Indian technology firms find offshore merit in South Africa

Indian technology firms find offshore merit in South Africa
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First Published: Fri, Aug 31 2007. 01 37 AM IST
Updated: Fri, Aug 31 2007. 01 37 AM IST
New Delhi: Alarge labour pool with multi-lingual skills, proximity to the Middle East and Europe, and a deep cost advantage vis-a-vis the US and Europe are factors making countries such as South Africa attractive offshore destinations for Indian back office and tech service providers.
Companies that are eyeing or have presence in both countries include all the major players including HCL Technologies Ltd, Wipro Ltd, Infosys Technologies Ltd and Tata Consultancy Services Ltd.
HCL, which had put together a team three months ago to assess the business process outsourcing climate in Africa, has already picked Cape Town and Johannesburg to set up back-office units, details of which will be finalized soon.
“We have zeroed in on these two locations, but the business plan, the scale and size and all other details will be finalized by (an) internal committee,” said a company executive, who did not wish to be identified.
Wipro and Infosys declined to comment on their Africa plans, but an industry representative said both firms are exploring the possibility of setting up operations there.
“Representatives of Infosys and Wipro have visited South Africa to invest there, but the process is still at a very nascent stage. Wipro is looking at setting up a manufacturing facility there,” said Shipra Tripathi, director, Africa desk, at business lobby Confederation of Indian Industry.
Satyam Computer Services Ltd, which serves six of the largest firms in Africa, already counts more than 120 workers at customer locations in offices at Johannesburg and Cape Town.
The Hyderabad-based firm said in July that it plans to strengthen its presence in South Africa over the next two to three years to leverage untapped business opportunities and local employees.  
TCS already has operations in both Johannesburg and Cape Town with 100 employees, and is in the process of setting up a global delivery centre in Morocco.
Other Indian tech and back-office companies are also speaking to government officials in African countries to understand the market there.
“Indian tech companies, such as Satyam and TCS, have approached us about possible investments... Other big outsourcing companies, such as Genpact and Convergys, have also been provided with information,” said Ray Ngcobo, chief director of the industry development division at South Africa’s department of trade and industry, in an email.
The main interest in Africa is likely to come from business process outsourcing firms—rather than tech services—thanks to language skill access and time zone advantages, especially to serve European customers. “We are in the same time zone as Europe and one hour ahead of the UK,” wrote Ngcobo.
Besides South Africa, Mauritius, Egypt, Ghana and Morocco are relatively mature destinations from a BPO perspective while Kenya, Nigeria, Senegal, Tunisia and Uganda are the upcoming destinations.
Offshore BPO services in Egypt, that provide large skilled multi-lingual workforce—English, French, German, Spanish, Italian, Hebrew and Russian—contributed around $150 million (Rs615 crore) in 2005 and have been gaining momentum since then, according to a joint report by researcher Everest Research Institute and consultant AT Kearney.
The number of offshore agents has doubled since 2005 and is currently at more than 5,000, the majority of them working from Cairo and Alexandria.
South Africa has four key BPO locations—Johannesburg, which has more than 360 contact centres, Cape Town, Durban and Port Elizabeth. Many of the big global tech and BPO firms such as IBM Corp., Microsoft Corp., Accenture Inc., Sun Microsystems Inc., Electronic Data Systems Inc., Unysis Corp. and Siemens AG operate from South Africa.
Africa is also emerging an attractive destination to play host to tech service delivery centres. According to the government-sponsored Electronics and Computer Software Export Promotion Council, export of computer software and services, together with BPO services to Africa, increased from $96 million in 2005-06 to $164 million in 2006-07. “The South African market provides substantial opportunity in software products for banking, insurance, e-governance, telecom, power, healthcare,” says D.K. Sareen, executive director at the council.
i-Flex Solutions Ltd, a provider of banking and financial software solutions, has cut its teeth in the African market two decades ago and counts at least 100 banks there among its clients. “Africa is mineral rich and certain parts are oil rich, which means there is huge potential for trading, which (in turn) requires a strong financial system and product,” said a company spokesperson.
The untapped tech labour pool in Egypt and South Africa will likely drive more investment towards these regions than elsewhere in Africa , predicted Nikhil Rajpal, vice-president, global sourcing practice at Everest Research Institute.
Even small and mid-sized tech firms are getting aggressive on this score. Bangalore-based consulting and tech services provider C Ahead Info Technologies India Pvt. Ltd, which specializes in business consulting and process re-engineering, has 15 people in Johannesburg.
“In the first quarter of 2008, we will be expanding to Cape Town with another 15 people offering similar services and will also be setting up a 300-seater disabled call centre in Johannesburg in the same period,” says Sandeep Sekhar, chief executive and chairman. “Last year, our revenues from Africa were less than 10%. This year, over 20% of will come from South Africa.”
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First Published: Fri, Aug 31 2007. 01 37 AM IST
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