- City Fajr Shuruq Duhr Asr Magrib Isha
- Dubai 03:59 05:25 12:20 15:41 19:10 20:35
The region’s increasing appetite for information technology to diversify resources away from hydrocarbons has largely benefited the outsourcing industry.
Although the Middle East and North Africa region has only become familiar with the word outsourcing – a process where a product design or customer service is subcontracted to a third-party company – in the early 2000s, it has gained immense popularity, so much so that new concepts such as the Dubai Outsource Zone are selling like hot cakes.
According to global market research firm International Data Corporation (IDC), spending in information systems outsourcing, which started with a small base in the UAE, has increased by nearly 7.5 times recently.
Services related to hosting infrastructure also made striking advances, rising by 69 per cent in 2005. The firm predicts outsourcing spending, which amounted to around 15 per cent of the total information technology services market, will reach approximately 23 per cent of the spending by 2010.
The Dubai Outsource Zone has increased its master plan 11 times its original size due to heavy demand from local and international outsourcing companies. The zone has seen its total area increase from three million square feet to 33 million sq ft.
Among the new entrants to the zone are integrated IT-focused international business engineering outsourcing service provider Futech and Emirates airline.
Futech plans to set up its regional headquarters at DOZ to support its worldwide operations. The Dubai-based carrier, on the other hand, has announced plans to invest up to $54.5 million (Dh200m) to set up a call centre at DOZ with 500 employees. The 100,000 sq ft facility will be ready this year.
The UAE’s second telecom operator, du, Dutch ABN Amro bank and Mashreq have also announced plans to set up call centres at DOZ.
Mena Business Services (MBS), a regional provider of contact centres, medical transcription and call centre training services, also announced it will move to DOZ to consolidate its regional operations.
Dubai Municipality has adopted outsourcing strategies to achieve greater flexibility and reduce costs.
The added interest in the region comes just in time when doubts have been cast over the outsourcing success in various hubs such as India and the Philippines.
India now leads the world in offshore outsourcing – the remote servicing of information technology or other business processes by staff based in India. The Indian outsourcing market was estimated at $47.8bn in 2007, 10 times what it was in 1998. Expansion is happening fast, and the IT outsourcing industry is predicted to grow at about 28 per cent a year. However, the advantages to banks and insurers of using offshore call centres are diminishing as wage costs rise in markets such as India, according to a new study.
Wage rises of up to 15 per cent a year are reducing the cost benefits of overseas centres, a research by Compass Management Consulting said. Compass, which looked into 50 call centres, also says poor service and language difficulties can lead to calls taking twice as long from United Kingdom-based operations. The consultants say shutting down a UK call centre and shifting the operations to India, for example, can deliver savings of up to 15 per cent in the short term. But in the long term the benefits are less significant, particularly in terms of longer call times for customers.
In the area of call centres, end-user experience is deemed to be of lower quality when a service is outsourced, analysts said. This is exacerbated when outsourcing is combined with offshoring to regions where the first language and culture are different.
LOST IN ACCENT
There are a number of observers who find the linguistics features such as accents, word use and phraseology different, which may make call centre agents difficult to understand. Studies carried out by Compass show lapses in listening and understanding by offshore centre staff can result in calls lasting up to twice as long as calls in Europe.
Such failures occur in 18 per cent of calls to offshore centres against four per cent for calls to domestic centres in Europe and the US.
One study that measured the performance of call centres according to their average number of sales found offshore centres made four sales per month, compared to 10 per month made by the UK, continental European or US call centre staff.
Simon Scarrott, head of business development and marketing at Compass, said banks and insurers should think carefully about what types of work could be offshored. “Routine queries on statements, for example, could be sent offshore while calls to open new accounts should be handled onshore by more experienced, better trained staff with home language skills,” he said.
Recently, Lloyds TSB, the UK’s biggest provider of current accounts, has moved calls back to the UK from a service centre in India.
However, Dubai, which began its Dubai Outsource Zone initiative only in 2003, is confident that the outsourcing business will continue to be robust. “Outsourcing is the way to go,” Ismail Al Naqi, Director of DOZ, told Emirates Business, adding that call centres comprise only 15 per cent at DOZ. “Eventually people will go to that direction.
One of the mandates that we have is to raise the knowledge and awareness on outsourcing.
“Within the zone we offer multiple products,” Al Naqi said. “Our office rates are subsidised by the government by 30 per cent. We have residential facilities, which are also subsidised.
“A studio apartment in Dubai Outsourcing Zone costs Dh25,000 a year and this rate is fixed for five years. We’re also working on different packages to bundle telecommunication services to make it cost-effective. There are no hidden costs.”
The UAE is not alone in the region in wooing outsourcing firms. Egypt, for one, is seen by some as the “India of the Middle East”.
A Yankee Group report says India holds a 60 per cent global outsourcing market share, but firms such as Cisco, Google, IBM, Microsoft, Oracle and Orange Business Services are starting to exploit Egypt’s IT talent pool.
Key to this growth is the Egyptian Government’s move to set an ambitious target for the country to reach $1.1bn of the global outsourcing market by 2010, quadrupling from its 2005 revenue.
DOZ, on the other hand, is aiming to grow 15-fold as it eyes for a five per cent share of the $300bn global outsourcing industry, or a $15bn market in five years.
“In Dubai it’s still a small industry. I would say about Dh400m to Dh500m annually,” Al Naqi said. “Today we have more than a hundred companies registered with us, and 70 or 80 firms are operational from the zone.”
Egypt, however, is on par with Dubai in terms of telecommunication rules. The UAE is currently locked in with two providers, which more or less offer the same restrictive services.
“We need to see a transformation in UAE’s telecommunications industry, basically by enabling voice over internet protocol service (VoIP) and by reducing the international private circuits by 70 per cent,” Al Naqi said.
In the UAE, free- to low-cost web-based VoIP services are blocked. But while issues such as VoIP services are being debated, Dubai has found a way to make it better known in the outsourcing circle.
Arab Bank, a Jordanian company, is pre-engineering its entire bank office operation and they are centralising it in DOZ.
“Why in Dubai and not in Jordan? There are a lot of reasons – stability, cost-effectiveness, strong infrastructure and availability of multi-lingual talent, among others,” said Al Naqi.
Outsourcing and offshoring are used interchangeably in public discourse despite important technical differences. Outsourcing involves contracting with a supplier, which may or may not involve some degree of offshoring.
Offshoring is the transfer of an organisational function to another country, regardless of whether the work is outsourced or stays within the same corporation. With increasing globalisation of outsourcing companies, the distinction between outsourcing and offshoring has become less clear over time.
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