Africa – The Next Frontier

Africa “only has wars and poor people.”

A few days ago, as I was leafing through “O”, Oprah Winfrey’s monthly magazine, I came across a story of one American woman’s struggle to bring up her adopted African-born daughter. The little 6-year old girl was constantly  teased in school because of her origins, as other boys and girls taunted: “Africa “only has wars and poor people”.

This got me thinking about my beloved continent of Africa, and the changes it has gone through in the last few decades. It seemed to me that despite very real progress, Africa is still viewed largely as a destitute and desolate place, with little or no hope for redemption.

So, a few days later I contacted my father, and over a hot cup of coffee, quizzed him about our continent, and the changes we have been through in the last decades.

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It has always intrigued me that his own father, who died in 1981 at the age of around 100, had the privilege of watching as Africa slowly transformed from a virtually unexplored space in the 19th century to an appreciably modern continent only 100 years later.

Kabugua wa Kinoo was born in the early 1880’s, long before British explorers came to our part of the world. Though the British had been in coastal Kenya for several decades, none had ventured into Kikuyu-land where my grandfather was born, until he was at least 15 years old. Thus, my grandfather had the privilege of watching with great interest as the history of our country, and indeed our continent, unfolded.

In the mid 1890’s, he must have been intrigued as the first Englishman come into his village, and tried to persuade him and his siblings to go to school, learn the religion of the “book”, and shed off some traditional practices.

At the turn of the century, my grandfather may have heard of the “great snake” – East Africa’s first railway line which, according to legend had been foretold years earlier by a great Maasai leader. Later, as roads and airports were built, he must have been very curious about these new, previously unheard-of methods of transportation.

In the 1920’s and 30’s, my grandfather must have been intrigued as our country was transformed into a Crown Colony, governed by the British. Later, in the 1940’s and 50’s, he would watch as young African men organized themselves into a resistance movement to fight for the return of self governance. He must have been very proud to watch Kenya and other African countries regain self governance in the 60’s and begin to take an active role in global trade and politics.

In the 1970’s, with much delight, I presume, my grandfather would then watch as his only son went to university, learnt the new ways of the world, got a job, moved to the city and into a marvelous new stone mansion. He must have been highly impressed as my father bought him beautiful new western clothes, took him to hospital whenever he fell ill and baptized his grandchildren interesting new names.

My grandfather must have lived a very exciting life. He died peacefully of old age, having breathed his last in his much-loved mud hut back in his village.

In one of the few surviving photographs of him, one can see him on my parents’ wedding day, sitting proudly in his traditional regalia, looking pointedly at the camera with his elegantly dressed wife by his side.

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Thus, as I sipped my coffee, I reflected upon the story of Africa’s transformation in the last 150 years through the life of my grandfather.   To date I am still fascinated  by the progress the continent has made in so short a time.

At the time of my grandfather’s birth, Africa had just entered the consciousness of the rest of the world, through the exploratory journeys of European missionaries. In the course of just a few decades, the continent was transformed as education, health, transportation and other sectors were impacted by the European settlers and other global economic events.

Today, young and eager Africans are actively striving to be an effective part of the global economy. There has arisen a new generation of “Cheetahs” who are actively working to change the fortunes of the continent. They are well-educated, ambitious, highly conscious of global economic and political trends, and are determined to succeed.

I can only imagine what Africa must seem like to the outside observer, with stories of war, poverty, illness and so on constantly portrayed in the media. But to me and numerous other African entrepreneurs born into post-colonial Africa, these issues are merely a challenge that we must overcome in order to succeed.

Africa’s Cheetah Generation is ready to take the continent to the next level. We seek opportunities in commerce, industry, education, health and other sectors where we can actively and gainfully engage the rest of the world. We believe the days of aid are over, and are eager to prove our worth to our counterparts in other parts of the world.

Reader, Africa’s “wars and poor people” stage is over!

We have progressed beyond this stereotype, and thousands of young African men and women are fired up and ready to take their place in the global economy.

We are eager to see Africa emerge as the Next Frontier of economic growth and success.

Our Motto? No more Aid, Just Trade!

So let’s trade, people!

(Find some up-coming Cheetahs here: http://www.odesk.com/groups/cheetahs )

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Generation 1 - Grandfather Kabugua wa Kinoo in 1967, aged 86

Generation 1 and 2: Grandad and others at my parents wedding, 1967

Generation 2 and 3: On my wedding day with both sets of parents, 1998. Grandad did not live to share this special moment with us.

Generation 4:- My three little girls, 2008

Entrepreneurship In Africa – Who Knew?

Did you know that Africa was once the source of 90% of the world’s gold? And that one of the largest proven oil reserves is found on the African continent?

No? Neither did I!

A few months ago, in the course of researching for an article, I was pleasantly surprised to unearth some gems about the continent of Africa, facts about my own homeland that I didn’t know.

I was amazed to find out that Africa is the most polyglot (I learnt that this means multilingual!) continent in the world. I speak three languages, as do most of my fellow countrymen (Kenya) but I was not aware that this was common throughout our continent. (Most Africans can speak at least two African languages and one European one, I discovered.)

To my further surprise, I found that Africa’s economy has had healthy growth in the past few years, averaging a rate of 5%, comparable to other more economically advanced regions. This was great news!

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I am an entrepreneur, born and bred in the East African country of Kenya and have been in business for the last ten years. I believe much of Africa’s recent economic growth has been driven by the same entrepreneurial spirit that has seen other regions grow and prosper. However, very little of this is heard of, and most images coming out of Africa do not do much to highlight entrepreneurship on the continent.

As an entrepreneur, I have met and networked with several young Africans engaged in all sorts of entrepreneurial activity – from simple retail activities – buying and selling of this and that, to manufacturing of various products for local and international markets, to providing services ranging from the simple to the complex – from say, laundry services to high-level financial services.

What has always amazed me, is the sheer determination and ability of African (and other) entrepreneurs to navigate not only the usual challenges of business, but also to overcome the additional challenges of operating in a developing economy.

I run a business process outsourcing company from Nairobi, the capital city of Kenya. In the past few years, I have witnessed changes in the economic environment that have enabled my company and others to grow and prosper in a manner that may not have been possible a decade or two ago. For instance, due to recent improvements in telecommunications, my company is able to serve USA-based organizations from our office in Nairobi, providing “back-office” support to several companies.

That said, I have always been curious to hear other views about Africa. So, I’d love to hear from you – feel free to leave your comments / views!

Outsourcing in Africa Comes of Age

Sometime in November 2007, I attended The 3rd African Outsourcing and Contact Centre Conference held in Kenya’s capital city, Nairobi.

Participants of the 2-day event included several well-known personalities from Africa’s outsourcing space, representing BPO operators, investors, consultants, vendors, researchers and academics. There were delegates from as far as UK and India, as well as from the African continent itself; South Africa, Egypt, Mauritius, Ghana, Uganda and the host country Kenya.

The conference began with a resounding welcome from the Permanent Secretary to Kenya’s information ministry, Dr Bitange Ndemo and was later addressed by Minister Mutahi Kagwe. Like many African countries, Kenya is paying very serious attention to developments in outsourcing and has identified this sector as one of the pillars of its own economic development.

Key among international speakers were Kerry Hallard, a board member of UK’s National Outsourcing Association, Ian Rees of Secure Future Associates, UK; Scott Wise Genesys, UK; and Mahavir Shah of Panamax, India.

Speakers from the African continent included Sandile Gwala of Deloitte, South Africa; Andre Deetlefs of Avaya, South Africa; Mark Hill of Teleforma, Mauritius and Hussein Kamel of Xceed Contact Centre, Egypt.

The venue was packed beyond capacity, and by the time we headed for our tea break on the first day at a few minutes past 10.00am, space in the conference hall had been reduced to standing-room-only.

In the course of two days, several pertinent issues were discussed, key among them the current emergence of Africa as a destination for outsourced services. International marketing, technology, policy and strategy issues were discussed, including case studies from the African region and beyond.

A few years ago, a conference such as this would have attracted far less attention in Africa. However, there is now enormous interest in outsourcing, and judging by the turnout at this event, this can only continue to grow. Perhaps the phenomenal success of Asia’s outsourcing players has inspired an interest from Africa’s growing business and investment community.

The continent is now making rapid strides in outsourcing and some countries are already being hailed as serious alternatives to India. Countries at the forefront of this include Egypt, Ghana, Mauritius, Kenya, Senegal and South Africa.

The 3rd African outsourcing conference aimed to address a wide variety of players, including prospective and existing BPO operators, potential investors, policy makers and regulators, and technology suppliers and consultants. The event proved to be a very successful networking and learning opportunity for the region’s BPO players.

The next African outsourcing conferences will be held next year (2008) in Kenya and Mauritius. It is an annual event, run jointly by premier event and conference organizers Africa IT Exhibitions and Conferences (AITEC) and In-Sync Ltd.

This particular event was partly sponsored by Kenya’s ICT Board, in partnership with The Kenya BPO and Contact Centre Society, and was a resounding success.

Presentations and further information will be available on the AITEC website at: http://www.aitecafrica.com

Outsourcing to Africa: From a speck on the radar…

Try this: Google the term “Outsourcing to Africa”, and take note of the results. Do the same for India. Compare the two. Interesting result, isn’t it?

I suspect you will be as surprised as I was to find almost similar results; just over half a million documents for each search.

Let’s go to Africa…

Sometime ago, I was invited to make a presentation on the current outsourcing activity in Africa. The event was an intimate, 4.30pm, invitation-based, gathering of some of Kenya’s foremost business people. It was quite challenging, as it was the first time I had been invited to speak specifically about Africa, and without the benefit of co-speakers to help cover such a wide topic. Nonetheless it was a welcome challenge, as it required me to focus my attention on the wider African region, and appreciate the experiences of my fellow outsourcing practitioners on the continent.

I tried to approach the discussion along a specific framework. To which countries were BPO projects heading in Africa? What were the strengths of these countries, in relation to those of their competitors? Which specific BPO companies were excelling? And finally, what services were they offering?

I explored the outsourcing industry in four of Africa’s major geographical regions: North Africa, West Africa, Eastern Africa and Southern Africa. From each region I selected one or two representative countries, and spent some time on its specifics. At the end of the session I compared Africa’s outsourcing landscape with that of India, and tried to draw some lessons from the latter’s spectacular success.

This is a summary of that discussion, which I will cover in a number of phases. It will be a multiple-part series, through which I will touch on the outsourcing activities of each African region and finally attempt to provide a comparison with India in the final part.

So, Why Africa?

If I may first address this question; why, indeed, is Africa now able to attract the attention of some of the world’s most respected outsourcing companies?

The answer to that question is multifaceted, and speaks to both the current situation in Africa and that of the more established players in Asia.

One of the key drivers of Africa’s heightened visibility, I suspect, is the current need for new destinations that may offer different characteristics from their better-known counterparts.

Rising labor costs in India, for example, have created a need for other competitively priced destinations, particularly in low-cost Africa. Also, a recent appreciation of the rupee could negatively impact the industry, in which case other supplier countries would benefit.

As another example; Mauritius, on the Eastern coast of Africa, has sometimes been viewed as a possible “back-up” location that would come into play in case of, say, a wide scale natural calamity on the Asian continent. This, I imagine, is an unlikely but not entirely impossible event.

At the other end of the spectrum, and possibly another reason for its emerging visibility, is Africa’s improved economic and political landscape. The continent has made good strides in the last decade or so, and this could improve its chances of success in the outsourcing sector. Granted, outsourcing companies keenly seek out low cost destinations; however, a strong, growing, and thriving economy is often  considered the most attractive characteristic for a potential supplier. South Africa and several other countries come to mind.

Improved educational standards on the continent are another factor. Of importance also is the fact that the educational systems of several African countries are based on those of their former colonial masters. This serves to contribute to some affinity between the two, and sometimes strengthens economic ties.

As a side note – Philippines, a former colony of USA, is currently enjoying very strong outsourcing relations with the latter, due in part to this historical background.

An interesting twist is the emerging role of the African Diaspora. In the recent past, I have come across more than one African company whose principals are men and women in the Diaspora, who have either come back home and invested in the sector or they are instrumental at sending BPO contracts back home. I am vigorously persuaded that this will be a growing trend in the years to come.

There are several other factors that point to Africa’s growing visibility in this sector and it is my belief that one or more of these will be instrumental in the success of Africa in the global outsourcing space.

Which business processes?

Outsourced functions currently heading to Africa are varied, and range from the usual suspects – data capture and processing, transaction processing, hotel and airline reservations, transcription, customer care services – to newer, more value added services.

An interesting example is Media Process Outsourcing, if I may use this newly coined term. MPO describes some of the projects coming out of the global media and entertainment industry and is a relatively new outsourcing frontier, even for seasoned destinations like India.

I have also come across outsourced legal processes, another area that is gaining serious momentum and is set to produce fresh new sources of revenue.

Let’s, indeed..!

Africa is indeed making great headway, and all indications are that it will shortly emerge as a strongly competing destination for outsourced services.

The continent has emerged from a tiny speck on the radar a few years ago, to a solid destination on the global outsourcing the map.

Good things come to those who take time to watch and learn, I believe.

More on the “Outsourcing to Africa series will be posted on this blog shortly. Please drop by.

Still to come:

Outsourcing to Africa: Egypt – the great sphinx is rising!
Outsourcing to Africa: Ghana – a vibrant gateway to West Africa
Outsourcing to Africa: Kenya – the next attraction?
Outsourcing to Africa: Mauritius – a unique study in bilateral success
Outsourcing to Africa: Senegal – the “Paris” of Africa
Outsourcing to Africa: South Africa – booming business at the tip of the continent
Outsourcing to Africa: Can we compete with India?

Note: The search results referenced in the first paragraph of this document were based on the terms “Outsourcing to Africa” and “Outsourcing to India” on 3rd March 2008, and are subject to change.

Outsourcing to Africa: Guest Interview Series – Russ Sandlin

Is Africa the next outsourcing frontier?

According to my guest Russ Sandlin, it just might be.

Africa has “friendly people who sincerely come across as warm on the phone”, and great English and French capabilities.

These, I believe, may well be some of Africa’s strongest selling points in the global outsourcing space.

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In this series of articles, I will examine Africa’s emergence as a destination for outsourced services. I will be speaking to a number of global industry players, each of whom have had practical experience from different countries around the world. I trust each of them will offer a unique perspective based on their own hands-on experience.

Russ Sandlin

My first guest, Russ Sandlin, has over 20 years experience in contact centre management, and has been instrumental in setting up BPO operations across four continents.

He has managed large contact centers for Barclays PLC, HSBC, Chase Manhattan, Bank of America, AT&T and Dell. He has also helped US-based investors move their work offshore, setting up contact centers in Korea, Mexico, Dubai, Qatar, Pakistan, India, The Philippines and Ghana. In addition to these countries, Russ also serves as an offshore consultant for Australia and soon, Kenya.

He also runs Benprise LLC which assists investors in all phases of management, wealth creation and wealth preservation both in the US and offshore.

Russ is currently based in the Philippines.

I was fortunate enough to meet Russ online through a mutual acquaintance, and was delighted when he took some time to share his views about Africa. We had time for only a brief chat, but he did provide some very useful insights into some of the most important BPO issues on the continent.

Below is a summary of our discussions:

Mugure: Hi Russ. Thanks for taking the time to speak with me. I am very keen to hear your views on outsourcing to Africa, and what you think our chances are in the face of competition from Asia

Russ: I can give you my views for sure since I have operated in both ‘theaters”, so to speak.

My view on country ratings:

The Philippines is number one now in the world for voice, in terms of customer satisfaction. India is number one for ITO and KPO and higher end BPO. China is the up and coming “sleeping giant”. All three have superior infrastructure over Africa

On Africa’s chances in the face of competition from Asia:

I like Africa long term. Africa in general has:

– Great English and French

– Friendly people who sincerely come across as warm on the phone

– Africa is very strong in the European markets, specifically UK and France

– Kenya, Uganda, Tanzania, South Africa, Egypt, and Ghana are on their way for English

– For French, Senegal, Tunisia and Morocco are strong

On the other hand, Africa has a number of weaknesses:

– Weak infrastructure

– High cost of bandwidth across the continent

– Reliability and corruption problems

– Education

– Accents may present a challenge

– Africa is more costly than the Philippines and India

On the effect of political instability on outsourcing:

When I set up call centers in Pakistan, there were public protests going on at the time. The same happens in India, Philippines, Korea and Mexico. It’s just that Kenya’s took such a violent turn. For Kenya specifically, some PR efforts need to take place.

Mugure: Yes. The good news is that all that (political instability in Kenya) was settled, and very speedily. BPO companies did not let clients down, in spite of the problems. One centre set up beds and took care of the staff for four days at the height of the violence.

Russ: That’s a great story. Defining moments, in fact.

On using local talent:

It is very important to raise local talent wherever you operate.

On opportunities for new, upcoming destinations:

I would consider placing low-value-chain work in such destinations at first, specifically outbound work. Higher value contracts would require strong bandwidth at low cost. Mission critical work requires 99.999 uptime.

Russ will be traveling back to Africa shortly, which I hope will result in new contracts for some BPO operations based on the continent. I hope he will be able to drop by again after his trip.

In the meantime, here is a brief but very insightful interview of Russ by ABS CBN news service, Philippines: http://www.youtube.com/watch?v=z31DtkWCnrU

Outsourcing to Africa: Egypt – The Great Sphinx is Rising!

In July 2007, AT Kearney ranked Egypt 13th in their list of top 50 outsourcing destinations worldwide.   This placed Egypt at the top-most position among all African countries featured in the report, an annual compilation by the well-respected research company.

Indeed, Egypt is currently one of the most important players in Africa’s outsourcing space, with several Egypt-based BPO companies achieving considerable success.   Although the BPO industry in Egypt is relatively young, the country has attracted investment from both indigenous and international organizations, a few of which I will discuss in this article.

MEET THE PLAYERS

Egypt entered the international outsourcing space in May 2003, when Xceed, the country’s first international call centre, opened its doors for business.

Xceed was established in 2001, primarily as the IT arm of Telecom Egypt, the incumbent telecommunications operator. One of Xceed’s immediate plans was to create and operate a call centre capable of serving Telecom Egypt’s client base of several million subscribers.

In a recent conversation I had with Chairman and CEO Dr Adel Danish , Dr Adel recounted how Xceed successfully built a state-of-the-art call centre in a record one year, with an initial capacity of 1200 seats. Of this, 300 seats would serve Telecom Egypt, while the rest were set to target international markets.
Within a few short years, Xceed has grown to a capacity of 1,600 workstations, across four sites, with 1,000 of these allocated to serve USA, Canada and Europe in eight different languages. The company has the impressive distinction of being the first organization in Africa, Middle East and the South European continent to be COPC certified.

Also important in the history of call centres in Egypt is Tamima. This company began as a business consulting firm in the 1980’s. Later, the company’s founder started a trade and export company, which led to a TV shopping operation by 1994. This led to the creation of a call centre, whose aim was primarily to handle incoming sales calls. The start of TV shopping required 4 telephone lines and 14 members in staff, which by 2005 had exceeded 160 staff and 120 telephones generating a turnover of US$ 10 million annually. Today, Tamima is a multi-faceted enterprise, offering a mix of services to its varied clientele.

Raya Contact Center (RCC) was established during a regional-growth drive by its parent company Raya Holding in 2003-2004. RCC is another player of note, and currently has a capacity of 1,200 seats.   RCC’s client base is drawn for USA, Australia, Europe, the Middle East and Japan. Clients include Microsoft, Intel, CISCO, Vodafone, Dell, McDonald’s, HTC, P&G, Coca Cola, Unilever, General Motors and Barclays Bank.

In a presentation I made on outsourcing to Egypt sometime in 2004, I mentioned 450 total seats for this company, a number that has more than doubled in the last three years.

C3, The Call Centre Company, was founded in 2001. By 2006, the company reportedly had 600 agents serving several companies worldwide in more than 8 languages. The company claimed to be the leading provider of third-party offshore BPO in Egypt at the time, with a significant client base of European and USA based companies, including The Wall Street Journal. Raya later acquired a stake in C3 as part of its plan to “diversify its client base to include large companies in Europe and the USA .. and increase its exports volume”.

ECCO, another important player, was established in 2001 as a 3rd party outsourcing call center. ECCO’s has served several international companies, including one of the world’s best known brands in global telecommunications.

A number of multinational companies have also set up operation in Egypt, which I believe further illustrate the country’s considerable potential.

Satyam, a multi-national consulting and IT services company, recently signed an MoU with the Egyptian government, and will set up a 300-seat center at the Smart Village, in Giza. The center will serve as a support facility for Satyam’s Middle East customers. Satyam employs nearly 35,000 professionals worldwide, in 55 countries, across six continents.

Teleperformance, another multinational, has a 300-seat facility in Egypt, with plans to grow this to 900 workstations in the short term. The company’s 14,000 square meter building can eventually hold 2,500 production workstations.

WHY EGYPT?

Languages: Perhaps one of the most unique features of Egypt’s BPO proposition is its language capabilities. English, French, Italian, Spanish, Portuguese, Russian, Hebrew and Arabic speakers are available in various capacities.       Xceed, for instance, supports several countries including USA, UK, France, Italy, Spain, Belgium, Luxembourg, UAE, Qatar, Bahrain, Portugal and Greece in a number of different languages. Teleperformance’s language capabilities include Arabic, English, French and German.

The majority of the call centres in the country report a capability to handle calls in more than one language.   Labour cost: A recent Datamonitor report placed Egypt’s call centre agent costs at slightly higher than India, but lower than South Africa, Poland and Hungary. This, combined with the country’s other attributes, is a distinct advantage and a compelling proposition.

Geographical Location: Egypt’s proximity to Europe is highly advantageous, placing it as a suitable “near-shore” location for the European and Middle Eastern markets. The time difference between Egypt and North America also enables Egyptian night-shift BPO workers to support day-shift operations in USA and Canada.      Professional Workforce: Egypt graduates between 270,000 and 290,000 students annually, with 80,000 of them schooled in IT and engineering courses. This is one of the highest in Africa. Indeed, one of Satyam’s reasons for locating their newest development centre in Egypt was reportedly the availability of software engineering skills in the country.

Communication and IT Infrastructure: Egypt has one of the best Communication and IT networks in the Middle East and Africa region, lending the country a considerable advantage over other potential African BPO suppliers. There are digital telephone exchanges throughout Egypt, all interconnected through fibre optic technology.     The country is also connected to international telecommunication infrastructure via three major submarine fibre-optic cables, with three more expected shortly.   In January 2008, when two submarine fibre-optic cables snapped along the coast of Egypt, the country was able to utilize the third cable as emergency back-up for critical telecommunications. Such emergency preparedness is an important factor in the success of any BPO destination.

Government Support: The Egyptian government has been very supportive of the industry, providing tax breaks, establishing free trade zones to encourage investment, and even providing funds for training of potential workers. As in most other successful BPO supplier countries, the government has played a crucial role in the success of the industry in Egypt.

Egypt currently positions itself as a high quality, low cost, multi-language destination and it is my belief that will all the above factors in place, the country is destined for great success in the global BPO space.  This article is part of a multi-part series on outsourcing to Africa.

Outsourcing to Africa: Guest Interview Series – Manuel de Joya in Ethiopia

On July 7 of 2007, Offshoring 2.0, Ethiopia’s very first IT outsourcing center opened its doors for business.

Its parent company, eVentive LLC headquartered in Chicago, launched the center shortly after eVentive graduated its first team of Ethiopian trainees, in the capital city of Addis Ababa.

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I met my guest, Manuel de Joya, a Managing Partner at eVentive through a popular social networking site early this year, and was highly impressed by his work in Ethiopia. Manuel and I have exchanged emails several times since then, and I finally had the opportunity to interview him about his company, eVentive, and why they chose Ethiopia as their offshore partner.

Below is an outline of the discussions I have had with Manuel:

Question (QTN): Hi Manuel. Could you provide us with a brief professional background of yourself.

I have been in IT since 1986 and in consulting since 1987. I have worked as a principal and in senior management in a number of firms.

eVentive LLC has been in existence since 2002. Our management team is made up of three partners – Yemiru Chanyalew, who is our CEO, Doug Deneau and myself. Because of the nature of system integration and the volume of work being sent offshore, Yemiru had a vision to change our business model to deliver work from offshore. So in 2007, we began the process of transforming our business, and this is when I got involved.

QTN: What specifically motivated you to set up eVentive’s offshore component in Ethiopia?

I believe there are three tenets of success in IT outsourcing:

The first is the educational base of the people. You need to consider if the location is capable of producing a sufficient number of graduates in various disciplines over the long-term. In other words, is the education system capable of supporting a steady pipeline of potential employees?

Secondly, you need to consider the infrastructure, the most important being telecommunication and the availability of electric power.

Another important factor is the ease of procuring the hardware and software you will need in your operation. In USA this is done very efficiently through e-commerce.

The last is training. Is there a capability to train potential workers in business practice, in the technical aspects of the business, in the languages they will need, and so on.

When considering Ethiopia, I looked at first three layers and was satisfied. But we needed the fourth layer, which was training.

We found there was a high level technical skills, but most of the potential employees had not had the opportunity to work with firms from other countries. This is a fairly common experience, even in other countries. We needed to close this gap, so we developed a program for Ethiopia.

QTN: How did prepare your Ethiopian staff to handle outsourced IT projects?

We hired the best possible people, and then trained them to the level required for the tasks ahead. We call this 360 degree training through our BlueNile SED(tm) program.

There were three major aspects:

First, was a technical track, to introduce advanced technical skills to supplement the knowledge the potential employees already had.

Second was training in business skills.

Third was development of the architecture of deliverables, which included the development methodology and project management.

By July 2007, with a 100% graduation rate, we had our first recruits and opened our doors for business.

QTN: Were you able to utilize local talent for senior management positions?

Yes, we have a local partner and a project manager involved.

QTN: Did you have previous business experience in Ethiopia?

Not directly as a company, but we did have Ethiopian nationals on our US
staff with Ethiopian business experience.

QTN: What were some of the difficulties setting up?

Every country has a unique culture. Ethiopians are a very spiritual people and they observe their religious traditions very seriously. One must understand this when doing business in Ethiopia. Fortunately, we have several Ethiopians on staff which was helpful.

We also had some procurement challenges and encountered problems with stability of the electricity grid.

I believe the answer to such challenges is to anticipate them and respond proactively. Do not scramble to implement solutions after the fact.

QTN: Which are the other significant outsourcing players in Ethiopia?

There is significant foreign investment in Ethiopia. However, as Ethiopia’s first IT outsourcing company, we have two major differentiators:

The first is the in-depth training we provide, that I described earlier.

The second is the nature of our outsourcing practice. Typically for companies like ours, business comes from USA and Europe. In some countries this creates a micro-economy that is dependent on another economy. In established destinations like India, this sometimes leads to a high imbalance between incomes within and outside of the industry.

In order to address this, we ensure that a percentage of our business is derived regionally that is from Africa, especially from Ethiopia. African economies are growing rapidly – Ethiopia, for instance, is going through an economic boom at the moment and is the fourth largest economy in Africa. There is good business potential there, and it is possible for our company to derive up to 50% of our business regionally.

Another key aspect of our business is the offshore/onshore model. We have a front-end, customer facing team onshore and then implementation is done inexpensively offshore. This is the heart of Offshoring 2.0 and we have implemented this through our BlueNile(tm) methodology.

QTN: What are your thoughts on the wider African continent? How would you rate other African countries as potential outsourcing suppliers?

First of all, Africa’s expertise in various European languages is a singular advantage. The Francophone nations seem to be particularly poised for success.

However, having said that, there are really 3 tiers of outsourcing in Africa – the top-tier countries that you mentioned earlier (Egypt, Ghana, Mauritius, Kenya, Senegal and South Africa), who are already doing it, the second, emerging tier which includes countries like Ethiopia, where we have chosen to open our development center, and Madagascar which has recently started, and the third tier, who are yet to begin.

There is a lot of promise in Africa. I recently spoke at Novatech 2008 in Addis Ababa, Ethiopia. Novatech was focused on ICT development in Africa, and I was amazed at the energy and desire on the part of many African entrepreneurs to showcase their ICT capabilities to the world market.

A number of governments are providing support to the industry. In Mauritius and Madagascar for example, the government is involved in creation of infrastructure, as well as in marketing communications.

Ethiopia is also on the way. IT is one of top priorities of the Ethiopian government at the moment.

QTN: Do you think Africa can compete favorably with Asia and Latin America?

One of Africa’s challenges lies in the relative maturity of the telecommunications market and the disparities between regions. The presence of telecommunications monopolies in some regions will hamper the development and penetration of the broadband and mobile technology that is needed to make outsourcing successful.

On a positive note, Africa’s bandwidth to Europe and the rest of the globe is improving every year – but the last mile will be the weak link unless the above situation is addressed in the medium term.

Having said that, Africa can indeed compete. There are currently some difficulties in established destinations like India, where costs are rising quickly.

Latin America has a time advantage over Africa, as some American companies prefer to work with “near-shore” vendors. However, the level of sophistication there is lower than
India.

In Europe the cost differential is not as high as other destinations, so Africa has an advantage there.

QTN: Would you consider outsourcing to any other African country?

Yes, I would not hesitate to. As a matter of fact, we are currently establishing the viability of a number of locations, and are already having conversations about expanding to other countries. If we find the right conditions and the right opportunity, we will certainly do so.

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Manuel was an invited speaker at Novatech 2008, an IT conference held in Addis Ababa, Ethiopia, to discuss ICT Development in Africa. His paper is available here.