11 Feb 2018
Cairo – International Data Corporation (IDC), a global research and consulting firm headquartered out of Framingham, Massachusetts, USA, has initiated a study to understand the global market trends and opportunities for the Egyptian offshoring industry in relation to IT outsourcing (ITO), business process outsourcing (BPO), and knowledge process outsourcing (KPO). IDC's office in Egypt, managed by Nagia El Emary, acts as a research and consulting hub servicing Egypt, the wider Middle East and Africa, and Central and Eastern Europe. The study concluded recently, with the findings providing a broad range of interesting insights.
The total Egyptian IT and IT-enabled services (ITeS) export industry was worth over $3.25 billion in 2017. IDC expects this figure to grow at a compound annual growth rate (CAGR) of 13.4% over the 2017-2020 period, spurred by the considerable efforts of key stakeholders such as the country's Ministry of Communications and Information Technology (MCIT).
The overall Egyptian IT/ITeS industry – including export, onshore, and in-house services – employed over 292,000 people in 2017, and IDC expects this figure to rise to 378,000 by 2020. Egypt has identified the enormous potential of the IT/ITeS industry as a strategic lever for enabling the overall development of its economy and broader society, and significant investments have been made in ramping up the country's capabilities to become an established leader in this space.
"MCIT has been progressively developing the Egyptian ICT sector, making significant strides on different fronts of the industry, which have boosted investor confidence in the sector as well as Egypt's positioning in the global marketplace," says His Excellency Mr. Yasser ElKady, Egypt's Minister of Communications and Information Technology. "The ICT sector has been witnessing unprecedented growth and is currently the country's largest contributor to GDP growth. Building on this momentum, we are setting an ambitious target to reach an export revenue of $20 billion by 2025, through expanding on the country's IT/ITeS offerings, and surging exports of electronics manufacturing and regional mega projects.” At the current rate of growth, IDC believes Egypt’s IT/ITeS exports will make a significant contribution to this target, but the industry will need to continue exploring innovative new technology streams and business models in order to make it happen.
According to the study, the Egyptian BPO industry's export revenues totaled $1.9 billion in 2017, accounting for 58% of the country's total IT/ITeS exports; meanwhile, Egypt's ITO export industry was valued at $771 million for the same year, constituting 24% of total exports. These export industries are expected to grow at CAGRs of 16.5% and 8.1%, respectively, over the 2017-2020 period. The KPO industry is also expected to witness significant growth, with export revenues forecast to grow from $591 million in 2017 to $775 million in 2020, representing a CAGR of 9.4%.
Egypt has been attracting a fair amount of interest from multinational corporations looking to engage IT offshore services in the country, and industry leaders from the ICT space are increasingly setting up captive centers in Egypt to handle their global operations. These include the likes of IBM, which has set up six centers in Egypt; Valeo, which has its main R&D center in Egypt; and Mentor Graphics, which hosts its biggest R&D center outside the United States in Egypt. Other examples include Dell EMC's Center of Excellence, Microsoft's Advanced Technology Lab (ATL), and operation hubs for both Vodafone International Services and Orange Business Services.
Egypt is one of the market leaders in the global BPO export space, with its projected growth rate for the next 3-4 years to be at least double that of the global offshore industry average. Egypt's BPO export space generated an average revenue per employee of $17,800 in 2017 from a highly skilled labor pool of 106,500 people, a figure that is expected to cross the 161,000 mark by 2020. Meanwhile, with around 19,000 employees, Egypt's ITO export space generated an average revenue per employee of $40,000 in 2017. With specific strengths around electronic manufacturing services, Egypt also has a strong KPO market, which – at $55,400 – recorded the highest revenue per employee of all the segments in 2017.
"With businesses around the world now actively pursuing their own digital transformation (DX) initiatives, IDC expects 3rd Platform technologies (i.e., cloud, big data and analytics, social, and mobile), together with a new wave of innovation accelerators (i.e., IoT, security, automation/cognitive systems, AR/VR, 3D printing, and blockchain), to majorly drive ICT investments over the next five years," says Jyoti Lalchandani, IDC's group vice president and regional managing director for the Middle East, Turkey, and Africa. "The rapid growth of digital technologies has created the potential for offshoring hubs to emphasize their global position, and those countries that take the initiative to build out their resource pools are going to be the market's true game changers."
Egypt has adequately foreseen the transformation required for 3rd Platform technologies and is therefore employing a multi-faceted approach towards developing corresponding competencies within the country's ITO, BPO, and KPO industries. Egypt has made a number of investments that are expected to boost the skills ecosystem in this regard, with one example being the Next Technology Leaders (NTL) initiative – a presidential initiative implemented by MCIT that focuses on building outstanding technology capacity within the workforce. The NTL provides government-funded degrees in collaboration with leading universities like MIT, Johns Hopkins, and the Universities of California, Texas, and Virginia and enterprises like IBM, Google, Amazon, Facebook, and GitHub on emerging technologies that drive accelerated innovation (including data science, the Internet of Things, artificial intelligence, cybersecurity, etc.). The aim is to train and certify 16,000 resources by 2019, of which around 6,000 have already been completed.
Expanding beyond Cairo has been a key part of the industry's ongoing transformation, with modern technology parks being built and becoming operational in places like Assiut, Alexandria, Sadat City, and Beni Suef. The parks are offering immense investment opportunities, including datacenter clusters (Borg El Arab), electronic design and manufacturing clusters (Assiut), and Egypt Government Cloud and data hubs (Cairo and Borg El Arab). The Smart City initiative for the country's new administrative capital, with its focus on Big Data and the Internet of Things, as well as the continued focus on cybersecurity (Egypt currently ranks 14th in the ITU's Global Cybersecurity Index) are further enablers for building out the ecosystem. Furthermore, Egypt's high mobile penetration rate and its recent launch of 4G networks are expected to boost the mobility segment of the industry.
The technology innovation ecosystem is booming in Egypt, with the United Nations Development Programme (UNDP) selecting Cairo to host its first Regional UN Technology Innovation Lab (UNTIL) in Africa in 2017. This traction has been driven by the outstanding success of startups and small and medium enterprises (SMEs) in Egypt. Furthermore, numerous industry collaborations with best-in-class ICT organizations continue to be put in place, with the aim of further empowering the thriving ecosystem of entrepreneurs and SMEs. One such example is IBM's provision of support for SMEs in the country through its cloud computing and data analytics solutions. With these collaborations already beginning to bear fruit, Egypt's offshoring industry is poised to grow from strength to strength.
International Data Corporation (IDC) is the premier global provider of market intelligence, advisory services, and events for the information technology, telecommunications, and consumer technology markets. With more than 1,100 analysts worldwide, IDC offers global, regional, and local expertise on technology and industry opportunities and trends in over 110 countries. IDC's analysis and insight helps IT professionals, business executives, and the investment community to make fact-based technology decisions and to achieve their key business objectives. Founded in 1964, IDC is a subsidiary of IDG, the world's leading technology media, research, and events company. To learn more about IDC, please visit www.idc.com. Follow IDC on Twitter at @IDC.
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