists, and because there’s shared cultural affinity, South Africa is becoming a popular destination for voice-based services delivery for U.K. companies. Additionally, because most African countries share similar time zones with Europe, delivery and client teams are able to collaborate in real time, thereby, optimizing work in both the geographies.
The leading locations in the MEA region
The map below highlights key locations leveraged by global enterprises and service providers for global services delivery. While the emerging locations house 20,000 to 100,000 FTEs across global services, nascent locations employ less than 20,000 FTEs in this space.
A snapshot view of the top five global services delivery locations in MEA
- Egypt: Offers the most attractive cost-talent proposition, with strong multilingual skills, especially in English, French, and Arabic languages. However, relatively higher operating environment risk with concerns around high inflation rates and repressive government policies
- Morocco: Primarily leveraged for French and Arabic language voice-based BPS and IT services. Morocco offers moderate-high competitive intensity and strong government support (especially for the IT-BPS sector through financial, tax, and customs advantages)
- South Africa: Characterized with large, high-quality talent pools and the highest maturity across functions, South Africa houses multiple organizations delivering voice and non-voice BPS, including complex processes. It has a stable geopolitical environment, well-developed infrastructure, high ease of doing business, strong government incentives for the IT-BPS sector, and limited safety and security concerns
- Mauritius: It is leveraged for IT (both ADM and infrastructure), non-voice business process services, and R&D services to serve French and Canadian markets. It offers a favorable business environment, with government incentives for the IT-BPS sector, such as tax-free dividends and foreign tax credits
- Israel: Leveraged for delivery of advanced IT (including IoT, ML, and AI) and R&D services, primarily to support the U.S. and Europe. Israel offers a highly favorable business environment with lower tax rates and conducive government incentives, such as low corporate tax and grants up to 20 percent of the amount of the investment.
For a detailed view of each of these locations, please read our latest Location Spotlight reports. Each report analyzes the individual country’s global sourcing profile, key opportunities, drivers, challenges, talent and skills availability, financial attractiveness, and environment risks.
Long gone are the days of selecting offshore/nearshore service delivery locations with a regional/local interpretation of demand, a focus on cost savings, and an emphasis on service delivery in and of itself. Today, it is evolving to include a global view of demand, an increasing focus on talent quality and capacity for innovation, and the involvement of group-level strategy at its core.
So, which locations will help enterprises fulfill their requirements? Where can they place a long-term bet for a sustainable strategy that provides a competitive edge against their competitors?
Everest Group’s viewpoint, “2019 Locations Predictions: Follow the Talent,” reveals location-specific forecasts that can guide organizations on how to transform their global delivery location strategies.
Everest Group’s Predictions for Global Services Delivery Locations
As companies look for large-scale rebalancing and consolidation/right-sizing to fewer centers, the primary focus of a location strategy will be talent quality and availability. Asia has the largest talent pool with varied skillsets for IT, digital, Engineering and R&D (ER&D), and BPS service delivery.
India – India will continue to progress in the next three to five years, driven by growth in the digital and ER&D functions, as well as the increase in the availability of depth and breadth of talent. Cities such as Hyderabad and Pune will experience the highest traction due to increasing demand for complex IT and high-end R&D work from the technology and BFSI giants.
The Philippines – The Philippines will continue its dominance as one of the largest voice-BPS markets, and will also experience growth in IT services, accentuated by a faster rotation into digital such as customer analytics and social media-driven services. We expect increased traction in locations beyond Manila, such as Iloilo, Quezon, Taguig, and Davao, given their attractive cost proposition and untapped talent pools.
Malaysia – Malaysia will continue to grow, especially in the multilingual BPS, banking-BPS, and digital sectors, due to the increasing demand from Southeast Asian markets and global BFSI majors.
Europe, Middle East, and Africa (EMEA)
As companies consolidate their portfolios, and as technology and design thinking-based approaches blur the boundaries between IT and BPS, cross-functional collaboration will become critical to achieving digitalization and faster time-to-market. The EMEA region provides an ecosystem that enables companies to tap into talent that can multi-task, and is more suited for cross-functional center setups.
Poland – Poland will overtake Canada to become the third largest location in the world for BPS delivery, given its expansion of multi-functional delivery centers across various verticals and its strong government support. Cities such as Krakow, Warsaw, and Wroclaw will see traction in high-end IT services, with players setting up digital innovation hubs, including blockchain, cryptocurrencies, and AI.
Ireland – Ireland will experience the fastest growth in the region due to strong government support, well-developed infrastructure, and the increasing trend across global majors to shift their headquarters away from the United Kingdom because of Brexit uncertainties. Beyond Dublin, we also expect higher BPS growth in tier-2/3 locations such as Cork, Limerick, and Galway.
Israel – Israel will witness a significant uptick in next-generation IT services including big data, cybersecurity, cloud, and IoT, driven by a focus on research and close collaboration between academia and industry.
The rise of reshoring amidst the protectionist policies adopted by leading source geographies, including the United States, is driving companies to scrutinize and consolidate their service delivery portfolios. The Americas region is becoming a preferred choice for firms, given the ease of coordination with onshore teams, better alignment/training, and customer intimacy.
Costa Rica – Costa Rica will experience an increase in center set-up activity, although the typical scale of operations might decline due to the focus on delivering agile transformation and automation solutions to support North American operations.
Jamaica – Jamaica will see accelerated growth, especially in the BPS segment, on the back of availability of a large English-speaking talent pool and dedicated government investments to enhance the business environment.
Canada – Canada will also witness accelerated growth, particularly due to high government investments in attracting foreign investors, and especially in the IT and digital services space. Uncertainty around U.S. government policies will further drive enterprises to expand beyond existing U.S. delivery centers, especially Canada.
In today’s complex, and often volatile, environment, a tightly defined and carefully crafted location strategy is increasingly critical to enterprises’ long-term success. For more details on Everest Group’s Predictions for Global Services Delivery Locations, please see our viewpoint, “2019 Locations Predictions: Follow the Talent” or contact Parul Jain or Anish Agarwal directly.
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