International Business Opportunities

UK and Ireland based companies currently outsource 8% of IT operations to offshore partners, versus a average of 2% of European companies.

This is the result of a survey conducted by Capgemini, IT and business consultancy company. These figures are expected to increase to 24% for British and Irish and to 5% for the European companies by 2008.

Andrew Taylor, vice president of Capgemini, explained the cause of this gap between UK and Europe:

“The rest of Europe is definitely a step behind, because of social and cultural issues, but increased competition will not give them an option,”

According the Capgemini’s report, British and Irish companies are mostly focused on cost-reduction and less aggressive than US companies in terms of reinvesting the savings made through outsourcing.
That would cause a difference in productivity: US productivity has grown by 1.8 percent in 2005, compared to 0.9 percent in Ireland and Britain.

The survey shows that companies that reinvest the savings from outsourcing in in new technology to become more competitives get a 10% higher rate of productivity than those who simply use outsourcing to cut costs.
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Egypt aims to compete in the offshore outsourcing market with India and European countries such as Ireland, Czech Republic, Hungary, and others.

Foreign language skills and low labour costs could make Egypt an outsourcing destination, especially for European companies. The country is ideally situated to be a near-shore outsourcing destination for Europe; furthermore, the salaries for staff working on offshore accounts are pretty low.
Xceed, a leading Egyptian call centre company, says salaries range from around €300 to €350 per month.

Hassan El Shawarby, sales manager at another call centre company, Raya, said:

“We will be cheaper than India by 20 to 30 per cent on the high quality call-centre services.”

According a list of top offshore outsourcing destinations compiled by AT Kearney, Egypt is being ranked No.12.

Mohammed Omran, CEO of the Egyptian government-funded Information Technology Industry Development Agency (Itida), said:

“One of the key challenges is for Egypt to develop our own expertise in order to be able to compete with the world’s outsourcing companies… and compete against India, Ireland and eastern Europe.” ( source )

According to a statement from the Irish Congress of Trade Unions (ICTU), Ireland could suffer a loss of about 38,000 jobs due to outsourcing to low wage countries such as India.

The services sector, employing 67% of the workforce in Ireland, would be the most threatened by offshore outsourcing.
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Among the original attractions of doing business in Ireland, it seems just the low corporate tax mostly continues to draw multinationals to this location.

Low corporate tax rate, language skills, the availability of an educated work force, overall low costs and high productivity first attracted multinationals to choose Ireland for European operations.

However in the last five years the environment has changed dramatically, with the increasing costs of labor, electricity, and for other services; just the corporate tax rate continues to be kept low.

So the multinationals still aimed to base their European operations in ireland to take advantage of such tax benefits, are starting to shift from doing manufacturing to financial services, research or any activities not so reliant on low costs of operation.
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Gartner, the world’s largest IT research and advisory company, estimates offshore outsourcing spending will surpass $50 billion for information technology, and $24 billion for business process services, by 2007.

According to Tom Lambert, President of The International Centre for Consulting Excellence, about 11 per cent of the total service sector in the US and Europe could be outsourced by 2010, with financial services playing a very important role in the industry.

It is estimated, India, leading country in the global offshoring industry, will face a skill shortage of at least half a million within five years.
Because of that, increasingly companies are looking to new outsourcing destinations such as China, Philippines, Russia, Ireland, Czech Republic and other Eastern Europe countries.

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