Niche offshoring for SA

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SA has an opportunity to capture a portion of the global IT offshoring market, although the country`s competencies lie in customer contact.

Of the three outsourcing layers, SA`s main strength is in customer contact, says Calling the Cape executive director Luke Mills.

India`s real strength is in IT offshoring, he says. Its four or five major IT firms are among the leaders in this field globally. US-based IDC says these Indian vendors are beginning to threaten the market share of top global players such as IBM.

Mills says he has seen some companies move towards outsourcing a small part of their processes from top to bottom, and providing a company with the opportunity to manage IT, back-office processes and customer contact. However, some firms are still splitting these processes up and having different companies manage each process.

SA, says Mills, has certain niche areas with expertise such as in financial services, which may benefit from IT offshoring. However, this will never be to the same extend as the multibillion-dollar Indian industry.

Globally, offshore IT services vendors will are expected to capture $29.4 billion in worldwide customer spending by 2010, with little sign of a market slowdown, according to IDC.

Mills says SA could capture a small piece of this market as IT providers - for risk purposes - need different centres in different time zones.

However, in order to attract large global IT providers, the country would need to have an incentive on the table. SA would also need to reduce telecommunications costs and have at least two telecommunications providers with offerings like Telkom`s.

Government is making progress towards preparing incentives that may attract such companies here, and the imminent launch of the second national operator will aid with risk management, says Mills. "Service level agreements, at all levels, measure downtime per year in minutes; you can`t rely on a single provider."

What would aid SA`s movement into this field is if a large player entered the scene and local companies looked at outsourcing, as this would lead to a new skills set. "A big global outsource company could be a major catalyst in all tiers," he says.

Good progress

SA has the potential to garner a "good chunk" of customer contact work, he says. The Western Cape alone has seen R2 billion in investments in the last two years. Between 2 000 and 3 000 permanent jobs are being created each year, says Mills.

Keryn House CEO of ContactinGauteng says SA aims to be one of the world`s hottest offshore destinations in the next few years. "SA is positioning itself to be in the top three offshore destinations in the world by 2007 and to create 100 000 jobs in the sector by 2009."

She says the local offering differentiates itself from other options because of its time zone. "[This] makes it effectively an onshore destination to UK and Western Europe, the strong capability in solving complex problems with empathy; especially in the areas of financial services and ICT."

House cites Barclays and Vodafone`s investments into SA as examples of this strength. SA, she adds, offers between 30% and 40% lower cost than onshore and has a telecommunications deregulation process "well on its way".

"Government [is] fully committed to attracting foreign investment into business process outsourcing (BPO), plus attractive skills incentives from the City of Johannesburg offering international call centre qualifications [will] ensure the agent pipeline is continually growing, for investment to flourish. Global brands like IBM, Virgin and Sykes and are increasingly choosing Gauteng for BPO."

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SA needs to skill up

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