With more and more companies in First World countries opting to outsource various operations — including business activities such as software development – it has emerged that South Africa is already regarded as a shining star, and is currently ranked as number six in the world when it comes to being among the most attractive destinations for outsourcing in the world.
According to Org Geldenhuys, a director of Pretoria-based recruitment house Abacus Recruitment, this is ”incredibly good news for the SA economy and for local companies at large”.
He says the outsourcing trend is particularly true for the information technology (IT) industry.
”According to the latest reports, India and Ireland are seen as the most attractive destinations for IT outsourcing. One of the main reasons for this is because of the lower cost of labour. In India, for instance (according to India’s indiatimes.com) the average salary of an IT employee is about $5 800 per annum, while in Ireland it is $28 000 and in Canada $28 174.
”While we might be ranked number six in the world in terms of the popularity stakes, our average IT salaries for general IT staff are actually also very competitive and currently weigh in at around $22 000 (if one extrapolates from the latest salary figures provided by IT Web’s 2003 IT Salary Survey). This is about 30% cheaper than Canada.
”This means that if we are able to leverage on our outsourcing popularity we, as a country, could certainly rise in the rankings. The bottom line is that our average IT salary is lower than Ireland, so if the government and corporate SA are clever the knock-on affects could be enormous.”
He acknowledges that the government seems to be ”proactive regarding the outsourcing potential”.
”The Trade and Industry Minister, Alec Erwin, is to visit the US to promote SA’s suitability for the provision of back and front-office functions to large companies on an outsourcing basis. Through this move the government hopes to create 100 000 new jobs, just through call centre outsourcing, by the year 2005.”
Geldenhuys says China — regarded as a sleeping giant by many pundits — is also a strong contender. This is according to a recent study conducted by Merrill Lynch on global outsourcing destinations. In China employee costs are higher than those in India. In addition, salary costs vary significantly across different cities in China — and project managers are particularly rare. These skills are generally imported from Australia and Hong Kong, according to the study.
”Whichever way you look at it an increasing number of companies –especially IT companies — are looking to outsource many operations. The move by companies like Oracle and Intel to expand their India development centres is indicative of this growing trend. The South African government should wisen up to this trend and recognise the incredible opportunities — and should make it easier for overseas companies to outsource work to South Africa. It could end up being a major boon to the IT industry, and to the local economy as a whole,” says Geldenhuys.
He says the study reveals that outsourcing in Ireland — the current outsourcing champion – is mainly driven by the development centres of large technology companies such as Microsoft, Dell and IBM — unlike India, which is more focused on project and shrink-wrapped solutions. Of course, Canada is in a fairly strong position, thanks primarily to its close proximity to the US – the world’s powerhouse economy. – I-Net Bridge