June 1, 2009 (FinancialWire) (ValueNotes Outsourcing Watch: Insights for Investors) — Wipro (NYSE: WIT) recently announced the setting up of a center in Egypt. Beyond the pyramids and with a futuristic outlook, Egypt is looking to script an outsourcing success story and they have found a ready audience in Indian companies. There are also unconfirmed reports of TCS planning to set up a center in the country.

Satyam and i-flex already have a presence in the country. Wipro stated that lower costs and availability of skilled manpower led them to explore the opportunity. Anand Sankaran, senior VP and business head, India and Middle East Business, Wipro said they plan to shift work from the Middle East and India into the country.

Egypt: Finding Favor In The Outsourcing Space

A recent report by AT Kearney ranked Egypt as the sixth most attractive destination for outsourcing IT services, contact centers and back office support. The attributes evaluated for ranking were: financial attractiveness, people and skills availability and business environment.

While buyers continue to favor India as an offshoring destination, there do exist a host of other reasons that are gradually bringing Egypt to the fore in the outsourcing space. Among these are:

– Lower costs

– Lower wage inflation

– Educated and skilled manpower

– Multi-lingual capabilities

– Similar time zone as Europe

– Subsidies offered by the government to create local employment

– Lowering of taxes from 40% to 20%

Government involvement and interest directly translates into tax sops and subsidies for the investing companies, which in turn increases the attractiveness of an outsourcing destination that has already evoked interest in the international market. Information Technology Industry Development Agency (ITIDA) of Egypt, is making efforts to encourage the industry and leverage the positive aspects. ITIDA focuses on development of the Information and Technology industry of the country, with special emphasis on the outsourcing segment. It provides a common platform to the buyers and the Egyptian service providers.

India Inc: Inching Towards Egypt

Indian service providers, especially the larger ones are setting up centers across various countries in Asia, Africa, Europe and Americas. This allows companies to manage risks better, increase presence across the globe, have greater international appeal and offer more services to the client.

Indian companies in their bid to tide over current recession and reverse the anti-outsourcing wave are trying to evolve into global players. The added benefits of being recognized as global companies include exposure to more markets, larger client base, increased capabilities and greater acceptance in the west. As part of their strategy, not only are these service providers moving closer to their clients, they are attempting to scale up with employees across countries offering multi-lingual services and creating jobs outside of India. Egypt offers them a location that is closer to Europe, thus increasing the ability to offer multi-lingual services and work in a similar time zone.

In an effort to uphold the tag of the most favored outsourcing destination, the Indian outsourcing companies are taking the initiative of ‘Global sourcing’ to new heights. Innovation being the key to sustain and move ahead, Indian companies must outsource work to other countries, and develop themselves as partners instead of being just service providers. The need of the hour is to leverage the experience gained over the years, and optimize the skill sets that Indian companies possess.

Going Forward: Overcoming Challenges

For Egypt to move ahead in the outsourcing space the general perception about the country needs to be changed. While ITIDA needs to make consistent effort to address buyer concerns and increase the capabilities of the vendors, they also need to highlight the advantages that they can offer.

State-of-the-art infrastructure is key for outsourcing to develop. Egypt will have to improve communication and transport facilities. More IT parks with all the latest amenities should help the country forge ahead and make a mark in the outsourcing industry. Ability to communicate in English is important along with knowledge of the regional languages. Investment in education and development of skill sets is imperative as ability to scale up will aid in industry development.

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