[kictanet] Marketing Kenya as a BPO Destination
nicholasnesbitt
nnesbitt at kencall.com
Sat Jun 21 00:01:59 EAT 2008
To add to the debate, here is an article on how the high cost of
bandwidth in Mauritius is one of the factors hindering the growth of
the country's BPO sector....
Russell Southwood
Mauritius call-centre and BPO sector needs lower international
bandwidth prices to stay competitive
Bandwidth is the petrol of the new global economy and as the price of
actual petrol continues to go through the roof, it is an essential
component of being able to sell “smart exports” based on “think-work”
rather than simply minerals, produce or tourism. Mauritius has had
some considerable success in attracting Business Process Outsourcing
and Call Centre work but the high price of international bandwidth
remains a key concern. With the new cables arriving on the East coast
of Africa delivering lower cost international fibre, Mauritius has got
to figure out how best to stay competitive. Russell Southwood looks at
the dilemmas faced by this Indian Ocean island.
Mauritius not only identified ICT as a fifth pillar of its economy
alongside sugar, textiles, tourism and financial services, it actually
went out and turned this ambition into a reality. Cheaper bandwidth
was a key element of delivering the vision and the island was
connected to the SAFE part of the SAT3/SAFE cable in 2000.
The vision had a number of strands: firstly, Mauritius wanted to
attract call centres, business process outsourcing (BPO) and computer
software programming; secondly, it wanted to take advantage of the
bilingual capability of its citizens who speak both French and
English; and thirdly, it wanted to attract computer assembly work. A
key element was its Cybercity project, a 12-storey double tower that
looked initially like a “white elephant” but is now largely full. A
number of financial incentives were put in place to attract investors.
In 2003 the call centre/BPO sector on the most optimistic estimates
employed around 2,000 people. The more honest at that point would
admit that the island was struggling to find a foothold in this brave
new world and was scrabbling around for low-value telemarketing work.
In 2008, the more pessimistic estimates indicate that this figure has
at least doubled from five years ago. It is now attracting a much
broader range of work including being the Help Desk function for
Orange serving France and several other countries.
But despite this success, the industry has two problems: the
continuing relatively high price of international bandwidth and a
shortage of high-quality staff. Both are acting as a dampener on
further ambitious expansion. However, the latter is a sign of success
and is something that can be addressed through education and training
strategies.
The high cost of bandwidth was something the Government who own 60% of
incumbent telco Mauritius Telecom (with the other 40% owned by France
Telecom) was keen to address. Initially Mauritius Telecom as the
monopoly operator was selling international bandwidth for US$6,300 per
mbps per month. After a price determination by the regulator ICTA this
went down to US$3,450 with a further 25% discount for volume. Since
that point, Mauritius Telecom has reduced prices further in November
2007 by 20% and has plans for further reductions.
All of this has been positive but there remain two stumbling blocks to
further growth. The first of these is that the island is only
connected by a single fibre and when that goes down (as it has done)
then everybody has to rely on satellite. The Mauritius Investment
Board wants to attract data centres to the island but investors want
fibre redundancy.
The second stumbling block will emerge in Q2, 2009 when the SEACOM and
TEAMS fibre projects go live: wholesale prices for international
bandwidth will go down to the US$500-1,000 range, making one element
of the BPO and Call Centre cost base uncompetitive. Worse still, it
will deal the South African call centre sector right back into centre
stage as it will have overcome its own high calling cost issues.
Finding a solution to these stumbling blocks has posed a number of
strategic dilemmas. Ideally, a competitor international cable would be
built and/or operated by someone who was not the incumbent in order to
provide a measure of genuine competition. Having addressed high fibre
prices, the Government seems to feel the issue is not now a problem
and has not really courted partnership with private fibre builders or
sought to create a public-private partnership like the Kenyan
Government.
The project that the Government is focused on is known as Lion and
this 1,800-km cable will connect Madagascar with the region’s existing
Sat3-Wasc-Safe cable. Lion will link Madagascar with the rest of the
world via the islands of Reunion and Mauritius, the two connection
points of the Sat3-Wasc-Safe cable, which also link Europe to Asia via
South Africa. The investment will be made by a consortium, including
Orange Madagascar, Mauritius Telecom, and France Telecom, who will
operate the cable jointly.
In other words, the cable will be entirely controlled by the France
Telecom-owned incumbents of these three islands. To be fair, France
Telecom has been a “price progressive” (offering some of the lowest
prices) in the context of SAT3 but it would again be another monopoly
on top of the one that already exists. There appears to have been no
discussion about co-location or access. Worse still, a well-informed
source told us that the project is having difficulty finding the
required capital to build.
In these circumstances, it would make better sense to either have a
neutral private operator finance and build the cable on which the
subsidiaries of France Telecom and others can buy can buy capacity or
for the Government to act as the facilitator for a consortium of
investors to finance it as the Kenyan Government has done with TEAMS.
In both cases it would provide competitive, cheaper bandwidth which
will help Mauritius and others to stay competitive in the new global
economy.
On Jun 20, 2008, at 8:07 PM, Paul Kukubo wrote:
> Wambui
>
> Thank you for your email that raises an interesting discussion.
>
> Firstly, please join the Board and the BPO society tomorrow during
> the launch of the BPO standards and ethics guidelines at KICC and
> this issue can be discussed in more detail. Our support of this
> event is a signal that this is one of the most important building
> blocks of this industry. And, having been developed by the private
> sector as a self regulation mechanism, the standards send a very
> strong signal of industry seriousness as we market BPO, both locally
> and internationally.
>
> The country marketing plan is being finalised now and is informed by
> all the input we have received throughout the year. we have had many
> forums and visited very many local BPOs to understand their issues
> and believe me, there are many issues. The absence of a formal plan
> does not in itself mean planlessness. The board was also faced with
> the need to be quick and agile in responding to marketing
> opportunities as they presented themselves. This has been gradually
> replaced by the current draft strategic plan and now the soon to be
> launched country marketing plan.
>
> As an example, during last year's BPO conference at Safaripark, the
> board's emphasis was on capacity building for the sector. Skills,
> knowledge on the issues involved with outsourcing etc. Many of the
> participants came there to understand what BPO was and to appreciate
> the business opportunity. We as a board realised that we were
> serving both prospective investors as well as more established BPO
> players.. they have different needs.
>
> If you attended some of the review forums we have held, you would
> have heard first hand some of the experiences many BPO companies
> have been through. High costs, failed contracts etc on one hand..
> But on the other hand some that have built long term plans in niche
> specialist areas are enjoying steady business. This is not surprising.
>
> The board has been very appreciative of the fact that many local
> investors put in their money into BPO and have not made the returns
> they expected. This is normal in any business segment. The board
> also anxious about the time and processes it takes to release World
> bank money for the BPO subsidy
>
> We need to turn this situation into an opportunity to ask serious
> questions as the private sector and government.
> The subsidy will come soon, will it be enough to create
> competitiveness?
> Clients will bring in their work to local BPOs what state of
> readiness to deliver will they find?
> Should everyone be trying to go into call centres and
> transcriptions? What niche areas are there?
> Where are the best source markets for work?
> What partnerships should we create to enable local companies develop
> greater financial and marketing muscle?
> Government's role vs the role of the private sector?
> Why arent local large corporates who have call centre work or needs
> farming this work out? Is it just awareness? or they playing a wait
> and see atiitude?
> The country has certain strengths and certain weaknesses? how do we
> play these up and down respectively?
> And most importantly, what is the role of innovation in creating
> lasting value for our sector? Innovation can either be in processes,
> in delivery, in marketing or in the actual service offering? when
> an industry has contraints, look for the innovation.. as an example
> without the introduction of prepaid billing, there could never have
> been adoption of mobile technology in poorer countries on the scale
> that it is found around the world today. most of the developed world
> did not depend on the prepaid model and many find the idea that you
> can buy airtime in bits very novel even today..
> The sector will take time to grow and in the process many will
> create value and many will lose value.
>
> As players in the sector with alot at stake, I propose we keep the
> debate at the level where it attracts deeper thought and reduce an
> inclination towards hype.
>
> We meet very many potential BPO investors visting the board for
> advice based on the perception of quick returns and we are always
> quick to offer caution. Understand the market, play for the long
> haul, like any business.
>
> No doubt, the board has a huge responsibility to guide this process,
> but ultimately this is a business sector, like any other and once
> the macro issues are resolved (undersea cable, greater marketing,
> incentives to players, skills development), the issue will be a
> micro one.
>
> As micheal porter said
> "The capacity for wealth creation is rooted in the sophistication of
> the operating practices and strategies of companies, as well as in
> the quality of the microeconomic business environment in which a
> nation's companies compete. More than 80 percent of the variation of
> GDP per capita across countries is accounted for by microeconomic
> fundamentals. Unless microeconomic capabilities improve,
> macroeconomic, political, legal, and social reforms will not bear
> full fruit."
>
> The Board has stepped up the capacity support, including guiding the
> media on salient issues of reporting on this subject, in order to
> attract the right questions and add value to would be investors.
>
> when a company farms out some of it works to an outsourcing
> provider, it does not do so to create jobs. it does so to realise
> value, either greater efficiency, cost savings, synergy.
> for this debate to be sustainable, it must be framed in the
> following context: 'I am company X providing the following
> competency Y based on the following skills A B C D. I can add the
> following value that I have established you need, both short and
> long term. '
>
> The collective noise of many company Xs coupled with the ICT board
> saying 'Kenya can offer 1 2 3, (including the forthcoming technology
> park, I must add), is what we say in our marketing.
>
> This is a journey that must walk together. The Board is extremely
> committed.
>
> Regards
>
> On Fri, Jun 20, 2008 at 12:54 PM, Wambui Wakarema <wambuiwakarema at yahoo.co.uk
> > wrote:
>
> Is the ICT Board aware that the BPO industry in Kenya is in crisis?
> Most of the BPO's and Call Centres have suspended operations due to
> the high cost of bandwidth. They are all waiting for the subsidy
> that never was. When is the subsidized bandwidh going to be
> released? There may be no BPO's to use it by the time it is released
> - if ever.
>
> Added to this is the struggle to get BPO work both locally and from
> overseas. Has the Board developed a strategy for marketing Kenya as
> an outsourcing destination? Am not talking about haphazard marketing
> activities and expos. What is the long term strategy? Can industry
> players have a look at this strategy or plan?
>
> Wambui Wakarema
>
> Sent from Yahoo! Mail.
> A Smarter Email.
>
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>
>
> --
> Paul Kukubo
> Chief Executive Officer, Kenya ICT Board
> PO Box 27150 - 00100
> Nairobi, Kenya
>
> CCK Offices Waiyaki Way
>
> Tel direct: +254 20 2089062/251152
> telkom Direct: +254 20 3518000
> Fax: +254 20 315147
> Cell: + 254 735 180001
>
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