An e-merging partnership (text)

Business Monthly

February 2009

Philip Whitfield

The Roman emperor Augustus forged trade between Egypt and India, taking advantage of winds and tidal waters to speed a fleet of 140 merchant ships from the Red Sea into the Indian Ocean. Thereafter, India supplied the Roman empire, through Egypt, with precious cargoes of construction materials, spices, food and silks. Two thousand years later, Egypt and India have come together to spur world trade once again – this time through the worldwide web.

At her desk at Microsoft’s Egypt headquarters in Smart Village, Sarah Toulan, an account technology specialist, listens intently to a confounded banker daunted by the plethora of information scattered on computers in branch offices across Egypt, the Middle East, Europe and the US. Ushering chaos into order, sloth into efficiency, and with disarming charm, she confidently offers a solution. “We can come over and sit with you to demonstrate how your problem will be fixed,” she says, to the banker’s satisfaction.

Toulan has been on the job for two weeks, the product of focused teaching, an internship and several months’ soft skills and product-specific training. She epitomizes the tens of thousands of new Egyptian graduates whose skills have attracted the Indian giants of back-office business process outsourcing (BPO) to come to Egypt.

In the next 18 months or so, Egypt is set to capture $1.3 billion of the mushrooming market for BPO, the fastest-growing sector in global commerce, currently valued at $1.2 trillion. In Egypt, the plan is to grow the sector by 15 percent annually, adding an estimated 30,000 to 50,000 new jobs a year, generating $400 million a year in hard currency, according to the Ministry of Communications & Information Technology (MCIT).

Indian IT companies say the main reason for setting up in Egypt is the abundant talent pool with broad business and multilingual skills that include languages such as English, Arabic, French and German. Also they welcome the commitment by the Egyptian government to support them over the long term.

Existing Egyptian call center operations, such as Xceed, fear their arrival will drive up wages, diminishing one of Egypt’s big attractions. Another concern of the IT industry is the poor penetration of high-speed broadband Internet in Egypt.

Seeking to allay skepticism that Egypt is unprepared, MCIT’s Information Technology Industry Development Agency (ITIDA) has signed off on a $10 million branding and marketing program for the next three years. The slogan “Egypt On” attempts to position Egypt in the minds of the targeted group as an IT destination, according to ITIDA officials.

A year of intense activity has shaken up higher education to prepare for the arrival of the business process outsourcers from India. The academic community is welcoming the industry enthusiastically. Undergraduates are streaming into classrooms for new, optional courses teaching the business skills the BPO providers require. Student attendance is averaging 95 percent – an unprecedented response.

The Information Technology Institute (ITI) has introduced the courses at five locations: Giza, Cairo, Mansoura, Alexandria and Assiut. These English language and soft skills courses have elevated the level of importance of interpersonal and linguistic skills and basic computer knowledge to complement technical skills. Lessons include communications, teamwork, time management and dealing with different cultures.

“The talent capability is far greater in Egypt than in India, especially for Middle East and European market needs,” says Mohammed Shahabuddin, an Indian IT management expert contracted by ITIDA as program advisory manager to assimilate the Indian newcomers.

Toulan embodies the hopes of Egypt’s economic renaissance. Her experience at work, and that of 3,000 new entrants into Egypt’s IT industry, gives an inkling of the vision of President Hosni Mubarak and Prime Minister Ahmed Nazif for Egypt as leader, not trailer, embracing the potential of youth who are determined to find well-paid jobs.

The renewal of joint endeavors between Egypt and India is no coincidence. The Egyptian government is led by technocratic economic reformers; India’s prime minister, Manmohan Singh, at one time an economist at the International Monetary Fund, initiated the economic reforms that heralded the arrival of the world’s biggest business back office in clusters of call centers in India.

Mubarak led his ministers and IT businesspeople to New Delhi last November in his first visit to India in 25 years. In the wings of the Egyptian presidential party were foreign minister Ahmed Aboul Gheit; trade and industry minister Rachid Mohamed Rachid, who did the spadework on a visit in April; and communications and information technology minister Tarek Kamel. IT entrepreneurs such as Wael Amin, president of ITWorx, Egypt’s largest software applications company, were also present.

Tapping IT

“I shall have an important meeting today with India’s business community and I am looking forward to boosting trade and investment between our two countries,” Mubarak told The Times of India in an interview published on November 18. Later that day, Mubarak told Indian businesspeople: “It is through an information-based society that our future generation stands a real chance of success. That is why we have set our priorities on the ICT sector, where I believe there is great potential for further cooperation between our two countries.”

In one meeting after another, Mubarak and his team extinguished any notion of competition, emphasizing partnership and the benefits stemming from allies bonding in a common cause. The outcome was a series of protocols paving the way for the exchange of knowledge and the strengthening of business partnerships, consulting, training and research.

Ten Indian IT companies expressed positive interest in joining Wipro and Satyam, the Indian IT software application companies that have established bases in Smart Village. Together these two giants alone directly employ some 100,000 people worldwide.

The new scenario couples Egypt with India in multifaceted cooperation. Tenders are going out now to begin constructing a new IT center in Maadi. Indian-headquartered Wipro, which ranks among the top three offshore BPO services providers, is establishing a development center in Egypt.

Anand Sankaran, chief executive of Wipro Infotech, the company’s India and Middle East business, told Business Monthly: “Egypt has the potential to emerge as the regional IT hub given its high-quality talent pool. This, coupled with the government’s proactive support to IT companies, could help in IT exports out of Egypt. The emergence of IT is good for job creation and channeling the local talent.”

Like Wipro, Satyam has also set up a technology support facility in Smart Village.

Satyam is so important to India that, in response to a scandal involving its fallen chairman, B. Ramalinga Raju, fraudulently siphoning off $1.48 billion, the Indian government replaced Satyam’s board of directors and assured investors that Satyam would be offered enough financial support to keep the company afloat and continue to employ its 50,000 workers at home and abroad.

Trust and credibility

The specter of Indian miscreants poaching staff from the 2,000 Egyptian IT companies that have paid the price of training and developing their human resources is a general concern, agrees Adel Danish, chairman and CEO of Xceed. The crux of the issue, he says, appears to be the Indian companies’ requirement for staff with European and Arabic language skills. Until recently, they were satisfying the need for French, Italian and German out of low-cost eastern Europe.

“Those workers have either migrated or are costing more,” says Danish. He cautions that without careful planning the India-based newcomers will lure good staff from home-grown Egyptian companies, driving wages up and diminishing Egypt’s cost advantage.

“The better way is for Indian companies to partner with Egyptian counterparts,” he says, citing joint ventures such as National Bank of Egypt’s with Chase Manhattan in 1975 to form what is now Commercial International Bank (CIB). “Overall, the government of Egypt, and IT players such as Xceed, view these foreign investors favorably. They endorse Egypt’s credibility as a destination for foreign direct investment,” he says.

Amin emphasizes ITWorx’s global reach. “Eighty percent of our business is overseas,” he points out. “We have developed expert knowledge of how to do business with governments and companies all over the world and, frankly, we’ve nothing to fear from India. There are situations where our combined knowledge could offer a better value proposition to our customers and prospects.

“My impression is that some Indian companies acknowledge that Egypt does have something to offer. Egypt has excellent staff, and language skills they don’t possess, a lower cost base and a better strategic location to serve Europe.

“The major issue to be tested is trust between potential partners,” he says. “Egypt is used to workers migrating to the Gulf, the United States and elsewhere, lured by comparatively high pay packets. IT is a global market. I was in India to witness the protocol signing and I think we can trust each other. But the business is cutthroat, particularly as the global economy slows, and competition from eastern Europe is very severe, particularly from the Romanians, Russians and Bulgarians, who are competent and agile.”

Labor logistics

ITIDA believes as many as 40,000 graduates a year will be needed to staff customer support and sales offices in BPO operations. He is executing a strategy agreed on by the heads of more than 20 Egypt-based IT companies, seven ministries, and NGOs and educators. ITIDA is addressing three significant challenges: First, preparing for the introduction of unique value-added services in accountancy, HR management, sales and customer care not offered by the “3-Is” (India, Ireland and Israel). Second, effecting a market-driven public-private partnership strategy, introducing BPO services suggested by 20 existing foreign direct investors in Egypt. Third, focusing on the critical reasoning skills deficit.

“We need people who can reason, not memorize,” says Amin Khaireldin, adviser and board member of ITIDA “We left our egos in the parking lot and beat our brains out in this room.”

Karim Ramadan, Microsoft Egypt’s general manager, sees the current movement in the industry more as the fusion of the best of breeds, whatever their pedigree. Ramadan is more than enthusiastic about the Egypt-India initiative and the new IT training programs. “The arrival of companies from India is positive for Egypt and is the pattern for industry as sectors mature. Egypt benefits from a larger pool of expertise,” he says.

“It’s natural for incoming companies to look for labor from existing companies. In the end, the results are positive. Yes, wages are driven upwards. But Egypt has lost a lot of qualified computer engineers to the Gulf, where wages are much higher, and some of those migrants will return as wages go up in Egypt.”

ITIDA is working in tandem with the ITI and other government bodies, whose Education Development for Universities in Egypt (EDU Egypt) program has been adjusted to equip 5,500 people for jobs in the IT/BPO sector this year, 20,000 in 2010 and 40,000 in 2011.

The ITI’s chairman, Mohamed Salem, points out that of those who opted to take special courses in computer studies and soft skills, more than 1,000 (about 50 percent) have found jobs and 95 percent of undergraduates registered full attendance at classes.

Academia has welcomed the IT industry’s input to develop the training programs, Salem says. “In the past, [academics] didn’t like industry interfering. But we were lucky and they have been very supportive. At a policy level, Kamel and Hani Helal, the minister for higher education and state for scientific research, were united in their support. “At the college level we found academic staff open to understanding the industry’s issues and the approach we were taking,” Salem says. “Academia following the industry in cooperation with the ITI programs was the real win for this initiative, and we are expecting a marvellous success for our training.”

The ITI has been involved in training fresh graduates since the early 1990s. “What’s new today is that these training programs are targeting the IT companies’ human resources demands,” says Riham Moawad, who is in charge of business development at the institute. “Working hand-in-hand with the industry’s stakeholders made my job much easier.” Students attend the classes in their own time, and class sizes do not exceed 25.

Last September, three of the biggest Indian companies sent 20 trainers to Egypt to help develop a program to train 140 Egyptian teachers to introduce the program in 19 faculties at seven universities. “It’s not a matter of a right way or a wrong way to train people,” says Heba Saleh, deputy for projects at the ITI. “It’s a matter of achieving success through realizing targets.”

Some adjustments were made after input from the IT industry. The ITI, along with the universities and colleges delivering the program will be reaching conclusions with representatives of the IT industry in June to agree on the shape of the program. Salem recognizes that “the challenge is to assure multinational companies the quality of graduates meets their requirements.”

Branding Egypt

The slogan “Egypt On” came out of the London office of communications specialists Hill & Knowlton (H&K) as part of a $10 million three-year international campaign to promote Egypt as a global outsourcing destination.

ITIDA says H&K created a slogan “with a compelling brand proposition,” and the branding campaign won Egypt the British National Outsourcing Association’s award for Best Offshoring Destination for 2008. ITIDA points out that after the launch of Egypt On (www.egypt-on.com), Egypt was mentioned in 350 articles published in four markets between July and December 2008, compared to 35 articles mentioning Egypt as an outsourcing location from January 9, 2007 to July 9, 2007.

This success has renewed calls from the IT sector to harmonize the image Egypt presents to the world. ITIDA senior staff have visited Ireland in recent months to see for themselves how the country achieved one of the most remarkable economic turnarounds in modern times, transforming a moribund agriculture-based economy into a competitive high-tech player.

A positive path

One concern directly related to the incoming BPOs is the dismal penetration rate for high-speed broadband connectivity in Egypt, which lies around 12th in the league table of broadband penetration in 15 MENA countries. Less than 1 percent (about 600,000) of Egypt’s Internet users are connected by broadband, compared to broadband penetration rates of more than 5 percent in the Gulf. ADSL is unavailable in much of Egypt, including in some upscale neighborhoods in Greater Cairo.

Microsoft’s Ramadan says: “We need to step up productivity and efficiency. It’s not good for professionals to be cut off from high-speed Internet connections in traffic jams.”

No more pressing urgency intrudes on Khaled Elamrawi, Intel’s general manager, Egypt, Levant and North Africa. “Only 15 to 20 percent of schools are connected via broadband, which means that Egyptian students are falling woefully behind their foreign peers,” he says. “Health providers, and government institutions such as the post office, are held back because of the archaic national IT infrastructure, which largely relies on a pair of copper, or less conductive, wires to complete the connection to the Internet for homes and offices.”

Craig Barrett, Intel’s chairman, came to Egypt in December to press the case for Egypt to adopt WiMAX. “If the whole of Baltimore, and hundreds of cities across the whole of Europe can go WiMAX, why can’t Cairo?” was his message.

Elamrawi has just put a plan in front of Kamel outlining how it can be achieved in Egypt – identifying the costs and benefits, and the financial and technical partners who would make it happen fast. Intel’s plan offers to mix and match WiMAX with Egypt’s three mobile service providers’ 3G offerings, and ADSL hard-wired broadband that is fed down Telecom Egypt’s phone lines.

Companies such as Intel, Motorola, Nokia, Siemens, Alcatel, TE Data, Mobinil, Etisalet, Vodafone and Microsoft support WiMAX coexisting with 3G, which is optimized for cellular voice and moderate data-rate applications. The convergence of wired and wireless Internet would make Egypt even more attractive to foreign BPO companies and offer software application developers more opportunities for social development, particularly in healthcare, education, government services and security. Given Egypt’s obsession with mobile phone calling, probably more convincing to general users is the fidelity of video mobiling face to face.

Ramadan says he believes Kamel will come up with a satisfactory solution that protects existing investments and bridges the last mile. “I think it will get the go-ahead sooner rather than later,” he says. “Kamel understands this and I think he’ll deliver a positive response.”

Back in Toulan’s cubicle, she says modestly that she is proud to be among the new IT entrants that demonstrate Egypt’s ability to compete for and win the confidence of customers around the world. “I have been given an opportunity, which I truly appreciate to show that Egypt has ‘all that it takes,'” echoing Mubarak’s comments in India. “Sure it’s Microsoft, but it’s Microsoft Egypt. Together we’re the best team you could wish for.”

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