South Africa has the potential to shoot up the list of preferred outsourcing destinations for European businesses, says Simon Scarrott, an executive consultant for the UK-based Compass Group.
He believes SA could become the number one destination. Research indicates SA is already among the top destinations for European outsourcing, currently standing at 10th position.
"There are three key elements necessary to make a country work as an outsourcing destination: education, productivity and governance," says Scarrott.
Although countries like India have lower personnel cost, their overall productivity is low, making the cost per unit higher than keeping things local, he says.
It is a trend among many big firms in the UK, such as JP Morgan, to boast of the fact that their contact centres are local, says Scarrott.
Offshore outsourcing is a competitive market, he says, especially with the increasing appeal of Eastern Europe due to factors such as proximity, education level and tax incentives.
Overcoming challenges
SA faces a potential language barrier due to the low education level of the majority of the people who need jobs.
To get around this, Scarrott suggests SA avoids trying to enter an already established and competitive market, such as contact centres. It should instead focus on back-office functions that do not require as much customer contact, such as business processes, finance and human resources. This is not yet a fiercely competitive market, he says.
In order to succeed in outsourcing, SA should take Ireland in the early 1970s as an example, he says. The Irish invested heavily in education, have the highest percentage of graduates in Europe, and also focused on repatriation to bring the educated Irish back to Ireland.
Scarrott says the boom in India was also a matter of good fortune as the country was quick to recognise the Y2K implications and exploit them.
He believes the 2010 Soccer World Cup can be used to advantage if SA can learn to use the prime global marketing platform to its full potential.
Scarrott suggests SA work on the marketing strategy and try pitching to the advisory firms, which consult the companies looking to offshore, as opposed to the companies themselves. According to Scarrott, the advisory community has a strong influence on companies.
At a round-table held last year in London, SA cited language, time-zone and personnel costs as benefits of outsourcing to SA. Scarrott warns SA should not rely on these because "they certainly won't, in isolation, make a strong enough case to make the move".
Scarrott will speak about outsourcing and its implications in SA at ITWeb's IT Confidence conference at the end of this month.
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