Outsourcing: Competing in the Global Marketplace

1
Outsourcing Competing in the
Global Marketplace

• ABFICT 2004 Annual Conference
• May 2, 2004 Cairo, Egypt
• Walda Roseman, President and CEO

2
Why Outsource?

• labor arbitrage is far from the only factor in
  the decision to outsource. Companies cite
  greater productivity, improved service and
  superior technical skills as other reasons to
  move operations offshore.
• - A. T. Kearneys Making Offshore Decisions

3
Outsourcing Today

• According to the U.S. Department of Commerce, the
  value of U.S. exports of legal work, computer
  programming, telecommunications, banking,
  engineering, management consulting, and other
  private services jumped to 131.01 billion in
  2003, up 8.42 billion from 2002. Imports of
  services - a category that encompasses U.S.
  outsourcing of call centers and data entry - hit
  77.38 billion for the year, up 7.94 billion
  from 2002.

4
Outsourcing Today (contd)

• Information Technology Services
• Computer and Related Services
• Business Process Outsourcing
• Customer Interaction Services
• Back-Office Operations
• More Independent Professional or Business
  Services
• Source World Bank

5
Outsourcing The Future

• The outsourcing segment will continue to
  outperform the western European IT services
  market overall, growing by 3.1 percent in 2004,
  then rising steadily during the next three years
  to an annual increase of 8 percent in 2007.
  Moreover, as a result of global outsourcing
  trends, Gartner predicts that up to 25 of
  traditional IT jobs in many developed countries
  today will be situated in emerging markets by
  2010.
• - Gartner Press Release

6
More Predictions
Source RTTS.com
7
Pros and Cons of Outsourcing

• Pros
• Competition
• Productivity
• Improves local knowledge and access to local
  markets
• Access to skilled human resources
• Non-governmental foreign aid

• Cons
• Potential loss of jobs
• Potential brain drain
• Management complexity
• National politics
• Legal disinentives

8
Smart outsourcing must be matched by smart
insourcing
9

• The Good News
• Money Follows Opportunity
• The Challenge
• Opportunity Requires Seduction

10
What Outsourcers Look For

• Financial structure
• People skills and availability
• Business environment

11
Financial Structure

• Compensation costs
• Infrastructure costs
• Tax and regulatory costs

12
People Skills and Availability

• Cumulative business process experience and skills
• Labor force availability
• Education and language
• Attrition rates

13
Business Environment

• Country environment (includes economic and
  political aspects)
• Country infrastructure
• Cultural adaptability
• Security of intellectual property

14
2003 Ten Most Attractive

• 1. India
• 2. China
• 3. Malaysia
• 4. Czech Republic
• 5. Singapore

• 6. Philippines
• 7. Brazil
• 8. Canada
• 9. Chile
• 10. Poland
• - A.T. Kearney

15
How Can Arab Businesses Compete?

• Implement Solid Business Plans and Commercial
  Best Practices
• Offer quality info-structure
• Work with governments to implement legal, policy
  and regulatory best practices

16
Key Government Best Practices

• Transparent legal processes
• Ready access to a fair judicial process
• Transparent investment processes
• Local partner required?
• No restrictions on capital flow
• Transparent ICT regulatory processes
• Need a robust ICT environment
• Political stability

17
Key Government Best Practices to Attract
Outsourcing (contd)

• Implement Best Practices
• Early implementation ofWTO Agreements
• Creation of effective regulator
• Implementation of business friendly regulations
  for ICT sector

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Other Key Conditions

• High education levels
• English skills matter
• Gender inclusion
• Half a workforce is not enough
• Strategic marketing efforts
• Have to reach out to companies and make them
  aware of your countrys strengths

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Build a field and they will come.