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Home > Articles > Outsourcing > ArticleItem
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6/9/2006 1:55:49 AM
Angelique van Engelen
Offshore Outsourcing Trend Might Be Heading For Africa
 Big Western companies are all into outsourcing very specific aspects of their activities abroad and Africa might become a new area of emerging interest. The business logic of the deals is obvious. Western companies that have trouble keeping their heads above water due to high overhead costs are making savings and improving their profitability buying into a trend that is by now well established and virtually as low risk as any business outsourcing practice elsewhere.
The trend has taken off some 15 years ago and gained momentum on the spur of the cost savings success stories and in many cases reputable quality of the work delivered by these fairy tale like 'night workers' in obscure overseas locations.
Accenture, the US group that has been a key player since the onset of the BPO take off, is by now the largest outsourcing expert in India and is under fire from all sides. The company has built up so much expertise that it is charging astortionate fees for its work, which critics say is threatening to defeat the logic to outsource. There are concerns about the firm's ability to compete on price and some outsiders say that the company is not growing its BPO activities any more. Accenture contests this, saying that the firm is instead expanding business, rather than cannibalizing revenue by moving to other business areas. It would be logical from a market technical point of view. Demand is by far not anywhere near its saturation point.
Africa might become a hotly contested next destination. Simon Thuo, a stock broker on the Nairobi Stock Exchange, is in the final stages of drawing up his business plan to start up a data entry and call centre in Nairobi, in an effort to get a foot in the door. A born negotiator, Thuo is in his everyday life involved in stockbroking, a profession that he's sticking to until his BPO plans have panned out sufficiently. Thuo's negotiations as a stock broker are likely not all that different from his work for his BPO business, which he has called Symon&Oscar. His everyday business is very much dominated by what's going on in the stock market in Kenya and making sure that the process is as transparent as possible. The world of stock broking is small and news travels fast. Yet to discern rumor from fact is an art in the Kenyan setting. Thuo says that his best negotiating quality as a stock broker is confidentiality and delivering on promises, also two key aspects in BPO negotiations. "Leaking client information and lack of trustworthiness is the biggest mistake BPO businessmen make", he says.
Africa is only just emerging on the BPO scene, yet Thuo has good confidence that it can compete with the Asian countries. He believes that Kenyan nationals' command of English is a lot better than Indians, and that combined with an even cheaper living standard, Kenya - based companies are better able to compete on price. People working around the clock in Africa doing all the hard work are happy with jobs like these because they have better guarantees and working conditions than in many other work places in their country. Asked whether he thinks the developments are on a higher level perhaps an unfair way of taking advantage of the bad work conditions of his country, Thuo cites a familiar response; "In life one has to start from somewhere and that is why I am putting all the necessary effort and manage a business in which I will be a shareholder".
The international BPO scene has evolved into a cut throat business however that is in which corporations are not at all shy from cancelling deals they are not happy with and there is a growing differentiation in the market and the labor pools. The more professional certain segments get, the higher the price of the deal. Indian towns and areas are setting the trend here and still have the largest share of the world market. The game is dominated by quality assurances, trust building and offering more highly diversified human expertise.
The BPO world was turned upside down in 2004 when Getronics decided to pull out of a contract it had in India worth millions of dollars. A second wave of BPO activity is emerging and bears all the hallmarks of quality control rather than competing on price only. India is somewhat the victim of its own success. Now that certain companies have become highly successful they have grown beyond what's healthy and exhausted the 'resource pools' of human talent. It will be interesting to see where the global trend goes in about five years. West African countries are likely going to have a rough time entering this market and competing with India, but there's hope for the likes of Thuo; investors are beginning to sign deals in Africa. South Africa is becoming a popular destination and that will draw focus to other African countries in the running.
Thuo says in his country, Kenya, there is a big problem with the government not allowing for incoming calls to be made over the satellite network. Yet, one callcentre has been founded and beaten Thuo to it. Named Kencall, the callcentre started began a telemarketing service from Nairobi. "East and Central Africa is not yet connected to the global fibre optic cable", says Thuo. This will likely be the case in 2008 only. "Telemarketing is the lower end of a call centre services. I prefer BPO-data entry, claims processing, medical transcription, legal transcription and corporate transcriptions services", says Thuo.
Prospects for African countries to become involved in BPO activity are quite good as the new wave in outsourcing activity takes off. One home grown African BPO is Rising Data Solutions which is located in Ghana. The company was established by Ghanean businessmen. They stand out for their strong business acumen. The company is is able to achieve operating costs 20-30% lower than existing Indian competitors without sacrificing on quality.
People are beginning to wonder whether Indian services should diversify and split up in more recognizable segments. There's talk of the value chain and the need for Indian companies to offer specialist services to move up on the ladder.
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Source: GP
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