Egypt: India's Gateway to the Middle East

by Hazem Abdelazim    Feb 06, 2009

There is no denying the fact that India is the largest provider of outsourced services to the world. By 2010, according to an XMG report, India will have at least a 15% share of the offshore market. XMG highlighted that the country’s share of the global outsourcing market in 2007 was the highest of all countries at 11.5%, with China coming in second with just 4.4% of the market share.

But the outsourcing saga doesn’t end at India anymore. Indian IT-BPO companies are now looking to outsource the outsourced . Interestingly, this kind of outsourcing is not seen as providing a competitive edge to other countries, but rather works as complementing the services already provided by India. Many Indian companies are opening back offices in the Middle East, Europe, America, and even other developing countries in Asia.

The Middle East and Africa (MEA) region is particularly attractive due to its low costs. The region is also gathering interest among European and American countries for direct outsourcing because of its geographical proximity, and it is best for India s interest to tap these markets before they become direct competition. A number of Indian companies are opening service delivery centers in Cairo whilst others are actively participating with the Egyptian government in training university graduates to acquire the proper set of skills needed to work in the BPO industry. 

Besides the obvious cost advantage, what qualities would an Indian IT company look for while outsourcing work? The answer is qualified people, infrastructure, language skills, a healthy business environment, quality of living, and favorable government policies.

In November last year, India s National Association of Software and Services Companies (NASSCOM) and Egypt s Information Technology Industry Development Agency (ITIDA) signed a memorandum of understanding (MoU), to extend the collaboration between the two countries and in February 2009, ITIDA will act as the platinum sponsor of NASSCOM’s India Leadership Forum.

It is worth highlighting that the 2008 Global Services-Tholons study The 50 Emerging Global Outsourcing Cities placed the Egyptian city of Cairo at 7th in 2008, up from its 2007 ranking of 11th.

The Egyptian Advantage

The Egyptian government has taken the development of world class infrastructure for information and communication technology (ICT) very seriously, be it in the form of real estate, telecommunications or Internet connectivity. Take for example the Smart Village near Cairo. Currently this state-of-the-art technology park provides facilities for over 20,000 people to work in the IT outsourcing industry. Additional Smart Villages are being planned for Alexandria and Damietta and the Maadi Contact Center Park in Cairo, for the BPO sector, will be up and running in 2012 and will be home to 45,000 people.

It is important to note that Egyptian ICT exports rose from US$ 250 million in 2005 to $650 million in 2008 and this sector is said to create around 10,000 jobs each year in the country.

The government s support is evident through a number of initiatives and reforms that have taken place. The government offers tax exemptions to companies that invest in infrastructure, and is also attracting multinational companies by providing tax and financial incentives along with assistance in training staff.

The General Authority for Free Zones and Investment (GAFI), affiliated to the Ministry of Investment, is developing ICT investment zones, with minimum bureaucracy and red tape, to facilitate further investments into the sector.

The one advantage that the Egyptian workforce has over their Indian counterparts is that it is not only fluent in Arabic and English, but many also speak a host of other languages like French, Spanish, Italian and German. This gives them the ability to easily service a large number of European and Middle Eastern markets.

Egyptian universities educate around 330,000 students every year, of which 100,000 have a background in commerce, science or engineering, providing for a skilled and technically aware workforce. The government has also established several training institutes like the Information Technology Institute in Cairo to train its young population, almost half of which is between the ages of 15 and 39.

Given its geographical proximity, beneficial time zone and cultural affinity to Europe and the US makes it the perfect partner to complement existing delivery locations in Asia and Eastern Europe.

Labor costs are significantly lower than in Eastern Europe. Companies operating in Egypt can also benefit from some of the world s lowest telecoms costs with ready access to VoIP at competitive global internet rates. Real estate costs are also low. In addition the rate of inflation is stable.

It is important to note that Egypt is not untested waters. There are a large number of multinational companies like Microsoft, Cisco, Google, IBM, Vodafone, HSBC, and Oracle, along with three of India s top 5 IT-BPO companies, who have already setup base there.

A great partner

Looking at all these benefits one can easily conclude that Egypt is in fact a great country to partner with for outsourcing. Indian companies need to successfully tap into the resources that Egypt provides in order to make sure that their clients get a cost-effective and quality solution.

Egypt already has a sound ICT infrastructure in place, reducing the investments that Indian companies need to make to setup operations there. The additional support from the government and its pro-business policies towards the outsourcing industry means that Indian companies who decide to setup there can be sure of a sound business environment to work in.

The Egyptian workforce can be easily used to complement that of Indian IT companies. Combining the IT knowledge of Indians with the language skills of the Egyptians would provide great advantages to Indian companies. According to the Yankee Group s report Can Middle Eastern Companies Fulfill the Eastern Promise , Egypt has the strongest similarities with India and China and is by far the Middle Eastern country currently best positioned to take advantage of the boom in outsourcing.

Indian companies can also use the geographical location of Egypt to great advantage. Seeing that the country is closer to Europe than India, and not too far from India itself, IT companies can set base there to effectively tap into the MEA region, which remain largely untapped, while servicing their European and American clients as before.

By working in partnership, Egyptian and Indian companies can successfully offer global outsourcing solutions to existing and new markets, while also providing Indian companies with the opportunity to expand into the Middle Eastern and European continental markets.

The author is CEO of Egypt s Information Technology Industry Development Agency (ITIDA)