The move into emerging markets - particularly Asia, the Middle East, Africa and South America - holds great appeal for many multinational companies. Thus, it makes more sense for these organisations to outsource their ICT to a well-established service provider than to build their own infrastructure from the ground up.
So say Dimension Data's Alan Turnley-Jones, director of managed services development and operations, and Dave D'Aprano, group sales director of IT outsourcing.
The two argue that rapid growth opportunities and little or no immediate competition in emerging markets are usually the drivers behind such ambitions.
They also believe these markets attract both established multinational organisations as well as smaller, local businesses that want to expand within the same region. Furthermore, while multinational and domestic businesses face similar challenges in emerging markets, their outlooks and levels of success in these geographies may differ drastically.
"An organisation that's been operating in an emerging market has a better understanding of the nuances and idiosyncrasies of doing business there," says Turnley-Jones. "Often, organisations that previously operated in only developed markets have a very limited view of what it takes to be successful in the developing world," he adds.
According to Turnley-Jones, aspects related to emerging markets that are often underestimated include the immaturity of the logistics infrastructure, such as the condition of roads, railways and other forms of transport.
He explains that organisations also overlook foreign legal and tax implications, such as withholding taxes; the scarcity of resources, both physical and human; networking and other infrastructure challenges; as well as local employment legislation.
SA's BEE charter is one such example, he says. Most emerging countries take similar measures to guard against multinationals entering and exiting the country without due consideration for the fate of the local workforce.
"Outsourcing allows you to establish a presence and gain a foothold in those markets more quickly, and helps ensure your focus remains on your core capabilities while you're expanding," says Turnley-Jones.
"Outsourcing dramatically increases your speed to market," agrees D'Aprano, "simply because it's quicker and easier than creating your own service and support organisation, hiring staff and setting up legal trading entities. Also, for many ICT departments that are used to delivering services in a mature market such as Europe, the gathering of the expertise and building of infrastructure in markets as diverse as Asia or Africa would be costly.
"Most organisations are under tremendous financial pressure, so they simply don't have the same scale in emerging markets as they do in their home countries. Their emerging market teams are usually smaller and more concentrated, and, owing to factors such as distance and time zone differences, their home support teams simply can't handle the extra responsibility of supporting emerging market sites," D'Aprano explains.
The two, nonetheless, point out that it is important to keep in mind that emerging markets are not all the same and that there are specific challenges in each that are either unique to, or more pronounced in, some markets than in others.
"For example, in Asia-Pacific, many organisations struggle with geographical spread due to the vast distances between countries, as well as the many different languages spoken in that region," says D'Aprano.
"In certain African countries, such as Angola, local legislation and security measures are a greater challenge," adds Turnley-Jones. "So, it's crucial to evaluate the local capability of the outsourcer in your target areas. Does it have the required understanding, skills and expertise in the cities and countries where you need them?"
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