Outsourcing companies in the Gulf are moving up the value chain from providing mere back-office operations to IT and business process services.
Traditionally outsourcing companies have provided service for back-office operations. But countries such as the UAE, Egypt, Jordan and Morocco have been making efforts to build up infrastructure, people and funds to grow the sector. And industry experts believe the outsourcing industry has been growing at 20 per cent annually in the Middle East.
Amin Khaireldin, Strategy Advisor and Board Member at Egypt-based Information Technology Industry Development Agency (Itida), said: "In Egypt we put resources in a business park-like Smart Village. From the premises services such as financial analytics are conducted by 200 analysts for a Dubai-based company. Technical as well as packaged implementation services (PIS) are the focus."
Business process outsourcing (BPO) is another area gaining relevance in the region. BPO involves the contracting of operations and responsibilities of specific business functions (or processes) to a third-party service provider. "Gulf-based companies are now considering taking BPO services from outsourcing firms in the Gulf. And Itida has been making investments towards acquiring international standards in this segment," said Khaireldin.
IT service companies such as Patni Computer Services (PCS) have noticed this change in this region. Derek Kemp, President (Emea), PCS, said: "The Gulf economies have been building resources for a three-tier model. This is mainly onshore, nearshore and offshore. They are trying to inject the culture for IT services. However, not all countries in the GCC are human intensive as the scale is not available. But the growth potential is immense, for instance, a country like Egypt has been able to grow in its GDP because of outsourcing. The opportunities from oil, gas, telecom and financial services are immense."
According to Kemp, long-term contracts in outsourcing have started happening, which was not the case earlier. "Traditionally the market in the Gulf depended on buying rather than a service model. Therefore, now even companies based in the Gulf are looking at working on an outsourced model. This attitude change will raise the profile of the region."
He also explained that although the market size is small the ICT (Information and computing technology) spend in the region would help other sectors grow. "The ICT spend in the region is the same as in the UK. Markets are flat in the UK currently and US is starting to pick up while continental Europe has picked up in offshoring."
Khaireldin said the UAE is not human intensive, but it provides high-end financial services. "For low- and mid-level services human capital is essential along with low labour costs and incentives."
Gulf states are looking at upgrading skills of graduates in the BPO and PIS segments. "PIS is expected to hit $3 billion (Dh11bn) by 2020 from the current ?$200 million in the region," Khaireldin said.
By Nancy Sudheer
© Emirates Business 24/7 2010
