Information technology (IT) outsourcing revenue will show a compound annual growth rate of 15% over the next five years to reach nearly R5,25-billion by 2006, according to a recent study by Africa’s IT market analyst BMI-TechKnowledge.
Specialised business process outsourcer eQuals COO Stuart Herd stated on Wednesday that this growth refers to IT-focused outsourcing and does not include other business process outsourcing (BPO) revenue, such as work done for insurance companies and motor manufacturers.
He added that the BMI-TechKnowledge research should dispel the scepticism from some quarters locally, who believe that the outsourcing potential will arguably fall short of delivery and the expected provision of jobs and profits.
Herd reported that attracting foreign investors to South Africa and enticing them to regard the country as a preferred IT offshore outsourcing destination depends on a number of factors, such as how much value is offered by providers.
The company cited the telecommunications infrastructure as a vital consideration and the ability to sell South Africa as a viable and profitable destination with a slew of advantages.
“An increasing number of companies are realising that shifting critical functions to lower-priced locations improves margins without compromising on customer satisfaction and delivery.
“South Africa has a lot going for it and companies need to maximise the many advantages that exist for us to compete in the fast emerging BPO market space. One of the benefits we have is that we are a Third World country with a First World infrastructure. Although our telecommunication costs are expensive compared to other countries, our infrastructure is at least sound,” he said.
Herd also noted that the country enjoys what is believed to be the world’s cheapest electricity supply. South Africa’s cost of labour — even at a fairly high skills level — is also competitive, although the strength of the rand has had some negative impact on this, he asserted.
He said the biggest problem South Africa is facing is “prohibitive communication costs”.
“However, although we are not really very well known as a good outsourcing choice, we need not only look at the cost factor. It will be very difficult to compete — at a pure price level — with countries like India and China, where labour is extremely cheap,” he added.
“We need to focus more on trying to add value and to offer a higher level of skills and services, but at a good price. If we are 20% or 30% so more expensive than countries like India or China — but our quality and service levels are better — then we may have a good chance of attracting BPO business.” — I-Net Bridge