Egypt leads Middle East in global outsourcing sector

Dubai: The Middle East is making great strides in attracting outsourcing services to the region, particularly as global companies expand their presence in the region, but the countries must differentiate their offers and their potential to succeed in the growing global outsourcing space and compete on a more equal footing with the more established markets like China and India, said Yankee Group report.

"Of all the countries in the Middle East, Egypt has the strongest position in the outsourcing market. Some other countries including Abu Dhabi and Oman are coming on strong in the outsourcing space but others such as Jordan and Dubai face longer odds in competing for a piece of the outsourcing pie," Zeus Kerravala, Enterprise Research Senior Vice-President, Yankee Group, said.

Although the Middle East faces many hurdles in gaining some traction, this region offers some distinct advantages as it makes its play. India is the dominant outsourcing market and is likely to remain so for the foreseeable future.

The report said the cost of doing business in India has increased significantly during the past couple of years. In addition, a war for talent in has led to high attrition and infrastructure woes continue to plague the country.

"Key to the region's future economic prosperity is the diversification from being focused almost solely on oil-related activities toward the building of robust service industries. The countries of the Middle East are putting the rising petrodollar revenue to work in building new infrastructure and in developing knowledge-based economies.

"To this end, countries such as Egypt, Jordan and the UAE are jumping into the outsourcing market, exploiting the need enterprises increasingly have to simultaneously reduce operational costs while concentrating on core business activities as they seek to globalise their operations," he said.

Recently, Oman and Bahrain have thrown their hats into the ring, making strong bids to attract outsourcing to their countries. Saudi Arabia, which has the largest domestic IT market in the region, is also well positioned to potentially become an outsourcing hub for the entire region.

In general, in the Middle East, the IT skill sets are largely untapped and available at competitive prices. Although the Saudi Arabian economy dominates the region, Egypt is the most advanced country in terms of the outsourcing industry. The Egyptian pitch offers an appealing blend of a skilled and relatively cheap workforce with abundant foreign language skills. This resonates well with enterprises looking to outsource non-critical, transactional tasks.

Abu Dhabi has also entered the domestic and regional outsourcing market through its joint venture with EDS.

He said only Egypt has a similar profile to India and China. What is striking about the other Middle Eastern countries is that their gross national income (GNI) per capita is extremely high. Also, the local population makes up only a small portion of the total workforce. This leads to imbalances in wealth distribution among the local population, leading to high levels of unemployment.

For example, in Bahrain, Jordan and Oman, the official unemployment rates among the locals are at least double or triple than in India. In these countries, low-cost immigrants from the Indian subcontinent and other Arab states have bolstered the workforce.

"The good news for Middle Eastern countries is that all of the countries in the region have superior internet penetration compared to India. The UAE has the highest internet penetration, followed by Bahrain and Oman. The Emirates' internet penetration is nine times that of India and four times that of Egypt," he said.