Egypt positions itself as a technology service provider
Choosing the location of shared services or the provision of ITO (information technology outsourcing) and BPO (business process outsourcing) services is far from being an insignificant task. The selection of the destination country plays an important role in the success of the organisation of these services and the buyer-supplier business relationship. In this sense, Egypt offers a unique combination of advantages, which make it an ideal destination, gaining ground against some of the main outsourcing service providers, such as India, Malaysia or the Philippines.
Firstly, the ICT sector is one of the fastest growing economic contributors to Egypt's GDP. In 2018, the sector's overall revenues exceeded EUR 4 billion and are expected to reach EUR 5.1 billion by 2020. ICT exports, which include IT services, business process outsourcing (BPO) and knowledge process outsourcing (KPO), stood at 3.1 billion euros in 2017 and could reach 4.55 billion in 2020. The positive performance of the sector has made Egypt one of the fastest developing offshore destinations in the world and its BPO and IT industry is gaining a greater share of the world market. The segment is expected to grow at an annual rate of 14.2% in the period 2017-2020.
Egypt represents one of the largest telecommunications markets in Africa; the sector has effective competition and mobile phone penetration rates of over 100%. The country's Internet infrastructure is fairly centralised. The state-owned Telecom Egypt owns the country's telecommunications network and leases licences to other Internet service providers such as Orange, Vodafone and Emirate Etisalat. The Egyptian government is investing heavily in upgrading the network. Internally, the implementation of fibre optic cabling throughout the country is underway. Internationally, Egypt is at the heart of a global cable network consisting of 15 lines, and the use of increasingly high quality underwater cables has significantly improved its connectivity; with a capacity of 60 Tbps per cable, Egypt has a highly efficient connection with more than 60 countries.
The Egyptian market offers attractive outsourcing services thanks to competitive labour costs and a young and highly qualified workforce. More than 500,000 students graduate annually from the country's 35 universities and 100 technical institutes, and almost half of these graduates pursue their studies in a field related to the BPO (business process outsourcing) sector. Every year, 95,000 young people complete engineering studies, 50,000 computer science studies and 67,000 studies in other scientific disciplines.
In turn, there are numerous cooperation programmes driven by multinational companies operating in the country. Some companies such as Cisco or Microsoft regularly partner with educational institutions to offer hands-on training programmes. On the other hand, it should be noted that Egyptian students are increasingly multilingual: most speak English and a growing number have skills in French, German, Italian and Spanish.
Egyptian start-ups are increasingly attracting investment from Europe, the United States and other MENA countries. Among the factors driving this investment are the increasing level of smartphone penetration, the development of the Internet of Things (IoT) and big data in the New Administrative Capital's Smart City project, and the creation of new technology parks and data centres. The digital transformation plays a central role in the strategy of the Egyptian government, which wants to position the country as a major centre for technological services. The European Outsourcing Association ranked Egypt in 2016 as an exceptional destination for outsourcing services; that same year, Forbes included it in the top 10 countries for the creation of start-ups, and the AT Kearney Global Retail Development Index ranked it 30th in the world for its growth potential.
As mentioned above, the outsourcing industry has grown enormously in Egypt. Translation services, human resources, finance, engineering and software development are on the rise, and cultural compatibility, physical proximity and a similar time zone have facilitated productive business interactions with European countries. As a result, the sector employs 170,000 people in Egypt and provides services for more than 100 different markets in 20 different languages. BPO centres in Egypt have a much lower turnover rate than other global offshoring destinations, which guarantees better continuity. Egypt has moved from providing low value-added services to offering a high-value outsourcing industry, which is strongly supported by the national government.
Finally, and in relation to the COVID-19 pandemic, the World Economic Forum indicates that this sector has a great potential for development and will be one of the sectors that encourages the growth of the economy in the coming years, as there are external factors that play in favour of the industry. The growing European demand for these services and the current shortage of qualified professionals, the change in the landscape of shared services to higher value services, as well as the increase in costs in traditional destinations, promise to boost the growth of the service outsourcing industry in Egypt in the near future.
