Description
Business process outsourcing (BPO) is a subset of outsourcing that involves the contracting of the operations and responsibilities of specific business functions (or processes) to a third-party service provider. Originally, this was associated with manufacturing firms, such as Coca Cola that outsourced large segments of its supply chain
Development of a Business Process Outsourcing Industry in Kenya: Critical Success Factors
IDRC Grant No. 104488-001
Final Report (June 2008 – July 2009)
by
Prof. Timothy M. Waema (Principal Investigator)
July 2009
List of Abbreviations
BBBEE BKB BOI BPeSA BPO BPO & O CCIFM CCK CMM COTU DPSA DTI EOU EPC EPZ FDI FLAG FOSS GEAR GDP HP IBM ICASA ICT ID IDRC INSAT IPR ISO IT ITeS ITSA KBPOCCS KenInvest KEPSA KICTANET KICTB KIRDI KPO KTCIP MBA M&E MMU MoIC MoU Broad Based Black Economic Empowerment Brand Kenya Board Board of Investment Business Processing enabling South Africa Business Process Outsourcing Business Process Outsourcing and Off-shoring Chamber of Commerce and Industries France-Mauritius Communications Commission of Kenya Capability Maturity Model Central Organization of Trade Unions Department of Public Service Administration Department of Trade and Industry Export Oriented Unit Export Promotion Council Export Processing Zone Foreign Direct Investment Fiber-Optic Link Around the Globe Free and Open Source Software Growth, Employment and Redistribution Gross Domestic Product Hewlett-Packard International Business Machines Independent Communications Authority of South Africa Information and Communications Technology Identification International Development and Research Centre Indian National Satellite Intellectual Property Right International Standards Organization Information Technology Information Technology Enabled Services IT Standards Association Kenya the Kenya BPO & Contact Center Society Kenya Investment Authority Kenya Private Sector Alliance Kenya ICT Action Network Kenya ICT Board Kenya Industrial Research and Development Institute Knowledge Process Outsourcing Kenya Transparency and Communication Infrastructure Project Masters in Business Administration Monitoring and Evaluation Multimedia University Ministry of Information and Communication Memorandum of Understanding 2
MTP NASSCOM NCCU NICTSP NSR OSW OTAM PIN PC PPP RDP R&D SAFE SAITIS SETA SEZ SME STPs STPIs SWOT TESPOK UK UN URL USA VAT VSAT WSIS WTO
Medium-Term Plan National Association of Software and Services Companies National Contact Center Union National ICT Strategic Plan National Skills Registry Office on the Status of Women Outsourcing and Telecommunication Association of Mauritius Personal Identification Number Personal Computer Public Private Partnership Reconstruction and Development Programme Research and Development South Africa - Far East South Africa IT Strategy Project Sector Education and Training Authority Special Economic Zone Small and Medium Enterprises Software Technology Parks Software Technology Parks of India Strengths, Weaknesses, Opportunities and Threats Telecommunications Service Providers Association of Kenya United Kingdom United Nations Universal Resource Locator United States of America Value Added Tax Very Small Aperture Terminal World Summit on Information Society World Trade Organization
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Table of Contents
List of Abbreviations.................................................................................................................2 Table of Contents......................................................................................................................4 Executive Summary..................................................................................................................6 1. Introduction...........................................................................................................................8 1.1. Background.....................................................................................................................8 1.2. Objectives and Scope of the Study..................................................................................9 1.3. Outputs and Dissemination...........................................................................................10 1.4. Structure of the Report..................................................................................................11 2. Methodology......................................................................................................................12 2.1. Case Study Process.......................................................................................................12 2.2. Data Collection and Analysis Process...........................................................................13 2.3. Database Development..................................................................................................16 2.4. Challenges.....................................................................................................................17 3. Case Study Findings ...........................................................................................................18 3.1. Policy Legal/Regulatory and Institutional Frameworks ..............................................18 3.1.1. Policy Framework..................................................................................................18 3.1.2. Legal and Regulatory Framework .........................................................................20 3.1.3. Institutional Framework ........................................................................................24 3.2. Tax, Infrastructural, Bandwidth and Other Incentives..................................................28 3.2.1. India........................................................................................................................28 3.2.2. South Africa...........................................................................................................28 3.2.3. Mauritius................................................................................................................30 3.2.4. Kenya.....................................................................................................................30 3.3. Human Resource Issues................................................................................................32 3.3.1. India........................................................................................................................35 3.3.2. South Africa...........................................................................................................37 3.3.3. Mauritius...............................................................................................................37 3.3.4. Kenya.....................................................................................................................38 3.4. Youth and Gender.........................................................................................................39 3.4.1. India........................................................................................................................41 3.4.2. South Africa...........................................................................................................42 3.4.3. Mauritius................................................................................................................43 3.4.4. Kenya.....................................................................................................................44 3.5. Outsourcing in Client Countries....................................................................................46 3.6. Types of BPO Operations and Niche Areas..................................................................50 3.6.1. India .......................................................................................................................50 3.6.2. South Africa...........................................................................................................51 3.6.3. Mauritius................................................................................................................53 3.6.4. Kenya.....................................................................................................................54 4. SWOT Analysis...................................................................................................................56 4.1. India...............................................................................................................................56 4.2. South Africa..................................................................................................................58 4.3. Mauritius.......................................................................................................................59 4.4. Kenya............................................................................................................................60 4.5. Summary – Niche Service Areas..................................................................................62 5. Critical Issues, Policy Options and Recommendations.......................................................63 5.1. Policy, legal & regulatory and institutional frameworks .............................................63 4
5.2. Human Resource Issues...............................................................................................65 5.3. Youth and Gender........................................................................................................67 5.4. Incentives.....................................................................................................................68 5.5. Niche for Kenya............................................................................................................71 6. References...........................................................................................................................73
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Executive Summary
Kenya is preparing itself to enter into the global and vibrant Business Process Outsourcing (BPO) and IT Enabled Services (ITES) market. It however lacks empirical evidence and tailored research to guide its policy decisions and investment options. There is demand and specific requests from the government and key stakeholders in the sector for this type of information. This policy brief is a synthesis of a study whose aim was to provide evidence and a deeper understanding of the imperatives for success in this industry to better inform Kenya’s policy decisions and investment choices. It was carried out through a case study method to establish the critical success factors in four vendor countries (India, South Africa, Mauritius and Kenya) with relation to the policy, legal, regulatory and institutional frameworks; human resource issues; youth and gender issues; and various forms of incentives. The study also researched on the outsourcing issues in two client countries (UK and USA). The research found that in the three countries (excluding Kenya), the BPO-ITES industry is given a high priority, there is strong and appropriate legal framework and the industry associations are strong and are key in driving the BPO-ITES industry, while in South Africa the national and regional associations receive state funding. On human resources, the study found that India introduces children to science and technology at a very early age and it has a National Skills Registry and that in Mauritius, the national association was working with the government to create an ICT academy to train for the industry. The research found that countries had differing measures for gender equity, participation of youth in employment, and incentives in the BPO-ITES industry. It was particularly noted that South Africa did not have tax incentives but had a variety of investment and training and skills support incentives, while Mauritius had abolished all the tax incentives except for a 15% corporate tax. The study found that the key drivers in out-sourcing and off-shoring in both USA and UK were similarity in work culture and quality. The major industries where most of the outsourced work is derived were found to be in banking; investment management; insurance; legal; supply chain, logistics, transportation; healthcare; news, media & entertainment; energy and utilities; agriculture/food; pharmaceutical/biotech; government & public agencies; and manufacturing. It emerged that no African country featured in the top 10 preferred outsourcing destinations in the USA while in the UK, only Egypt in Africa was in the top three perceived best three destinations. For Kenya, the research found a widespread perception that it lacked an effective and focused marketing as a BPO destination. It also emerged that Kenya (and Africa in general) is viewed as a country (and continent) with challenged infrastructure, poor work culture/ethics and constraining socio-economic environment. However, individuals/organizations that have had a chance to visit/interact with Kenya(ns) have a different testimony; Kenya has a high chance of being a favorable outsourcing destination if correct measures are put in place. The study contends that Kenya has key strengths, including a highly skilled and competitive pool of labour, neutral English accent, strategic location as a regional hub for communication and finance, and production of over 30,000 and over 250,000 university high school graduates annually, respectively. In addition, Kenyans generally have a warm and welcoming culture/attitude, due to the predominance of the tourism and hospitality industries in the economy.
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When the above strengths are considered, the provision of call centre/customer services an ideal niche for the country to carve for itself in the BPO space. Kenya can also capitalize on its large pool of high school and diploma graduates to provide back office services such as transcription, digitization, data entry and various other data processing services. In addition, Kenya can use its excellent education system to create a niche in BPO-ITES training for the region. The key policy recommendations are: a) Development of a BPO sector policy as pledged in the medium term plan of Vision 2030. b) In order to address the lack of a strategy and a weak M&E framework, combine the results of this study with those of McKinsey&Company and create an informed strategy for the BPO sector in Kenya and strengthen the M&E functions of the KICTB and Vision 2030 Secretariat. c) Create a single ICT-BPO sector and mainstream it into the national planning and operational frameworks. d) In order to address the weak legal framework, strengthen existing laws to provide an enabling legal framework for ICT-BPO in the short-term, while in the medium- to long-term, develop separate legislations critical for ICT-BPO sector and compliant with relevant international laws. For youth and gender, amend the Employment Act, 2007 to explicitly regulate working hours for employees and to require employers to facilitate safe commuting at night. e) Develop a BPO incentives framework as an integral part of the law that will transform EPZs into SEZs. In addition, provide tax, training and set-up incentives for a specific time period to encourage BPO industry growth, especially in the rural areas. f) In order to address the lack of standards, develop BPO standards, benchmarked to international standards and ensure all key BPO firms adopt these standards. g) For institutional framework, change the mandates of an existing body to coordinate all the institutions that deal with BPO in the short-term, while in the in the medium- to long-term, create a new entity (body corporate with power and a powerful champion) to coordinate ICT-BPO activities across all ministries and public enterprises that have a role to play in ICT-BPO. In addition, strengthen KBPOCCS to be the key BPO industry association and create a strong ICT association. h) In order to address the lack of updated skills database, establish framework for collection and updating of ICT skills data and task the national body responsible for ICT-BPO coordination to be established as recommended under institutional framework with this responsibility. i) Fast-track implementation of integration of ICT into education as defined in Sessional Paper No. 1 of 2005 on Policy Framework for Education, Training and Research and the National Strategy for Education and Training (2006). j) In order to address BPO skills sets, create a policy and strategy on ICT-BPO skills requirements and mainstream into relevant ministries for implementation. k) Develop and implement a marketing, branding and positioning strategy for Kenya.
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1. Introduction
1.1.Background
ICTs are transforming world economies with an increasing number of countries, especially in the developing world, identifying the ICT industry as a key sector for achieving rapid economic growth. In particular, the business process outsourcing (BPO) sub-sector, worth over $130billion worldwide, provides one of the greatest economic opportunities for wealth generation and employment creation. For example, India, usually the first stop for western companies looking to increase profits by outsourcing some of their business processes and which employs over 1.5million people in this sector earned $39.6billion in the financial year 2006/2007 from call centres, back-office operations and software development. The amount contributed to 5.2% of national GDP. The Philippines on the other hand, earned $3.26billion over the same period. With these outstanding results, many developing countries such as Mauritius, Ghana, Costa Rica, Kenya and Rwanda, among others, are seeking to follow suit. These countries are at varying stages of developing a business process outsourcing industry. Kenya, impeded in the BPO industry to-date by poor and expensive communication links to the rest of the world, is hoping that the arrival of the fibre-optic cable will boost its status as the region’s top economy. Kenya hopes that this, plus cheap labour, clear accents and customer fatigue with Indian call centres could help it hook into this multi-billion dollar industry. As an indication of how important this sector is to Kenya’s economic growth, BPO is one of the pillars in the government’s Vision 2030 document. Kenya has also developed a policy framework and defined some strategic directions (Kenya ICT Strategy 2006), one of which explicitly focuses on BPO as a key opportunity for realising the country’s ICT objectives. The Kenya BPO and Contact Centre Society was formed to set standards and provide for self-regulation while the Kenya ICT Board takes the lead in marketing Kenya abroad as a BPO destination of choice. To address the bandwidth issue in this sector, the Kenya government, has taken a stop-gap measure of subsidising bandwidth costs through a grant from the World Bank while the country awaits the impending arrival under-sea cable along the East African coast. While Kenya is preparing itself to enter into this vibrant market, it lacks empirical evidence and tailored research to guide its policy decisions and investment options. There is demand and specific requests from the government and key stakeholders in the sub-sector for this type of information. This is the gap that this study intended to fill. The research sought to support the efforts of the government, private sector and civil society in Kenya to maximise opportunities and minimise risks in the selection of appropriate policies, legal and institutional frameworks, infrastructure and capacity building strategies. Detailed case studies were carried out of business process outsourcing companies and their clients in six countries: two countries that outsource work to developing countries, two countries that have a mature BPO service industry, one country that has an emerging BPO service industry and finally one country that is just starting out on the BPO journey (pioneer market). A thorough analysis of the Kenya business environment and culture was also carried out with the aim of developing niche areas and recommendations for Kenya.
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1.2.Objectives and Scope of the Study
The general objective of the project was to undertake comprehensive research in the business process outsourcing (BPO) sub-sector in pioneer, emerging and mature markets in order to provide evidence and a deeper understanding of the imperatives for success in this industry to better inform Kenya’s policy decisions and investment choices. The specific objectives were: 1. To provide empirical evidence and recommendations to inform the development of BPO legislation, policy and strategy documents by Kenya’s Ministry of Information and Communication, Kenya ICT Board and Kenya BPO and Contact Centre Society among others. 2. To identify the critical success factors that underlie BPO industries in developing countries (in pioneer, emerging and mature markets) in terms of: policy and institutional environment; legal and regulatory considerations; incentives; infrastructural & bandwidth requirements; effects of bandwidth subsidy; human capacity needs & capacity building requirements; criteria for choice of BPO destination; trends in BPO demand; and types of BPO operations. 3. To examine and provide comprehensive case studies of eight countries representing pioneer, emerging and mature BPO markets. 4. To provide a deeper understanding of youth employment and gender issues within the BPO sector in pioneer, emerging and mature markets. 5. To increase the level of awareness and input among key stakeholders through interactive dialogue on key BPO issues within the Kenyan context. 6. To contribute to the knowledge base in this emerging area through publication and dissemination of a book entitled “The BPO Sector in Mature, Emerging and Pioneer Markets: Lessons and Opportunities for National Development.” The scope of the study is outlined below: 1. 8 countries classified under 4 categories: ? BPO clients: U.S.A., U.K. (3 BPO clients each) ? Pioneer BPO services: Kenya & Ghana (3 companies & 1 BPO client each) ? Emerging BPO services: South Africa & Egypt (3 companies & 1 BPO client each) ? Mature BPO Services: India & Mauritius (3 companies & 1 BPO client each) 2. Three BPO Associations: ? Regional Asian BPO Association ? Business Process Outsourcing and Call Centres Association in Kenya ? BPeSA - Business Processing enabling South Africa
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The researchers had to drop Ghana and Egypt from the selected countries largely because of budget constraints. One of the partners who was supposed to provide part of the funding, the Kenya ICT Board, failed to do so. However, the researchers were convinced that the huge amount of data from the six countries was adequate to give policy direction to Kenya. Moreover, any further delays in completing the project would have missed the objective of informing BPO policy. With McKinsey&Company consultants completing a related consultancy at the time and with the landing of the undersea fibre cables that were scheduled to land in July 2009, it was important that the study provided results and recommendations at this crucial time. One of the other key changes in the scope concerns publication and dissemination of a book based on the findings. This was not done and instead a detailed report and a policy brief were developed for a number of reasons. One, given the financial challenge cited above, it was not prudent to start a very expensive process of publication of a book. Secondly, the content of the findings is fast changing in each of the countries. Given the long periods involved in publications, the book is likely to be out of date by the time it is launched. What is important is that the study has created a baseline of data that can be updated on a regular basis to inform policy and strategic direction in this fast-changing industry. The researchers therefore decided a detailed final report and a standalone policy brief would be more relevant and useful. The researchers also put together an easy to use/update web-based database that contains the research findings
1.3.Outputs and Dissemination
There were various outputs that were disseminated throughout the study. The key ones include: • Questionnaires for data collection for the following categories: o BPO Clients o BPO Vendors o BPO Vendor Employees o BPO Vendor Human Resources Management o BPO Client Associations o BPO Consultants • Proceedings and PowerPoint presentations of the launch stakeholder workshop, midterm stakeholder workshop, and final stakeholder workshop. • An interactive database for the data collected. This database has been tested with the data collected from the six countries. • A comprehensive database of the stakeholders in the BPO sub-sector. • First technical and financial progress reports. • Second and final technical and financial reports. • Policy brief - this is attached as a separate report. • Final BPO study report – this report. Through this study, the critical success factors for the BPO industry in Kenya were identified and clear recommendation provided for policy makers and industry practitioners to support their policy decisions, investment choices and operational approaches. Findings from this research, especially this report and the Policy Brief, are expected to directly influence policy
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and inform practice. The key recommendations will be widely disseminated in a policy brief to be disseminated to key legislators and policy makers, which is attached to this report.
1.4.Structure of the Report
After this introduction, Chapter 2 provides the methodology that was followed, including the challenges encountered. The next chapter offers the findings in terms of critical success factors in all case study organizations in key thematic areas: policy, legal, regulatory and institutional frameworks; incentives; human resource issues; youth and gender; outsourcing in client countries; and types of BPO operations and niche areas. Chapter 4 gives the strengths, weaknesses, opportunities and threats for the four vendor countries. The final chapter provides the critical issues and policy options and recommendations. This chapter covers policy, legal, regulatory and institutional frameworks; incentives; human resource issues; youth and gender; and niche for Kenya. An abridged version containing the policy recommendations in the last chapter is provided as a separate policy brief.
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2. Methodology
The researchers used the Case Study approach as the BPO industry is relatively new in the Kenyan context and not much research has been done on it. The ‘case study’ has been defined as an empirical enquiry that ‘investigates a contemporary phenomenon within its real life context, when the boundaries between phenomenon and context are not clearly evident’ and in which ‘multiple sources of evidence are used’ (Yin, 1993). The BPO industry is still rather complicated to analytically assess, therefore, the case study approach is the best to yield a rich picture of the situation, which could further be subjected to comparative analysis. The case study approach has been used for many years as it can explain a decision or set of decisions: why they were taken, how they were implemented and with what result (Schramm, 1971). It is also noted that the depth of enquiry facilitated by the case study method is significantly greater than other research methods such as surveys, focus groups, in-depth interview, experiments and analysis of archival evidence. In general, the case study involved review of existing documents, either found in the Internet or physical documents. These documents included national policies and strategies, laws governing the BPO sector/industry in a country, publicly available documents on the BPO firms and associations chosen to be part of the case studies, etc. Further, the case study involved key informant interviews with the key national officials and persons involved in the BPO firms and associations. These people were identified through contacts the researchers had, contacts given by the initial contacts and search through the websites of the chosen BPO firms and associations. In one or two cases, the researchers used the Kenyan Embassies of the case study countries to obtain contacts. Finally, structured questionnaires were used for the various sources of information, namely BPO vendor managers, BPO client managers, BPO consultants, and youth and women working in the BPO companies. These questionnaires were piloted with one BPO vendor in Kenya and the final instruments compiled ready for data collection.
2.1.Case Study Process
To guard against diversity between the case study researchers, each was guided by a case study protocol as illustrated below:
Table 2.1: Guide for case study protocol 1. Protocol Overview • Research objectives 2. Field Procedures • • Key issues on which the researcher needs to focus List of informants who included:
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? ? ? ? ? ? ? ? •
Policymaker(s) in the ICT sector BPO association official(s) A senior manager (strategic level) A manager at the tactical level who deals with the BPO client / vendor relationship The ICT manager A worker at the supervisory level Workers at the operations level Targeted youth and women informants.
3.
Case Study Questions
•
•
This resulted in six different questionnaires to focus on these target groups, these were: ? BPO Clients ? BPO Vendors ? BPO Vendor Employees ? BPO Vendor Human Resources Management ? BPO Client Associations ? BPO Consultants The key questions to guide the researcher For each question: a list of probable sources of evidence including informant comments, documents, artifacts and observations
During each visit the case study researcher collected the following evidence where available: • Firm’s URL and website information; • Documents describing firm’s BPO strategy, services provided, etc.; • Interview notes / transcripts (as in the protocol above); • Record of direct observations; • Archival records.
2.2.Data Collection and Analysis Process
Data collection and analysis was carried out in five steps as outlined below. Step 1: Literature Review The team began by conducting a literature review to put the work in context. This involved desk (Internet and library) research reviewing the country’s ICT policy and BPO industry reports, policies and regulations. Eight countries were chosen for the study, from pioneer 1 BPO services (Kenya and Ghana), emerging2 BPO services (South Africa and Egypt), mature3 BPO services (India and Mauritius) and BPO clients (UK and USA). These countries were chosen based on the following criteria:
1
At the time of the study, a pioneer BPO destination was defined as having less than 10 established companies in the industry and less than 10,000 workers employed in the industry while the industry was 1 to 5 years old. 2 At the time of the study, an emerging BPO destination was defined as having 10 to 100 established companies in the industry and 10,001 to 100,000 workers employed in the industry while the industry was five to fifteen years old. 3 At the time of the study, a mature BPO destination was defined as having more than 100 established companies in the industry and over 100,000 workers employed directly in the industry while the industry was over fifteen years old.
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• •
•
•
•
represent the countries with the highest outsourcing work, the UK & USA; demonstrated success as a leading BPO destination, India; emerging BPO destinations with great promise, South Africa, Egypt and Ghana; demonstrated challenges and some failures, Mauritius which can inform other countries interested in this sector. Kenya – as this study is meant to inform the Country’s policy – which has some BPO companies and internal BPO clients
Step 2: Questionnaires’ Development The researchers also compiled ICT and BPO indicators for each country to be studied. The next stage involved the development of detailed questionnaires. Six different types of questionnaires were developed to target different categories and avoid a long questionnaire with sections that may be unnecessary for certain categories. The categories identified were: • BPO Clients • BPO Vendors • BPO Vendor Employees • BPO Vendor Human Resources Management • BPO Client Associations • BPO Consultants Step 3: Stakeholders’ Sensitisation Workshop One of the key objectives of the research was to increase the level of awareness and input among key stakeholders through interactive dialogue on key BPO issues within the Kenyan context. Therefore, the researchers organized a half-day workshop to sensitise the stakeholders about the study and discuss the methodology to be used especially the questions to be asked. The findings from these interactions contributed to the final development of the questionnaires. A pilot case study was carried out to refine the case study protocol. This took place in Nairobi, Kenya. The findings from this pilot were fed into the process of refining the questionnaires. Step 4: Establishing Contacts The next step was to make initial contacts and obtain commitments for research participation. In some cases like the US and UK this proved to be a very difficult process as they were not very forthcoming with appointments and were sometimes reluctant to participate in the research. After the researchers identified the various organizations that would be interviewed various methods were adopted to acquire contacts of key executives in these organizations. These included: a. Institutions/ Associations Some contacts were acquired through the various associations and institutions. In Mauritius, for example, the Board Of Investment (BOI) and Outsourcing and Telecommunications Association of Mauritius (OTAM) were helpful while in Kenya the Kenya BPO & Contact Center Society (KBPOCCS) availed lists of potential interviewees. The IDRC and the Kenya ICT Board also assisted in acquisition of contacts.
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b. Personal contacts and networks The researchers’ personal contacts and networks proved to be the most effective as many in the research team are experienced researchers in ICT for Development and/or are key industry players in the BPO industry. This helped especially in the case of Kenya. In South Africa, for example, researchers used contacts acquired through the School of Computing and Informatics, University of Nairobi to assist in scheduling appointments. The contacts for India, Mauritius USA and UK were largely through the personal contacts of Kenya BPO and Contact Centre Association. Consultants, who assist clients from the UK and USA outsource their work, were instrumental in introducing the researchers to possible interviewees. c. Internet searches Once the contact was established, the researchers acquired background information via the Internet. This provided useful information on the organisations visited. This way, the researchers could pre-fill some sections of the questionnaires shorten the amount of time spent in the organisation visited. This made some interviewees comfortable as they realised the researchers had conducted sufficient background information on them. For example, those interviewed in the UK who were initially sceptical and gave researchers a rigid time-frame to complete the questionnaires; but once the interview started they relaxed and were even the ones who were comfortable to run over- time. d. Through other interviewees Some interviewees provided the researchers with contacts of other players in the industry. This was especially effective in South Africa but not so effective in the UK where vendors did not want to disclose their clients. In such cases, most client information was drawn from the associations that represent the clients and consultants. The argument given by some was that a number of clients did not want their customers in the UK to know they were outsourcing or if they did, they did not want them to know who they were outsourcing to. From this process the researchers drew up a list of contacts for each target country. Appointments were scheduled and monitored via emails and where necessary, phone calls were made. The types of firms that acted as sources of data are shown in Table 2.2.
Table 2.2: Types of firms which were sources of data BPO Sectors of Interest • Data entry services • Data transcription services • Call Centres • Contact Centres (Combination of data entry, data transcription and call centre activity) • Software development Types of Firm from each sector • Clients in developed countries that source BPO services from pioneer or emerging environments • Clients in developed countries that are considering outsourcing to pioneer or emerging markets • Consultants who help Clients identify vendors • Vendors who carry out the outsourced work for the clients • BPO associations
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Step 5: Case Studies Data Collection and Analysis The researchers visited BPO client companies in the UK and USA for detailed observation of operations and interviews with key personnel. The same was done in the pioneer, emerging and mature BPO service country. A structured questionnaire for youth and women working in the BPO Vendor companies was used to provide a deeper understanding of youth employment and gender issues within the BPO sector. In each pioneer, emerging and mature BPO service country, the researchers visited a BPO Association(s) and also talked to consultants. The data collection process was divided into two phases. a. Phase one involved the research teams visits to the USA, South Africa and Kenya. The findings from these three countries helped with a further review of the questionnaires. The data was analysed and incorporated into an interactive database described in section 2.3 In addition, the findings were discussed in a one day workshop with stakeholders whose comments incorporated into the second phase of data collection. There were lessons learnt, however, and one included getting the buy-in of possible clients to be interviewed through referrals from BPO consultants and BPO client associations. b. Phase two involved visits to the UK, Mauritius and India. After this, the researchers analyzed the data, updated the database and combined the findings from all the six countries. The findings were then discussed on the Kenya ICT Action Network (KICTANET) under the following themes: (i) The Policy, Legal and Institutional Frameworks for the BPO Sector (ii) Subsidies accorded to BPO Sector (iii) Human Capacity Issues (iv) Youth and Gender Issues (v) Strengths, Challenges and Niches for Kenya as a BPO destination The findings from the KICTANET discussion forum were synthesized and this contributed to the development of the final report which was then presented in a one day workshop with stakeholders. The main focus of the final report was on the critical success factors, policy options and policy recommendations. The input by the stakeholders was incorporated in the development of Policy Brief.
2.3.Database Development
A database was designed and implemented based of specifications that were drawn from the different categories of the questionnaires and largely on the analysis framework developed for each questionnaire. The database does not include names of institutions and persons interviewed because of confidentiality. Under the category of the Vendor Questionnaire, the following information was included: • General Information • Relationship • Human resources 16
• • • • • • • • • •
Marketing and Partnering BPO Associations Financial Communication, Language and culture Service delivery Size Process of BPO business development Joint Ventures and Partnerships National Level factors General Outsourcing Questions
With the addition of ‘support by national institutions’, similar information regarding the client questionnaire was incorporated in the database. A different example can be drawn from the Vendor Association questionnaire from which the following was considered in the database design: • General • Formation of Association • Size • Off-shoring & Outsourcing • Government Linkages • Capacity Building • Services
2.4.Challenges
One of the challenges was lack of sufficient funding as this research was delayed by over one year waiting for funding; this had some cost implications. The funding was not sufficient and sometimes caused unnecessary delays and forced the researchers to scale down some the scope of the project. A further challenge was that some interviewees were very guarded about where they outsourced to as they did not want it to be known to their customers. The same was true of some vendors who did not want to disclose the names of their clients even when they were reassured of confidentiality by the researchers. This resulted in some potential interviewees declining to meet the research team. There were also cases of no response even when initial interaction had been established. This was especially in the case of the USA. Finally, there were minor communication challenges like slow internet and email server problems. These resulted in delayed receipt and dispatch of emails to and from the respective recipients.
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3. Case Study Findings
3.1.Policy Legal/Regulatory and Institutional Frameworks
The following is a synthesis of the findings on policy, legal/regulatory and institutional frameworks of the BPO industry in vendor countries (namely South Africa, India, Mauritius and Kenya).
3.1.1.Policy Framework
India In India, progressive free market policy is part of the forces that drives the country’s economy and consequently BPO industry. The Indian Government has given priority to ITBPO sector in Special Economic Zones to spiral growth. It is initiating many infrastructure projects with private sector involvement and encourages domestic technology adoption. The educational system is well aligned to industry needs. The other key policy initiative is on security; the Government set up a body to control against cyber crime in India; developed a cyber security training and awareness policy; and documented security policies covering use of information, mobile computing, and user access. Mauritius The Mauritius vision and strategy for BPO/ITES industry is driven from the top (within the government rank), with a lot of emphasis on foreign direct investment. In Mauritius, one will find the major international ICT players from USA, Europe and India, including Oracle, Microsoft, IBM, HP, CISCO, Accenture, Infosys, Hinduja Group, France Telecom, Teleforma, TNT Group. Although Mauritius has diversified BPO/ ITES services, call centres employ about 50% of the total workforce of the sector. The vision of the Mauritius Government is to transform Mauritius into a Cyber island and develop ICT as the 5th pillar of the economy alongside Sugar, Textile, Tourism and Financial Services. The objectives are to: i .Accelerate the integration of Mauritius into the World Information Society ii.Position Mauritius as a strategic ICT regional hub iii.Develop Mauritius as an attractive investment location for ICT iv.Develop Mauritius as a competitive outsourcing destination for ICT and BPO/ ITES The National ICT Strategic Plan (NICTSP) 2007-2011 seeks to provide the right environment for the harnessing of ICT to generate employment, improve quality of life, and create new opportunities for the socio-economic development of Mauritius. The Strategy's expected goals are a 7% contribution to the gross domestic product of Mauritius from offshore ICT export services, employment of at least 29,000 qualified individuals, employment of 90% of those who graduate in ICT, the doubling of the number of foreign investors, and Memoranda of Understanding for collaborative ventures in the field of ICT with countries in the region.
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Other key objectives of the government's strategy include an increase in preference for ICT, with at least 50% acceptance for services available online, an increase in PC ownership by 20,000 households, and 12,000 PCs in primary schools, 150 Public Internet Access Points across the island, Internet connectivity and networking of all primary, secondary schools, and an increase in broadband penetration by at least 250,000. South Africa In 1994, with a new democratic order being elected, South Africa entered a period of transition, dismantling structures established in the Apartheid era and replacing these with processes to empower and enfranchise all of the country’s people. The South African Government’s strategy for transformation is contained in the Growth, Employment and Redistribution (GEAR) program, formerly known as the Reconstruction and Development Programme (RDP). The South Africa ICT sector strategy was conceived in this new era of change. The purpose of this strategy is to further the development of the ICT Sector in South Africa. The strategy is intended to be complementary to and supportive of broader socio-economic development goals of the government of South Africa, particularly with regard to its emphasis on social upliftment and empowerment. The South Africa IT Strategy Project (SAITIS) was developed by the Department of Trade and Industry and the Department of Communication, in consultation with the private sector and other stakeholders. SAITIS has four fundamental objectives: (1) to create a robust, growing and sustainable ICT sector; (2) to increase use of ICT as an enabler for socio-economic development; (3) to create a knowledgeable and growing ICT workforce; and (4) to create a world-class culture of ICT innovation. South Africa already has an established ICT sector. Furthermore, the country’s level of investment in ICT as a percentage of GDP appears to be comparable to that of most developed countries. South Africa has been in the BPO business since the mid 1990s. South Africa introduced a range of incentives to attract investors, especially call centres. In addition, South Africa has been actively participating at outsourcing events and making direct pitches via road shows across the UK North America to target new business. As a result, it is becoming a favoured international location for business process outsourcing and offshoring. South Africa has slowly accepted call centre culture; this promotes domestic market and also makes training employees easier. Kenya In Kenya, the current national ICT policy is the first for the Country and was published through a special issue of the Kenya Government Gazette (Gazette Notice No. 2431) of March 2006. The vision in this policy is “a prosperous ICT-driven Kenyan society”. Its mission is “to improve the livelihoods of Kenyans by ensuring the availability of accessible, efficient, reliable and affordable ICT services”. Three of the broad objectives of the IT policy come close to addressing the opportunities in outsourcing. These are: • Using IT to generate additional employment and promoting entrepreneurship for the new digital economy; • Encouraging and accelerating investments and growth in IT hardware, software, Internet, training, IT enabled services, telecommunications and electronic commerce; 19
•
and Providing adequate infrastructure in the country for IT sector to flourish.
The Kenya Vision 2030 represents the blueprint for the country’s development up to year 2030. The vision aims to make Kenya a globally competitive and prosperous nation with a high quality of life by 2030. The vision has three pillars, namely, the economic pillar, the social pillar and the political pillar. The overall objective of the Kenya Vision 2030 is to realize a higher and sustainable growth of the economy in a more equitable environment, accompanied by increased employment opportunities. The Vision is to be implemented in five successive Medium-Term Plans (MTPs), the first of which runs from 2008 to 2012. One of the six key sectors in the economic pillar is Business Process Outsourcing and Offshoring (BPO). The vision of this sector is for Kenya “to be the top off shoring destination in Africa”. The targets for the 2008-2012 MTP are to create 20,000 direct BPO jobs and an additional GDP contribution of Kshs 10 billion. These targets will be achieved by attracting at least five leading IT suppliers, at least ten large multi-national corporations and global players in Kenya. The flagship projects for the 2008-2012 period are the: i. establishment of a BPO park in Athi River EPZ, ii. marketing campaigns to promote BPO in the targeted geographical markets, iii.training programmes around primary processes (e.g. customer contact) and industry specifics (e.g. back-office data entry in financial services), and iv.designing and implementing a comprehensive incentive framework to improve the attractiveness of Kenya as a BPO destination and to encourage investments in this field. However, low level details of how the above targets will be realized are missing. At the same time, the implementation matrices for both 2008-2012 Vision 2030 MTP and the national ICT sector master plan 2008-2012 (MoIC’s response to the Vision 2030 first MTP) do not have detailed performance indicators and targets that can be used for monitoring and evaluation. The first MTP also pledges to develop a BPO and Contact Centre Policy but how this will be done is not spelled out. Indeed, this issue is left out in the implementation matrices in the Annex of the plan. A critical issue for the BPO sector is standards and A future BPO policy should be able to address this. It was established that the KBPOCCS had created a draft set of standards which had not been discussed with the stakeholders.
3.1.2.Legal and Regulatory Framework
India Until 1991, India was a closed economy with hardly any presence in international trade. Progressive liberalisation since 1991 has made India one of the biggest emerging markets. One of the ways that encouraged investors into the IT-BPO industry was by strengthening the legal system and compliance with international laws e.g. labour laws, international relationship, etc. One of the key legislations is the Information Technology Act 2000 which, among other things, recognizes digital signatures, imparts legitimacy to contract through electronic means unless otherwise agreed, and provides for legal recognition of transactions through electronic data inter-change.
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Other key laws are the Indian Copyright Act of 1957 amended in 1994 to outlaw software piracy, and the Indian Intellectual Property Rights (IPR) Laws which protect intellectual property in accordance with India's obligations under the TRIPS Agreement of the WTO. The importance of intellectual property in India is well established at all levels - statutory, administrative and judicial. Cases of infringement of IPRs are tried in the judicial courts. The IPR Laws also provide for appeals in the judicial courts of the administrative decisions relating to Intellectual Property Rights. Many BPO firms have already aligned their processes and practices to international standards, such as ISO, Capability Maturity Model (CMM) and Six Sigma. This has helped India to become a credible outsourcing destination. South Africa In South Africa, all the ICT legislations (Telecommunications Act of 1996, the Independent Broadcasting Authority Act and portions of the Broadcasting Act) were repealed by a convergence statute in 2006, the Electronic Communications Act. The objectives of this Act are: 1 to create a single statute for the electronic communications sector; 2 to provide for legislation that is technology neutral, and for the making of policy, licensing and regulation in an increasingly converged environment; 3 to provide for the greater liberalisation of the sector; and 4 to provide for less intrusive regulation by distinguishing between services requiring an individual licence and services requiring a class licence The data protection laws are closely related to privacy laws and there is currently no allencompassing privacy or data protection legislation. The right to privacy applies to online and offline activities and is internationally recognised as a fundamental right. Privacy is protected by the common law and Section 14 of the Constitution. The common law right of privacy is protected under the law of delict. In addition, South Africa has a variety of laws on intellectual property rights, including the Trade Marks Act, Copyright Act, Patents Act and Designs Act. In general, South Africa has IPR and data protection legislation that provide confidence by BPO clients. Finally, South Africa has comprehensive BPO-specific Quality Assurance Framework. These standards are referred to as ARP 099 (Recommended Practices). They cover: inbound contact centres, outbound contact centres and back-office operations. South Africa competes at global quality service benchmark levels. Mauritius In Mauritius, the Information and Communication Technologies Act 2001 repealed the Telecommunications Act 1998. This Act lays out the institutional and procedural guidelines for the regulation and democratisation of ICTs and related matters. The setting up of the ICT Authority, the ICT Advisory Council, and the ICT Appeal Tribunal is pursuant to the adoption of this Act.
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Subsequently, Mauritius has created an appropriate legal framework consisting of the Electronic Transaction Act, Data Protection Act, and Cybercrime and Computer Misuse Act. The Electronic Transaction Act is essentially the e-commerce law. The following are three examples of what the Act provides: • an appropriate legal framework to serve as the foundation to facilitate electronic transactions and communications and give a new orientation to the traditional way of doing business by fostering the conduct of transactions by electronic means; • the legal recognition and regulation of electronic records and electronic signatures for authentication purposes during the conduct of electronic transactions and the security of such records and signatures; • the regulation of the formation of contracts by electronic means; and • uniform rules and regulations aimed at establishing standards to combat fraud, forgery or any unlawful practice in order to build and ensure confidence in electronic records and dealings to promote electronic communications and transactions. The Data Protection Act provides for the protection of privacy rights of individuals in view of the developments in techniques used to capture, transmit, manipulate, record or store data relating to individuals. Finally, the Cybercrime and Computer Misuse Act provides for repression of criminal activities perpetrated through computer systems and aims at better protection against computer misuse. It also caters for new forms of Cybercrime, such as illegal interception of data and online child pornography. Kenya In Kenya, ICT issues are considered under various legislations. These include the Kenya Communications Act of 1998; the Science and Technology Act, Cap. 250 of 1977; and the Kenya Broadcasting Corporation Act of 1988. The national ICT policy (The Kenya Gazette, 2006) recognizes that these Acts are inadequate in dealing with issues of convergence, electronic commerce and e-Government. It thus also recognizes the need for a comprehensive policy, legal and regulatory framework which includes the following relevant aspects: • Support ICT development, investment and application; • Promote competition in the industry where appropriate; • Address issues of privacy, e-security, ICT legislation, cyber crimes, ethical and moral conduct, copyrights, intellectual property rights and piracy. The Kenya Communications (Amendment) Bill, 2008, which was to amend the Kenya Communications Act, 1998 and address some of the above challenges, was passed by parliament in December 2008 and the President signed it into law in January 2009. One of the key sections is on electronic transactions under Part VII. In this part, the new Act, among other things, gives legal recognition of electronic records; recognizes electronic messages as valid for the formation of contracts; and supports the use of electronic records and electronic signatures in government and its agencies. The new Act also deals with various aspects of ICT and cyber crimes, including: • unauthorized access to computer data, • access to computer system with intent to commit crime, • unauthorized access to and interception of computer service, • unauthorized modification of computer material, • damaging or denying access to computer system, 22
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electronic fraud, tampering with computer source documents, and publishing of obscene information in electronic form.
Inclusion of e-transactions in the Kenya Communications (Amendment) Act, 2009 is a great step in the right direction. It demonstrates the MoIC’s commitment to e-transactions. By including e-transactions in the converged Bill, the Ministry rightly recognizes the technology convergence that has occurred in the digital world. While this convergence is a reality that has been recognized globally, most of the countries Kenya may be competing with in the BPO industry have not converged their laws. They all have stand-alone laws that regulate etransactions. The practice in other countries has been to create a separate e-transaction legislation. Examples include South Africa’s Electronic Communication and Transactions Act, 2002; India’s Information Technology Act, 2002 amended in 2006; Egypt’s e-Signature Law No. 15/2004; Philippines Electronic Commerce Act 8792, 2000; and Singapore Electronic Transactions Act, 2001. For now, Kenya should use the relevant provisions in the Kenya Communications (Amendment) Act, 2009 to spur the growth of the BPO sector. However, in future, this Act will need to be reviewed to align Kenya with the international best practice of creating separate legislations for critical aspects of the ICT/BPO sectors, harmonize with the East African neighbours’ and the East African Community laws in these sectors, and address certain limitations in the Law. These limitations include not ensuring cross-border recognition and enforcement of electronic transactions, limited range of cyber crimes and lack of provision for limitation of liability for service providers (intermediaries) for 3rd party content despite the agency involved in e-transactions. Intellectual property rights (IPRs) are covered under a number of laws in Kenya: The Industrial Property Act of 2001 covers patents, industrial designs and “lesser” patents; the Trade Marks Act covers trade marks; and the Copyright Act of 2001 covers copyrights, including software. The provisions for the intellectual property rights in these acts in a knowledge era are weak, especially the protection of IPRs, and need to be addressed. The study established that there are efforts to revise the Copyright Act. It is important that this revision strengthens the intellectual property rights in ICTs and BPO sectors, especially for software development. There is also the Freedom of Information Bill, which if enacted, will, among other things, enable the public to access information in the possession of the government and public authorities and certain private bodies that have a public character. This Bill proposes a Commission be established to enforce data privacy and security together with other stakeholders, such as CCK. This apparently is what is delaying the processes of creating a data protection legislation. The researchers recommend that the creation of the two pieces of legislation (data protection and freedom of information) move in parallel. Kenya’s Employment Act 2007 promotes equal opportunity in employment and strives to eliminate discrimination in any employment policy or practice. Some of the provisions of the Act are: • no discrimination against an employee or prospective employee or harass an employee or prospective employee on grounds of race, colour, sex, language, religion, political or other opinion, nationality, ethnic or social origin, disability, pregnancy, mental status or HIV status • 1 day of rest in every seven days • 21 days of leave for every 12 months of work 23
• • • • • • •
3 months and two weeks maternity and paternity leave, respectively (annual leave notwithstanding) per year with full pay 7 days of sick leave per year with full pay and thereafter 7 days with half pay enough pay to obtain reasonable accommodation sufficient supply of wholesome water sufficient and of proper medicine during illness and if possible, medical attendance during serious illness 28 days of notice for termination of employment or payment of 28 days in lieu of notice protection of children from exploitation as child labourers
From the above, this Law is very protective of the employee. The established BPO firms will have no problems complying with it but start-up firms will have challenges in compliance. The law however does not have provisions for a 24-hour economy and for employees working at night and/or at odd hours, which is typical of BPO work. Data protection is critical in BPO operations and Kenya does not however have data protection legislation. It was established that the National Communications Secretariat has produced a raw draft of a data protection legislation. However, this had not been subjected to stakeholder discussion. It is important to note that Kenyan BPO firms will still be required to adhere to the Data Protection Act(s) of the countries which they are providing BPO services to, regardless of our act being in place. A final critical issue concerns incentives for the BPO sector. It was established that the law on incentives is being developed and that the Ministry of Information and Communications is currently leveraging on the current EPZ Law to offer incentives to BPO firms. It might be important to think of an-all inclusive law that spells out the incentive frameworks for all types of companies that may be set up the planned special economic zones.
3.1.3.Institutional Framework
India The National Association of Software and Services Companies (NASSCOM) is India’s private sector lobby group whose members come from software development, software services, software products, consulting services, BPO services, e-commerce and web services, engineering services and animation and gaming. It has regional offices in major cities in India and has been extremely effective. It works very closely with the Government to implement the required policy issues and education system and to grow the industry. The Association also works with academic institutions to develop and update curricula. NASSCOM has evolved to become India’s voice in the industry, both domestically and globally. It started small but has grown to become an authority in IT-BPO Services in India and globally. The other important institution for the BPO sector in India is the Data Security Council. This is a government body including industry players that was formed to manage and limit fraud and cyber crime in India. Such a council gives clients confidence in a country as it demonstrates the seriousness with which the Government takes cyber crime.
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South Africa The main institution that works for the BPO sector in South Africa is the Business Processing enabling South Africa (BPeSA). BPeSA, in close collaboration with the Regional Associations (Calling the Cape, Contacting Gauteng and the KZNonSOURCE), is involved in vigorous marketing of South Africa as an excellent outsourcing destination. The Regional associations ensure equitable growth of the BPO sector in all geographical areas in South Africa. In addition, South Africa has National Contact Center Union (NCCU). As a union representing one of the fastest growing sectors in South Africa, the NCCU offers support and protection to its members when it comes to labour-related issues in the workplace. Unionized contact centre employees experience significant benefits, including: • Improved working conditions • More frequent, quality training • Skills development • Greater opportunities for advancement • Greater bargaining capability • Empowerment Another institution is the Independent Communications Authority of South Africa (ICASA), which is the regulator of telecommunications and the broadcasting sectors in South Africa. It is not clear whether ICASA has a role to play in the BPO sector in South Africa. Others are Department of Communications, which is in charge of telecommunications policy, ecommerce policy and information society issues; the Department of Public Service Administration (DPSA), which is responsible for developing IT policy for government and coordination of all government IT initiatives. It is not clear whether these departments developed the BPO policy. Department of Trade and Industry plays a key role in supporting and promoting training programmes are specific to the BPO and call centre industry. Mauritius In Mauritius, the Board of Investment (BOI) is the key institution that many firms claim has helped to grow the BPO/ITES sector. BOI is dynamic and has become critical in creating and maintaining links with existing and potential external clients. It has offices abroad to assist potential investors to start businesses in Mauritius and regularly organizes missions abroad to market Mauritius as an outsourcing destination. The other government institutions that have significant roles on outsourcing are the National Computer Board and the Information and Communication Technologies Authority (ICT Authority). The former empowers people by creating ICT awareness and spreading IT culture in Mauritius and empowers businesses by promoting the development of the Mauritian ICT industry and operating incubator centres for start-ups in the ICT sector. The latter, which is the ICT regulator, licenses BPO firms. Finally, there is the Outsourcing & Telecommunications Association of Mauritius (OTAM), an association which brings together call centres/BPOs, software developers, International Long Distance (ILD) operators and Internet Service Providers. OTAM promotes the interests of its members through negotiations with government and the authorities, promotion of 25
networking and participation in regional and international fairs, organisation of ICT forums and activities aimed at the development of the ICT sector in Mauritius. It credits itself for successfully lobbying for the Data Protection Act. Kenya Kenya has a number of institutions that are key for the BPO sector. One of the key ones is the Kenya ICT Board, whose objectives are: ? . To develop and position Kenya as the preferred ICT destination in Africa; ? ? . To develop and promote competitive ICT industries in Kenya; ? ? ? . To develop world class Kenyan ICT institutions; and ? ? . To increase ICT access, utilization for all Kenyans (become a principle driver in bridging the digital divide) There has been little visible benefits of the Kenya ICT Board for the BPO sector. The key development has been the bandwidth subsidy but many BPO firms did not qualify for varying reasons. There are a few that did say it has enabled them to be more competitive. The Board has been organizing various trainings and meetings for BPO firms but the clear output based on this is not clear in the public domain. Kenya Investment Authority (KenInvest) is the second key institution for the BPO sector. It provides professional assistance, facilitation, information and advice to local or a foreign investors seeking to establish a new investment or expand existing investments in Kenya. Two of its key responsibilities of KenInvest are to facilitate the implementation of new investment projects and to organize investment promotion activities both locally and internationally. The Brand Kenya Board (BKB) is a state corporation established as a body corporate in accordance with the State Corporation Act (Cap.446). The Board's mandate is to ensure an integrated national brand is created, harnessed and sustained for the long term. The Board has two key objectives; to build national identity and pride in every Kenyan and to instill confidence in Kenya among foreigners, be they investors, development partners or tourists. It is expected that the marketing of Kenya as a BPO destination will be done by Brand Kenya Board. The Export Promotion Council's (EPC) key mandate is to develop Kenya’s exports of products and services. EPC has been instrumental in training services-oriented exporters on how to market their services. The EPC has been working with the Kenya’s BPO Association to train its members on how to market their services. The EPC also organizes annual networking sessions, through the Bridges Across Borders program in collaboration with the International Trade Centre in Geneva. The EPC in previous years used to focus mainly on developing the export of products sector. However, they are now placing a lot of emphasis and resources on the export of services, with BPO being one of the key areas they are focusing on. The EPC has a wealth of resources from the ITC in Geneva, which are being disseminated to the BPO industry in Kenya, as well as other professional services sectors. The Communications Commission of Kenya (CCK), the ICT regulator, plays a peripheral role in the BPO sector. It registers BPO firms at an annual fee of Ksh10,000. However, many firms are resisting this registration. This is an issue that needs addressing. Another institution 26
that also has potential to play a role is the Ministry of Higher Education, Science and Technology. It has initiatives to incubate software development and plans to put up technology parks. Kenya Industrial Research and Development Institute (KIRDI) and the Ministry of Industrialization are also involved in ICT incubation. For example, working with KICTB, Ministry of Industrialization, UNIDO and an Indian software development company, KIRDI is running a software entrepreneurs incubation programme (www.kirdi.go.ke). Finally, there is the Kenya BPO and Contact Centre Society (KBPOCCS). This is the private sector association representing the needs of the Contact Centre and Business Process Outsourcing industry in Kenya. The objectives of this industry association are to market the industry locally and internationally, to represent needs and interests of the industry, to set up standards and to strengthen the industry. Although this association is very young, it is just but one of the many associations in the ICT and BPO industries. The others include the Computer Society of Kenya (CSK), IT Standards Association (ITSA), KEPSA’s (Kenya Private Sector Alliance) ICT Sector Board, Telecommunications Service Providers Association of Kenya (TESPOK), etc. Almost all these associations are small and ineffective. If these associations are to be effective, there is need for consolidation to create a strong ICT and BPO industry association. It can be observed that there are very many organizations trying to market Kenya as a BPO destination. These include the Kenya ICT Board, KenInvest, KBPOCCS and the newly formed Brand Kenya Board. It is now evident that all these bodies will now have to work closely with BKB in marketing Kenya as a BPO destination, without duplicating effort and resources. There could be other duplications as well. For example, Kenya ICT Board plans BPO parks, Ministry of Higher Education, Science and Technology plans for science/technology parks, Ministry of Industrialization plans for industrial parks and Ministry of Trade plans for incubation parks. Other ministries also plan relevant parks for their functions. Although the government has expanded the concept of EPZs into special economic zones (SEZs) to take care of these varieties of parks and anchored in Vision 2030, it is possible that without proper coordination there will be unnecessary and costly duplication of efforts. There is therefore need to coordinate between the various ministries and public enterprises involved. The big question is: Who will perform the coordination? The coordination would ordinarily be expected at the Cabinet level but it is often too late to coordinate at Cabinet level and it often leads to delays in consultations. Within the current political set up, coordination at the Cabinet level may be challenging to achieve. Finally, the Monitoring and Evaluation (M&E) Directorate in the Ministry of State for Planning, National Development and Vision 2030 has never been devolved into the ministries and public enterprises. Whether it is a consequence of this lack of devolution or not, the M&E capacity of the Ministry of Information and Communications, Kenya ICT Board and all the other institutions highlighted earlier is weak. At the same time, the institutional framework for Vision 2030 is in the formation stages and, even if it were to develop strong M&E capabilities, it may not be able to marshal enough power to ensure corrective action is taken by the concerned institutions across all the ministries and public enterprises.
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3.2.Tax, Infrastructural, Bandwidth and Other Incentives
3.2.1.India
The Government of India takes the BPO sector very seriously as it has proved to be not just a job creating sector but a great income earner for the country, at an estimated USD$60 billion for the year 2009. In order to determine the incentives the industry needs, the Government actively engages with NASSCOM, to ensure that the incentives needed by the industry are put in place to propel the growth of the industry. India has special economic zones where they offer the following incentives: (i) 100% tax holiday for the first 5 years, 50% for next 5 years, and up to 50% for balance 5 years in the IT-BPO sector. (ii)Exemption from excise duties, service and sales taxes for all IT-BPO related businesses. There has been a progressive reduction in the excise and import duties, lifting of import restrictions and easing of FDI caps. These benefits are restricted to prescribed zones with a minimum area of 25 acres. License application procedures are easy;. businesses operating in this sector have quick registration procedures to encourage as many such companies to set shop. Other incentives for BPO sector in India are: • Accelerated Power Development and Reform Programme initiated in 2001 for fast track reform in the distribution segment. • Boost to domestic airlines with the removal of tariffs like Air Travel Tax. • The National Highways Development Programme (NHDP) that made India have the second largest road network in the world totalling more than 3.3 million kms. • Special IT-specific infrastructure is available in the Software Technology Parks of India (STPIs). There are presently 35 government and 25 private Software Technology Parks (STPs), which have made significant contributions to national software exports. • Liberalized norms have been put in place for investments of up to 100 per cent foreign equity with full repatriation benefits. • Tax related incentives such as 90% of profits from software exports is exempted from tax, up to 100% repatriation of benefits, 100% income tax exemption on exports up to 2010, zero customs duty for import of software and hardware for export projects, etc In recent years significant trunk capacity added in the form of fiber-optic cable and one of the world's largest domestic satellite systems, the Indian National Satellite system (INSAT), with 6 satellites supporting 33,000 very small aperture terminals (VSAT) increased India’s bandwidth capacity.
3.2.2.South Africa
South Africa has a fairly well developed BPO industry, given its strong economy. The industry in South Africa is largely domestic owing to the large businesses. When South
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Africa decided to start marketing itself as a potential outsourcing destination to Europe and the rest of the world, it had to put in place various incentives to attract such business. The public sector in South Africa has made a long-term commitment to the BPO sector, supported by the Office of the President. The South African government has identified the Business Process Outsourcing and Off-shoring (BPO&O) sector as one of the top three priority sectors to stimulate growth within its Accelerated Shared Growth Initiative (ASGISA). The sector is identified for its potential to attract investment and create employment opportunities in the economy. To realize this vision, the Department of Trade and Industry (DTI) has introduced an incentive programme to attract investment in the sector. The incentive is offered to local and foreign investors establishing projects that aim primarily to serve offshore clients. There are attractive financial and non-financial incentives. A government-backed BPO support programme, launched in 2007, aims to enhance South Africa's competitiveness and included a budgeted R1.1 billion in investment incentives. The plan focuses on: • A broad-based marketing strategy. • A government support programme which includes an investment grant and training subsidies. • A developmental pricing framework for telecommunications. The BPO specific incentives to invest in the country include: (a) Investment incentive grant. The South Afican Government is keen on developing the offshore outsourcing market. As a result, it has introduced an investment incentive grant for local and foreign companies that primarily aim to serve offshore clients. The objective of this incentive is to attract BPO investment that creates employment opportunities. The grant is from R37,000 to R60,000 per seat, the amount given dependent on the level of qualifying investment expenditure and employment creation. The qualification required is a minimum of 200 seats and 90% of revenue must be derived from offshore. This incentive grant program started on 6th December 2006 and will run for a period of 5 years until 31st March 2011. Table 3.1 shows how the grant is calculated. (b) Training and skill support grant. This grant supports company specific training requirements which include In-house trainer/facilitator/assessor development skills, cost for developing learning materials, cost for trainer secondment to South Africa and cost of purchasing and installing training equipment and facilities. The grant is up to R12,000 per agent (c) Export market and investment assistance. This is to assist exporters to develop markets for their products. (d) Technology industry finance. South Africa government offers competitive risk related rates based on prime interest rates for investments in technology intensive businesses. This is most suitable for software development. (e) Enterprise Development. This is R&D capacity building and certified BPO staff. South Africa is encouraging certification of BPO staff and BPOs themselves so as to provide standards required by international clients. However investors are yet to take advantage of the abover incentives because of the strict qualification criteria. For example, one has to have created a certain number of jobs in order
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to qualify. Many investors are not operating in the scales stipulated hence few companies qualifying. Other Government initiatives include: • Special programs such as e-Government, ICT Research and Development (R&D), Business Process Outsourcing and Operations (BPO&O), Broad Based Black Economic Empowerment (BBBEE) in South Africa and Free and Open Source Software (FOSS), which enable the widespread use of ICT products and services. • KZNonSOURCE a local government initiative with a mission to facilitate the establishment of call centres in the Province of KwaZulu-Natal to meet clients and their customer needs. The BPO Association (BPeSA) and the Regional Associations get a good percentage of their funding from Government. This makes the associations much more active and visible, which in turn helps them to sell the Country.
3.2.3.Mauritius
Mauritius is one of the more established outsourcing destinations in Africa, much as many do not perceive it to be in Africa. It had incentives like other countries but abolished them. The argument was that the BPO companies benefited more while the country hardly benefited from the investment. The only incentive that Mauritius has left is a 15% corporate tax, which is one of the lowest globally. It is still not clear why the government of Mauritius has this argument considering that if the companies attract work, the country will get revenues streaming in. This argument may only hold if the companies in outsourcing in Mauritius have been remitting the funds abroad instead of in Mauritius. In this case, it is prudent for a country to ensure that even as foreign owned companies are enjoying subsidies, most of the revenue generated should remain within a country. The Government of Mauritius has ensured doing business in and from Mauritius is both easy and smooth and complies with best practices in terms of transparency, good governance and ethics. Mauritius has enacted anti-money laundering and terrorist financing legislation while the business framework itself has been made simpler. Commercial law in Mauritius is a combination of the English Common Law and the French Code Napoléon. The Business Facilitation Act 2006 has further simplified the operational framework for doing business in Mauritius. Foreign nationals are allowed to work and/or live in Mauritius under three distinct and simply laid down schemes: As a retired non-citizen, irrespective of age and nationality; as a professional; and as an investor. A "Work & Live in Mauritius" (http://www.boimauritius.com/WorknLive.aspx) department has been set up within the Board of Investment (BOI) as a single-facing service counter to expedite formalities for individuals and investors setting up in Mauritius.
3.2.4.Kenya
Kenya’s BPO industry is fairly young and is still in the process of setting up the required institutional framework needed by the industry. Various incentives have been put in place by different institutions involved in the industry. Amongst these institutions that are mandated to 30
come up with incentives to grow this industry are Kenya ICT Board, KenInvest, Export Promotion Council and Export Processing Zone Authority. In Kenya, the following tax incentives are granted to EPZ companies: • 10 year corporate income tax holiday and a 25% tax rate for a further 10 years thereafter (except for EPZ commercial enterprises) • 10 year withholding tax holiday on dividends and other remittances to non-resident parties (except for EPZ commercial licence enterprises) • Perpetual exemption from VAT and customs import duty on inputs – raw materials, machinery, office equipment, certain petroleum fuel for boilers and generators, building materials, other supplies. VAT exemption also applies on local purchases of goods and services supplied by companies in the Kenyan customs territory or domestic market. Motor vehicles which do not remain within the zone are not eligible for tax exemption • Perpetual exemption from payment of stamp duty on legal instruments • 100% investment deduction on new investment in EPZ buildings and machinery, applicable over 20 years • 100% foreign ownership for a period of three years. Thereafter, 20% must be transferred to local ownership. Any BPO firm setting up operations in EPZs is entitled to the above benefits. There are however many BPO firms outside the EPZs. It is hoped that when the special economic zones in Vision 2030 are established, BPO firms will be accommodated and will enjoy the SEZ package of incentives. There is however one apparent contradiction which needs to be addressed. While firms are allowed 100% foreign ownership in the EPZs, the license from CCK requires a maximum of 80% of foreign ownership. The Kenya ICT Board (KICTB) is tasked with developing the outsourcing industry in Kenya. According to KICTB, the government is considering substantial incentives to encourage the growth of the BPO sector. These incentives include: (a) Tax incentives o Reduced income taxes for both expatriates and key national employees o Corporate tax holidays for BPO firms, with reduced tax after the holiday o BPO firms can obtain EPZ status, with a tax holiday followed by reduced tax rates (b) Custom duties o VAT exemptions for local purchases of key inputs (c) Set-up & training subsidies o Subsidies as specific set-up costs o Subsidies for relevant training programmes o Discounts for rents in BPO specific locations (d) Reduced regulatory/ burden o Speeding up the process of setting up new BPO providers o Simplifying hiring and firing processes Other Government initiatives are: (a) The allocation of Sh900 million in the Budget towards the creation of a Business Process Outsourcing park
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(b) Stimulating the growth of the local ICT industry through government patronage of local ICT industry products and services (c) Promoting the development, adoption and enforcement of international standards within the ICT industry to facilitate the development of a world-class and globally competitive local ICT industry and services sector; (d) Promoting the development of a broad engineering base, especially in the maintenance, repair and fabrication of ICT equipment; and (e) Improving the environment in which enterprises, especially SMEs develop and grow, in particular by increasing their access to information, support services and investment capital and resources, especially those targeted at the ICT industry and services sector. (f) Aggressively developing, promoting and enhancing Kenya’s image as a competitive regional destination for ICT foreign direct investment (FDI). (g) Establishment of the Kenya ICT Board in 2007 to advise government on all matters pertaining to Information Communication Technologies. The Government and the World Bank have initiated a Sh7.8 billion ($116 million) ICT project which is bound to revolutionize the ICT sector in the country. The Kenya Transparency and Communication Infrastructure Project (KTCIP) will, among other things, facilitate connectivity for the Country’s emerging business process outsourcing industry, support the creation of digital villages in rural and urban areas and accelerate provision of eGovernment services. KTCIP has two fundamental objectives: to extend the reach of ICT connectivity and reduce prices of its access; and to contribute to the improvement of Government efficiency and transparency through e-Government applications. One of the key incentives that BPO operators expected was bandwidth subsidy. This is because of the high cost of satellite bandwidth, which makes Kenya not able to compete on fair terms with other BPO destinations globally. The Government of Kenya successfully negotiated for a BPO “Bandwidth Support Capacity Purchase Scheme” support line in the Financing Agreement signed with the International Development Association for the Kenya Transparency and Communication Infrastructure Project (KTCIP). According to this scheme, for every incremental bandwidth above the level at 31st December 2006, KICTB would pay the difference between the actual cost and US$ 500 per 1 Mbps. This tariff level (US$ 500 per Mb/sec) was deemed to be at par with competitive destinations (e.g. India) and was meant to allow operators to focus on business development related activities and expenses in order to grow. Results so far indicate that only 23 companies applied out of which only 7 have received the subsidy. According to KICTB, one of the key reasons for the small number of beneficiaries is that many of the vendors did not provide the required supporting documentation as per the World Bank MoU requirements citing mistrust of providing their confidential documents to government officials. Following the poor response and imminent arrival of fiber cables in June, KICTB has successfully applied for an extension of the period to 31st December 2009. It is however still not clear whether more firms will now come out to apply or be granted the subsidy thus the extension may still not yield the desired results.
3.3.Human Resource Issues
This is a synthesis of the human resource issues in South Africa, India, Mauritius and Kenya. In a glance, Figures 3.1 to 3.3 show the differences between the four countries with respect to labour force as a percentage of population, graduates per year as a percentage of population 32
and monthly pay for operators and professional staff. It can be observed that in terms of unemployment percentages, both Kenya and Mauritius have a very small labour force (Figure 3.1). At the same time, Kenya seems to have the highest unemployment rate compared to the other countries (Figure 3.2). In addition, Kenya, India and Mauritius have comparable figures of graduates per year as a percentage of population, at slightly less than 0.1%. However, South Africa has more graduates per year in comparison to its population compared to the other countries, at 0.24%. However, in terms of supply numbers, India leads by a huge margin while Mauritius has a very small supply of graduates (Figure 3.2). Finally, Kenya seems to generally pay lower salaries to BPO staff (Figure 3.3). However, if this is normalized to a norm of living standards, the picture could change.
Figure 3.1: Labour force as a percentage of population
Figure 3.2: Graduates per year and unemployment rate Kenya South Mauritius Africa Population 39,002,77 49,052,48 1,284,26 2 9 4 Graduates/yr 30,00 120,00 10,00 0 0 0 Graduates/yr 0.08 0.2 0.7 as % of popu4 8 lation Unemployment rate 40% (2008 est.) 21.7% (2008 est.) 7.6% (2008 est.)
India 1,166,079,21 7 1,000,000 0.09
6.8% (2008 est.)
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Figure 3.3: Monthly pay of operators and professional staff
From table 3.2, it can be observed that professional staff require at least a Bachelors degree across all countries. Although the sample of firms surveyed is not nationally representative, it can also be observed that in-house training is the key method of training in all countries except in Mauritius, where clients and colleges rank higher. A nationally representative sample is likely to reveal a different trend.
Table 3.2: Summary of findings Kenya Salary range (Man$500 - $3500 agers) in US$ Salary range (Profes- $500 to $1500 sional Staff) in US$ Min. qualifications Bachelors degree (Professional Staff) The most critical 1. In-house training methods, in 2. Colleges order of importance 3. Online courses South Africa $1500 to $8000 $2000 - $3000 Bachelors degree 1. In house Mauritius $1000 and above $500 to $1200 Bachelors degree 1. Client provided 2. Colleges 3. In-house 4. Online India $800- $4000 $800 to $2500 Bachelors degree 1. In-house 2. Client provided 3. Online courses
In the following sub-sections, the findings from the individual case study countries are described in more detail.
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3.3.1.India
In general, BPO Client Companies prefer destinations where there is abundant supply of skilled human resources. University/College graduates have been noted as one of India’s most valuable asset. In the 2009 A.T. Kearney Global Services Location Index, India leads with a score of 2.48 on “people skills and availability” sub-index, with South Africa and Mauritius at 1.02 and 0.95 respectively. Kenya is yet to make it to this index. India produces approximately 1 million graduates per year. The other countries compare very badly on this score; South Africa 120,000, Kenya 30,000 and Mauritius about 10,000 (estimated). Similarly at the secondary/high school level, India produces tens of million of school leavers every year. The key characteristics of the Indian ITeS/BPO human resource landscape are outlined below. Attrition rates The BPO industry employs about one million people, but the challenge is to maintain quality human resources given the attrition rate of around 35% in non-voice and 45% in voice call centers. It was also noted that more than 60% of those who left a particular BPO did not leave for a competitor, but left the industry as a whole. Table 3.3 shows the attrition rate across industries. It can be observed that the BPO industry has one of the highest attrition rates, especially in the first three years.
Table 3.3: Attrition rates across sectors Sr. Sector 0-3 4-7 No years years 1 Pharmacy & 25.00% 10.00% Chemicals 2 Manufacturing 8.58% 2.46% 3 Financial Services 20.00% 20.00% 4 Hospitality 35.00% 25.00% 5 Ad & Media 40.00% 35.00% 6 BPO 40.00% 30.00% 7 Automobile 7.00% 3.00% 8 Auto Component 12.00% 15.00% 9 Banking 10.00% 5.00% 10 Infrastructure 16.00% 11.00% 11 IT & Telecom 32.00% 25.00% Source: Emmay HR / BusinessWorld, 4 Feb 2008 8-12 years 5.00% 2.46% 20.00% 20.00% 20.00% 20.00% 2.00% 20.00% 2.50% 7.00% 10.00% 13+ years 2.00% 3.00% 20.00% 7.50% 15.00% 10.00% 2.00% 12.00% 2.50% 11.00% 5.00% % change from 2006 to 2007 -5.00% 5.00% 13.00% 17.00% Not visible 5.00% 2.00% 9.00% 5.00% Expected increase in 2008 6.00% -3.50% 20.00% 22.00% 14.00% 6.00% 2.00% 20.00% 9.00%
Some of the reasons given for high attrition rates are: • Many see BPO jobs as menial, monotonous and physically strenuous. • People who join a BPO usually do so to make a 'quick buck’ and to await better opportunities. • The industry has concentrated on hiring young, dynamic personnel and these are looking for more than just a job. • Performance is often overlooked, which leaves the deserving few disgruntled with top management and hence fosters attrition.
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BPO operators have attempted to solve this by hiring mature talent people over 35 years of age. Other methods used are: • Offer of training in generic courses like management diploma and Masters in Business Administration (MBA). • Use of psychometric tests to get people who can work at night and handle the monotony • A secure career with progression, benefits, perks and transport. • As an employee retention strategy, good performance must be recognized and suitably rewarded. • Hire out-station candidates (from small towns) and provide them with shared accommodation. • A comprehensive process framework and a congenial work environment Skills required Table 3.4 shows the skills required in each of the verticals. It can be observed that these skills are quite basic.
Table 3.4: Skills required in each of the verticals Segments Skills Call Centre Good communication and language skills, accent understanding team leadership, basic computing skills Remote customer interaction Language and accent understanding Date search, Integration Computing, language and analytical skills Human Resource Services Country specific HR policies, rules and regulations Remote education Subject knowledge, computing and language skills Engineering and design Technical and engineering design and computing skills Translation, Medical Language understanding, basic computing (word processing Transcription and knowledge) and understanding of various medical terminologies Localisation Animation Drawing and creative skills, computer graphic skills Finance and Accounting International/country specific accounting rules Market Research Understanding statistical sales and marketing concepts Network Consultancy and Understanding different network configurations and support management equipment, technical/computing skills
Source: http://www.bpoindia.org/knowledgeBase/hr-attrition.shtml Quality of English Apart from Mumbai, Delhi and Bangalore, the quality of English among the graduates applying for jobs in the ITeS industry needs to improve. The effect of this is that client countries are turning to Philippines, Ireland and Singapore as well as the emerging destinations such as Egypt and the Middle East. Other human resource issues include: • Fluent English, communication and customer service skills are generally strong; however accent is still an issue. • At a very early stage, children are introduced to science and technology and this helps to nurture a strong culture and interest in these fields. • Call centres practice continuous recruitment and training of call centre agents. A database of suitable candidates is maintained, and thus it is possible to meet client’s demands of scalability on time.
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• •
Numerous international brands have their offshore operations in India and send experienced and highly skilled staff from their home offices to work in the India operations, thus transferring skills to the local population. National Skills Registry (NSR) is an industry initiative to ensure that individuals employed by organizations have their background and antecedents verified, thereby preventing, if not eliminating, the menace of fake resumes. This is an institutionalized mechanism through which objectively verifiable data of an individual is independently checked.
3.3.2.South Africa
The Skills Development Act 1998, established the National Skills Authority, Sector Education and Training Authorities (SETAs), and other bodies in the Department of Labour to promote development and training. One of the stated purposes of the Act is to improve the employment prospects of persons previously disadvantaged by unfair discrimination and to redress those disadvantages through training and education. The BPO Sector in South Africa is characterized by the presence of a high proportion of white senior managers which gives the impression of ‘white-culture’ which is a strong marketing point for BPO industry in mostly Europe and USA. The SETA's have been established in terms of the Skills Development Act and are responsible for disbursement of the training levies payable by all employers. These levies are collected by the South African Revenue Service via the Department of Labour, and are disbursed through a management system motivated by skills requirement assessment and monitoring. Thus SETA's will ensure that the skill requirements of the Sector are identified and that the adequate and appropriate skills are readily available. The SETA would contribute to the improvement of sector skills through achieving a more favourable balance between demand and supply, and would ensure that education and training: • Is provided subject to validation and quality assurance; • Meets agreed standards within a national framework; • Ensures that new entrants to the labour market are adequately trained, and; • Acknowledges and enhances the skills of the current work force. The Government has also formulated an elaborate incentive programme that is part of a holistic value-proposition to position South Africa as a preferred destination for investors in the BPO sector. The Training and Skills Support Grant is provided directly to approved projects towards costs of providing company specific training (as opposed to industry wide training).
3.3.3. Mauritius
Mauritius produces an estimated 10,000 graduates per year. This creates scalability problems and as a result the country is keen to collaborate with other African countries to address this challenge. In Mauritius, the National ICT Policy 2007-2011 emphasises reform in the education sector, the main policy measures implemented being:
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• • •
Review of the curricula at the level of primary and secondary levels in order to improve the quality of education for Science and Technology and introduce new learning methods; Improve the IT base of primary and secondary schools and increase the use of e-learning; and Equip teachers with the necessary ICT skills in order to improve pedagogy for the benefit of learners
Training is key as illustrated by the initiative to create an ICT Academy by the Outsourcing and Telecommunication Association of Mauritius (OTAM) (the BPO industry association) in collaboration with the Mauritius Government to train people after Higher School Certificate, where they would be offered vocational and professional courses. In addition, OTAM is working towards public-private partnership with the University of Technology of Mauritius that would also offer training to people in Reunion and Madagascar. One of the country's strengths as a BPO destination is a population that speaks both French and English making the workforce an attractive one for firms seeking to set up and serve European clients. The linguistic richness is a uniqueness of the island's history. Mauritius has the advantage of properly documenting their national graduate’s database and marketing it appropriately to potential clients in Europe/America. In addition, the Researchers noted that Mauritius had a government funded but Private-Sector oriented ICT Academy that produced graduates specifically for the ICT industry. In order to complement the small skilled labour force, the government set up a flexible labour policy that allows firms to bring in highly skilled workers that the economy needs, confident in the belief that this will not only create income streams in the economy but also bring gains to the country’s citizens by jump-starting businesses that would otherwise take many years to start with domestic workers alone.
3.3.4.Kenya
Various policy documents reviewed indicate that efforts have been made towards strengthening adoption and use of ICT in the education sector. Sessional Paper No. 1 of 2005 on Policy Framework for Education, Training and Research aimed to develop a national ICT education policy and strategy and also facilitate the formation of a National ICT coordination mechanism with sectoral committees to address specific sector training needs. Vision 2030 targeted BPO training programmes around primary processes (e.g. Customer Interaction Services) and industry specifics (e.g. back-office data entry within financial services) to be conducted to build the required quality and size of the talent pool. However, the implementation details for these policy pronouncements have not been provided. The National ICT Strategy for Education and Training (June 2006), a by-product (partly) of Sessional Paper No. 1 of 2005, aims to facilitate transformation of human resource capacity through the use of ICT to support teaching and learning targeting all levels of education especially primary and secondary schools. It was established that in the first three years, the first round of 213 schools in Kenya (out of the 4,000 secondary schools and over 20,000 primary schools) have been equipped with ICT Infrastructure. This implies that over 127,800 secondary school students are getting hands on experience on basic ICT skill sets. More 38
schools are expected for the 2009-2010 financial year. Computers for Schools initiative has provided over 16,000 computers in over 531 institutions as well as developing and implementing programmes for training of trainers, educational administrators and managers. Kenyans generally have a neutral accent and English is the official language. There is no database of ICT-BPO skills is available in the Country. In 2006, the Computer Society of Kenya conducted an ICT skills survey to determine the anticipated demand for such skills in the Government, Commercial and Outsourcing sectors in Kenya. The resultant data quickly became obsolete as there was no mechanism for updates. However their data can be a useful basis for launching a fresh skills census. The Government had established an Industry-specific University (Multimedia University College of Kenya) to address the human resource gap; the impact of this is yet to be felt. Since BPO is one of the pillars in the Vision 2030, what needs to also be established is set of specific skills required for the BPO industry. The targeted training programmes can be utilised by Education Managers to tilt or include/enhance some skill sets within the curriculum that will form the foundation for further development either on the job or at tertiary level. In line with this need, the Government has established a cross-cutting Steering Committee coordinated from the office of the Head of Public Service and Secretary to the Cabinet, whose primary objective will be to review, design and implement new curricula in tertiary institutions with the aim of tripling the number of suitable graduates for the BPO&O industry from 5,000 to 15,000. Although a sector strategy on Capacity building does not exist, National Economic and Social Council (NESC) emphasizes that this as a key to the country’s competitiveness. In this regard finalization of the skills inventory and establishment of body to coordinate the BPO sector in general and human capacity development are critical.
3.4.Youth and Gender
The following is a synthesis of the findings on youth and gender in the three vendor countries (South Africa, India, Mauritius and Kenya) that were within the scope of this research. Table 3.5 shows a summary of the findings. It can be observed that the minimum employment age is highest in Kenya. It can also be observed that a high school certificate is the minimum qualification for agents across the countries. However, Kenya employs some agents with a degree. This perhaps may be attributed to the high levels of unemployment in the country. This category of employees (university graduates) is not likely to stay as agents for too long because generally it would be looking for what they perceive to be “better” jobs. A further finding is that the number of female employees at the operational levels tends to be slightly higher than that of the male employees in call centres in Kenya, South Africa and Mauritius where we obtained data. This is likely to be the case in the other India. On the other hand, male employees dominate in professional jobs in the three countries where we obtained data. Gender and age issues do not influence choice of employees by the vendor companies; see figures 3.4, 3.5 and 3.6 below
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Table 3.5: Summary of findings Kenya Min. employment age Min. qualifications (operators or agents) Global gender gap (2008) ranking (and score) Global gender gap (2008) – Male Labour force participation Global gender gap (2008) – Female Labour force participation Gender parity in back office operations Gender parity in call centres Gender parity in professional cadres 18 Certificate, diploma or degree depending on operation 88 (0.655) 90.00% 72.00% Approx. 50% Female > Male by 20% Male > Female by 20% Female > Male Male > Female South Africa 15 Grade 12 22 (0.723) 82% 49% Mauritius 16 School Certificate or below 95 (0.647) 84% 47% India 14 High School 113 (0.606) 84% 36%
Male > Female
Other findings to be found in Figures 3.4 and 3.5 reveal the following: • Age does not influence employment in Kenya, South Africa and Mauritius while work experience does (Figure 3.4) • Most of the employees in Mauritius in BPO-ITES firms are operators. Among the employees, there were more female operators than male operators amongst the youth as well as the non-youth (Figure 3.5)
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Figure 3.4: Factors that Influence Employment
Factors Influencing Employment
•
Percentage
150 100 50 0
No SA
Yes
Yes Kenya
No
No
Yes
Mauritius
Age Gender Education Work Experience
Yes-No/Country
Figure 3.5: Youth and gender employment in Mauritius
Mauritius: Youth and Gender Employment
40% 35% 30% 25% 20% 15% 10% 5% 0% M Below 25 F M 25-50 F M Over 50 F
Senior (Strategic) Manager Tactical Manager IS/ICT Manager Supervisor Operators
In the following sub-sections, the findings from the individual case study countries are described in more detail.
3.4.1.India
Large number of university graduates India produces approximately 1 million graduates per year. A strong culture of science and technology exists in India, right from Nursery School age. Currently the nation has the capability to graduate over 500,000 engineers annually. India's annual enrolment of scientists, engineers and technicians now exceeds 2 million. Fluent English communication and customer service skills are generally strong in India.
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National Skills Registry There is continuous recruitment and training of call centre agents by the call centres. They maintain a database of suitable candidates, and are thus able to meet their client’s demands of scalability on time. This is a strong selling point to clients. Favourable Labour Laws India provides for core labour standards of ILO for welfare of workers and to protect their interests which include maternity benefits and equal remuneration for both men and women. There is low female literacy of 47.8% in the country and low contribution of females to the workforce. NASSCOM has launched the Women in Leadership-IT Initiative to enhance participation of women into the workforce and create more women leaders in the IT-BPO industry.
Legal benefits to employees The following were the legal benefits to employees found in India: • Annual leave • Maternity leave • Medical cover • Sick leave
3.4.2.South Africa
Black Economic Empowerment Just like other sectors in South Africa, Black Economic Empowerment policy ensures equitable distribution (by race) of workers in the BPO sector. However, senior managers in the BPO sectors are mostly white. This gives the impression of ‘white-culture’ which is a strong marketing point for BPO industry in mostly Europe and USA. Favourable Labour Laws The Labour laws that govern the sector include: • Basic condition of employment: applies to all employers and workers and regulates leave, working hours, etc. • Family responsibility Leave • Employment equity • Skills Development Act meant to improve productivity in the workplace and the competitiveness of employers and to promote self-employment. • Skills Development Levies Act: Prescribes how employers should contribute to the National Skills Fund. Office on the Status of Women (OSW) This office was established in March 1997 and is responsible for advocating women rights in South Africa. It is located within the Office of the President hence very influential. One the key achievements by the OSW is that of coming up with the ‘South Africa's National Policy Framework for Women's Empowerment and Gender Equality’ which outlines South Africa's vision for gender equality and for how it intends to realize this ideal. This has already been presented to and passed by the Cabinet. The Framework, among other things, has a section on ‘Women and ICT’ that contains the phrase, ‘Allowing for gender perspectives of policies in communications means to understand fully how women and men have been socialized
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differently and, consequently, to understand the differential impacts of policy on women and men’. National Youth Economic Empowerment Policy & Implementation Framework [2002-2007] This framework was established under the hospices of the Department of Trade and Industry in South Africa. Its aim was to establish principles for youth development and identify strategic intervention areas. It addresses youth development across all sectors (BPO included) and it endeavours to ensure that all young women and men are given meaningful opportunities to reach their full potential. There is no gender or age based discrimination in the work place. Over 60% of employees in the technical operations are young people (below 30 years old). There exists no law or policy that prefers youth from other groups of people in employment. Also there exists no gender affirmative action in South Africa. The study also found out that there were 40% more females below 25 years than males and 7% more males above 25 years than females in the companies interviewed.
Legal benefits to employees The following were the legal benefits to employees found in South Africa: • Annual leave • Medical cover • Maternity leave • Sick leave • Paternity leave • Family responsibility • Other benefits that the employees enjoy include, incentives, commissions and monthly awards
3.4.3.Mauritius
Outsourcing and Telecommunications Association of Mauritius (OTAM) Training is key as illustrated by the initiative to create an ICT Academy by OTAM with the Mauritius Government to train people after Higher School Certificate, where they would be offered vocationally focused courses. In addition OTAM wants a public-private partnership with the University of Technology of Mauritius that would also offer training to people in Reunion and Madagascar. Salaries are not standardised and most industry players feel there is a need to standardise salaries this is clearly illustrated by the 2008 Mauritius ICT- BPO salary survey that was commissioned by CCIFM (Chamber of Commerce and Industry France Mauritius) and OTAM (Outsourcing and Telecommunications Association of Mauritius).
Legal benefits to employees The following were the legal benefits to employees found in Mauritius: • Annual leave • Medical cover
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• • • • •
Maternity leave Sick leave Paternity leave Transportation Other benefits that the employees enjoy include; Leave without pay, company car, laptop, performance bonus, transport allowance and car allowance
Favourable Labour Laws There is no 24 hour culture. Most shops, restaurants close by 5.00 pm while the public transportation stops operations at 7.00 pm. In general, researchers found that there is a negative perception of working in 24/7 environment, especially for female workers. This negative perception is further enhanced by the Labour Act that prohibits employment of female employees in industrial undertakings between 10 p.m. and 5 a.m. It also prohibits employment of young people between 6 p.m. and 6 a.m. In addition, the Labour Act does not allow an employer to employ a young person for more than 36 hours in a week. There are privileges for female workers which include that she may absent herself from work during pregnancy. All employees have sick leave, annual leave and additional leave of 2 days. In most cases the higher the academic level the higher the proportion of male employees. In high end jobs, there are 20% more male employees than female employees while in the lower end jobs, like call centers and back office operations, there are 40% more female employees than male employees. ICT Literacy, IC3 & ICT Awareness courses by National Computer Board are provided to women in different regions across Mauritius. ICT Literacy and IC3 courses are provided after which a certificate of attendance is issued.
3.4.4.Kenya
Legal benefits to employees The following were the legal benefits to employees found in Kenya: • Annual leave • Maternity leave • Paternity leave • Medical cover • Sick leave • Other benefits that the employees enjoy include: o Interest free loans o Subsidized food o House allowance o SACCO memberships o Temporary loans Free medical care o Auto loan program o Payment of commission
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Maternity Leave The 3 months maternity leave (The Employment Act, 2007; Section V (Rights and Duties in Employment), Section 29) and the not less than 21 working days of annual leave (Section 28) may work against women. Employers may find it costly and hence shun from employing women. In some cases, some female employees may invoke section 30 (sick leave) of the act and prolong the period for which the employer pays her without working. 30.(1) After two consecutive months of service with his employer, an employee shall be entitled to sick leave of not less than seven days with full pay and thereafter to sick leave of seven days with half pay, in each period of twelve consecutive months of service, subject to production by the employee of a certificate of incapacity to work signed by a duly qualified medical practitioner or a person acting on the practitioner’s behalf in charge of a dispensary or medical aid centre Maximum working hours and night shift By very nature of the BPO industry, employees may be for required to work for long hours as well night shifts. The Kenya’s Employment Act, 2007 does not explicitly provide adequate protection of the employees especially the youth and women. Under Section V (Rights and Duties in Employment), Section 27 on Hours of Work (page 37) only provides for the following: (1) An employer shall regulate the working hours of each employee in accordance with the provisions of this Act and any other written law. (2) Notwithstanding subsection (1), an employee shall be entitled to at least one rest day in every period of seven days From the above, it is clear that the Act is silent on the allowed maximum number of hours and also on working at night. Equal Remuneration In the Employment Act, 2007, Section II (General Principals); Section 5 (Discrimination is employment), part 4 says “An employer shall pay his employees equal remuneration for work of equal value.” This way, employees are protected against discrimination based on gender, age, etc. A similar but more elaborate Act exists in India(Equal Remuneration Act, 1976 (Act 25 of 1976 amended by Act 49 of 1987) Unequal Opportunities A higher percentage of Kenyan males (like everywhere in the world) tend to be more educated and hence occupy the higher rank jobs. Affirmative action which ensures equity in professional level jobs and that training should be provided to both genders to ensure upward mobility is enjoyed by both. This will ensure that women do not occupy low-level call centre jobs only but that we can have more women in the professional ranks. Promote BPO jobs among the youth There is need to raise awareness among the youth of the opportunities for career growth within the call centre industry. For example, in the outsourced operation/BPO, Call Centre Agents can move up to Trainer, Call Centre Manager, Quality Assurance, Analyst, Workforce Management, Operations, General Management and various other functions within the call centre. The youth in Kenya associate employment in the BPO Sector with ‘Call Centre’ which is translated to mean ‘just answering to phone calls’
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Enforcement and Enrichment of the Employment Act, 2007 There is need by the National Labour Board, Central Organisation of Trade Unions (COTU), Ministry of Labour and other related government agencies to ensure adherence to the law by the employers in the BPO industry. This way, protection of young and female employees can be assured.
3.5.Outsourcing in Client Countries
Overview US and the UK are the two main clients of outsourcing and as such, formed the two case studies for the Clients section of this research. In general, there is evidence of reverse outsourcing in both countries; clients now prefer vendors with presence at the client’s home country. India still remains the major outsourcing destination especially for US but this position is currently under high threat. The credit crutch that has hit both the US and UK will marginally reduce quantity and nature of outsourced work It also emerged that Kenya and Africa in general is viewed as a country/continent with challenged infrastructure, poor work culture/ethics and hindering socio-economic situation. However, individuals/organizations that have had a chance to visit/interact with Kenya(ns) have a different testimony; Kenya has a high chance of being a favourable outsourcing destination if correct measures are put in place. Government regulations on outsourcing There is a lot of ‘anti-outsourcing’ regulations by both the US and UK governments. The main overriding factor is in both countries is that outsourcing takes away work from the citizens (UK and US). For instance President Obama is particularly against outsourcing; he has proposed a tax revision which will mean that US companies, earning income overseas, will have to pay US corporate tax on that money immediately, rather than deferring payment until the income is returned back to US soil. This, together with a couple of rules recently passed by the Senate (e.g. strict conditions on H-1B hiring) will see a downturn in outsourcing. Institutional framework Outsourcing is viewed as any other trade in the UK. The National Outsourcing Association (NOA) is the only trade association in the UK that deals with outsourcing issues. NOA is involved in research, events, education and public affairs. Its membership categories include: • BPO end users – such as banks and telecommunication companies • BPO suppliers – such IBM and PricewaterhouseCoopers • BPO consultants – provide services to both the end users and the clients The association creates a voice to lobby the government on issues affecting the members. The association for example lobbied against higher tax imposed on companies that outsourced work off-shore.
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Major outsourcing industries In both US and UK, the following are the major industries where most of the outsourced work is derived: • Banking • Investment Management • Insurance • Legal • Supply Chain, Logistics, Transportation • Healthcare • News, Media & Entertainment • Energy & Utilities • Agriculture/Food • Pharmaceutical/Biotech • Government & Public Agencies • Manufacturing The following are the most often outsourced functions: • Purchasing, Procurement, Spend Management, Payables • Compliance, Finance Accounting • Technology • Legal Services • Bundled ITO BPO • Research, Development, Innovation • Document Services • Lead Generation, Marketing & Sales • Back Office, General Administration • Facilities Management • Engineering • Learning, Training, Recruitment & Human Resources Preferred outsourcing destinations In the USA, the top ten preferred outsourcing destinations4, in order of preference are: 1. Rural or Small Town USA (via Indian Companies) 2. India 3. Eastern & Central Europe 4. UK & Ireland (areas of high unemployment) 5. South America 6. Mexico 7. Philippines 8. Canada 9. Russia 10. Middle East
4
2008 Back Book of Outsourcing – State of the Industry Report; www.TheBlackBookOfOutsourcing.com
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It can be noted that Africa does not feature in the above list. It is to be noted that in the Black Book of Outsourcing, South Africa topped (90.9%) the list of outsourcing destination with disappointing results. In the UK, the three perceived best three destinations as voted during NOA’s 2008 annual awards5 are Egypt, Romania and Philippines. It is to be noted that only Egypt, which is often considered as part of the Middle East, features in Africa. Trends in outsourcing According to the Black Book of Outsourcing6, in the USA: “Outsourcing is taking on a new twist. Rather than U.S. jobs going to India, the latest evolution of outsourcing is moving in reverse, with India’s leading service providers opening offices on Main Street, USA. The reverse outsourcing development is too new for Indian companies to point to actual cost savings yet, but moving front office processes closer to the client is fast attracting buyer interest. Major suppliers are responding to the demand for enhanced, locally delivery customer service.” In the UK, there is an exodus (mostly perceived) of outsourced work from offshore destinations (particularly from India) back to the UK. It is mostly perceived because some confirm that there is a lot of work being brought back on-shore but the National Outsourcing Association believes it is not as significant as many put it. However, the trend is there and it could gradually increase. In addition, many who return their work on-shore do not have a problem outsourcing again but it has to be to those who can mirror their customer-care. This means that the UK customers should believe the work is being done locally due to the quality of the work. Other issues that were raised are: • UK-based Call centres are cashing in on this but it may not be long term because it is not cost effective. One of the main causes of this is the perceived (by the UK people) poor quality service offered by offshore service providers. This is especially in the case of customer services (front office work) rather than back office. There are many examples where the customer felt the person at the call-centre did not identify with the problem and this could be a cultural issue more than anything else e.g. example of flooded house in the UK being dealt with by call centre agent in India. • Erosion of confidence that clients’ data is safe offshore. A story on sale of credit card information from a call centre in India7 for example did a lot to worsen the situation, and anecdotally many claim there are similar examples. • Offshore call centres are opening onshore offices in order to win back clients’ confidence and reassure customers. North Ireland is currently a preferred destination. It was found that clients prefer optimal service - the same work culture/quality and not necessarily cheap service. Most companies that outsource (mobile phone companies, banks, insurance firms etc.) appreciate the fact that getting new customers is much more costly than retaining the existing ones. The issue now is they would rather pay the optimum price rather
5
6
www.noa.co.uk.index.php/awrds 2008 Back Book of Outsourcing – State of the Industry Report; www.TheBlackBookOfOutsourcing.com http://news.bbc.co.uk/2/hi/uk_news/7953401.stm
7
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than the cheapest price. Therefore, they would rather reduce outsourcing offshore to retain their customers. For example, “since 2005 Orange UK has been working with outsourcing partners in India, but in June 2008 made a strategic announcement that it would halt the expansion of offshored customer service support for mobile and broadband customers, and deliver this support locally from UK-based contact centres8”. The same trend is to be found in the USA. For example, in mid-April 2009, Delta Airlines closed Indian call centers due to poor customer feedback. The customers of Delta Airlines could not stand their phone enquires being handled in India. The Airlines has hired about 4,500 call-centre workers in the USA after it ended its current outsourcing operations in India. However, Delta's call centres in Jamaica and South Africa would continue. With the current financial recession, outsourced work is likely to temporarily reduce but outsourcing in general is here to stay and the trend shows that call centres are likely to increase. What clients are looking for in a vendor? Clients are looking for a client-centric culture that is similarity in work culture and quality. In both USA and UK, clients, especially services that involve regular direct interaction with the customers e.g. call/contact centres, will outsource to vendors that are able to replicate the client’s work culture and deliver exactly the same (or higher) quality of service as an inhouse option. Optimal service (no longer cost-saving alone) is now the key driver to selecting an outsourcing destination. For example, to successfully service an American insurance company, the agents working at the vendor’s site must fully understand/identify with the operations of the insurance industry in the USA. Others things that clients are looking for are: • Cultural Alignment • Balance Onshore/Offshore • Vertical Expertise • Technological Savvy • Innovative Business Models • Global Footprint • Re-Architecting to Transformational • Connecting Operations to Analysis • Tailored Industry Services Perception of Kenya(ns) There is widespread perception that there is no effective focused marketing of Kenya’s strengths as a BPO destination. Kenya has a unique opportunity to learn from mistakes of other countries, such as, India, and exploit her strengths as outlined above. Other perceptions on opportunities that can make Kenya a better outsourcing destination include: a) Making use of the Kenyans holding senior positions in multinational companies in the Diaspora to bring in work to Kenya; India did this with a high degree of success. b) Government incentives such as tax holiday and bandwidth subsidy could help in growing Kenya’s outsourcing industry.
8
http://www.vnunet.com/computing/news/2232698/orange-uk-extends-outsourced
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c) Identify special industries where the Country is sure of critical mass of experts, e.g. law, finance, IT, etc. d) Exploiting Kencall’s win at the Birmingham Expo of 2008, which gave Kenya more visibility especially in the UK. e) ‘Obamania’ can be used to promote outsourcing to Kenya. This is an area that can be used effectively probably with the Kenya Tourism Board. Obama’s presidency put Kenya in the limelight regardless of the fact that he is not a Kenyan. If this is pitched correctly it can be used effectively.
3.6.Types of BPO Operations and Niche Areas
3.6.1.India
BPO, KPO and Call Centres serve various industry verticals. There are a number of large operations with presence in their key markets. Joint Venture, mergers and acquisitions, management buyouts have resulted in formation of these large enterprises – with annual turnovers of in the hundreds of millions of dollars. Table 3.6 shows the processes for the different service areas while Figure 3.6 shows the BPO operators in India.
Table 3.6: Processes for various service areas Service Processes Customer Care Complaint resolution, sales, tech support, enquiries, helpdesk, loyalty program management, Computer Aided Telephonic Interviews (CATI), chat support. Finance & Accounts payable, expense reports, payment processing, accounts receivable, Accounting billing, order management, collections, credit control, claims management, inventory accounting, payroll services, month end reporting & consolidation. Legal Services Contract management, legal research, litigation support, claims processing, claims settling & closing, conveyancing. BPO Transcription, digitisation, data entry, proof reading, editing, data conversion, web development Software Programming, applications & solution development, enterprise software Development development, code review, code inspection. Research & Analytics Market research, data collection, data processing, analysis, customer analytics, CRM analytics, data management, M& A research, MIS & reporting. Procurement RFI, RFQ, RFP design and administration, industrial reports, commodity market intelligence, index pricing, projections & forecasts, periodic industry newsletters, periodic market trends update, supplier scorecard compilation.
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Figure 3.6: BPO operators in India Service No. of operators Software Technology Website Development & Marketing Business Support services Architecture & Engineering Finance & Accounts Management & Consulting Legal Sales & Marketing Graphic Design & Multimedia Writing & Translation Total 758 713 2806 388 798 248 173 347 269 179 6679
Numberof operators
Software Technology Website Development & Marketing Business Support services Architecture & Engineering Finance & Accounts
India has been described by some commentators as being ‘everything to everybody’ in terms of BPO, because of the various services it ably supplies. India’s large population has enabled them to provide the sort of numbers that meet the diverse requirements of their client countries who are outsourcing various services to India. University/College graduates have been noted as one of India’s biggest assets. India has used these factors to carve a niche for itself in providing call centre services to its clients. There a strong culture of science and technology has led large pool of science, technology and engineering graduates. This has translated to India becoming a preferred destination for high end knowledge process outsourcing. This way, India has carved a specialist niche in provision of Information Technology, and Engineering outsourcing. India is moving higher up the value chain of outsourced services and concentrating more on providing services such as software development, Programming, applications & solution development, enterprise software development, code review, code inspection, engineering services etc.
3.6.2.South Africa
Figure 3.7 shows the geographical distribution of contact centres and the major service offered by contact centres in South Africa.
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Figure 3.7: Geographical distribution of contact centres and major service offered by contact centres in South Africa
•
Johannesburg (Gauteng)
• Bloemfontein (Free State) •Port Elizabeth
(Eastern Cape)
• Durban (KwaZulu
Natal)
•
Cape Town (Western Cape)
Source: Contact Industry Hub, 2007, http://www.contactindustryhub.com
South Africa has developed a strong call centre industry, which employs over 100,000 people. They have carved a niche in the financial services sector. South Africa has excellent actuarial and insurance services. It is common to find people who may source work to India because it is cheaper but are now taking some of the actuarial work to South Africa as they will find the skill sets that they may not get as easily in India or Philipines. This trend may increase as they are willing to pay the optimum price for these skill sets not necessarily the cheapest price. This is despite the fact that South Africa is more expensive, their interest here is the skill sets. South Africa has many large, experienced players with scalable insurance infrastructure which includes:
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• • • •
Product sophistication; they have similar life products to the UK and generally to the USA Mature insurance industry with first world insurance operations Common qualifications with many Client countries (e.g. actuarial sciences) Skilled labour pool with non-unionised, educated, good product knowledge and market understanding
There is also great potential in the Banking sector which can be viewed as a niche area for South Africa as well. The following reasons qualify this recommendation, South Africa has: • Sophisticated banking environment • Well regulated financial services environment e.g., FAIS, FSA(UK) & FSB (SA) links • High financial services, business English proficiency • Compliance to international regulations e.g., Basel II • Automated environment which includes excellent technological platforms
3.6.3.Mauritius
Figure 3.8 shows the ITES-BPO companies in Mauritius.
Figure 3.8: ITES-BPO companies in Mauritius Service No. of operators BPO Call center Help desk Software development Consultancy ICT related training Business continuity & disaster recovery Others Total 107 31 2 89 9 4 4
ICT related training Software development Consultancy
BPO Call center Help desk
2 248
Source: Mauritius Board of Investment Website Mauritius greatest niche comes from the fact that the country is generally multilingual in two European languages (English and French), many of the current BPO work in developing countries is amongst English speakers and they definitely need contacts who can also work with their potential French clientele. Moreover, French companies have also been increasingly outsourcing their call centres to North Africa and a number of them are looking to spread their risk by outsourcing to different countries. Mauritius is a good destination for back office transcription and translation services.
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3.6.4.Kenya
By far, call and contact centres are the majority in Kenya. This means that Kenya’s focus has been on the low end of the industry. However, there are many small BPO firms doing onshore high-end work. Common BPO operations in Kenya are: BPO operations • Data Entry • Transcription • Software Development • Web Designing • Document Imaging • Data Storage and back up Call Centre operations • Telemarketing • Customer Service and customer care • Market Research • Lead Generation • Appointment setting Figure 3.9 shows the BPO and contact centre operations in Kenya. This information is based on the current members registered by KBPOCCS.
Figure 3.9: BPO & Contact Centre Members in Kenya
Category
BPO's And Call Centers Hardware And Software Providers Training And Consultants Individual Members (Others) Total
No. of operators
29 4 3 15 51
Numberof operators
BPO'sAnd Call Centers Hardware And Software Providers Training And Consultants Individual Members (Others)
Source: Kenya BPO and Contact Centre Society Website http://www.kenyabposociety.or.ke/index.php?option=com_weblinks&Itemid=23
Kenya’s strengths include a highly skilled and competitive pool of labour, neutral English accent, strategic location as a regional hub for communication and finance, and production of over 30,000 and over 250,000 university high school graduates annually, respectively. In addition, Kenyans generally have a warm and welcoming culture/attitude, due to the predominance of the tourism and hospitality industries in the economy. When the above strengths are considered, the provision of call centre/customer services an ideal niche for the country to carve for itself in the BPO space. Kenya can also capitalize on its large pool of high school and diploma graduates to provide back office services such as transcription,
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digitization, data entry and various other data processing services. In addition, Kenya can use its excellent education system to create a niche in BPO-ITES training for the region.
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4. SWOT Analysis
The following is a synthesis of the Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis from the vendor countries and possible niche areas for each vendor country. This chapter ends with the niche service areas for each country as a summary.
4.1.India
Strengths India has been the destination of choice for outsourcing due to the following strengths: • Progressive liberalization since 1991 has made India one of the biggest emerging markets. • Government championship evidenced by the Indian government’s active involvement in developing the industry. The government works closely with NASCCOM and involves NASCCOM in all policy decision making regarding the industry. • BPO Industry players are included in all government bodies involved with the industry to ensure that Government is charting in the right direction • It has a large pool of English speaking graduates in various disciplines, who are absorbed into the call centre industry. • Generally, India has a large pool of science, technology and engineering graduates which has made it a preferred destination for high end knowledge process outsourcing. • Good infrastructure which includes science & technology parks, fibre optic cables, electricity etc • Good road network, 10% of national highways have four-lanes • Lower operating costs than competing destinations; for example, the average per minute calling cost has decreased by about 90% over seven years. This is one of the best in the world. • Strong industry Association (NASCOOM) with resources to support the industry’s growth and development • There is government support for the industry evident by the favourable policies for the sector e.g. education, incentives, marketing. • The ‘India Brand’ is recognized globally as ITES/BPO hub • Favourable tax incentives (see chapter 3) • License application procedures are easy. Investors have a single window clearance. • Strong legal system; strives to ensure compliance with international laws e.g. labour laws, international relationship etc. All these with a view to encouraging investors into the IT-BPO industry. • Existence of the Data security council • Cyber security training and awareness policy put in place by the Government • National Skills registry (NSR) to facilitate personnel background checks Weaknesses Nevertheless, India has weaknesses that have led to opening up other potential outsourcing destinations. They are:
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•
• •
• •
The heavy Indian accent which has resulted in poor customer experience especially for call centre work for international clients. Many international clients now provide premium access lines to their top customers so that the calls are handled in their home country (USA/UK) rather than India. High attrition (reduction) rates among call centre agents. International backlash due to security breaches has meant that a number of companies have pulled out of India. For example, many came to believe that clients' data is not safe offshore in India. A story by BBC (Thursday, 19 March 2009) on sale of credit card information from a call centre in India did a lot to worsen the situation. High cost of electricity and losses due to rampant theft however, the government plans to spend billions of dollars to improve this. The top six airports in the country are currently overstretched
Opportunities The following are opportunities which India can harness to propel their BPO industry further • The world economic recession may turn out to a blessing in disguise for India. It is argued that this may make client companies think of ways of reducing cost, one of which may be outsourcing more of its non-core operations. • The mature state of India has opened new opportunities for the country. A number of Indian BPO firms are now setting up operations in different countries/continents with the hope of maximizing on the various capabilities offered by different countries. These firms are therefore likely to be able to offer services in locations preferred by their clients and hence increasing their competitive advantage. Threats Although India is seen as the most successful vendor country, it still has its fair share of threats and they are as follows: • Since India is being seen as mature in the BPO industry, some establishments have reached “plateauing” levels. At this level, a couple of clients have been disappointed because of one or two omissions by the vendors. Consequently some clients have shipped jobs back to their home country. • With the economic melt down, client countries like the USA and Europe may up their anti-outsourcing campaign. If the campaign continuous, it may threaten the development of the BPO industry in India just like it may in Philippines, South Africa and many other vendor countries. • Terrorism like activities (e.g. the Mumbai case), if they continue, is most likely to threaten the trust by client countries to continue business in India. • Other emerging markets e.g. Africa and Eastern European countries are likely to become an alternative market for BPO clients. If this happens, India will be disadvantaged because there is a very high chance of clients moving jobs from India to these new destinations. • High number of staff poaching across various companies ; this is likely to destabilize the BPO industry as staff retention becomes a challange
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4.2.South Africa
Strengths There are a number of advantages in South Africa’s favour as a BPO destination, some are perceived and others are factual. For example: • Many in the world perceive South Africa to be politically and economically stable. The South African Government has managed to make people perceive the country as a worthwhile destination in Africa • The Black Economic Empowerment policy ensures equitable distribution (by race) of workers in the BPO sector which has augured well for the country • It is an advantage that Senior managers in the BPO sectors are mostly white; this gives the impression of ‘white-culture’ which is a strong marketing point for BPO industry • There is clear government championship for the BPO sector evidenced by the fact that investors and potential vendors are wooed from the Office of the President; and there is commitment to regulatory changes when required; • There is an effective marketing strategy (target marketing and perception management) • Successful telecommuniation liberalisation and high international bandwidth (? 120 Gbps), 99% digital network & the latest in fixed line, wireless and satellite • There is a credible, functional industry body that represents all industry stakeholders (BPeSA and other related regional bodies) • Electricity costs are competitive e.g. Eskom is one of the lowest-cost electricity suppliers in the world • There is an adequately sized and skilled talent pool (agent and managerial) • There are BPO specific incentives to invest in the country such as grants of R37,000 to R60,000 per seat; and training and skill support grant of up to R12,000 per agent • There is world class connectivity; South Africa has 10 international airports. It as an excellent road and railway network • There are plenty of office spaces, premier international conference centres, and premier hotel chains. Weaknesses With the above strengths, one would wonder what the weaknesses would be in South Africa as a BPO destination. Some weaknesses include: • Cost of operation is still high compared to other outsourcing destination countries. For example, agents are paid US$ 7 – 8 per hour, while the cost of bandwidth is said to be comparable to satellite charges. • Even though there are BPO specific incentives as highlighted above, investors are yet to take advantage of these because of the strict qualification criteria. For example, one has to have created a certain number of jobs in order to qualify. Opportunities South Africa has the following key opportunities: • Two under sea cables. It also expects to have the third one landing in less than a year (from Nov 2008) and this is expected to reduce the relatively high cost of bandwidth.
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•
•
The 2010 world cup campaign will definitely put South Africa ahead of any other African country and may help in creating confidence in general. This may include confidence to outsource to the country. South Africa may then take advantage of this and market the country as an outsourcing destination of choice. In South Africa, there are many expatriates from different parts of the world and particularly Africa, hence providing the expertise needed for IT-BPO industry. The country may harness this and make it their competitive advantage.
Threats South Africa seems from the look of things to be the most opportune country in Africa. However it has its fair share of threats to the BPO industry as listed below: • Just like many vendor countries South Africa may suffer from anti-outsourcing campaign from client countries like USA • Labour policies e.g. Black economic empowerment may impact negatively particularly in cases where experts are required • Political turbulence. During the research period, the political landscape of South Africa was taking shape after the ousting of the former president Tabo Mbeki by the current president Jacob Zuma. This was not good for the BPO industry and may threaten the industry if a similar situation re-occurs. • Stiff competition from other emerging markets e.g. Mauritius, Ghana and Kenya
4.3.Mauritius
Strengths The Mauritians are well positioned to get a lot of work from client countries like the UK due to the following strengths: • Their education system is based on the UK system so it is easy for client countries to identify with them. • The World Bank ‘Doing Business Indicators’ shows that Mauritius has a favourable investment climate ranked at 24 with other critical rankings such as number 11 for protecting investors and 7 for starting a business. • It is a multilingual country (with two European languages) so it is an attractive destination for both English and French speaking clients. • The higher stakeholders have a very strong relationship with private sector and hence training needs clarity. Weaknesses Despite the obvious strengths, there are weaknesses in Mauritius as a BPO destination. These include: • No 24 hour culture; most shops and restaurants close by 8pm and public transport stops at 7.00 pm. There is a negative perception of working in 24/7 environment and many Mauritians cannot imagine working at night. • Internet and mobile communication tariffs are still high despite liberalization and presence of the submarine cable. • The SAFE cable opened up the BPO sector clearly evidenced by the number of companies formed in 2004 and 2005, however the cable is limited and a second cable is expected.
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• •
There is a need to create mechanisms for staff retention as there is a lot of poaching across BPO firms and to other companies. Sometimes perceived not to be in Africa and kind of cut off from the rest of the continent hence missing out on the opportunities for Africa
Opportunities Mauritius has the following key opportunities: • Mauritius has one under sea cables, which according to the study has not been able to reduce the cost of bandwidth very much as expected of a fibre optic cable. As the country awaits the arrival of the second fibre optic cable, which is expected to bring competition and hence lowering the cost of bandwidth, one may see this as one of the opportune areas. • French speaking personnel in the BPO industry is still regarded as valuable and Mauritius can capitalize on this. Threats Threats to Mauritius BPO industry are more less the same as for most vendor countries. However the most prominent one is the fact that the country has a very small labour market. This may hinder the expansion of the BPO industry. Even with the small number of staff, the poaching game of human resource from with and outside the BPO/ITES industry is rampant and is likely to destabilize the market.
4.4.Kenya
Strengths The following are some of the key factors (strengths) that make Kenya a choice destination for outsourcing: • Good place to work and holiday (temperate weather and beautiful country) • Highly skilled and competitive labour-force • Good English accent for English speaking clients • Strategic location; it is a regional hub for communication and finance • Kenya has a fully liberalized economy • Well-established local and foreign private sector • Government championship of the BPO industry (2009/2010 budget on ICT in the country is the evidence of that) Other recent happenings that have strengthened Kenya’s position include: • In the 2009 Global Africa competitiveness index, Kenya has moved up 6 places to position 93 of 134 countries globally. The other East African countries have dropped; Tanzania and Uganda at positions 113th and128th respectively (The East African, June 15-21, 2009). Kenya's advance to become the favourite investment destination in East Africa is powered mainly by its capacity for innovation, quality of education and sophistication of financial markets. • Kenya, South Africa and Tunisia have emerged as the top innovators of Africa in a report on the continent's competitiveness launched recently. The three countries - which scored highly on ratings of their scientific capacity - are on a par with such innovative
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•
countries as Brazil and India, according to the Africa Competitiveness Report 20099, produced by the World Economic Forum, the African Development Bank and the World Bank Africa. In a league table that included 33 African countries, and 134 countries overall, Tunisia ranked thirtieth for innovation factors (and first in Africa); South Africa thirty-sixth (second) and Kenya fiftieth (third). Kenya and Zimbabwe were among top 10 internet users despite relying on satellite [Kenya has 3 million Internet users and an Internet penetration of 7.9%].
Weaknesses However, the following challenges need to be addressed in order to improve Kenya's attractiveness. These hese weaknesses can make the country lose out in the global BPO market: • Perception by many client countries that Kenya is not politically stable • Poor governance record in the country that has not been improved by current developments • There are more discussions about the BPO/technology park with no clear progress to implementation. • Too many bureaucratic hurdles even for investors • Taxation laws/ tax regime. Some of Kenya’s taxation policies are discouraging, for example, 12% tax on foreigners outsourcing work to Kenya. • Very expensive communication and electricity costs • The perception that there is not much being done for local investors, many local BPO firms believe there is more focus on foreigners. In addition, some believe that Kenya is sending the wrong people to woo investors, for example, one of the key interviewees in the UK expressed concern about the choice of events Kenyan delegations choose to attend and how they sometimes target the wrong sources. They also criticized the Kenyan embassy for not taking these matters more seriously like embassies of other countries such as South Africa and Egypt. • There is lack of coordination and perceived ‘bad blood’ between some of the key institutions and groups that represent this industry • There is a lack of confidence within the state corporations in adapting IT (BPO) because of fear of 'losing' touch with the citizens. Corporations such as the security department (CID, Army, NSIS, Immigration) would need to get in touch with a person making any application for either jobs, Certificate of Good Conduct etc), in order to verify the existence of such an individual • Financial institutions have adapted technology, but cautiously. The great fear is security. For instance, banks will not communicate with a customer through internet, phone, especially when discussing financial status of an account holder. The same is true of hospitals etc. • Negativity that is a characteristics of Kenyans and particularly by our local media. Opportunities The study findings include the following as the opportunities that are available for the Kenya BPO sector: • The landing of the two fibre optic cables in the financial year 2009/2010 is a plus for Kenya. This is expected to bring the souring cost of bandwidth down at the same time increasing effectiveness and reliability, hence quality service in the BPO sector.
9
http://www.weforum.org/en/initiatives/gcp/Africa%20Competitiveness%20Report/index.htm
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•
•
•
•
Kenya has huge domestic markets particularly in Government institutions. This may be used to demonstrate to international clients the fact that we are capable of delivering on quality and with reasonable cost. A comparable sizable number of knowledge workers (e.g. lawyers, nurses etc.) is an opportune area Kenya can take advantage of and introduce Knowledge process outsourcing (KPO). In the recent past, international bodies, mostly from the western world, have seen Kenya as a peace hub in the region. Even though this changed during and after the 2007 general elections, Kenya can still recover and take advantage of the peaceful nature amid chaos in most of its surrounding countries. The presence of the technology leaders, e.g. Google, Oracle, SAP and many others can be used by Kenya to develop confidence with regard to outsourcing clients and particularly the origin of the said players.
Threats Although Kenya seems to be showing all signs of growth and progress in the BPO industry, it also has a number of threats which if not checked may water down the gains so far. Findings from the study include the following threats • The cost of bandwidth is likely to come down for all competing and emerging markets like Ghana. This will leave the country with nothing to look forward to except to compete in other areas such as quality and political stability and perception • In the recent past, many western countries like the USA has been advocating for stoppage to job exports. If this goes on, Kenya might be forced to do with the limited international competitive jobs. • The world economic recession may also be seen as a threat to the Kenyan BPO sector because it may lead to reduction in the number of jobs being exported to Africa. This may be due to cost cutting measures by foreign companies or guarding against job loses in their countries. • Political instability and tribal animosity currently being experienced in the country may severely affect the BPO industry particularly if the situation does not improve in the near future. Continuity of high level corruption might also threaten the industry.
4.5.Summary – Niche Service Areas
As a summary, the niche service areas for India, South Africa, Mauritius and Kenya are shown in the table 4.1 below.
Table 4.1: Niche service areas India a) Software a) development b) Engineering services c) Call Centre services b) South Africa Call centre services for financial services industry. High-end actuarial services Mauritius a) French/English call centre services b) Translation Services c) Software Development Kenya a) Customer Service b) Back Office e.g. transcription, data processing c) BPO Training for the region
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5. Critical Issues, Policy Options and Recommendations
5.1.Policy, legal & regulatory and institutional frameworks
From the findings, Table 5.1 synthesizes the critical issues on policy, legal, regulatory and institutional frameworks for each of the four vendor countries.
Table 5.1: Critical issues on policy, legal, regulatory and institutional frameworks India Mauritius South Africa Policy framework • Policy priority given to • BPO/ITES is an • BPO&O sector as one IT-BPO sector in integral part of of the top three Special Economic national development priority sectors to Zones to spur growth vision stimulate growth • Cyber security training • BPO/ITES vision & • Incentive framework & awareness policy strategy is driven from to attract investors the top of Govt • Aggressive marketing as a BPO destination Legal and regulatory framework • Strong legal system • Appropriate legal • IPR & data protection and compliance with framework for laws to provide international laws e.g. BPO/ITES industry confidence to labour laws, investors international • Comprehensive BPOrelationship, etc. specific Quality • Adoption of Assurance Framework International standards (stds) – benchmarked to global best practice Institutional framework • NASSCOM’s • Dynamic & effective • Active BPeSA & effectiveness and close Board of Investment regional BPO working relationship (offers OSS for BPO associations, with with Govt and investors) Govt funding academia • Effective advocacy by • National Contact • Data Security Council OTAM Center Union dealing with fraud and (NCCU), offering cyber crime support and protection to its members when it comes to labourrelated issues in the workplace Kenya • Govt support for BPO and ICT sectors, especially the prominent role of BPO and the ICT infrastructure projects
•
e-transactions part in Communications (Amendment) Act 2009 that enables e-commerce
•
• •
Formation of KICTB and its bandwidth subsidy project and marketing Kenya as a BPO destination KBPOCCS’s advocacy and draft BPO standards EPC and its annual training forums for services-oriented exporters on how to market their services
From the findings, Table 5.2 provides the critical issues and the policy options and recommendations on policy, legal, regulatory and institutional frameworks for Kenya.
Table 5.2: Critical issues and the policy options and recommendations on policy, legal, regulatory and institutional frameworks for Kenya
63
Critical Issues Policy framework Lack of specific BPO policy
Policy Options
Policy Recommendations c)
a) Do nothing – Let Vision 2030 continue providing the
policy framework for the BPO sector b) Update the national ICT policy and incorporate BPO policy issues c) Development of a specific BPO sector policy as pledged in the medium term plan of vision 2030
Note: BPO sector policy (b) or c)) should, amongst other things: o demonstrate a strong commitment by the Government to outsource its services o address standards in the ICT-BPO sector o address incentive scheme for BPOs o align with Vision 2030 Lack of BPO strategy a) Subject the BPO go-to-market strategy and and weak M&E implementation plan proposed by McKinsey&Company framework consultants to stakeholder discussion. This strategy should show how the targets in Vision 2030 (20,000 direct BPO jobs and an additional GDP contribution of Kshs 10 billion) shall be realized by 2012 b) Combine the results of this study with those of McKinsey&Company and create an informed strategy for the BPO sector in Kenya c) Strengthen the M&E functions of the KICTB and Kenya Vision 2030 Secretariat ICT and BPO are not a) Create 2 separate sectors for BPO and ICT and real sectors, e.g. one mainstream them into the national planning and cannot obtain operational frameworks. At the moment, ICT issues are aggregated socioaddressed under Transport, Storage and Communications economic data on these sector and BPO is no where in our national plans sectors b) Create a single ICT-BPO sector and mainstream it into the national planning and operational frameworks. For example, it should be possible to obtain aggregate socioeconomic data (e.g. employment in the sector, GDP contribution to other sectors and nationally), data on ICT sector indicators (e.g. ICT-BPO infrastructure access and use), ICT industry data (e.g. ICT-BPO products manufactured and services offered), etc. Legal and regulatory framework Weak legal framework a) Strengthen existing laws to provide an enabling legal for BPO and ICT framework for ICT-BPO sectors (no data o Review the IPR legislations to provide an protection, weak IPR enabling environment for protection of laws, etc.) intellectual property in a global knowledge economy o Review the Kenya employment act to address 24 hour economy and employees working at night or at odd hours b) Develop separate legislations critical for ICT-BPO sector and compliant with relevant international laws (data protection, freedom of information, e-commerce, IPR, labour) Lack of a BPO a) Develop separate incentive framework for BPO incentive framework b) Develop a BPO incentives framework as an integral part (currently leveraging on of the law that will transform EPZs into SEZs. This law
b) & c)
b)
a) in the short term b) in the mediumto long-term
b)
64
Critical Issues EPZ incentives)
Policy Options should rationalize all the incentives for all types exportoriented firms to be established in these zones. One should be able to operate from anywhere and still be entitled to the incentives Note: Incentive framework should be time-bound and should be aimed at ensuring the BPO sector takes off in Kenya in the next five years a) Develop BPO standards, benchmarked to international standards b) Ensure all key BPO firms adopt these standards
Policy Recommendations
Lack of BPO standards
a) & b)
Institutional framework Many institutions a) Leave the institutional framework as it is – there are working on different already too many institutions aspects of BPO, with b) Change the mandates of an existing body to coordinate very little coordination all the institutions that deal with BPO e.g. the Kenya ICT Board c) Create a new entity (body corporate with power and a powerful champion) to coordinate ICT-BPO activities across all ministries and public enterprises that have a role to play in ICT-BPO Many and weak ICT a) Do nothing - leave the ICT-BPO associations as they are and BPO industry b) Strengthen KBPOCCS to be the key BPO industry associations (CSK, association ITSA, KBPOCCS, c) Create a strong ICT association KEPSA’s ICT Sector d) Create one strong ICT-BPO association Board, TESPOK, etc.)
b) in the short term c) in the long term
b) & c)
5.2. Human Resource Issues
From the findings, Table 5.3 synthesizes the critical issues on human resource issues for each of the four vendor countries.
Table 5.3: Critical issues on human resource issues India Mauritius • India produces approximately 1 million gradu- • A population that speaks both French and English ates per year thus ensuring an adequate supply making the workforce an attractive one for firms of skilled human resources seeking to set up and serve European clients • Fluent English, communication and customer • Teachers are Equipped with the necessary ICT skills service skills are generally strong in India; in order to improve pedagogy for the benefit of however accent is still an issue. learners • Children are introduced to science and techno- • A UK Education System with which clients easily logy and this helps to nurture a strong culture identify and interest in these fields at a very early • Review of the curricula at the level of primary and stage secondary levels in order to improve the quality of • Numerous international brands have their offeducation for Science and Technology and introduce shore operations in India and send experienced new learning methods; and highly skilled staff from their home offices • Creation of an ICT Academy to train people after to work in the India operations, thus transferHigher School Certificate ring skills to the local population. • There exists a National Skills Registry, to enOther factors: sure that individuals employed by organizations have their background and qualifications • Performance-based recognition and reward verified
65
•
•
Call centres practice continuous recruitment and training of call centre agents. BPO/KPO courses have been entrenched in education system. There is however up to 40% attrition Readiness of agents to work in industry
• • • • •
Travel opportunities Competitive remuneration Conducive work environment Working hours and overtime payment Job security with career progression
Other factors: • • • • Competitive Remuneration A secure career with progression, benefits, perks and transport Performance-based recognition and reward South Africa The Skills Development Act 1998, established the National Skills Authority, Sector Education and Training Authorities (SETAs), and other bodies in the Department of Labour to promote development and training. A Training and Skills Support Grant is provided directly to approved projects towards costs of providing company specific training
• • • • • • • • • •
•
Other factors • • • Staff retention strategies (job security, career progression and good working environment) Continuous training Affirmative action in the provision of training services to the regional populations especially to address past injustices
Kenya Kenyans generally have a neutral accent and English is the official language Current Economic Survey puts the number of university student enrolment at 124,000 The Kenya Government has established an Industryspecific University (Multimedia University College of Kenya) to address the HR gap. In general, the Employment Act 2007 is friendly for the employee as it provides for a suite of benefits The Work ethic is quite weak BPO companies and Call centres practice continuous recruitment and training of call centre agents. The standards for career progression opportunities are not yet developed Self-improvement support Continuous in-house training Competitive remuneration
From the findings, Table 5.4 provides the critical issues and the policy options and recommendations on human resource issues for Kenya.
Table 5.4: Critical issues and the policy options and recommendations on human resource issues for Kenya Critical Issue Policy Options Policy Recommendations No updated skills database for a) Leave MoIC to continue with initiative already a) in the short term ICT exists (Computer Society started – working with KNBS of Kenya ICT Workforce b) Establish framework for collection and updating of b) & c) in the Survey Report, 2006 is a ICT skills data medium and long useful for launching fresh c) Task the body responsible for ICT-BPO to be term census) established as recommended in this report with this responsibility Slow implementation of a) Fast-track implementation of integration of ICT into a) & b) integration of ICT across all education as defined in Sessional Paper No. 1 of 2005 levels of Education and on Policy Framework for Education, Training and Training Research and the National Strategy for Education and Training (2006) b) Appoint a champion to oversee the implementation
66
Critical Issue High rates of attrition in BPO Work ethic and culture that is incongruent with off-shore clients
Policy Options
a) Kenya BPO and Contact Centre Society to finalize
b) the Standards and Ethics Guidelines, working with the Government and other stakeholders Encourage in-house, peer assessment methods of training to transform agents Acquire legal force for the Guidelines in order to guarantee robust career growth and long-term opportunity Let the status quo remain – e.g. limited in-house training in BPO firms, resource-poor Multimedia University College to provide critical BPO training Create and implement a policy: • To incorporate BPO training into curricula across the education system (secondary & tertiary levels) • To provide training incentives for tertiary institutions to provide BPO training • To provide training incentives for in-house training • To encourage creation of Centres of Excellence for BPO training by private sector or based on PPP As part of the BPO sector strategy to be developed, develop a strategy on ICT-BPO skills requirements and mainstream it into relevant ministries for implementation Adapt recognized international standards for ICTBPO certification Regulate examinations and certifications in ICT-BPO
Policy Recommendations All
c)
Lack of a policy to support sustained development of specialized BPO skill sets to meet demand
a)
b)
b) & c)
c)
Absence of common certification of agents based on a common curriculum
a) b)
b)
5.3. Youth and Gender
From the findings, Table 5.5 synthesizes the critical issues on youth and gender for each of the four vendor countries.
Table 5.5: Critical issues on youth and gender India Mauritius Gender • Women in Leadership- • There is a Labour Act that IT Initiative by prohibits employment of NASSCOM aim at female employees in enhancing industrial undertakings participation of between 10 p.m. and 5 women into the a.m. workforce • Privilege for female workers to absent herself • An elaborate ‘Equal from work-during Remuneration Act, pregnancy. 1976 (Act 25 of 1976 • ICT Literacy, IC3 & ICT amended by Act 49 of Awareness courses by 1987)’ for ensuring National Computer Board equal remuneration for are provided to women in both genders different regions of the South Africa • Powerful Office on the Status of Women (OSW). Developed policy on women empowerment & gender equality, with section on “ICT and women” Provision for Family Responsibility Leave No gender affirmative action • Kenya Employee-friendly Kenya’s Employment Act, 2007 that provides for: o 3-months maternity leave o 21 days annual leave o 2 weeks paternity leave
• •
67
India Youth • Strong legal system and compliance with international laws e.g. labour laws, international relationship, etc.
Mauritius country • There is a Labour Act that prohibits employment of young employees in industrial undertakings between 6 p.m. and 6 a.m. Labour Act prohibit employment of youth for more than 36 hours in a week •
South Africa
Kenya
•
National Youth Economic Empowerment Policy & Implementation Framework addresses youth development across all sectors (BPO included) and it endeavors to ensure that all young women and men are given meaningful opportunities to reach their full potential
•
A Government Ministry specifically for the youth
From the findings, Table 5.6 provides the critical issues and the policy options and recommendations on youth and gender for Kenya.
Table 5.6: Critical issues and the policy options and recommendations on youth and gender for Kenya Critical Issues Policy Options Policy Recommendations BPO working a) Leave the Employment Act 2007 as it is and let employers to b) environment not create a conducive working environment within the law conducive b) Amend the Employment Act, 2007 to explicitly regulate working hours for employees and to require employers to facilitate safe commuting at night Lack of awareness on a) Kenya BPO and Call Centre Society to create standards for All BPO as a source of career progression in standard BPO jobs viable employment b) Relevant public and private agencies e.g. Ministries of Labour, Youth and ICT, KICTB, KBPOCCS, Kazi Kwa Vijana, etc, to mount programmes to promote the industry among the youth c) Relevant public and private industry stakeholders to sensitise trainees and trainers in BPO-related courses that may open up opportunities in BPO for the youth and women 3 months maternity a) Reduce the maternity leave back to 2 months b) leave (Federation of b) The Government, through the Ministry of Youth and Gender, to Kenya Employers provide a social welfare kitty to compensate employers who launched a complaint) may be adversely affected by the female employees’ absence
5.4. Incentives
From the findings, Table 5.7 synthesizes the critical issues on incentives for each of the four vendor countries.
Table 5.7: Critical issues on incentives India Mauritius Tax incentives • 100% tax holiday for first 5 • 15% corporate tax yrs, 50% for next 5 yrs and (the lowest globally) South Africa • None • Kenya 10 yr corporate income tax holiday
68
• • •
• • • • •
•
India 50% for balance 5yrs for ITBPO sector Excise duty and service & sales tax exemption Removal of domestic air travel tax 90% profits of software exports is exempted from tax zero customs duty for software imports Zero customs duty for software imports Zero duty on import of hardware for export projects Single point taxation for venture capital funds Enhanced rate of depreciation of computers 100% income tax exemption till 2010 *All the above benefits are limited to prescribed zones with a minimum of 25 acres
• • •
•
Mauritius Customs duty is based on world custom’s structure *Special tariff reductions on SADC or COMESA goods Zero duty on computers * Mauritius abolished all other tax incentives
South Africa •
• •
• •
•
Kenya for EPZ companies 25% tax rate for 10 yrs (except EPZ commercial enterprises) Vat and custom duty exemption Proposed Special Economic Zones wherever companies offices are located as well as in areas demarcated by government Stamp duty exemption on legal instruments 100% investment deduction in EPZ buildings and machinery for 20 years 100% foreign ownership permitted Ksh.900m for developing business park 3 fiber optic cables landing in Kenya by end of yr 2010 Bandwidth subsidy from World Bank National fibre optic cable Licensing of 2 more mobile companies to operate in Kenya Telecommunicatio ns liberalization
Infrastructure incentives • Amongst the world’s lowest telecom tariffs driven by free market competition • Amongst the world’s largest domestic satellite systems • Has 5 submarine cables with different landing sites • Has 3 satellite earth stationsaccelerated power development reform program initiated in 2001 to fast track power distribution • National highway development program ahead of its time line. • It has the 2nd largest road network in the world • Has 35 Government owned and 25 private owned software development parks with special IT- specific infrastructure Other incentives • Liberalized norms for investments of up to 100% foreign equity with full repatriation benefits. • Setting up of IT Venture Capital Fund. • Fast track clearance of goods
• • • • •
Good telecom system Has one submarine cable and one satellite system Mauritius Cyber City (business park) Incubation centre for ICT services Quality infrastructure ICT parks
•
•
• • •
Good road network Has SAFE fibre optic cable Has 3 satellite earth stations Most modern telecommunicatio n system in Africa Connecting to fibre optic cables by end of yr 2009
• • • • •
•
•
•
Free repatriation of capital and profits without any prior Central Bank approval. Dividends from companies resident in
•
Grants, including investment incentive grants, training and skill support grants, export market and investment
• •
Establishment of the Kenya ICT Board in 2007 Facilitate and manage ICT industrial incubation and
69
• •
•
India imported by manufacturers of electronic goods. Deployment of additional resources for technical Manpower development. IT software and services industry has been accorded the status of a priority sector by the Government Export Processing Zones (EPZs) set up to provide internationally competitive infrastructure facilities
•
•
Mauritius Mauritius and from holders of Regional Development Certificates are taxfree. Enacted anti-money laundering and terrorist financing legislation while the business framework itself has been made simpler. A "Work & Live in Mauritius" department has been set up within the Board Of Investment (BOI) as a singlefacing service counter to expedite formalities for individuals and investors setting up in Mauritius.
•
•
•
South Africa assistance, technology industry finance, etc. Encouraging the growth of offshore outsourcing, through marketing the services of those exporting services. Competitive risk related rates based on prime interest rates for investments in technology intensive businesses. This is most suitable for software development. Govt funding of BPeSA and the Regional Associations get a good percentage of their funding from Government
•
Kenya technology parks Development and marketing Kenya as a competitive destination for Business Process Outsourcing services in Kenya and abroad.
From the findings, Table 5.8 provides the critical issues and the policy options and recommendations on incentives for Kenya.
Table 5.8: Critical issues and the policy options and recommendations on incentives for Kenya Critical Issues Policy Options Policy Recommendations Tax incentives – lack of a) No tax incentives b) specific tax incentives for b) Government to provide tax incentives for a specific time the BPO sector period to encourage BPO industry growth, especially in the rural areas Capacity building – lack of a) Integrate BPO training in curricula of all higher learning All adequate human skills to institutions grow the BPO sector b) A proper training framework modeled on international standards to be adapted for guidance to institutions c) Government to select specific institutions to provide training grants to develop capacity d) Provide training grants to majority local shareholding companies to encourage growth of SMEs in the sector High bandwidth and a) Review bandwidth subsidy requirements to enable more All telecommunications costs firms to qualify b) Reduction of bandwidth tariffs – the undersea cables Poor uptake of the landing in Kenya will sort this out bandwidth subsidy c) Ensure reduction in other telecommunications tariffs through competition and other regulatory interventions
70
Critical Issues by CCK High start-up expenses
Policy Options
Policy Recommendations All
a) Provision of phased out incubation centres for start-up
BPO companies for 3 year periods b) Government to outsource BPO work to local majority owned centres a) Developing the domestic BPO market segment b) Marketing and funding local BPOs to market their services internationally
Inadequate marketing of Kenya as a BPO destination
All
5.5.Niche for Kenya
From the findings and SWOT analysis for Kenya, Table 5.9 presents the critical issues and the policy options and recommendations on the niche for Kenya.
Table 5.9: Critical issues and the policy options and recommendations on the niche for Kenya Critical Issues Policy Options Policy Recommendations Capacity a) ICT Board to enhance capability and capacity of talent pool to ad- i. b), c), d) & e) building equately service the identified niche areas b) Determine the current and medium term supply capacity of skills against current and forecast demand for BPO services in niche areas c) MoIC & ministries in charge of Education to work together to develop a policy/framework to institutionalize capacity building for BPO sector d) Provide training incentives to encourage creation of Centres of Excellence for BPO training in niche areas by private sector or based on PPP e) As part of the BPO sector strategy to be developed, develop a strategy on ICT-BPO skills requirements and mainstream it into relevant ministries for implementation Branding and a) ICT Board/Brand Kenya Board to develop specific positioning state- All positioning ments based on the identification of the niche areas b) ICT Board and Brand Kenya Board to develop robust branding strategy so as to increase awareness in Kenya’s target markets about the country’s capabilities in the niche areas c) Develop specific messaging and marketing collateral or materials for each niche area d) Identify and invest in on-going PR activities such as events so that there is continuous communication regarding Kenya’s capabilities in the niche areas Patriotism/ a) Introduce in school curriculum, training on positive attitude and na- i. All attitude tional pride b) Provide civic education against negativity as one of the mandates of a national body in charge of BPO c) Form a “Kenya culture” through a national policy Regional a) ICT Board should market Kenya as a regional hub for BPO services i. All advantage b) The Kenyan Government to continue advocating for the East African community as Kenya will benefit c) EAC to work together in marketing the region for BPO services to avoid unnecessary competition
71
72
6. References
Computer Society of Kenya (2006). Kenya National ICT Workforce Skills Demand Survey Report. Government of Kenya (2007). Kenya Vision 2030: A Globally Competitive and Prosperous Kenya Government of Kenya (2007). The Employment Act, 2007. Kearney, A.T. (2009), The 2009 A.T. Kearney Global Services Location Index: The Shifting geography of off-shoring Kenya National Bureau of Statistics (2009). The Leading Economic Indicators, 2009. Ministry of Education (2006). National Information and Communications Technology (ICT) Strategy for Education and Training. Ministry of Education Science and Technology (2005). Sessional Paper No. 1 of 2005 on Policy Framework for Education, Training and Research Ministry of Information and Communication communications Technology (ICT) Policy. (2006). National Information and
Republic of Mauritius, Ministry of Information Technology and Telecommunications, National ICT Policy, 2007-11. Republic of Mauritius, Ministry of Information Technology and Telecommunications, National ICT Strategic Plan, 2007-2011. Republic of South Africa, The Skills Development Act No. 97 of 1998. Pillai A. (2006). Human Resource Issues in Business Process Outsourcing. Schramm W. (1971). ‘Notes on case studies of instructional media projects’; Working paper for the Academy of Educational Development; Washington D.C. Yin R.K. (1993). Case Study Research: Design and Methods. Sage Publications, California
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doc_668897780.pdf
Business process outsourcing (BPO) is a subset of outsourcing that involves the contracting of the operations and responsibilities of specific business functions (or processes) to a third-party service provider. Originally, this was associated with manufacturing firms, such as Coca Cola that outsourced large segments of its supply chain
Development of a Business Process Outsourcing Industry in Kenya: Critical Success Factors
IDRC Grant No. 104488-001
Final Report (June 2008 – July 2009)
by
Prof. Timothy M. Waema (Principal Investigator)
July 2009
List of Abbreviations
BBBEE BKB BOI BPeSA BPO BPO & O CCIFM CCK CMM COTU DPSA DTI EOU EPC EPZ FDI FLAG FOSS GEAR GDP HP IBM ICASA ICT ID IDRC INSAT IPR ISO IT ITeS ITSA KBPOCCS KenInvest KEPSA KICTANET KICTB KIRDI KPO KTCIP MBA M&E MMU MoIC MoU Broad Based Black Economic Empowerment Brand Kenya Board Board of Investment Business Processing enabling South Africa Business Process Outsourcing Business Process Outsourcing and Off-shoring Chamber of Commerce and Industries France-Mauritius Communications Commission of Kenya Capability Maturity Model Central Organization of Trade Unions Department of Public Service Administration Department of Trade and Industry Export Oriented Unit Export Promotion Council Export Processing Zone Foreign Direct Investment Fiber-Optic Link Around the Globe Free and Open Source Software Growth, Employment and Redistribution Gross Domestic Product Hewlett-Packard International Business Machines Independent Communications Authority of South Africa Information and Communications Technology Identification International Development and Research Centre Indian National Satellite Intellectual Property Right International Standards Organization Information Technology Information Technology Enabled Services IT Standards Association Kenya the Kenya BPO & Contact Center Society Kenya Investment Authority Kenya Private Sector Alliance Kenya ICT Action Network Kenya ICT Board Kenya Industrial Research and Development Institute Knowledge Process Outsourcing Kenya Transparency and Communication Infrastructure Project Masters in Business Administration Monitoring and Evaluation Multimedia University Ministry of Information and Communication Memorandum of Understanding 2
MTP NASSCOM NCCU NICTSP NSR OSW OTAM PIN PC PPP RDP R&D SAFE SAITIS SETA SEZ SME STPs STPIs SWOT TESPOK UK UN URL USA VAT VSAT WSIS WTO
Medium-Term Plan National Association of Software and Services Companies National Contact Center Union National ICT Strategic Plan National Skills Registry Office on the Status of Women Outsourcing and Telecommunication Association of Mauritius Personal Identification Number Personal Computer Public Private Partnership Reconstruction and Development Programme Research and Development South Africa - Far East South Africa IT Strategy Project Sector Education and Training Authority Special Economic Zone Small and Medium Enterprises Software Technology Parks Software Technology Parks of India Strengths, Weaknesses, Opportunities and Threats Telecommunications Service Providers Association of Kenya United Kingdom United Nations Universal Resource Locator United States of America Value Added Tax Very Small Aperture Terminal World Summit on Information Society World Trade Organization
3
Table of Contents
List of Abbreviations.................................................................................................................2 Table of Contents......................................................................................................................4 Executive Summary..................................................................................................................6 1. Introduction...........................................................................................................................8 1.1. Background.....................................................................................................................8 1.2. Objectives and Scope of the Study..................................................................................9 1.3. Outputs and Dissemination...........................................................................................10 1.4. Structure of the Report..................................................................................................11 2. Methodology......................................................................................................................12 2.1. Case Study Process.......................................................................................................12 2.2. Data Collection and Analysis Process...........................................................................13 2.3. Database Development..................................................................................................16 2.4. Challenges.....................................................................................................................17 3. Case Study Findings ...........................................................................................................18 3.1. Policy Legal/Regulatory and Institutional Frameworks ..............................................18 3.1.1. Policy Framework..................................................................................................18 3.1.2. Legal and Regulatory Framework .........................................................................20 3.1.3. Institutional Framework ........................................................................................24 3.2. Tax, Infrastructural, Bandwidth and Other Incentives..................................................28 3.2.1. India........................................................................................................................28 3.2.2. South Africa...........................................................................................................28 3.2.3. Mauritius................................................................................................................30 3.2.4. Kenya.....................................................................................................................30 3.3. Human Resource Issues................................................................................................32 3.3.1. India........................................................................................................................35 3.3.2. South Africa...........................................................................................................37 3.3.3. Mauritius...............................................................................................................37 3.3.4. Kenya.....................................................................................................................38 3.4. Youth and Gender.........................................................................................................39 3.4.1. India........................................................................................................................41 3.4.2. South Africa...........................................................................................................42 3.4.3. Mauritius................................................................................................................43 3.4.4. Kenya.....................................................................................................................44 3.5. Outsourcing in Client Countries....................................................................................46 3.6. Types of BPO Operations and Niche Areas..................................................................50 3.6.1. India .......................................................................................................................50 3.6.2. South Africa...........................................................................................................51 3.6.3. Mauritius................................................................................................................53 3.6.4. Kenya.....................................................................................................................54 4. SWOT Analysis...................................................................................................................56 4.1. India...............................................................................................................................56 4.2. South Africa..................................................................................................................58 4.3. Mauritius.......................................................................................................................59 4.4. Kenya............................................................................................................................60 4.5. Summary – Niche Service Areas..................................................................................62 5. Critical Issues, Policy Options and Recommendations.......................................................63 5.1. Policy, legal & regulatory and institutional frameworks .............................................63 4
5.2. Human Resource Issues...............................................................................................65 5.3. Youth and Gender........................................................................................................67 5.4. Incentives.....................................................................................................................68 5.5. Niche for Kenya............................................................................................................71 6. References...........................................................................................................................73
5
Executive Summary
Kenya is preparing itself to enter into the global and vibrant Business Process Outsourcing (BPO) and IT Enabled Services (ITES) market. It however lacks empirical evidence and tailored research to guide its policy decisions and investment options. There is demand and specific requests from the government and key stakeholders in the sector for this type of information. This policy brief is a synthesis of a study whose aim was to provide evidence and a deeper understanding of the imperatives for success in this industry to better inform Kenya’s policy decisions and investment choices. It was carried out through a case study method to establish the critical success factors in four vendor countries (India, South Africa, Mauritius and Kenya) with relation to the policy, legal, regulatory and institutional frameworks; human resource issues; youth and gender issues; and various forms of incentives. The study also researched on the outsourcing issues in two client countries (UK and USA). The research found that in the three countries (excluding Kenya), the BPO-ITES industry is given a high priority, there is strong and appropriate legal framework and the industry associations are strong and are key in driving the BPO-ITES industry, while in South Africa the national and regional associations receive state funding. On human resources, the study found that India introduces children to science and technology at a very early age and it has a National Skills Registry and that in Mauritius, the national association was working with the government to create an ICT academy to train for the industry. The research found that countries had differing measures for gender equity, participation of youth in employment, and incentives in the BPO-ITES industry. It was particularly noted that South Africa did not have tax incentives but had a variety of investment and training and skills support incentives, while Mauritius had abolished all the tax incentives except for a 15% corporate tax. The study found that the key drivers in out-sourcing and off-shoring in both USA and UK were similarity in work culture and quality. The major industries where most of the outsourced work is derived were found to be in banking; investment management; insurance; legal; supply chain, logistics, transportation; healthcare; news, media & entertainment; energy and utilities; agriculture/food; pharmaceutical/biotech; government & public agencies; and manufacturing. It emerged that no African country featured in the top 10 preferred outsourcing destinations in the USA while in the UK, only Egypt in Africa was in the top three perceived best three destinations. For Kenya, the research found a widespread perception that it lacked an effective and focused marketing as a BPO destination. It also emerged that Kenya (and Africa in general) is viewed as a country (and continent) with challenged infrastructure, poor work culture/ethics and constraining socio-economic environment. However, individuals/organizations that have had a chance to visit/interact with Kenya(ns) have a different testimony; Kenya has a high chance of being a favorable outsourcing destination if correct measures are put in place. The study contends that Kenya has key strengths, including a highly skilled and competitive pool of labour, neutral English accent, strategic location as a regional hub for communication and finance, and production of over 30,000 and over 250,000 university high school graduates annually, respectively. In addition, Kenyans generally have a warm and welcoming culture/attitude, due to the predominance of the tourism and hospitality industries in the economy.
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When the above strengths are considered, the provision of call centre/customer services an ideal niche for the country to carve for itself in the BPO space. Kenya can also capitalize on its large pool of high school and diploma graduates to provide back office services such as transcription, digitization, data entry and various other data processing services. In addition, Kenya can use its excellent education system to create a niche in BPO-ITES training for the region. The key policy recommendations are: a) Development of a BPO sector policy as pledged in the medium term plan of Vision 2030. b) In order to address the lack of a strategy and a weak M&E framework, combine the results of this study with those of McKinsey&Company and create an informed strategy for the BPO sector in Kenya and strengthen the M&E functions of the KICTB and Vision 2030 Secretariat. c) Create a single ICT-BPO sector and mainstream it into the national planning and operational frameworks. d) In order to address the weak legal framework, strengthen existing laws to provide an enabling legal framework for ICT-BPO in the short-term, while in the medium- to long-term, develop separate legislations critical for ICT-BPO sector and compliant with relevant international laws. For youth and gender, amend the Employment Act, 2007 to explicitly regulate working hours for employees and to require employers to facilitate safe commuting at night. e) Develop a BPO incentives framework as an integral part of the law that will transform EPZs into SEZs. In addition, provide tax, training and set-up incentives for a specific time period to encourage BPO industry growth, especially in the rural areas. f) In order to address the lack of standards, develop BPO standards, benchmarked to international standards and ensure all key BPO firms adopt these standards. g) For institutional framework, change the mandates of an existing body to coordinate all the institutions that deal with BPO in the short-term, while in the in the medium- to long-term, create a new entity (body corporate with power and a powerful champion) to coordinate ICT-BPO activities across all ministries and public enterprises that have a role to play in ICT-BPO. In addition, strengthen KBPOCCS to be the key BPO industry association and create a strong ICT association. h) In order to address the lack of updated skills database, establish framework for collection and updating of ICT skills data and task the national body responsible for ICT-BPO coordination to be established as recommended under institutional framework with this responsibility. i) Fast-track implementation of integration of ICT into education as defined in Sessional Paper No. 1 of 2005 on Policy Framework for Education, Training and Research and the National Strategy for Education and Training (2006). j) In order to address BPO skills sets, create a policy and strategy on ICT-BPO skills requirements and mainstream into relevant ministries for implementation. k) Develop and implement a marketing, branding and positioning strategy for Kenya.
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1. Introduction
1.1.Background
ICTs are transforming world economies with an increasing number of countries, especially in the developing world, identifying the ICT industry as a key sector for achieving rapid economic growth. In particular, the business process outsourcing (BPO) sub-sector, worth over $130billion worldwide, provides one of the greatest economic opportunities for wealth generation and employment creation. For example, India, usually the first stop for western companies looking to increase profits by outsourcing some of their business processes and which employs over 1.5million people in this sector earned $39.6billion in the financial year 2006/2007 from call centres, back-office operations and software development. The amount contributed to 5.2% of national GDP. The Philippines on the other hand, earned $3.26billion over the same period. With these outstanding results, many developing countries such as Mauritius, Ghana, Costa Rica, Kenya and Rwanda, among others, are seeking to follow suit. These countries are at varying stages of developing a business process outsourcing industry. Kenya, impeded in the BPO industry to-date by poor and expensive communication links to the rest of the world, is hoping that the arrival of the fibre-optic cable will boost its status as the region’s top economy. Kenya hopes that this, plus cheap labour, clear accents and customer fatigue with Indian call centres could help it hook into this multi-billion dollar industry. As an indication of how important this sector is to Kenya’s economic growth, BPO is one of the pillars in the government’s Vision 2030 document. Kenya has also developed a policy framework and defined some strategic directions (Kenya ICT Strategy 2006), one of which explicitly focuses on BPO as a key opportunity for realising the country’s ICT objectives. The Kenya BPO and Contact Centre Society was formed to set standards and provide for self-regulation while the Kenya ICT Board takes the lead in marketing Kenya abroad as a BPO destination of choice. To address the bandwidth issue in this sector, the Kenya government, has taken a stop-gap measure of subsidising bandwidth costs through a grant from the World Bank while the country awaits the impending arrival under-sea cable along the East African coast. While Kenya is preparing itself to enter into this vibrant market, it lacks empirical evidence and tailored research to guide its policy decisions and investment options. There is demand and specific requests from the government and key stakeholders in the sub-sector for this type of information. This is the gap that this study intended to fill. The research sought to support the efforts of the government, private sector and civil society in Kenya to maximise opportunities and minimise risks in the selection of appropriate policies, legal and institutional frameworks, infrastructure and capacity building strategies. Detailed case studies were carried out of business process outsourcing companies and their clients in six countries: two countries that outsource work to developing countries, two countries that have a mature BPO service industry, one country that has an emerging BPO service industry and finally one country that is just starting out on the BPO journey (pioneer market). A thorough analysis of the Kenya business environment and culture was also carried out with the aim of developing niche areas and recommendations for Kenya.
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1.2.Objectives and Scope of the Study
The general objective of the project was to undertake comprehensive research in the business process outsourcing (BPO) sub-sector in pioneer, emerging and mature markets in order to provide evidence and a deeper understanding of the imperatives for success in this industry to better inform Kenya’s policy decisions and investment choices. The specific objectives were: 1. To provide empirical evidence and recommendations to inform the development of BPO legislation, policy and strategy documents by Kenya’s Ministry of Information and Communication, Kenya ICT Board and Kenya BPO and Contact Centre Society among others. 2. To identify the critical success factors that underlie BPO industries in developing countries (in pioneer, emerging and mature markets) in terms of: policy and institutional environment; legal and regulatory considerations; incentives; infrastructural & bandwidth requirements; effects of bandwidth subsidy; human capacity needs & capacity building requirements; criteria for choice of BPO destination; trends in BPO demand; and types of BPO operations. 3. To examine and provide comprehensive case studies of eight countries representing pioneer, emerging and mature BPO markets. 4. To provide a deeper understanding of youth employment and gender issues within the BPO sector in pioneer, emerging and mature markets. 5. To increase the level of awareness and input among key stakeholders through interactive dialogue on key BPO issues within the Kenyan context. 6. To contribute to the knowledge base in this emerging area through publication and dissemination of a book entitled “The BPO Sector in Mature, Emerging and Pioneer Markets: Lessons and Opportunities for National Development.” The scope of the study is outlined below: 1. 8 countries classified under 4 categories: ? BPO clients: U.S.A., U.K. (3 BPO clients each) ? Pioneer BPO services: Kenya & Ghana (3 companies & 1 BPO client each) ? Emerging BPO services: South Africa & Egypt (3 companies & 1 BPO client each) ? Mature BPO Services: India & Mauritius (3 companies & 1 BPO client each) 2. Three BPO Associations: ? Regional Asian BPO Association ? Business Process Outsourcing and Call Centres Association in Kenya ? BPeSA - Business Processing enabling South Africa
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The researchers had to drop Ghana and Egypt from the selected countries largely because of budget constraints. One of the partners who was supposed to provide part of the funding, the Kenya ICT Board, failed to do so. However, the researchers were convinced that the huge amount of data from the six countries was adequate to give policy direction to Kenya. Moreover, any further delays in completing the project would have missed the objective of informing BPO policy. With McKinsey&Company consultants completing a related consultancy at the time and with the landing of the undersea fibre cables that were scheduled to land in July 2009, it was important that the study provided results and recommendations at this crucial time. One of the other key changes in the scope concerns publication and dissemination of a book based on the findings. This was not done and instead a detailed report and a policy brief were developed for a number of reasons. One, given the financial challenge cited above, it was not prudent to start a very expensive process of publication of a book. Secondly, the content of the findings is fast changing in each of the countries. Given the long periods involved in publications, the book is likely to be out of date by the time it is launched. What is important is that the study has created a baseline of data that can be updated on a regular basis to inform policy and strategic direction in this fast-changing industry. The researchers therefore decided a detailed final report and a standalone policy brief would be more relevant and useful. The researchers also put together an easy to use/update web-based database that contains the research findings
1.3.Outputs and Dissemination
There were various outputs that were disseminated throughout the study. The key ones include: • Questionnaires for data collection for the following categories: o BPO Clients o BPO Vendors o BPO Vendor Employees o BPO Vendor Human Resources Management o BPO Client Associations o BPO Consultants • Proceedings and PowerPoint presentations of the launch stakeholder workshop, midterm stakeholder workshop, and final stakeholder workshop. • An interactive database for the data collected. This database has been tested with the data collected from the six countries. • A comprehensive database of the stakeholders in the BPO sub-sector. • First technical and financial progress reports. • Second and final technical and financial reports. • Policy brief - this is attached as a separate report. • Final BPO study report – this report. Through this study, the critical success factors for the BPO industry in Kenya were identified and clear recommendation provided for policy makers and industry practitioners to support their policy decisions, investment choices and operational approaches. Findings from this research, especially this report and the Policy Brief, are expected to directly influence policy
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and inform practice. The key recommendations will be widely disseminated in a policy brief to be disseminated to key legislators and policy makers, which is attached to this report.
1.4.Structure of the Report
After this introduction, Chapter 2 provides the methodology that was followed, including the challenges encountered. The next chapter offers the findings in terms of critical success factors in all case study organizations in key thematic areas: policy, legal, regulatory and institutional frameworks; incentives; human resource issues; youth and gender; outsourcing in client countries; and types of BPO operations and niche areas. Chapter 4 gives the strengths, weaknesses, opportunities and threats for the four vendor countries. The final chapter provides the critical issues and policy options and recommendations. This chapter covers policy, legal, regulatory and institutional frameworks; incentives; human resource issues; youth and gender; and niche for Kenya. An abridged version containing the policy recommendations in the last chapter is provided as a separate policy brief.
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2. Methodology
The researchers used the Case Study approach as the BPO industry is relatively new in the Kenyan context and not much research has been done on it. The ‘case study’ has been defined as an empirical enquiry that ‘investigates a contemporary phenomenon within its real life context, when the boundaries between phenomenon and context are not clearly evident’ and in which ‘multiple sources of evidence are used’ (Yin, 1993). The BPO industry is still rather complicated to analytically assess, therefore, the case study approach is the best to yield a rich picture of the situation, which could further be subjected to comparative analysis. The case study approach has been used for many years as it can explain a decision or set of decisions: why they were taken, how they were implemented and with what result (Schramm, 1971). It is also noted that the depth of enquiry facilitated by the case study method is significantly greater than other research methods such as surveys, focus groups, in-depth interview, experiments and analysis of archival evidence. In general, the case study involved review of existing documents, either found in the Internet or physical documents. These documents included national policies and strategies, laws governing the BPO sector/industry in a country, publicly available documents on the BPO firms and associations chosen to be part of the case studies, etc. Further, the case study involved key informant interviews with the key national officials and persons involved in the BPO firms and associations. These people were identified through contacts the researchers had, contacts given by the initial contacts and search through the websites of the chosen BPO firms and associations. In one or two cases, the researchers used the Kenyan Embassies of the case study countries to obtain contacts. Finally, structured questionnaires were used for the various sources of information, namely BPO vendor managers, BPO client managers, BPO consultants, and youth and women working in the BPO companies. These questionnaires were piloted with one BPO vendor in Kenya and the final instruments compiled ready for data collection.
2.1.Case Study Process
To guard against diversity between the case study researchers, each was guided by a case study protocol as illustrated below:
Table 2.1: Guide for case study protocol 1. Protocol Overview • Research objectives 2. Field Procedures • • Key issues on which the researcher needs to focus List of informants who included:
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? ? ? ? ? ? ? ? •
Policymaker(s) in the ICT sector BPO association official(s) A senior manager (strategic level) A manager at the tactical level who deals with the BPO client / vendor relationship The ICT manager A worker at the supervisory level Workers at the operations level Targeted youth and women informants.
3.
Case Study Questions
•
•
This resulted in six different questionnaires to focus on these target groups, these were: ? BPO Clients ? BPO Vendors ? BPO Vendor Employees ? BPO Vendor Human Resources Management ? BPO Client Associations ? BPO Consultants The key questions to guide the researcher For each question: a list of probable sources of evidence including informant comments, documents, artifacts and observations
During each visit the case study researcher collected the following evidence where available: • Firm’s URL and website information; • Documents describing firm’s BPO strategy, services provided, etc.; • Interview notes / transcripts (as in the protocol above); • Record of direct observations; • Archival records.
2.2.Data Collection and Analysis Process
Data collection and analysis was carried out in five steps as outlined below. Step 1: Literature Review The team began by conducting a literature review to put the work in context. This involved desk (Internet and library) research reviewing the country’s ICT policy and BPO industry reports, policies and regulations. Eight countries were chosen for the study, from pioneer 1 BPO services (Kenya and Ghana), emerging2 BPO services (South Africa and Egypt), mature3 BPO services (India and Mauritius) and BPO clients (UK and USA). These countries were chosen based on the following criteria:
1
At the time of the study, a pioneer BPO destination was defined as having less than 10 established companies in the industry and less than 10,000 workers employed in the industry while the industry was 1 to 5 years old. 2 At the time of the study, an emerging BPO destination was defined as having 10 to 100 established companies in the industry and 10,001 to 100,000 workers employed in the industry while the industry was five to fifteen years old. 3 At the time of the study, a mature BPO destination was defined as having more than 100 established companies in the industry and over 100,000 workers employed directly in the industry while the industry was over fifteen years old.
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• •
•
•
•
represent the countries with the highest outsourcing work, the UK & USA; demonstrated success as a leading BPO destination, India; emerging BPO destinations with great promise, South Africa, Egypt and Ghana; demonstrated challenges and some failures, Mauritius which can inform other countries interested in this sector. Kenya – as this study is meant to inform the Country’s policy – which has some BPO companies and internal BPO clients
Step 2: Questionnaires’ Development The researchers also compiled ICT and BPO indicators for each country to be studied. The next stage involved the development of detailed questionnaires. Six different types of questionnaires were developed to target different categories and avoid a long questionnaire with sections that may be unnecessary for certain categories. The categories identified were: • BPO Clients • BPO Vendors • BPO Vendor Employees • BPO Vendor Human Resources Management • BPO Client Associations • BPO Consultants Step 3: Stakeholders’ Sensitisation Workshop One of the key objectives of the research was to increase the level of awareness and input among key stakeholders through interactive dialogue on key BPO issues within the Kenyan context. Therefore, the researchers organized a half-day workshop to sensitise the stakeholders about the study and discuss the methodology to be used especially the questions to be asked. The findings from these interactions contributed to the final development of the questionnaires. A pilot case study was carried out to refine the case study protocol. This took place in Nairobi, Kenya. The findings from this pilot were fed into the process of refining the questionnaires. Step 4: Establishing Contacts The next step was to make initial contacts and obtain commitments for research participation. In some cases like the US and UK this proved to be a very difficult process as they were not very forthcoming with appointments and were sometimes reluctant to participate in the research. After the researchers identified the various organizations that would be interviewed various methods were adopted to acquire contacts of key executives in these organizations. These included: a. Institutions/ Associations Some contacts were acquired through the various associations and institutions. In Mauritius, for example, the Board Of Investment (BOI) and Outsourcing and Telecommunications Association of Mauritius (OTAM) were helpful while in Kenya the Kenya BPO & Contact Center Society (KBPOCCS) availed lists of potential interviewees. The IDRC and the Kenya ICT Board also assisted in acquisition of contacts.
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b. Personal contacts and networks The researchers’ personal contacts and networks proved to be the most effective as many in the research team are experienced researchers in ICT for Development and/or are key industry players in the BPO industry. This helped especially in the case of Kenya. In South Africa, for example, researchers used contacts acquired through the School of Computing and Informatics, University of Nairobi to assist in scheduling appointments. The contacts for India, Mauritius USA and UK were largely through the personal contacts of Kenya BPO and Contact Centre Association. Consultants, who assist clients from the UK and USA outsource their work, were instrumental in introducing the researchers to possible interviewees. c. Internet searches Once the contact was established, the researchers acquired background information via the Internet. This provided useful information on the organisations visited. This way, the researchers could pre-fill some sections of the questionnaires shorten the amount of time spent in the organisation visited. This made some interviewees comfortable as they realised the researchers had conducted sufficient background information on them. For example, those interviewed in the UK who were initially sceptical and gave researchers a rigid time-frame to complete the questionnaires; but once the interview started they relaxed and were even the ones who were comfortable to run over- time. d. Through other interviewees Some interviewees provided the researchers with contacts of other players in the industry. This was especially effective in South Africa but not so effective in the UK where vendors did not want to disclose their clients. In such cases, most client information was drawn from the associations that represent the clients and consultants. The argument given by some was that a number of clients did not want their customers in the UK to know they were outsourcing or if they did, they did not want them to know who they were outsourcing to. From this process the researchers drew up a list of contacts for each target country. Appointments were scheduled and monitored via emails and where necessary, phone calls were made. The types of firms that acted as sources of data are shown in Table 2.2.
Table 2.2: Types of firms which were sources of data BPO Sectors of Interest • Data entry services • Data transcription services • Call Centres • Contact Centres (Combination of data entry, data transcription and call centre activity) • Software development Types of Firm from each sector • Clients in developed countries that source BPO services from pioneer or emerging environments • Clients in developed countries that are considering outsourcing to pioneer or emerging markets • Consultants who help Clients identify vendors • Vendors who carry out the outsourced work for the clients • BPO associations
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Step 5: Case Studies Data Collection and Analysis The researchers visited BPO client companies in the UK and USA for detailed observation of operations and interviews with key personnel. The same was done in the pioneer, emerging and mature BPO service country. A structured questionnaire for youth and women working in the BPO Vendor companies was used to provide a deeper understanding of youth employment and gender issues within the BPO sector. In each pioneer, emerging and mature BPO service country, the researchers visited a BPO Association(s) and also talked to consultants. The data collection process was divided into two phases. a. Phase one involved the research teams visits to the USA, South Africa and Kenya. The findings from these three countries helped with a further review of the questionnaires. The data was analysed and incorporated into an interactive database described in section 2.3 In addition, the findings were discussed in a one day workshop with stakeholders whose comments incorporated into the second phase of data collection. There were lessons learnt, however, and one included getting the buy-in of possible clients to be interviewed through referrals from BPO consultants and BPO client associations. b. Phase two involved visits to the UK, Mauritius and India. After this, the researchers analyzed the data, updated the database and combined the findings from all the six countries. The findings were then discussed on the Kenya ICT Action Network (KICTANET) under the following themes: (i) The Policy, Legal and Institutional Frameworks for the BPO Sector (ii) Subsidies accorded to BPO Sector (iii) Human Capacity Issues (iv) Youth and Gender Issues (v) Strengths, Challenges and Niches for Kenya as a BPO destination The findings from the KICTANET discussion forum were synthesized and this contributed to the development of the final report which was then presented in a one day workshop with stakeholders. The main focus of the final report was on the critical success factors, policy options and policy recommendations. The input by the stakeholders was incorporated in the development of Policy Brief.
2.3.Database Development
A database was designed and implemented based of specifications that were drawn from the different categories of the questionnaires and largely on the analysis framework developed for each questionnaire. The database does not include names of institutions and persons interviewed because of confidentiality. Under the category of the Vendor Questionnaire, the following information was included: • General Information • Relationship • Human resources 16
• • • • • • • • • •
Marketing and Partnering BPO Associations Financial Communication, Language and culture Service delivery Size Process of BPO business development Joint Ventures and Partnerships National Level factors General Outsourcing Questions
With the addition of ‘support by national institutions’, similar information regarding the client questionnaire was incorporated in the database. A different example can be drawn from the Vendor Association questionnaire from which the following was considered in the database design: • General • Formation of Association • Size • Off-shoring & Outsourcing • Government Linkages • Capacity Building • Services
2.4.Challenges
One of the challenges was lack of sufficient funding as this research was delayed by over one year waiting for funding; this had some cost implications. The funding was not sufficient and sometimes caused unnecessary delays and forced the researchers to scale down some the scope of the project. A further challenge was that some interviewees were very guarded about where they outsourced to as they did not want it to be known to their customers. The same was true of some vendors who did not want to disclose the names of their clients even when they were reassured of confidentiality by the researchers. This resulted in some potential interviewees declining to meet the research team. There were also cases of no response even when initial interaction had been established. This was especially in the case of the USA. Finally, there were minor communication challenges like slow internet and email server problems. These resulted in delayed receipt and dispatch of emails to and from the respective recipients.
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3. Case Study Findings
3.1.Policy Legal/Regulatory and Institutional Frameworks
The following is a synthesis of the findings on policy, legal/regulatory and institutional frameworks of the BPO industry in vendor countries (namely South Africa, India, Mauritius and Kenya).
3.1.1.Policy Framework
India In India, progressive free market policy is part of the forces that drives the country’s economy and consequently BPO industry. The Indian Government has given priority to ITBPO sector in Special Economic Zones to spiral growth. It is initiating many infrastructure projects with private sector involvement and encourages domestic technology adoption. The educational system is well aligned to industry needs. The other key policy initiative is on security; the Government set up a body to control against cyber crime in India; developed a cyber security training and awareness policy; and documented security policies covering use of information, mobile computing, and user access. Mauritius The Mauritius vision and strategy for BPO/ITES industry is driven from the top (within the government rank), with a lot of emphasis on foreign direct investment. In Mauritius, one will find the major international ICT players from USA, Europe and India, including Oracle, Microsoft, IBM, HP, CISCO, Accenture, Infosys, Hinduja Group, France Telecom, Teleforma, TNT Group. Although Mauritius has diversified BPO/ ITES services, call centres employ about 50% of the total workforce of the sector. The vision of the Mauritius Government is to transform Mauritius into a Cyber island and develop ICT as the 5th pillar of the economy alongside Sugar, Textile, Tourism and Financial Services. The objectives are to: i .Accelerate the integration of Mauritius into the World Information Society ii.Position Mauritius as a strategic ICT regional hub iii.Develop Mauritius as an attractive investment location for ICT iv.Develop Mauritius as a competitive outsourcing destination for ICT and BPO/ ITES The National ICT Strategic Plan (NICTSP) 2007-2011 seeks to provide the right environment for the harnessing of ICT to generate employment, improve quality of life, and create new opportunities for the socio-economic development of Mauritius. The Strategy's expected goals are a 7% contribution to the gross domestic product of Mauritius from offshore ICT export services, employment of at least 29,000 qualified individuals, employment of 90% of those who graduate in ICT, the doubling of the number of foreign investors, and Memoranda of Understanding for collaborative ventures in the field of ICT with countries in the region.
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Other key objectives of the government's strategy include an increase in preference for ICT, with at least 50% acceptance for services available online, an increase in PC ownership by 20,000 households, and 12,000 PCs in primary schools, 150 Public Internet Access Points across the island, Internet connectivity and networking of all primary, secondary schools, and an increase in broadband penetration by at least 250,000. South Africa In 1994, with a new democratic order being elected, South Africa entered a period of transition, dismantling structures established in the Apartheid era and replacing these with processes to empower and enfranchise all of the country’s people. The South African Government’s strategy for transformation is contained in the Growth, Employment and Redistribution (GEAR) program, formerly known as the Reconstruction and Development Programme (RDP). The South Africa ICT sector strategy was conceived in this new era of change. The purpose of this strategy is to further the development of the ICT Sector in South Africa. The strategy is intended to be complementary to and supportive of broader socio-economic development goals of the government of South Africa, particularly with regard to its emphasis on social upliftment and empowerment. The South Africa IT Strategy Project (SAITIS) was developed by the Department of Trade and Industry and the Department of Communication, in consultation with the private sector and other stakeholders. SAITIS has four fundamental objectives: (1) to create a robust, growing and sustainable ICT sector; (2) to increase use of ICT as an enabler for socio-economic development; (3) to create a knowledgeable and growing ICT workforce; and (4) to create a world-class culture of ICT innovation. South Africa already has an established ICT sector. Furthermore, the country’s level of investment in ICT as a percentage of GDP appears to be comparable to that of most developed countries. South Africa has been in the BPO business since the mid 1990s. South Africa introduced a range of incentives to attract investors, especially call centres. In addition, South Africa has been actively participating at outsourcing events and making direct pitches via road shows across the UK North America to target new business. As a result, it is becoming a favoured international location for business process outsourcing and offshoring. South Africa has slowly accepted call centre culture; this promotes domestic market and also makes training employees easier. Kenya In Kenya, the current national ICT policy is the first for the Country and was published through a special issue of the Kenya Government Gazette (Gazette Notice No. 2431) of March 2006. The vision in this policy is “a prosperous ICT-driven Kenyan society”. Its mission is “to improve the livelihoods of Kenyans by ensuring the availability of accessible, efficient, reliable and affordable ICT services”. Three of the broad objectives of the IT policy come close to addressing the opportunities in outsourcing. These are: • Using IT to generate additional employment and promoting entrepreneurship for the new digital economy; • Encouraging and accelerating investments and growth in IT hardware, software, Internet, training, IT enabled services, telecommunications and electronic commerce; 19
•
and Providing adequate infrastructure in the country for IT sector to flourish.
The Kenya Vision 2030 represents the blueprint for the country’s development up to year 2030. The vision aims to make Kenya a globally competitive and prosperous nation with a high quality of life by 2030. The vision has three pillars, namely, the economic pillar, the social pillar and the political pillar. The overall objective of the Kenya Vision 2030 is to realize a higher and sustainable growth of the economy in a more equitable environment, accompanied by increased employment opportunities. The Vision is to be implemented in five successive Medium-Term Plans (MTPs), the first of which runs from 2008 to 2012. One of the six key sectors in the economic pillar is Business Process Outsourcing and Offshoring (BPO). The vision of this sector is for Kenya “to be the top off shoring destination in Africa”. The targets for the 2008-2012 MTP are to create 20,000 direct BPO jobs and an additional GDP contribution of Kshs 10 billion. These targets will be achieved by attracting at least five leading IT suppliers, at least ten large multi-national corporations and global players in Kenya. The flagship projects for the 2008-2012 period are the: i. establishment of a BPO park in Athi River EPZ, ii. marketing campaigns to promote BPO in the targeted geographical markets, iii.training programmes around primary processes (e.g. customer contact) and industry specifics (e.g. back-office data entry in financial services), and iv.designing and implementing a comprehensive incentive framework to improve the attractiveness of Kenya as a BPO destination and to encourage investments in this field. However, low level details of how the above targets will be realized are missing. At the same time, the implementation matrices for both 2008-2012 Vision 2030 MTP and the national ICT sector master plan 2008-2012 (MoIC’s response to the Vision 2030 first MTP) do not have detailed performance indicators and targets that can be used for monitoring and evaluation. The first MTP also pledges to develop a BPO and Contact Centre Policy but how this will be done is not spelled out. Indeed, this issue is left out in the implementation matrices in the Annex of the plan. A critical issue for the BPO sector is standards and A future BPO policy should be able to address this. It was established that the KBPOCCS had created a draft set of standards which had not been discussed with the stakeholders.
3.1.2.Legal and Regulatory Framework
India Until 1991, India was a closed economy with hardly any presence in international trade. Progressive liberalisation since 1991 has made India one of the biggest emerging markets. One of the ways that encouraged investors into the IT-BPO industry was by strengthening the legal system and compliance with international laws e.g. labour laws, international relationship, etc. One of the key legislations is the Information Technology Act 2000 which, among other things, recognizes digital signatures, imparts legitimacy to contract through electronic means unless otherwise agreed, and provides for legal recognition of transactions through electronic data inter-change.
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Other key laws are the Indian Copyright Act of 1957 amended in 1994 to outlaw software piracy, and the Indian Intellectual Property Rights (IPR) Laws which protect intellectual property in accordance with India's obligations under the TRIPS Agreement of the WTO. The importance of intellectual property in India is well established at all levels - statutory, administrative and judicial. Cases of infringement of IPRs are tried in the judicial courts. The IPR Laws also provide for appeals in the judicial courts of the administrative decisions relating to Intellectual Property Rights. Many BPO firms have already aligned their processes and practices to international standards, such as ISO, Capability Maturity Model (CMM) and Six Sigma. This has helped India to become a credible outsourcing destination. South Africa In South Africa, all the ICT legislations (Telecommunications Act of 1996, the Independent Broadcasting Authority Act and portions of the Broadcasting Act) were repealed by a convergence statute in 2006, the Electronic Communications Act. The objectives of this Act are: 1 to create a single statute for the electronic communications sector; 2 to provide for legislation that is technology neutral, and for the making of policy, licensing and regulation in an increasingly converged environment; 3 to provide for the greater liberalisation of the sector; and 4 to provide for less intrusive regulation by distinguishing between services requiring an individual licence and services requiring a class licence The data protection laws are closely related to privacy laws and there is currently no allencompassing privacy or data protection legislation. The right to privacy applies to online and offline activities and is internationally recognised as a fundamental right. Privacy is protected by the common law and Section 14 of the Constitution. The common law right of privacy is protected under the law of delict. In addition, South Africa has a variety of laws on intellectual property rights, including the Trade Marks Act, Copyright Act, Patents Act and Designs Act. In general, South Africa has IPR and data protection legislation that provide confidence by BPO clients. Finally, South Africa has comprehensive BPO-specific Quality Assurance Framework. These standards are referred to as ARP 099 (Recommended Practices). They cover: inbound contact centres, outbound contact centres and back-office operations. South Africa competes at global quality service benchmark levels. Mauritius In Mauritius, the Information and Communication Technologies Act 2001 repealed the Telecommunications Act 1998. This Act lays out the institutional and procedural guidelines for the regulation and democratisation of ICTs and related matters. The setting up of the ICT Authority, the ICT Advisory Council, and the ICT Appeal Tribunal is pursuant to the adoption of this Act.
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Subsequently, Mauritius has created an appropriate legal framework consisting of the Electronic Transaction Act, Data Protection Act, and Cybercrime and Computer Misuse Act. The Electronic Transaction Act is essentially the e-commerce law. The following are three examples of what the Act provides: • an appropriate legal framework to serve as the foundation to facilitate electronic transactions and communications and give a new orientation to the traditional way of doing business by fostering the conduct of transactions by electronic means; • the legal recognition and regulation of electronic records and electronic signatures for authentication purposes during the conduct of electronic transactions and the security of such records and signatures; • the regulation of the formation of contracts by electronic means; and • uniform rules and regulations aimed at establishing standards to combat fraud, forgery or any unlawful practice in order to build and ensure confidence in electronic records and dealings to promote electronic communications and transactions. The Data Protection Act provides for the protection of privacy rights of individuals in view of the developments in techniques used to capture, transmit, manipulate, record or store data relating to individuals. Finally, the Cybercrime and Computer Misuse Act provides for repression of criminal activities perpetrated through computer systems and aims at better protection against computer misuse. It also caters for new forms of Cybercrime, such as illegal interception of data and online child pornography. Kenya In Kenya, ICT issues are considered under various legislations. These include the Kenya Communications Act of 1998; the Science and Technology Act, Cap. 250 of 1977; and the Kenya Broadcasting Corporation Act of 1988. The national ICT policy (The Kenya Gazette, 2006) recognizes that these Acts are inadequate in dealing with issues of convergence, electronic commerce and e-Government. It thus also recognizes the need for a comprehensive policy, legal and regulatory framework which includes the following relevant aspects: • Support ICT development, investment and application; • Promote competition in the industry where appropriate; • Address issues of privacy, e-security, ICT legislation, cyber crimes, ethical and moral conduct, copyrights, intellectual property rights and piracy. The Kenya Communications (Amendment) Bill, 2008, which was to amend the Kenya Communications Act, 1998 and address some of the above challenges, was passed by parliament in December 2008 and the President signed it into law in January 2009. One of the key sections is on electronic transactions under Part VII. In this part, the new Act, among other things, gives legal recognition of electronic records; recognizes electronic messages as valid for the formation of contracts; and supports the use of electronic records and electronic signatures in government and its agencies. The new Act also deals with various aspects of ICT and cyber crimes, including: • unauthorized access to computer data, • access to computer system with intent to commit crime, • unauthorized access to and interception of computer service, • unauthorized modification of computer material, • damaging or denying access to computer system, 22
• • •
electronic fraud, tampering with computer source documents, and publishing of obscene information in electronic form.
Inclusion of e-transactions in the Kenya Communications (Amendment) Act, 2009 is a great step in the right direction. It demonstrates the MoIC’s commitment to e-transactions. By including e-transactions in the converged Bill, the Ministry rightly recognizes the technology convergence that has occurred in the digital world. While this convergence is a reality that has been recognized globally, most of the countries Kenya may be competing with in the BPO industry have not converged their laws. They all have stand-alone laws that regulate etransactions. The practice in other countries has been to create a separate e-transaction legislation. Examples include South Africa’s Electronic Communication and Transactions Act, 2002; India’s Information Technology Act, 2002 amended in 2006; Egypt’s e-Signature Law No. 15/2004; Philippines Electronic Commerce Act 8792, 2000; and Singapore Electronic Transactions Act, 2001. For now, Kenya should use the relevant provisions in the Kenya Communications (Amendment) Act, 2009 to spur the growth of the BPO sector. However, in future, this Act will need to be reviewed to align Kenya with the international best practice of creating separate legislations for critical aspects of the ICT/BPO sectors, harmonize with the East African neighbours’ and the East African Community laws in these sectors, and address certain limitations in the Law. These limitations include not ensuring cross-border recognition and enforcement of electronic transactions, limited range of cyber crimes and lack of provision for limitation of liability for service providers (intermediaries) for 3rd party content despite the agency involved in e-transactions. Intellectual property rights (IPRs) are covered under a number of laws in Kenya: The Industrial Property Act of 2001 covers patents, industrial designs and “lesser” patents; the Trade Marks Act covers trade marks; and the Copyright Act of 2001 covers copyrights, including software. The provisions for the intellectual property rights in these acts in a knowledge era are weak, especially the protection of IPRs, and need to be addressed. The study established that there are efforts to revise the Copyright Act. It is important that this revision strengthens the intellectual property rights in ICTs and BPO sectors, especially for software development. There is also the Freedom of Information Bill, which if enacted, will, among other things, enable the public to access information in the possession of the government and public authorities and certain private bodies that have a public character. This Bill proposes a Commission be established to enforce data privacy and security together with other stakeholders, such as CCK. This apparently is what is delaying the processes of creating a data protection legislation. The researchers recommend that the creation of the two pieces of legislation (data protection and freedom of information) move in parallel. Kenya’s Employment Act 2007 promotes equal opportunity in employment and strives to eliminate discrimination in any employment policy or practice. Some of the provisions of the Act are: • no discrimination against an employee or prospective employee or harass an employee or prospective employee on grounds of race, colour, sex, language, religion, political or other opinion, nationality, ethnic or social origin, disability, pregnancy, mental status or HIV status • 1 day of rest in every seven days • 21 days of leave for every 12 months of work 23
• • • • • • •
3 months and two weeks maternity and paternity leave, respectively (annual leave notwithstanding) per year with full pay 7 days of sick leave per year with full pay and thereafter 7 days with half pay enough pay to obtain reasonable accommodation sufficient supply of wholesome water sufficient and of proper medicine during illness and if possible, medical attendance during serious illness 28 days of notice for termination of employment or payment of 28 days in lieu of notice protection of children from exploitation as child labourers
From the above, this Law is very protective of the employee. The established BPO firms will have no problems complying with it but start-up firms will have challenges in compliance. The law however does not have provisions for a 24-hour economy and for employees working at night and/or at odd hours, which is typical of BPO work. Data protection is critical in BPO operations and Kenya does not however have data protection legislation. It was established that the National Communications Secretariat has produced a raw draft of a data protection legislation. However, this had not been subjected to stakeholder discussion. It is important to note that Kenyan BPO firms will still be required to adhere to the Data Protection Act(s) of the countries which they are providing BPO services to, regardless of our act being in place. A final critical issue concerns incentives for the BPO sector. It was established that the law on incentives is being developed and that the Ministry of Information and Communications is currently leveraging on the current EPZ Law to offer incentives to BPO firms. It might be important to think of an-all inclusive law that spells out the incentive frameworks for all types of companies that may be set up the planned special economic zones.
3.1.3.Institutional Framework
India The National Association of Software and Services Companies (NASSCOM) is India’s private sector lobby group whose members come from software development, software services, software products, consulting services, BPO services, e-commerce and web services, engineering services and animation and gaming. It has regional offices in major cities in India and has been extremely effective. It works very closely with the Government to implement the required policy issues and education system and to grow the industry. The Association also works with academic institutions to develop and update curricula. NASSCOM has evolved to become India’s voice in the industry, both domestically and globally. It started small but has grown to become an authority in IT-BPO Services in India and globally. The other important institution for the BPO sector in India is the Data Security Council. This is a government body including industry players that was formed to manage and limit fraud and cyber crime in India. Such a council gives clients confidence in a country as it demonstrates the seriousness with which the Government takes cyber crime.
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South Africa The main institution that works for the BPO sector in South Africa is the Business Processing enabling South Africa (BPeSA). BPeSA, in close collaboration with the Regional Associations (Calling the Cape, Contacting Gauteng and the KZNonSOURCE), is involved in vigorous marketing of South Africa as an excellent outsourcing destination. The Regional associations ensure equitable growth of the BPO sector in all geographical areas in South Africa. In addition, South Africa has National Contact Center Union (NCCU). As a union representing one of the fastest growing sectors in South Africa, the NCCU offers support and protection to its members when it comes to labour-related issues in the workplace. Unionized contact centre employees experience significant benefits, including: • Improved working conditions • More frequent, quality training • Skills development • Greater opportunities for advancement • Greater bargaining capability • Empowerment Another institution is the Independent Communications Authority of South Africa (ICASA), which is the regulator of telecommunications and the broadcasting sectors in South Africa. It is not clear whether ICASA has a role to play in the BPO sector in South Africa. Others are Department of Communications, which is in charge of telecommunications policy, ecommerce policy and information society issues; the Department of Public Service Administration (DPSA), which is responsible for developing IT policy for government and coordination of all government IT initiatives. It is not clear whether these departments developed the BPO policy. Department of Trade and Industry plays a key role in supporting and promoting training programmes are specific to the BPO and call centre industry. Mauritius In Mauritius, the Board of Investment (BOI) is the key institution that many firms claim has helped to grow the BPO/ITES sector. BOI is dynamic and has become critical in creating and maintaining links with existing and potential external clients. It has offices abroad to assist potential investors to start businesses in Mauritius and regularly organizes missions abroad to market Mauritius as an outsourcing destination. The other government institutions that have significant roles on outsourcing are the National Computer Board and the Information and Communication Technologies Authority (ICT Authority). The former empowers people by creating ICT awareness and spreading IT culture in Mauritius and empowers businesses by promoting the development of the Mauritian ICT industry and operating incubator centres for start-ups in the ICT sector. The latter, which is the ICT regulator, licenses BPO firms. Finally, there is the Outsourcing & Telecommunications Association of Mauritius (OTAM), an association which brings together call centres/BPOs, software developers, International Long Distance (ILD) operators and Internet Service Providers. OTAM promotes the interests of its members through negotiations with government and the authorities, promotion of 25
networking and participation in regional and international fairs, organisation of ICT forums and activities aimed at the development of the ICT sector in Mauritius. It credits itself for successfully lobbying for the Data Protection Act. Kenya Kenya has a number of institutions that are key for the BPO sector. One of the key ones is the Kenya ICT Board, whose objectives are: ? . To develop and position Kenya as the preferred ICT destination in Africa; ? ? . To develop and promote competitive ICT industries in Kenya; ? ? ? . To develop world class Kenyan ICT institutions; and ? ? . To increase ICT access, utilization for all Kenyans (become a principle driver in bridging the digital divide) There has been little visible benefits of the Kenya ICT Board for the BPO sector. The key development has been the bandwidth subsidy but many BPO firms did not qualify for varying reasons. There are a few that did say it has enabled them to be more competitive. The Board has been organizing various trainings and meetings for BPO firms but the clear output based on this is not clear in the public domain. Kenya Investment Authority (KenInvest) is the second key institution for the BPO sector. It provides professional assistance, facilitation, information and advice to local or a foreign investors seeking to establish a new investment or expand existing investments in Kenya. Two of its key responsibilities of KenInvest are to facilitate the implementation of new investment projects and to organize investment promotion activities both locally and internationally. The Brand Kenya Board (BKB) is a state corporation established as a body corporate in accordance with the State Corporation Act (Cap.446). The Board's mandate is to ensure an integrated national brand is created, harnessed and sustained for the long term. The Board has two key objectives; to build national identity and pride in every Kenyan and to instill confidence in Kenya among foreigners, be they investors, development partners or tourists. It is expected that the marketing of Kenya as a BPO destination will be done by Brand Kenya Board. The Export Promotion Council's (EPC) key mandate is to develop Kenya’s exports of products and services. EPC has been instrumental in training services-oriented exporters on how to market their services. The EPC has been working with the Kenya’s BPO Association to train its members on how to market their services. The EPC also organizes annual networking sessions, through the Bridges Across Borders program in collaboration with the International Trade Centre in Geneva. The EPC in previous years used to focus mainly on developing the export of products sector. However, they are now placing a lot of emphasis and resources on the export of services, with BPO being one of the key areas they are focusing on. The EPC has a wealth of resources from the ITC in Geneva, which are being disseminated to the BPO industry in Kenya, as well as other professional services sectors. The Communications Commission of Kenya (CCK), the ICT regulator, plays a peripheral role in the BPO sector. It registers BPO firms at an annual fee of Ksh10,000. However, many firms are resisting this registration. This is an issue that needs addressing. Another institution 26
that also has potential to play a role is the Ministry of Higher Education, Science and Technology. It has initiatives to incubate software development and plans to put up technology parks. Kenya Industrial Research and Development Institute (KIRDI) and the Ministry of Industrialization are also involved in ICT incubation. For example, working with KICTB, Ministry of Industrialization, UNIDO and an Indian software development company, KIRDI is running a software entrepreneurs incubation programme (www.kirdi.go.ke). Finally, there is the Kenya BPO and Contact Centre Society (KBPOCCS). This is the private sector association representing the needs of the Contact Centre and Business Process Outsourcing industry in Kenya. The objectives of this industry association are to market the industry locally and internationally, to represent needs and interests of the industry, to set up standards and to strengthen the industry. Although this association is very young, it is just but one of the many associations in the ICT and BPO industries. The others include the Computer Society of Kenya (CSK), IT Standards Association (ITSA), KEPSA’s (Kenya Private Sector Alliance) ICT Sector Board, Telecommunications Service Providers Association of Kenya (TESPOK), etc. Almost all these associations are small and ineffective. If these associations are to be effective, there is need for consolidation to create a strong ICT and BPO industry association. It can be observed that there are very many organizations trying to market Kenya as a BPO destination. These include the Kenya ICT Board, KenInvest, KBPOCCS and the newly formed Brand Kenya Board. It is now evident that all these bodies will now have to work closely with BKB in marketing Kenya as a BPO destination, without duplicating effort and resources. There could be other duplications as well. For example, Kenya ICT Board plans BPO parks, Ministry of Higher Education, Science and Technology plans for science/technology parks, Ministry of Industrialization plans for industrial parks and Ministry of Trade plans for incubation parks. Other ministries also plan relevant parks for their functions. Although the government has expanded the concept of EPZs into special economic zones (SEZs) to take care of these varieties of parks and anchored in Vision 2030, it is possible that without proper coordination there will be unnecessary and costly duplication of efforts. There is therefore need to coordinate between the various ministries and public enterprises involved. The big question is: Who will perform the coordination? The coordination would ordinarily be expected at the Cabinet level but it is often too late to coordinate at Cabinet level and it often leads to delays in consultations. Within the current political set up, coordination at the Cabinet level may be challenging to achieve. Finally, the Monitoring and Evaluation (M&E) Directorate in the Ministry of State for Planning, National Development and Vision 2030 has never been devolved into the ministries and public enterprises. Whether it is a consequence of this lack of devolution or not, the M&E capacity of the Ministry of Information and Communications, Kenya ICT Board and all the other institutions highlighted earlier is weak. At the same time, the institutional framework for Vision 2030 is in the formation stages and, even if it were to develop strong M&E capabilities, it may not be able to marshal enough power to ensure corrective action is taken by the concerned institutions across all the ministries and public enterprises.
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3.2.Tax, Infrastructural, Bandwidth and Other Incentives
3.2.1.India
The Government of India takes the BPO sector very seriously as it has proved to be not just a job creating sector but a great income earner for the country, at an estimated USD$60 billion for the year 2009. In order to determine the incentives the industry needs, the Government actively engages with NASSCOM, to ensure that the incentives needed by the industry are put in place to propel the growth of the industry. India has special economic zones where they offer the following incentives: (i) 100% tax holiday for the first 5 years, 50% for next 5 years, and up to 50% for balance 5 years in the IT-BPO sector. (ii)Exemption from excise duties, service and sales taxes for all IT-BPO related businesses. There has been a progressive reduction in the excise and import duties, lifting of import restrictions and easing of FDI caps. These benefits are restricted to prescribed zones with a minimum area of 25 acres. License application procedures are easy;. businesses operating in this sector have quick registration procedures to encourage as many such companies to set shop. Other incentives for BPO sector in India are: • Accelerated Power Development and Reform Programme initiated in 2001 for fast track reform in the distribution segment. • Boost to domestic airlines with the removal of tariffs like Air Travel Tax. • The National Highways Development Programme (NHDP) that made India have the second largest road network in the world totalling more than 3.3 million kms. • Special IT-specific infrastructure is available in the Software Technology Parks of India (STPIs). There are presently 35 government and 25 private Software Technology Parks (STPs), which have made significant contributions to national software exports. • Liberalized norms have been put in place for investments of up to 100 per cent foreign equity with full repatriation benefits. • Tax related incentives such as 90% of profits from software exports is exempted from tax, up to 100% repatriation of benefits, 100% income tax exemption on exports up to 2010, zero customs duty for import of software and hardware for export projects, etc In recent years significant trunk capacity added in the form of fiber-optic cable and one of the world's largest domestic satellite systems, the Indian National Satellite system (INSAT), with 6 satellites supporting 33,000 very small aperture terminals (VSAT) increased India’s bandwidth capacity.
3.2.2.South Africa
South Africa has a fairly well developed BPO industry, given its strong economy. The industry in South Africa is largely domestic owing to the large businesses. When South
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Africa decided to start marketing itself as a potential outsourcing destination to Europe and the rest of the world, it had to put in place various incentives to attract such business. The public sector in South Africa has made a long-term commitment to the BPO sector, supported by the Office of the President. The South African government has identified the Business Process Outsourcing and Off-shoring (BPO&O) sector as one of the top three priority sectors to stimulate growth within its Accelerated Shared Growth Initiative (ASGISA). The sector is identified for its potential to attract investment and create employment opportunities in the economy. To realize this vision, the Department of Trade and Industry (DTI) has introduced an incentive programme to attract investment in the sector. The incentive is offered to local and foreign investors establishing projects that aim primarily to serve offshore clients. There are attractive financial and non-financial incentives. A government-backed BPO support programme, launched in 2007, aims to enhance South Africa's competitiveness and included a budgeted R1.1 billion in investment incentives. The plan focuses on: • A broad-based marketing strategy. • A government support programme which includes an investment grant and training subsidies. • A developmental pricing framework for telecommunications. The BPO specific incentives to invest in the country include: (a) Investment incentive grant. The South Afican Government is keen on developing the offshore outsourcing market. As a result, it has introduced an investment incentive grant for local and foreign companies that primarily aim to serve offshore clients. The objective of this incentive is to attract BPO investment that creates employment opportunities. The grant is from R37,000 to R60,000 per seat, the amount given dependent on the level of qualifying investment expenditure and employment creation. The qualification required is a minimum of 200 seats and 90% of revenue must be derived from offshore. This incentive grant program started on 6th December 2006 and will run for a period of 5 years until 31st March 2011. Table 3.1 shows how the grant is calculated. (b) Training and skill support grant. This grant supports company specific training requirements which include In-house trainer/facilitator/assessor development skills, cost for developing learning materials, cost for trainer secondment to South Africa and cost of purchasing and installing training equipment and facilities. The grant is up to R12,000 per agent (c) Export market and investment assistance. This is to assist exporters to develop markets for their products. (d) Technology industry finance. South Africa government offers competitive risk related rates based on prime interest rates for investments in technology intensive businesses. This is most suitable for software development. (e) Enterprise Development. This is R&D capacity building and certified BPO staff. South Africa is encouraging certification of BPO staff and BPOs themselves so as to provide standards required by international clients. However investors are yet to take advantage of the abover incentives because of the strict qualification criteria. For example, one has to have created a certain number of jobs in order
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to qualify. Many investors are not operating in the scales stipulated hence few companies qualifying. Other Government initiatives include: • Special programs such as e-Government, ICT Research and Development (R&D), Business Process Outsourcing and Operations (BPO&O), Broad Based Black Economic Empowerment (BBBEE) in South Africa and Free and Open Source Software (FOSS), which enable the widespread use of ICT products and services. • KZNonSOURCE a local government initiative with a mission to facilitate the establishment of call centres in the Province of KwaZulu-Natal to meet clients and their customer needs. The BPO Association (BPeSA) and the Regional Associations get a good percentage of their funding from Government. This makes the associations much more active and visible, which in turn helps them to sell the Country.
3.2.3.Mauritius
Mauritius is one of the more established outsourcing destinations in Africa, much as many do not perceive it to be in Africa. It had incentives like other countries but abolished them. The argument was that the BPO companies benefited more while the country hardly benefited from the investment. The only incentive that Mauritius has left is a 15% corporate tax, which is one of the lowest globally. It is still not clear why the government of Mauritius has this argument considering that if the companies attract work, the country will get revenues streaming in. This argument may only hold if the companies in outsourcing in Mauritius have been remitting the funds abroad instead of in Mauritius. In this case, it is prudent for a country to ensure that even as foreign owned companies are enjoying subsidies, most of the revenue generated should remain within a country. The Government of Mauritius has ensured doing business in and from Mauritius is both easy and smooth and complies with best practices in terms of transparency, good governance and ethics. Mauritius has enacted anti-money laundering and terrorist financing legislation while the business framework itself has been made simpler. Commercial law in Mauritius is a combination of the English Common Law and the French Code Napoléon. The Business Facilitation Act 2006 has further simplified the operational framework for doing business in Mauritius. Foreign nationals are allowed to work and/or live in Mauritius under three distinct and simply laid down schemes: As a retired non-citizen, irrespective of age and nationality; as a professional; and as an investor. A "Work & Live in Mauritius" (http://www.boimauritius.com/WorknLive.aspx) department has been set up within the Board of Investment (BOI) as a single-facing service counter to expedite formalities for individuals and investors setting up in Mauritius.
3.2.4.Kenya
Kenya’s BPO industry is fairly young and is still in the process of setting up the required institutional framework needed by the industry. Various incentives have been put in place by different institutions involved in the industry. Amongst these institutions that are mandated to 30
come up with incentives to grow this industry are Kenya ICT Board, KenInvest, Export Promotion Council and Export Processing Zone Authority. In Kenya, the following tax incentives are granted to EPZ companies: • 10 year corporate income tax holiday and a 25% tax rate for a further 10 years thereafter (except for EPZ commercial enterprises) • 10 year withholding tax holiday on dividends and other remittances to non-resident parties (except for EPZ commercial licence enterprises) • Perpetual exemption from VAT and customs import duty on inputs – raw materials, machinery, office equipment, certain petroleum fuel for boilers and generators, building materials, other supplies. VAT exemption also applies on local purchases of goods and services supplied by companies in the Kenyan customs territory or domestic market. Motor vehicles which do not remain within the zone are not eligible for tax exemption • Perpetual exemption from payment of stamp duty on legal instruments • 100% investment deduction on new investment in EPZ buildings and machinery, applicable over 20 years • 100% foreign ownership for a period of three years. Thereafter, 20% must be transferred to local ownership. Any BPO firm setting up operations in EPZs is entitled to the above benefits. There are however many BPO firms outside the EPZs. It is hoped that when the special economic zones in Vision 2030 are established, BPO firms will be accommodated and will enjoy the SEZ package of incentives. There is however one apparent contradiction which needs to be addressed. While firms are allowed 100% foreign ownership in the EPZs, the license from CCK requires a maximum of 80% of foreign ownership. The Kenya ICT Board (KICTB) is tasked with developing the outsourcing industry in Kenya. According to KICTB, the government is considering substantial incentives to encourage the growth of the BPO sector. These incentives include: (a) Tax incentives o Reduced income taxes for both expatriates and key national employees o Corporate tax holidays for BPO firms, with reduced tax after the holiday o BPO firms can obtain EPZ status, with a tax holiday followed by reduced tax rates (b) Custom duties o VAT exemptions for local purchases of key inputs (c) Set-up & training subsidies o Subsidies as specific set-up costs o Subsidies for relevant training programmes o Discounts for rents in BPO specific locations (d) Reduced regulatory/ burden o Speeding up the process of setting up new BPO providers o Simplifying hiring and firing processes Other Government initiatives are: (a) The allocation of Sh900 million in the Budget towards the creation of a Business Process Outsourcing park
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(b) Stimulating the growth of the local ICT industry through government patronage of local ICT industry products and services (c) Promoting the development, adoption and enforcement of international standards within the ICT industry to facilitate the development of a world-class and globally competitive local ICT industry and services sector; (d) Promoting the development of a broad engineering base, especially in the maintenance, repair and fabrication of ICT equipment; and (e) Improving the environment in which enterprises, especially SMEs develop and grow, in particular by increasing their access to information, support services and investment capital and resources, especially those targeted at the ICT industry and services sector. (f) Aggressively developing, promoting and enhancing Kenya’s image as a competitive regional destination for ICT foreign direct investment (FDI). (g) Establishment of the Kenya ICT Board in 2007 to advise government on all matters pertaining to Information Communication Technologies. The Government and the World Bank have initiated a Sh7.8 billion ($116 million) ICT project which is bound to revolutionize the ICT sector in the country. The Kenya Transparency and Communication Infrastructure Project (KTCIP) will, among other things, facilitate connectivity for the Country’s emerging business process outsourcing industry, support the creation of digital villages in rural and urban areas and accelerate provision of eGovernment services. KTCIP has two fundamental objectives: to extend the reach of ICT connectivity and reduce prices of its access; and to contribute to the improvement of Government efficiency and transparency through e-Government applications. One of the key incentives that BPO operators expected was bandwidth subsidy. This is because of the high cost of satellite bandwidth, which makes Kenya not able to compete on fair terms with other BPO destinations globally. The Government of Kenya successfully negotiated for a BPO “Bandwidth Support Capacity Purchase Scheme” support line in the Financing Agreement signed with the International Development Association for the Kenya Transparency and Communication Infrastructure Project (KTCIP). According to this scheme, for every incremental bandwidth above the level at 31st December 2006, KICTB would pay the difference between the actual cost and US$ 500 per 1 Mbps. This tariff level (US$ 500 per Mb/sec) was deemed to be at par with competitive destinations (e.g. India) and was meant to allow operators to focus on business development related activities and expenses in order to grow. Results so far indicate that only 23 companies applied out of which only 7 have received the subsidy. According to KICTB, one of the key reasons for the small number of beneficiaries is that many of the vendors did not provide the required supporting documentation as per the World Bank MoU requirements citing mistrust of providing their confidential documents to government officials. Following the poor response and imminent arrival of fiber cables in June, KICTB has successfully applied for an extension of the period to 31st December 2009. It is however still not clear whether more firms will now come out to apply or be granted the subsidy thus the extension may still not yield the desired results.
3.3.Human Resource Issues
This is a synthesis of the human resource issues in South Africa, India, Mauritius and Kenya. In a glance, Figures 3.1 to 3.3 show the differences between the four countries with respect to labour force as a percentage of population, graduates per year as a percentage of population 32
and monthly pay for operators and professional staff. It can be observed that in terms of unemployment percentages, both Kenya and Mauritius have a very small labour force (Figure 3.1). At the same time, Kenya seems to have the highest unemployment rate compared to the other countries (Figure 3.2). In addition, Kenya, India and Mauritius have comparable figures of graduates per year as a percentage of population, at slightly less than 0.1%. However, South Africa has more graduates per year in comparison to its population compared to the other countries, at 0.24%. However, in terms of supply numbers, India leads by a huge margin while Mauritius has a very small supply of graduates (Figure 3.2). Finally, Kenya seems to generally pay lower salaries to BPO staff (Figure 3.3). However, if this is normalized to a norm of living standards, the picture could change.
Figure 3.1: Labour force as a percentage of population
Figure 3.2: Graduates per year and unemployment rate Kenya South Mauritius Africa Population 39,002,77 49,052,48 1,284,26 2 9 4 Graduates/yr 30,00 120,00 10,00 0 0 0 Graduates/yr 0.08 0.2 0.7 as % of popu4 8 lation Unemployment rate 40% (2008 est.) 21.7% (2008 est.) 7.6% (2008 est.)
India 1,166,079,21 7 1,000,000 0.09
6.8% (2008 est.)
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Figure 3.3: Monthly pay of operators and professional staff
From table 3.2, it can be observed that professional staff require at least a Bachelors degree across all countries. Although the sample of firms surveyed is not nationally representative, it can also be observed that in-house training is the key method of training in all countries except in Mauritius, where clients and colleges rank higher. A nationally representative sample is likely to reveal a different trend.
Table 3.2: Summary of findings Kenya Salary range (Man$500 - $3500 agers) in US$ Salary range (Profes- $500 to $1500 sional Staff) in US$ Min. qualifications Bachelors degree (Professional Staff) The most critical 1. In-house training methods, in 2. Colleges order of importance 3. Online courses South Africa $1500 to $8000 $2000 - $3000 Bachelors degree 1. In house Mauritius $1000 and above $500 to $1200 Bachelors degree 1. Client provided 2. Colleges 3. In-house 4. Online India $800- $4000 $800 to $2500 Bachelors degree 1. In-house 2. Client provided 3. Online courses
In the following sub-sections, the findings from the individual case study countries are described in more detail.
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3.3.1.India
In general, BPO Client Companies prefer destinations where there is abundant supply of skilled human resources. University/College graduates have been noted as one of India’s most valuable asset. In the 2009 A.T. Kearney Global Services Location Index, India leads with a score of 2.48 on “people skills and availability” sub-index, with South Africa and Mauritius at 1.02 and 0.95 respectively. Kenya is yet to make it to this index. India produces approximately 1 million graduates per year. The other countries compare very badly on this score; South Africa 120,000, Kenya 30,000 and Mauritius about 10,000 (estimated). Similarly at the secondary/high school level, India produces tens of million of school leavers every year. The key characteristics of the Indian ITeS/BPO human resource landscape are outlined below. Attrition rates The BPO industry employs about one million people, but the challenge is to maintain quality human resources given the attrition rate of around 35% in non-voice and 45% in voice call centers. It was also noted that more than 60% of those who left a particular BPO did not leave for a competitor, but left the industry as a whole. Table 3.3 shows the attrition rate across industries. It can be observed that the BPO industry has one of the highest attrition rates, especially in the first three years.
Table 3.3: Attrition rates across sectors Sr. Sector 0-3 4-7 No years years 1 Pharmacy & 25.00% 10.00% Chemicals 2 Manufacturing 8.58% 2.46% 3 Financial Services 20.00% 20.00% 4 Hospitality 35.00% 25.00% 5 Ad & Media 40.00% 35.00% 6 BPO 40.00% 30.00% 7 Automobile 7.00% 3.00% 8 Auto Component 12.00% 15.00% 9 Banking 10.00% 5.00% 10 Infrastructure 16.00% 11.00% 11 IT & Telecom 32.00% 25.00% Source: Emmay HR / BusinessWorld, 4 Feb 2008 8-12 years 5.00% 2.46% 20.00% 20.00% 20.00% 20.00% 2.00% 20.00% 2.50% 7.00% 10.00% 13+ years 2.00% 3.00% 20.00% 7.50% 15.00% 10.00% 2.00% 12.00% 2.50% 11.00% 5.00% % change from 2006 to 2007 -5.00% 5.00% 13.00% 17.00% Not visible 5.00% 2.00% 9.00% 5.00% Expected increase in 2008 6.00% -3.50% 20.00% 22.00% 14.00% 6.00% 2.00% 20.00% 9.00%
Some of the reasons given for high attrition rates are: • Many see BPO jobs as menial, monotonous and physically strenuous. • People who join a BPO usually do so to make a 'quick buck’ and to await better opportunities. • The industry has concentrated on hiring young, dynamic personnel and these are looking for more than just a job. • Performance is often overlooked, which leaves the deserving few disgruntled with top management and hence fosters attrition.
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BPO operators have attempted to solve this by hiring mature talent people over 35 years of age. Other methods used are: • Offer of training in generic courses like management diploma and Masters in Business Administration (MBA). • Use of psychometric tests to get people who can work at night and handle the monotony • A secure career with progression, benefits, perks and transport. • As an employee retention strategy, good performance must be recognized and suitably rewarded. • Hire out-station candidates (from small towns) and provide them with shared accommodation. • A comprehensive process framework and a congenial work environment Skills required Table 3.4 shows the skills required in each of the verticals. It can be observed that these skills are quite basic.
Table 3.4: Skills required in each of the verticals Segments Skills Call Centre Good communication and language skills, accent understanding team leadership, basic computing skills Remote customer interaction Language and accent understanding Date search, Integration Computing, language and analytical skills Human Resource Services Country specific HR policies, rules and regulations Remote education Subject knowledge, computing and language skills Engineering and design Technical and engineering design and computing skills Translation, Medical Language understanding, basic computing (word processing Transcription and knowledge) and understanding of various medical terminologies Localisation Animation Drawing and creative skills, computer graphic skills Finance and Accounting International/country specific accounting rules Market Research Understanding statistical sales and marketing concepts Network Consultancy and Understanding different network configurations and support management equipment, technical/computing skills
Source: http://www.bpoindia.org/knowledgeBase/hr-attrition.shtml Quality of English Apart from Mumbai, Delhi and Bangalore, the quality of English among the graduates applying for jobs in the ITeS industry needs to improve. The effect of this is that client countries are turning to Philippines, Ireland and Singapore as well as the emerging destinations such as Egypt and the Middle East. Other human resource issues include: • Fluent English, communication and customer service skills are generally strong; however accent is still an issue. • At a very early stage, children are introduced to science and technology and this helps to nurture a strong culture and interest in these fields. • Call centres practice continuous recruitment and training of call centre agents. A database of suitable candidates is maintained, and thus it is possible to meet client’s demands of scalability on time.
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• •
Numerous international brands have their offshore operations in India and send experienced and highly skilled staff from their home offices to work in the India operations, thus transferring skills to the local population. National Skills Registry (NSR) is an industry initiative to ensure that individuals employed by organizations have their background and antecedents verified, thereby preventing, if not eliminating, the menace of fake resumes. This is an institutionalized mechanism through which objectively verifiable data of an individual is independently checked.
3.3.2.South Africa
The Skills Development Act 1998, established the National Skills Authority, Sector Education and Training Authorities (SETAs), and other bodies in the Department of Labour to promote development and training. One of the stated purposes of the Act is to improve the employment prospects of persons previously disadvantaged by unfair discrimination and to redress those disadvantages through training and education. The BPO Sector in South Africa is characterized by the presence of a high proportion of white senior managers which gives the impression of ‘white-culture’ which is a strong marketing point for BPO industry in mostly Europe and USA. The SETA's have been established in terms of the Skills Development Act and are responsible for disbursement of the training levies payable by all employers. These levies are collected by the South African Revenue Service via the Department of Labour, and are disbursed through a management system motivated by skills requirement assessment and monitoring. Thus SETA's will ensure that the skill requirements of the Sector are identified and that the adequate and appropriate skills are readily available. The SETA would contribute to the improvement of sector skills through achieving a more favourable balance between demand and supply, and would ensure that education and training: • Is provided subject to validation and quality assurance; • Meets agreed standards within a national framework; • Ensures that new entrants to the labour market are adequately trained, and; • Acknowledges and enhances the skills of the current work force. The Government has also formulated an elaborate incentive programme that is part of a holistic value-proposition to position South Africa as a preferred destination for investors in the BPO sector. The Training and Skills Support Grant is provided directly to approved projects towards costs of providing company specific training (as opposed to industry wide training).
3.3.3. Mauritius
Mauritius produces an estimated 10,000 graduates per year. This creates scalability problems and as a result the country is keen to collaborate with other African countries to address this challenge. In Mauritius, the National ICT Policy 2007-2011 emphasises reform in the education sector, the main policy measures implemented being:
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• • •
Review of the curricula at the level of primary and secondary levels in order to improve the quality of education for Science and Technology and introduce new learning methods; Improve the IT base of primary and secondary schools and increase the use of e-learning; and Equip teachers with the necessary ICT skills in order to improve pedagogy for the benefit of learners
Training is key as illustrated by the initiative to create an ICT Academy by the Outsourcing and Telecommunication Association of Mauritius (OTAM) (the BPO industry association) in collaboration with the Mauritius Government to train people after Higher School Certificate, where they would be offered vocational and professional courses. In addition, OTAM is working towards public-private partnership with the University of Technology of Mauritius that would also offer training to people in Reunion and Madagascar. One of the country's strengths as a BPO destination is a population that speaks both French and English making the workforce an attractive one for firms seeking to set up and serve European clients. The linguistic richness is a uniqueness of the island's history. Mauritius has the advantage of properly documenting their national graduate’s database and marketing it appropriately to potential clients in Europe/America. In addition, the Researchers noted that Mauritius had a government funded but Private-Sector oriented ICT Academy that produced graduates specifically for the ICT industry. In order to complement the small skilled labour force, the government set up a flexible labour policy that allows firms to bring in highly skilled workers that the economy needs, confident in the belief that this will not only create income streams in the economy but also bring gains to the country’s citizens by jump-starting businesses that would otherwise take many years to start with domestic workers alone.
3.3.4.Kenya
Various policy documents reviewed indicate that efforts have been made towards strengthening adoption and use of ICT in the education sector. Sessional Paper No. 1 of 2005 on Policy Framework for Education, Training and Research aimed to develop a national ICT education policy and strategy and also facilitate the formation of a National ICT coordination mechanism with sectoral committees to address specific sector training needs. Vision 2030 targeted BPO training programmes around primary processes (e.g. Customer Interaction Services) and industry specifics (e.g. back-office data entry within financial services) to be conducted to build the required quality and size of the talent pool. However, the implementation details for these policy pronouncements have not been provided. The National ICT Strategy for Education and Training (June 2006), a by-product (partly) of Sessional Paper No. 1 of 2005, aims to facilitate transformation of human resource capacity through the use of ICT to support teaching and learning targeting all levels of education especially primary and secondary schools. It was established that in the first three years, the first round of 213 schools in Kenya (out of the 4,000 secondary schools and over 20,000 primary schools) have been equipped with ICT Infrastructure. This implies that over 127,800 secondary school students are getting hands on experience on basic ICT skill sets. More 38
schools are expected for the 2009-2010 financial year. Computers for Schools initiative has provided over 16,000 computers in over 531 institutions as well as developing and implementing programmes for training of trainers, educational administrators and managers. Kenyans generally have a neutral accent and English is the official language. There is no database of ICT-BPO skills is available in the Country. In 2006, the Computer Society of Kenya conducted an ICT skills survey to determine the anticipated demand for such skills in the Government, Commercial and Outsourcing sectors in Kenya. The resultant data quickly became obsolete as there was no mechanism for updates. However their data can be a useful basis for launching a fresh skills census. The Government had established an Industry-specific University (Multimedia University College of Kenya) to address the human resource gap; the impact of this is yet to be felt. Since BPO is one of the pillars in the Vision 2030, what needs to also be established is set of specific skills required for the BPO industry. The targeted training programmes can be utilised by Education Managers to tilt or include/enhance some skill sets within the curriculum that will form the foundation for further development either on the job or at tertiary level. In line with this need, the Government has established a cross-cutting Steering Committee coordinated from the office of the Head of Public Service and Secretary to the Cabinet, whose primary objective will be to review, design and implement new curricula in tertiary institutions with the aim of tripling the number of suitable graduates for the BPO&O industry from 5,000 to 15,000. Although a sector strategy on Capacity building does not exist, National Economic and Social Council (NESC) emphasizes that this as a key to the country’s competitiveness. In this regard finalization of the skills inventory and establishment of body to coordinate the BPO sector in general and human capacity development are critical.
3.4.Youth and Gender
The following is a synthesis of the findings on youth and gender in the three vendor countries (South Africa, India, Mauritius and Kenya) that were within the scope of this research. Table 3.5 shows a summary of the findings. It can be observed that the minimum employment age is highest in Kenya. It can also be observed that a high school certificate is the minimum qualification for agents across the countries. However, Kenya employs some agents with a degree. This perhaps may be attributed to the high levels of unemployment in the country. This category of employees (university graduates) is not likely to stay as agents for too long because generally it would be looking for what they perceive to be “better” jobs. A further finding is that the number of female employees at the operational levels tends to be slightly higher than that of the male employees in call centres in Kenya, South Africa and Mauritius where we obtained data. This is likely to be the case in the other India. On the other hand, male employees dominate in professional jobs in the three countries where we obtained data. Gender and age issues do not influence choice of employees by the vendor companies; see figures 3.4, 3.5 and 3.6 below
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Table 3.5: Summary of findings Kenya Min. employment age Min. qualifications (operators or agents) Global gender gap (2008) ranking (and score) Global gender gap (2008) – Male Labour force participation Global gender gap (2008) – Female Labour force participation Gender parity in back office operations Gender parity in call centres Gender parity in professional cadres 18 Certificate, diploma or degree depending on operation 88 (0.655) 90.00% 72.00% Approx. 50% Female > Male by 20% Male > Female by 20% Female > Male Male > Female South Africa 15 Grade 12 22 (0.723) 82% 49% Mauritius 16 School Certificate or below 95 (0.647) 84% 47% India 14 High School 113 (0.606) 84% 36%
Male > Female
Other findings to be found in Figures 3.4 and 3.5 reveal the following: • Age does not influence employment in Kenya, South Africa and Mauritius while work experience does (Figure 3.4) • Most of the employees in Mauritius in BPO-ITES firms are operators. Among the employees, there were more female operators than male operators amongst the youth as well as the non-youth (Figure 3.5)
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Figure 3.4: Factors that Influence Employment
Factors Influencing Employment
•
Percentage
150 100 50 0
No SA
Yes
Yes Kenya
No
No
Yes
Mauritius
Age Gender Education Work Experience
Yes-No/Country
Figure 3.5: Youth and gender employment in Mauritius
Mauritius: Youth and Gender Employment
40% 35% 30% 25% 20% 15% 10% 5% 0% M Below 25 F M 25-50 F M Over 50 F
Senior (Strategic) Manager Tactical Manager IS/ICT Manager Supervisor Operators
In the following sub-sections, the findings from the individual case study countries are described in more detail.
3.4.1.India
Large number of university graduates India produces approximately 1 million graduates per year. A strong culture of science and technology exists in India, right from Nursery School age. Currently the nation has the capability to graduate over 500,000 engineers annually. India's annual enrolment of scientists, engineers and technicians now exceeds 2 million. Fluent English communication and customer service skills are generally strong in India.
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National Skills Registry There is continuous recruitment and training of call centre agents by the call centres. They maintain a database of suitable candidates, and are thus able to meet their client’s demands of scalability on time. This is a strong selling point to clients. Favourable Labour Laws India provides for core labour standards of ILO for welfare of workers and to protect their interests which include maternity benefits and equal remuneration for both men and women. There is low female literacy of 47.8% in the country and low contribution of females to the workforce. NASSCOM has launched the Women in Leadership-IT Initiative to enhance participation of women into the workforce and create more women leaders in the IT-BPO industry.
Legal benefits to employees The following were the legal benefits to employees found in India: • Annual leave • Maternity leave • Medical cover • Sick leave
3.4.2.South Africa
Black Economic Empowerment Just like other sectors in South Africa, Black Economic Empowerment policy ensures equitable distribution (by race) of workers in the BPO sector. However, senior managers in the BPO sectors are mostly white. This gives the impression of ‘white-culture’ which is a strong marketing point for BPO industry in mostly Europe and USA. Favourable Labour Laws The Labour laws that govern the sector include: • Basic condition of employment: applies to all employers and workers and regulates leave, working hours, etc. • Family responsibility Leave • Employment equity • Skills Development Act meant to improve productivity in the workplace and the competitiveness of employers and to promote self-employment. • Skills Development Levies Act: Prescribes how employers should contribute to the National Skills Fund. Office on the Status of Women (OSW) This office was established in March 1997 and is responsible for advocating women rights in South Africa. It is located within the Office of the President hence very influential. One the key achievements by the OSW is that of coming up with the ‘South Africa's National Policy Framework for Women's Empowerment and Gender Equality’ which outlines South Africa's vision for gender equality and for how it intends to realize this ideal. This has already been presented to and passed by the Cabinet. The Framework, among other things, has a section on ‘Women and ICT’ that contains the phrase, ‘Allowing for gender perspectives of policies in communications means to understand fully how women and men have been socialized
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differently and, consequently, to understand the differential impacts of policy on women and men’. National Youth Economic Empowerment Policy & Implementation Framework [2002-2007] This framework was established under the hospices of the Department of Trade and Industry in South Africa. Its aim was to establish principles for youth development and identify strategic intervention areas. It addresses youth development across all sectors (BPO included) and it endeavours to ensure that all young women and men are given meaningful opportunities to reach their full potential. There is no gender or age based discrimination in the work place. Over 60% of employees in the technical operations are young people (below 30 years old). There exists no law or policy that prefers youth from other groups of people in employment. Also there exists no gender affirmative action in South Africa. The study also found out that there were 40% more females below 25 years than males and 7% more males above 25 years than females in the companies interviewed.
Legal benefits to employees The following were the legal benefits to employees found in South Africa: • Annual leave • Medical cover • Maternity leave • Sick leave • Paternity leave • Family responsibility • Other benefits that the employees enjoy include, incentives, commissions and monthly awards
3.4.3.Mauritius
Outsourcing and Telecommunications Association of Mauritius (OTAM) Training is key as illustrated by the initiative to create an ICT Academy by OTAM with the Mauritius Government to train people after Higher School Certificate, where they would be offered vocationally focused courses. In addition OTAM wants a public-private partnership with the University of Technology of Mauritius that would also offer training to people in Reunion and Madagascar. Salaries are not standardised and most industry players feel there is a need to standardise salaries this is clearly illustrated by the 2008 Mauritius ICT- BPO salary survey that was commissioned by CCIFM (Chamber of Commerce and Industry France Mauritius) and OTAM (Outsourcing and Telecommunications Association of Mauritius).
Legal benefits to employees The following were the legal benefits to employees found in Mauritius: • Annual leave • Medical cover
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• • • • •
Maternity leave Sick leave Paternity leave Transportation Other benefits that the employees enjoy include; Leave without pay, company car, laptop, performance bonus, transport allowance and car allowance
Favourable Labour Laws There is no 24 hour culture. Most shops, restaurants close by 5.00 pm while the public transportation stops operations at 7.00 pm. In general, researchers found that there is a negative perception of working in 24/7 environment, especially for female workers. This negative perception is further enhanced by the Labour Act that prohibits employment of female employees in industrial undertakings between 10 p.m. and 5 a.m. It also prohibits employment of young people between 6 p.m. and 6 a.m. In addition, the Labour Act does not allow an employer to employ a young person for more than 36 hours in a week. There are privileges for female workers which include that she may absent herself from work during pregnancy. All employees have sick leave, annual leave and additional leave of 2 days. In most cases the higher the academic level the higher the proportion of male employees. In high end jobs, there are 20% more male employees than female employees while in the lower end jobs, like call centers and back office operations, there are 40% more female employees than male employees. ICT Literacy, IC3 & ICT Awareness courses by National Computer Board are provided to women in different regions across Mauritius. ICT Literacy and IC3 courses are provided after which a certificate of attendance is issued.
3.4.4.Kenya
Legal benefits to employees The following were the legal benefits to employees found in Kenya: • Annual leave • Maternity leave • Paternity leave • Medical cover • Sick leave • Other benefits that the employees enjoy include: o Interest free loans o Subsidized food o House allowance o SACCO memberships o Temporary loans Free medical care o Auto loan program o Payment of commission
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Maternity Leave The 3 months maternity leave (The Employment Act, 2007; Section V (Rights and Duties in Employment), Section 29) and the not less than 21 working days of annual leave (Section 28) may work against women. Employers may find it costly and hence shun from employing women. In some cases, some female employees may invoke section 30 (sick leave) of the act and prolong the period for which the employer pays her without working. 30.(1) After two consecutive months of service with his employer, an employee shall be entitled to sick leave of not less than seven days with full pay and thereafter to sick leave of seven days with half pay, in each period of twelve consecutive months of service, subject to production by the employee of a certificate of incapacity to work signed by a duly qualified medical practitioner or a person acting on the practitioner’s behalf in charge of a dispensary or medical aid centre Maximum working hours and night shift By very nature of the BPO industry, employees may be for required to work for long hours as well night shifts. The Kenya’s Employment Act, 2007 does not explicitly provide adequate protection of the employees especially the youth and women. Under Section V (Rights and Duties in Employment), Section 27 on Hours of Work (page 37) only provides for the following: (1) An employer shall regulate the working hours of each employee in accordance with the provisions of this Act and any other written law. (2) Notwithstanding subsection (1), an employee shall be entitled to at least one rest day in every period of seven days From the above, it is clear that the Act is silent on the allowed maximum number of hours and also on working at night. Equal Remuneration In the Employment Act, 2007, Section II (General Principals); Section 5 (Discrimination is employment), part 4 says “An employer shall pay his employees equal remuneration for work of equal value.” This way, employees are protected against discrimination based on gender, age, etc. A similar but more elaborate Act exists in India(Equal Remuneration Act, 1976 (Act 25 of 1976 amended by Act 49 of 1987) Unequal Opportunities A higher percentage of Kenyan males (like everywhere in the world) tend to be more educated and hence occupy the higher rank jobs. Affirmative action which ensures equity in professional level jobs and that training should be provided to both genders to ensure upward mobility is enjoyed by both. This will ensure that women do not occupy low-level call centre jobs only but that we can have more women in the professional ranks. Promote BPO jobs among the youth There is need to raise awareness among the youth of the opportunities for career growth within the call centre industry. For example, in the outsourced operation/BPO, Call Centre Agents can move up to Trainer, Call Centre Manager, Quality Assurance, Analyst, Workforce Management, Operations, General Management and various other functions within the call centre. The youth in Kenya associate employment in the BPO Sector with ‘Call Centre’ which is translated to mean ‘just answering to phone calls’
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Enforcement and Enrichment of the Employment Act, 2007 There is need by the National Labour Board, Central Organisation of Trade Unions (COTU), Ministry of Labour and other related government agencies to ensure adherence to the law by the employers in the BPO industry. This way, protection of young and female employees can be assured.
3.5.Outsourcing in Client Countries
Overview US and the UK are the two main clients of outsourcing and as such, formed the two case studies for the Clients section of this research. In general, there is evidence of reverse outsourcing in both countries; clients now prefer vendors with presence at the client’s home country. India still remains the major outsourcing destination especially for US but this position is currently under high threat. The credit crutch that has hit both the US and UK will marginally reduce quantity and nature of outsourced work It also emerged that Kenya and Africa in general is viewed as a country/continent with challenged infrastructure, poor work culture/ethics and hindering socio-economic situation. However, individuals/organizations that have had a chance to visit/interact with Kenya(ns) have a different testimony; Kenya has a high chance of being a favourable outsourcing destination if correct measures are put in place. Government regulations on outsourcing There is a lot of ‘anti-outsourcing’ regulations by both the US and UK governments. The main overriding factor is in both countries is that outsourcing takes away work from the citizens (UK and US). For instance President Obama is particularly against outsourcing; he has proposed a tax revision which will mean that US companies, earning income overseas, will have to pay US corporate tax on that money immediately, rather than deferring payment until the income is returned back to US soil. This, together with a couple of rules recently passed by the Senate (e.g. strict conditions on H-1B hiring) will see a downturn in outsourcing. Institutional framework Outsourcing is viewed as any other trade in the UK. The National Outsourcing Association (NOA) is the only trade association in the UK that deals with outsourcing issues. NOA is involved in research, events, education and public affairs. Its membership categories include: • BPO end users – such as banks and telecommunication companies • BPO suppliers – such IBM and PricewaterhouseCoopers • BPO consultants – provide services to both the end users and the clients The association creates a voice to lobby the government on issues affecting the members. The association for example lobbied against higher tax imposed on companies that outsourced work off-shore.
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Major outsourcing industries In both US and UK, the following are the major industries where most of the outsourced work is derived: • Banking • Investment Management • Insurance • Legal • Supply Chain, Logistics, Transportation • Healthcare • News, Media & Entertainment • Energy & Utilities • Agriculture/Food • Pharmaceutical/Biotech • Government & Public Agencies • Manufacturing The following are the most often outsourced functions: • Purchasing, Procurement, Spend Management, Payables • Compliance, Finance Accounting • Technology • Legal Services • Bundled ITO BPO • Research, Development, Innovation • Document Services • Lead Generation, Marketing & Sales • Back Office, General Administration • Facilities Management • Engineering • Learning, Training, Recruitment & Human Resources Preferred outsourcing destinations In the USA, the top ten preferred outsourcing destinations4, in order of preference are: 1. Rural or Small Town USA (via Indian Companies) 2. India 3. Eastern & Central Europe 4. UK & Ireland (areas of high unemployment) 5. South America 6. Mexico 7. Philippines 8. Canada 9. Russia 10. Middle East
4
2008 Back Book of Outsourcing – State of the Industry Report; www.TheBlackBookOfOutsourcing.com
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It can be noted that Africa does not feature in the above list. It is to be noted that in the Black Book of Outsourcing, South Africa topped (90.9%) the list of outsourcing destination with disappointing results. In the UK, the three perceived best three destinations as voted during NOA’s 2008 annual awards5 are Egypt, Romania and Philippines. It is to be noted that only Egypt, which is often considered as part of the Middle East, features in Africa. Trends in outsourcing According to the Black Book of Outsourcing6, in the USA: “Outsourcing is taking on a new twist. Rather than U.S. jobs going to India, the latest evolution of outsourcing is moving in reverse, with India’s leading service providers opening offices on Main Street, USA. The reverse outsourcing development is too new for Indian companies to point to actual cost savings yet, but moving front office processes closer to the client is fast attracting buyer interest. Major suppliers are responding to the demand for enhanced, locally delivery customer service.” In the UK, there is an exodus (mostly perceived) of outsourced work from offshore destinations (particularly from India) back to the UK. It is mostly perceived because some confirm that there is a lot of work being brought back on-shore but the National Outsourcing Association believes it is not as significant as many put it. However, the trend is there and it could gradually increase. In addition, many who return their work on-shore do not have a problem outsourcing again but it has to be to those who can mirror their customer-care. This means that the UK customers should believe the work is being done locally due to the quality of the work. Other issues that were raised are: • UK-based Call centres are cashing in on this but it may not be long term because it is not cost effective. One of the main causes of this is the perceived (by the UK people) poor quality service offered by offshore service providers. This is especially in the case of customer services (front office work) rather than back office. There are many examples where the customer felt the person at the call-centre did not identify with the problem and this could be a cultural issue more than anything else e.g. example of flooded house in the UK being dealt with by call centre agent in India. • Erosion of confidence that clients’ data is safe offshore. A story on sale of credit card information from a call centre in India7 for example did a lot to worsen the situation, and anecdotally many claim there are similar examples. • Offshore call centres are opening onshore offices in order to win back clients’ confidence and reassure customers. North Ireland is currently a preferred destination. It was found that clients prefer optimal service - the same work culture/quality and not necessarily cheap service. Most companies that outsource (mobile phone companies, banks, insurance firms etc.) appreciate the fact that getting new customers is much more costly than retaining the existing ones. The issue now is they would rather pay the optimum price rather
5
6
www.noa.co.uk.index.php/awrds 2008 Back Book of Outsourcing – State of the Industry Report; www.TheBlackBookOfOutsourcing.com http://news.bbc.co.uk/2/hi/uk_news/7953401.stm
7
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than the cheapest price. Therefore, they would rather reduce outsourcing offshore to retain their customers. For example, “since 2005 Orange UK has been working with outsourcing partners in India, but in June 2008 made a strategic announcement that it would halt the expansion of offshored customer service support for mobile and broadband customers, and deliver this support locally from UK-based contact centres8”. The same trend is to be found in the USA. For example, in mid-April 2009, Delta Airlines closed Indian call centers due to poor customer feedback. The customers of Delta Airlines could not stand their phone enquires being handled in India. The Airlines has hired about 4,500 call-centre workers in the USA after it ended its current outsourcing operations in India. However, Delta's call centres in Jamaica and South Africa would continue. With the current financial recession, outsourced work is likely to temporarily reduce but outsourcing in general is here to stay and the trend shows that call centres are likely to increase. What clients are looking for in a vendor? Clients are looking for a client-centric culture that is similarity in work culture and quality. In both USA and UK, clients, especially services that involve regular direct interaction with the customers e.g. call/contact centres, will outsource to vendors that are able to replicate the client’s work culture and deliver exactly the same (or higher) quality of service as an inhouse option. Optimal service (no longer cost-saving alone) is now the key driver to selecting an outsourcing destination. For example, to successfully service an American insurance company, the agents working at the vendor’s site must fully understand/identify with the operations of the insurance industry in the USA. Others things that clients are looking for are: • Cultural Alignment • Balance Onshore/Offshore • Vertical Expertise • Technological Savvy • Innovative Business Models • Global Footprint • Re-Architecting to Transformational • Connecting Operations to Analysis • Tailored Industry Services Perception of Kenya(ns) There is widespread perception that there is no effective focused marketing of Kenya’s strengths as a BPO destination. Kenya has a unique opportunity to learn from mistakes of other countries, such as, India, and exploit her strengths as outlined above. Other perceptions on opportunities that can make Kenya a better outsourcing destination include: a) Making use of the Kenyans holding senior positions in multinational companies in the Diaspora to bring in work to Kenya; India did this with a high degree of success. b) Government incentives such as tax holiday and bandwidth subsidy could help in growing Kenya’s outsourcing industry.
8
http://www.vnunet.com/computing/news/2232698/orange-uk-extends-outsourced
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c) Identify special industries where the Country is sure of critical mass of experts, e.g. law, finance, IT, etc. d) Exploiting Kencall’s win at the Birmingham Expo of 2008, which gave Kenya more visibility especially in the UK. e) ‘Obamania’ can be used to promote outsourcing to Kenya. This is an area that can be used effectively probably with the Kenya Tourism Board. Obama’s presidency put Kenya in the limelight regardless of the fact that he is not a Kenyan. If this is pitched correctly it can be used effectively.
3.6.Types of BPO Operations and Niche Areas
3.6.1.India
BPO, KPO and Call Centres serve various industry verticals. There are a number of large operations with presence in their key markets. Joint Venture, mergers and acquisitions, management buyouts have resulted in formation of these large enterprises – with annual turnovers of in the hundreds of millions of dollars. Table 3.6 shows the processes for the different service areas while Figure 3.6 shows the BPO operators in India.
Table 3.6: Processes for various service areas Service Processes Customer Care Complaint resolution, sales, tech support, enquiries, helpdesk, loyalty program management, Computer Aided Telephonic Interviews (CATI), chat support. Finance & Accounts payable, expense reports, payment processing, accounts receivable, Accounting billing, order management, collections, credit control, claims management, inventory accounting, payroll services, month end reporting & consolidation. Legal Services Contract management, legal research, litigation support, claims processing, claims settling & closing, conveyancing. BPO Transcription, digitisation, data entry, proof reading, editing, data conversion, web development Software Programming, applications & solution development, enterprise software Development development, code review, code inspection. Research & Analytics Market research, data collection, data processing, analysis, customer analytics, CRM analytics, data management, M& A research, MIS & reporting. Procurement RFI, RFQ, RFP design and administration, industrial reports, commodity market intelligence, index pricing, projections & forecasts, periodic industry newsletters, periodic market trends update, supplier scorecard compilation.
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Figure 3.6: BPO operators in India Service No. of operators Software Technology Website Development & Marketing Business Support services Architecture & Engineering Finance & Accounts Management & Consulting Legal Sales & Marketing Graphic Design & Multimedia Writing & Translation Total 758 713 2806 388 798 248 173 347 269 179 6679
Numberof operators
Software Technology Website Development & Marketing Business Support services Architecture & Engineering Finance & Accounts
India has been described by some commentators as being ‘everything to everybody’ in terms of BPO, because of the various services it ably supplies. India’s large population has enabled them to provide the sort of numbers that meet the diverse requirements of their client countries who are outsourcing various services to India. University/College graduates have been noted as one of India’s biggest assets. India has used these factors to carve a niche for itself in providing call centre services to its clients. There a strong culture of science and technology has led large pool of science, technology and engineering graduates. This has translated to India becoming a preferred destination for high end knowledge process outsourcing. This way, India has carved a specialist niche in provision of Information Technology, and Engineering outsourcing. India is moving higher up the value chain of outsourced services and concentrating more on providing services such as software development, Programming, applications & solution development, enterprise software development, code review, code inspection, engineering services etc.
3.6.2.South Africa
Figure 3.7 shows the geographical distribution of contact centres and the major service offered by contact centres in South Africa.
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Figure 3.7: Geographical distribution of contact centres and major service offered by contact centres in South Africa
•
Johannesburg (Gauteng)
• Bloemfontein (Free State) •Port Elizabeth
(Eastern Cape)
• Durban (KwaZulu
Natal)
•
Cape Town (Western Cape)
Source: Contact Industry Hub, 2007, http://www.contactindustryhub.com
South Africa has developed a strong call centre industry, which employs over 100,000 people. They have carved a niche in the financial services sector. South Africa has excellent actuarial and insurance services. It is common to find people who may source work to India because it is cheaper but are now taking some of the actuarial work to South Africa as they will find the skill sets that they may not get as easily in India or Philipines. This trend may increase as they are willing to pay the optimum price for these skill sets not necessarily the cheapest price. This is despite the fact that South Africa is more expensive, their interest here is the skill sets. South Africa has many large, experienced players with scalable insurance infrastructure which includes:
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• • • •
Product sophistication; they have similar life products to the UK and generally to the USA Mature insurance industry with first world insurance operations Common qualifications with many Client countries (e.g. actuarial sciences) Skilled labour pool with non-unionised, educated, good product knowledge and market understanding
There is also great potential in the Banking sector which can be viewed as a niche area for South Africa as well. The following reasons qualify this recommendation, South Africa has: • Sophisticated banking environment • Well regulated financial services environment e.g., FAIS, FSA(UK) & FSB (SA) links • High financial services, business English proficiency • Compliance to international regulations e.g., Basel II • Automated environment which includes excellent technological platforms
3.6.3.Mauritius
Figure 3.8 shows the ITES-BPO companies in Mauritius.
Figure 3.8: ITES-BPO companies in Mauritius Service No. of operators BPO Call center Help desk Software development Consultancy ICT related training Business continuity & disaster recovery Others Total 107 31 2 89 9 4 4
ICT related training Software development Consultancy
BPO Call center Help desk
2 248
Source: Mauritius Board of Investment Website Mauritius greatest niche comes from the fact that the country is generally multilingual in two European languages (English and French), many of the current BPO work in developing countries is amongst English speakers and they definitely need contacts who can also work with their potential French clientele. Moreover, French companies have also been increasingly outsourcing their call centres to North Africa and a number of them are looking to spread their risk by outsourcing to different countries. Mauritius is a good destination for back office transcription and translation services.
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3.6.4.Kenya
By far, call and contact centres are the majority in Kenya. This means that Kenya’s focus has been on the low end of the industry. However, there are many small BPO firms doing onshore high-end work. Common BPO operations in Kenya are: BPO operations • Data Entry • Transcription • Software Development • Web Designing • Document Imaging • Data Storage and back up Call Centre operations • Telemarketing • Customer Service and customer care • Market Research • Lead Generation • Appointment setting Figure 3.9 shows the BPO and contact centre operations in Kenya. This information is based on the current members registered by KBPOCCS.
Figure 3.9: BPO & Contact Centre Members in Kenya
Category
BPO's And Call Centers Hardware And Software Providers Training And Consultants Individual Members (Others) Total
No. of operators
29 4 3 15 51
Numberof operators
BPO'sAnd Call Centers Hardware And Software Providers Training And Consultants Individual Members (Others)
Source: Kenya BPO and Contact Centre Society Website http://www.kenyabposociety.or.ke/index.php?option=com_weblinks&Itemid=23
Kenya’s strengths include a highly skilled and competitive pool of labour, neutral English accent, strategic location as a regional hub for communication and finance, and production of over 30,000 and over 250,000 university high school graduates annually, respectively. In addition, Kenyans generally have a warm and welcoming culture/attitude, due to the predominance of the tourism and hospitality industries in the economy. When the above strengths are considered, the provision of call centre/customer services an ideal niche for the country to carve for itself in the BPO space. Kenya can also capitalize on its large pool of high school and diploma graduates to provide back office services such as transcription,
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digitization, data entry and various other data processing services. In addition, Kenya can use its excellent education system to create a niche in BPO-ITES training for the region.
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4. SWOT Analysis
The following is a synthesis of the Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis from the vendor countries and possible niche areas for each vendor country. This chapter ends with the niche service areas for each country as a summary.
4.1.India
Strengths India has been the destination of choice for outsourcing due to the following strengths: • Progressive liberalization since 1991 has made India one of the biggest emerging markets. • Government championship evidenced by the Indian government’s active involvement in developing the industry. The government works closely with NASCCOM and involves NASCCOM in all policy decision making regarding the industry. • BPO Industry players are included in all government bodies involved with the industry to ensure that Government is charting in the right direction • It has a large pool of English speaking graduates in various disciplines, who are absorbed into the call centre industry. • Generally, India has a large pool of science, technology and engineering graduates which has made it a preferred destination for high end knowledge process outsourcing. • Good infrastructure which includes science & technology parks, fibre optic cables, electricity etc • Good road network, 10% of national highways have four-lanes • Lower operating costs than competing destinations; for example, the average per minute calling cost has decreased by about 90% over seven years. This is one of the best in the world. • Strong industry Association (NASCOOM) with resources to support the industry’s growth and development • There is government support for the industry evident by the favourable policies for the sector e.g. education, incentives, marketing. • The ‘India Brand’ is recognized globally as ITES/BPO hub • Favourable tax incentives (see chapter 3) • License application procedures are easy. Investors have a single window clearance. • Strong legal system; strives to ensure compliance with international laws e.g. labour laws, international relationship etc. All these with a view to encouraging investors into the IT-BPO industry. • Existence of the Data security council • Cyber security training and awareness policy put in place by the Government • National Skills registry (NSR) to facilitate personnel background checks Weaknesses Nevertheless, India has weaknesses that have led to opening up other potential outsourcing destinations. They are:
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•
• •
• •
The heavy Indian accent which has resulted in poor customer experience especially for call centre work for international clients. Many international clients now provide premium access lines to their top customers so that the calls are handled in their home country (USA/UK) rather than India. High attrition (reduction) rates among call centre agents. International backlash due to security breaches has meant that a number of companies have pulled out of India. For example, many came to believe that clients' data is not safe offshore in India. A story by BBC (Thursday, 19 March 2009) on sale of credit card information from a call centre in India did a lot to worsen the situation. High cost of electricity and losses due to rampant theft however, the government plans to spend billions of dollars to improve this. The top six airports in the country are currently overstretched
Opportunities The following are opportunities which India can harness to propel their BPO industry further • The world economic recession may turn out to a blessing in disguise for India. It is argued that this may make client companies think of ways of reducing cost, one of which may be outsourcing more of its non-core operations. • The mature state of India has opened new opportunities for the country. A number of Indian BPO firms are now setting up operations in different countries/continents with the hope of maximizing on the various capabilities offered by different countries. These firms are therefore likely to be able to offer services in locations preferred by their clients and hence increasing their competitive advantage. Threats Although India is seen as the most successful vendor country, it still has its fair share of threats and they are as follows: • Since India is being seen as mature in the BPO industry, some establishments have reached “plateauing” levels. At this level, a couple of clients have been disappointed because of one or two omissions by the vendors. Consequently some clients have shipped jobs back to their home country. • With the economic melt down, client countries like the USA and Europe may up their anti-outsourcing campaign. If the campaign continuous, it may threaten the development of the BPO industry in India just like it may in Philippines, South Africa and many other vendor countries. • Terrorism like activities (e.g. the Mumbai case), if they continue, is most likely to threaten the trust by client countries to continue business in India. • Other emerging markets e.g. Africa and Eastern European countries are likely to become an alternative market for BPO clients. If this happens, India will be disadvantaged because there is a very high chance of clients moving jobs from India to these new destinations. • High number of staff poaching across various companies ; this is likely to destabilize the BPO industry as staff retention becomes a challange
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4.2.South Africa
Strengths There are a number of advantages in South Africa’s favour as a BPO destination, some are perceived and others are factual. For example: • Many in the world perceive South Africa to be politically and economically stable. The South African Government has managed to make people perceive the country as a worthwhile destination in Africa • The Black Economic Empowerment policy ensures equitable distribution (by race) of workers in the BPO sector which has augured well for the country • It is an advantage that Senior managers in the BPO sectors are mostly white; this gives the impression of ‘white-culture’ which is a strong marketing point for BPO industry • There is clear government championship for the BPO sector evidenced by the fact that investors and potential vendors are wooed from the Office of the President; and there is commitment to regulatory changes when required; • There is an effective marketing strategy (target marketing and perception management) • Successful telecommuniation liberalisation and high international bandwidth (? 120 Gbps), 99% digital network & the latest in fixed line, wireless and satellite • There is a credible, functional industry body that represents all industry stakeholders (BPeSA and other related regional bodies) • Electricity costs are competitive e.g. Eskom is one of the lowest-cost electricity suppliers in the world • There is an adequately sized and skilled talent pool (agent and managerial) • There are BPO specific incentives to invest in the country such as grants of R37,000 to R60,000 per seat; and training and skill support grant of up to R12,000 per agent • There is world class connectivity; South Africa has 10 international airports. It as an excellent road and railway network • There are plenty of office spaces, premier international conference centres, and premier hotel chains. Weaknesses With the above strengths, one would wonder what the weaknesses would be in South Africa as a BPO destination. Some weaknesses include: • Cost of operation is still high compared to other outsourcing destination countries. For example, agents are paid US$ 7 – 8 per hour, while the cost of bandwidth is said to be comparable to satellite charges. • Even though there are BPO specific incentives as highlighted above, investors are yet to take advantage of these because of the strict qualification criteria. For example, one has to have created a certain number of jobs in order to qualify. Opportunities South Africa has the following key opportunities: • Two under sea cables. It also expects to have the third one landing in less than a year (from Nov 2008) and this is expected to reduce the relatively high cost of bandwidth.
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•
•
The 2010 world cup campaign will definitely put South Africa ahead of any other African country and may help in creating confidence in general. This may include confidence to outsource to the country. South Africa may then take advantage of this and market the country as an outsourcing destination of choice. In South Africa, there are many expatriates from different parts of the world and particularly Africa, hence providing the expertise needed for IT-BPO industry. The country may harness this and make it their competitive advantage.
Threats South Africa seems from the look of things to be the most opportune country in Africa. However it has its fair share of threats to the BPO industry as listed below: • Just like many vendor countries South Africa may suffer from anti-outsourcing campaign from client countries like USA • Labour policies e.g. Black economic empowerment may impact negatively particularly in cases where experts are required • Political turbulence. During the research period, the political landscape of South Africa was taking shape after the ousting of the former president Tabo Mbeki by the current president Jacob Zuma. This was not good for the BPO industry and may threaten the industry if a similar situation re-occurs. • Stiff competition from other emerging markets e.g. Mauritius, Ghana and Kenya
4.3.Mauritius
Strengths The Mauritians are well positioned to get a lot of work from client countries like the UK due to the following strengths: • Their education system is based on the UK system so it is easy for client countries to identify with them. • The World Bank ‘Doing Business Indicators’ shows that Mauritius has a favourable investment climate ranked at 24 with other critical rankings such as number 11 for protecting investors and 7 for starting a business. • It is a multilingual country (with two European languages) so it is an attractive destination for both English and French speaking clients. • The higher stakeholders have a very strong relationship with private sector and hence training needs clarity. Weaknesses Despite the obvious strengths, there are weaknesses in Mauritius as a BPO destination. These include: • No 24 hour culture; most shops and restaurants close by 8pm and public transport stops at 7.00 pm. There is a negative perception of working in 24/7 environment and many Mauritians cannot imagine working at night. • Internet and mobile communication tariffs are still high despite liberalization and presence of the submarine cable. • The SAFE cable opened up the BPO sector clearly evidenced by the number of companies formed in 2004 and 2005, however the cable is limited and a second cable is expected.
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• •
There is a need to create mechanisms for staff retention as there is a lot of poaching across BPO firms and to other companies. Sometimes perceived not to be in Africa and kind of cut off from the rest of the continent hence missing out on the opportunities for Africa
Opportunities Mauritius has the following key opportunities: • Mauritius has one under sea cables, which according to the study has not been able to reduce the cost of bandwidth very much as expected of a fibre optic cable. As the country awaits the arrival of the second fibre optic cable, which is expected to bring competition and hence lowering the cost of bandwidth, one may see this as one of the opportune areas. • French speaking personnel in the BPO industry is still regarded as valuable and Mauritius can capitalize on this. Threats Threats to Mauritius BPO industry are more less the same as for most vendor countries. However the most prominent one is the fact that the country has a very small labour market. This may hinder the expansion of the BPO industry. Even with the small number of staff, the poaching game of human resource from with and outside the BPO/ITES industry is rampant and is likely to destabilize the market.
4.4.Kenya
Strengths The following are some of the key factors (strengths) that make Kenya a choice destination for outsourcing: • Good place to work and holiday (temperate weather and beautiful country) • Highly skilled and competitive labour-force • Good English accent for English speaking clients • Strategic location; it is a regional hub for communication and finance • Kenya has a fully liberalized economy • Well-established local and foreign private sector • Government championship of the BPO industry (2009/2010 budget on ICT in the country is the evidence of that) Other recent happenings that have strengthened Kenya’s position include: • In the 2009 Global Africa competitiveness index, Kenya has moved up 6 places to position 93 of 134 countries globally. The other East African countries have dropped; Tanzania and Uganda at positions 113th and128th respectively (The East African, June 15-21, 2009). Kenya's advance to become the favourite investment destination in East Africa is powered mainly by its capacity for innovation, quality of education and sophistication of financial markets. • Kenya, South Africa and Tunisia have emerged as the top innovators of Africa in a report on the continent's competitiveness launched recently. The three countries - which scored highly on ratings of their scientific capacity - are on a par with such innovative
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•
countries as Brazil and India, according to the Africa Competitiveness Report 20099, produced by the World Economic Forum, the African Development Bank and the World Bank Africa. In a league table that included 33 African countries, and 134 countries overall, Tunisia ranked thirtieth for innovation factors (and first in Africa); South Africa thirty-sixth (second) and Kenya fiftieth (third). Kenya and Zimbabwe were among top 10 internet users despite relying on satellite [Kenya has 3 million Internet users and an Internet penetration of 7.9%].
Weaknesses However, the following challenges need to be addressed in order to improve Kenya's attractiveness. These hese weaknesses can make the country lose out in the global BPO market: • Perception by many client countries that Kenya is not politically stable • Poor governance record in the country that has not been improved by current developments • There are more discussions about the BPO/technology park with no clear progress to implementation. • Too many bureaucratic hurdles even for investors • Taxation laws/ tax regime. Some of Kenya’s taxation policies are discouraging, for example, 12% tax on foreigners outsourcing work to Kenya. • Very expensive communication and electricity costs • The perception that there is not much being done for local investors, many local BPO firms believe there is more focus on foreigners. In addition, some believe that Kenya is sending the wrong people to woo investors, for example, one of the key interviewees in the UK expressed concern about the choice of events Kenyan delegations choose to attend and how they sometimes target the wrong sources. They also criticized the Kenyan embassy for not taking these matters more seriously like embassies of other countries such as South Africa and Egypt. • There is lack of coordination and perceived ‘bad blood’ between some of the key institutions and groups that represent this industry • There is a lack of confidence within the state corporations in adapting IT (BPO) because of fear of 'losing' touch with the citizens. Corporations such as the security department (CID, Army, NSIS, Immigration) would need to get in touch with a person making any application for either jobs, Certificate of Good Conduct etc), in order to verify the existence of such an individual • Financial institutions have adapted technology, but cautiously. The great fear is security. For instance, banks will not communicate with a customer through internet, phone, especially when discussing financial status of an account holder. The same is true of hospitals etc. • Negativity that is a characteristics of Kenyans and particularly by our local media. Opportunities The study findings include the following as the opportunities that are available for the Kenya BPO sector: • The landing of the two fibre optic cables in the financial year 2009/2010 is a plus for Kenya. This is expected to bring the souring cost of bandwidth down at the same time increasing effectiveness and reliability, hence quality service in the BPO sector.
9
http://www.weforum.org/en/initiatives/gcp/Africa%20Competitiveness%20Report/index.htm
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•
•
•
•
Kenya has huge domestic markets particularly in Government institutions. This may be used to demonstrate to international clients the fact that we are capable of delivering on quality and with reasonable cost. A comparable sizable number of knowledge workers (e.g. lawyers, nurses etc.) is an opportune area Kenya can take advantage of and introduce Knowledge process outsourcing (KPO). In the recent past, international bodies, mostly from the western world, have seen Kenya as a peace hub in the region. Even though this changed during and after the 2007 general elections, Kenya can still recover and take advantage of the peaceful nature amid chaos in most of its surrounding countries. The presence of the technology leaders, e.g. Google, Oracle, SAP and many others can be used by Kenya to develop confidence with regard to outsourcing clients and particularly the origin of the said players.
Threats Although Kenya seems to be showing all signs of growth and progress in the BPO industry, it also has a number of threats which if not checked may water down the gains so far. Findings from the study include the following threats • The cost of bandwidth is likely to come down for all competing and emerging markets like Ghana. This will leave the country with nothing to look forward to except to compete in other areas such as quality and political stability and perception • In the recent past, many western countries like the USA has been advocating for stoppage to job exports. If this goes on, Kenya might be forced to do with the limited international competitive jobs. • The world economic recession may also be seen as a threat to the Kenyan BPO sector because it may lead to reduction in the number of jobs being exported to Africa. This may be due to cost cutting measures by foreign companies or guarding against job loses in their countries. • Political instability and tribal animosity currently being experienced in the country may severely affect the BPO industry particularly if the situation does not improve in the near future. Continuity of high level corruption might also threaten the industry.
4.5.Summary – Niche Service Areas
As a summary, the niche service areas for India, South Africa, Mauritius and Kenya are shown in the table 4.1 below.
Table 4.1: Niche service areas India a) Software a) development b) Engineering services c) Call Centre services b) South Africa Call centre services for financial services industry. High-end actuarial services Mauritius a) French/English call centre services b) Translation Services c) Software Development Kenya a) Customer Service b) Back Office e.g. transcription, data processing c) BPO Training for the region
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5. Critical Issues, Policy Options and Recommendations
5.1.Policy, legal & regulatory and institutional frameworks
From the findings, Table 5.1 synthesizes the critical issues on policy, legal, regulatory and institutional frameworks for each of the four vendor countries.
Table 5.1: Critical issues on policy, legal, regulatory and institutional frameworks India Mauritius South Africa Policy framework • Policy priority given to • BPO/ITES is an • BPO&O sector as one IT-BPO sector in integral part of of the top three Special Economic national development priority sectors to Zones to spur growth vision stimulate growth • Cyber security training • BPO/ITES vision & • Incentive framework & awareness policy strategy is driven from to attract investors the top of Govt • Aggressive marketing as a BPO destination Legal and regulatory framework • Strong legal system • Appropriate legal • IPR & data protection and compliance with framework for laws to provide international laws e.g. BPO/ITES industry confidence to labour laws, investors international • Comprehensive BPOrelationship, etc. specific Quality • Adoption of Assurance Framework International standards (stds) – benchmarked to global best practice Institutional framework • NASSCOM’s • Dynamic & effective • Active BPeSA & effectiveness and close Board of Investment regional BPO working relationship (offers OSS for BPO associations, with with Govt and investors) Govt funding academia • Effective advocacy by • National Contact • Data Security Council OTAM Center Union dealing with fraud and (NCCU), offering cyber crime support and protection to its members when it comes to labourrelated issues in the workplace Kenya • Govt support for BPO and ICT sectors, especially the prominent role of BPO and the ICT infrastructure projects
•
e-transactions part in Communications (Amendment) Act 2009 that enables e-commerce
•
• •
Formation of KICTB and its bandwidth subsidy project and marketing Kenya as a BPO destination KBPOCCS’s advocacy and draft BPO standards EPC and its annual training forums for services-oriented exporters on how to market their services
From the findings, Table 5.2 provides the critical issues and the policy options and recommendations on policy, legal, regulatory and institutional frameworks for Kenya.
Table 5.2: Critical issues and the policy options and recommendations on policy, legal, regulatory and institutional frameworks for Kenya
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Critical Issues Policy framework Lack of specific BPO policy
Policy Options
Policy Recommendations c)
a) Do nothing – Let Vision 2030 continue providing the
policy framework for the BPO sector b) Update the national ICT policy and incorporate BPO policy issues c) Development of a specific BPO sector policy as pledged in the medium term plan of vision 2030
Note: BPO sector policy (b) or c)) should, amongst other things: o demonstrate a strong commitment by the Government to outsource its services o address standards in the ICT-BPO sector o address incentive scheme for BPOs o align with Vision 2030 Lack of BPO strategy a) Subject the BPO go-to-market strategy and and weak M&E implementation plan proposed by McKinsey&Company framework consultants to stakeholder discussion. This strategy should show how the targets in Vision 2030 (20,000 direct BPO jobs and an additional GDP contribution of Kshs 10 billion) shall be realized by 2012 b) Combine the results of this study with those of McKinsey&Company and create an informed strategy for the BPO sector in Kenya c) Strengthen the M&E functions of the KICTB and Kenya Vision 2030 Secretariat ICT and BPO are not a) Create 2 separate sectors for BPO and ICT and real sectors, e.g. one mainstream them into the national planning and cannot obtain operational frameworks. At the moment, ICT issues are aggregated socioaddressed under Transport, Storage and Communications economic data on these sector and BPO is no where in our national plans sectors b) Create a single ICT-BPO sector and mainstream it into the national planning and operational frameworks. For example, it should be possible to obtain aggregate socioeconomic data (e.g. employment in the sector, GDP contribution to other sectors and nationally), data on ICT sector indicators (e.g. ICT-BPO infrastructure access and use), ICT industry data (e.g. ICT-BPO products manufactured and services offered), etc. Legal and regulatory framework Weak legal framework a) Strengthen existing laws to provide an enabling legal for BPO and ICT framework for ICT-BPO sectors (no data o Review the IPR legislations to provide an protection, weak IPR enabling environment for protection of laws, etc.) intellectual property in a global knowledge economy o Review the Kenya employment act to address 24 hour economy and employees working at night or at odd hours b) Develop separate legislations critical for ICT-BPO sector and compliant with relevant international laws (data protection, freedom of information, e-commerce, IPR, labour) Lack of a BPO a) Develop separate incentive framework for BPO incentive framework b) Develop a BPO incentives framework as an integral part (currently leveraging on of the law that will transform EPZs into SEZs. This law
b) & c)
b)
a) in the short term b) in the mediumto long-term
b)
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Critical Issues EPZ incentives)
Policy Options should rationalize all the incentives for all types exportoriented firms to be established in these zones. One should be able to operate from anywhere and still be entitled to the incentives Note: Incentive framework should be time-bound and should be aimed at ensuring the BPO sector takes off in Kenya in the next five years a) Develop BPO standards, benchmarked to international standards b) Ensure all key BPO firms adopt these standards
Policy Recommendations
Lack of BPO standards
a) & b)
Institutional framework Many institutions a) Leave the institutional framework as it is – there are working on different already too many institutions aspects of BPO, with b) Change the mandates of an existing body to coordinate very little coordination all the institutions that deal with BPO e.g. the Kenya ICT Board c) Create a new entity (body corporate with power and a powerful champion) to coordinate ICT-BPO activities across all ministries and public enterprises that have a role to play in ICT-BPO Many and weak ICT a) Do nothing - leave the ICT-BPO associations as they are and BPO industry b) Strengthen KBPOCCS to be the key BPO industry associations (CSK, association ITSA, KBPOCCS, c) Create a strong ICT association KEPSA’s ICT Sector d) Create one strong ICT-BPO association Board, TESPOK, etc.)
b) in the short term c) in the long term
b) & c)
5.2. Human Resource Issues
From the findings, Table 5.3 synthesizes the critical issues on human resource issues for each of the four vendor countries.
Table 5.3: Critical issues on human resource issues India Mauritius • India produces approximately 1 million gradu- • A population that speaks both French and English ates per year thus ensuring an adequate supply making the workforce an attractive one for firms of skilled human resources seeking to set up and serve European clients • Fluent English, communication and customer • Teachers are Equipped with the necessary ICT skills service skills are generally strong in India; in order to improve pedagogy for the benefit of however accent is still an issue. learners • Children are introduced to science and techno- • A UK Education System with which clients easily logy and this helps to nurture a strong culture identify and interest in these fields at a very early • Review of the curricula at the level of primary and stage secondary levels in order to improve the quality of • Numerous international brands have their offeducation for Science and Technology and introduce shore operations in India and send experienced new learning methods; and highly skilled staff from their home offices • Creation of an ICT Academy to train people after to work in the India operations, thus transferHigher School Certificate ring skills to the local population. • There exists a National Skills Registry, to enOther factors: sure that individuals employed by organizations have their background and qualifications • Performance-based recognition and reward verified
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•
•
Call centres practice continuous recruitment and training of call centre agents. BPO/KPO courses have been entrenched in education system. There is however up to 40% attrition Readiness of agents to work in industry
• • • • •
Travel opportunities Competitive remuneration Conducive work environment Working hours and overtime payment Job security with career progression
Other factors: • • • • Competitive Remuneration A secure career with progression, benefits, perks and transport Performance-based recognition and reward South Africa The Skills Development Act 1998, established the National Skills Authority, Sector Education and Training Authorities (SETAs), and other bodies in the Department of Labour to promote development and training. A Training and Skills Support Grant is provided directly to approved projects towards costs of providing company specific training
• • • • • • • • • •
•
Other factors • • • Staff retention strategies (job security, career progression and good working environment) Continuous training Affirmative action in the provision of training services to the regional populations especially to address past injustices
Kenya Kenyans generally have a neutral accent and English is the official language Current Economic Survey puts the number of university student enrolment at 124,000 The Kenya Government has established an Industryspecific University (Multimedia University College of Kenya) to address the HR gap. In general, the Employment Act 2007 is friendly for the employee as it provides for a suite of benefits The Work ethic is quite weak BPO companies and Call centres practice continuous recruitment and training of call centre agents. The standards for career progression opportunities are not yet developed Self-improvement support Continuous in-house training Competitive remuneration
From the findings, Table 5.4 provides the critical issues and the policy options and recommendations on human resource issues for Kenya.
Table 5.4: Critical issues and the policy options and recommendations on human resource issues for Kenya Critical Issue Policy Options Policy Recommendations No updated skills database for a) Leave MoIC to continue with initiative already a) in the short term ICT exists (Computer Society started – working with KNBS of Kenya ICT Workforce b) Establish framework for collection and updating of b) & c) in the Survey Report, 2006 is a ICT skills data medium and long useful for launching fresh c) Task the body responsible for ICT-BPO to be term census) established as recommended in this report with this responsibility Slow implementation of a) Fast-track implementation of integration of ICT into a) & b) integration of ICT across all education as defined in Sessional Paper No. 1 of 2005 levels of Education and on Policy Framework for Education, Training and Training Research and the National Strategy for Education and Training (2006) b) Appoint a champion to oversee the implementation
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Critical Issue High rates of attrition in BPO Work ethic and culture that is incongruent with off-shore clients
Policy Options
a) Kenya BPO and Contact Centre Society to finalize
b) the Standards and Ethics Guidelines, working with the Government and other stakeholders Encourage in-house, peer assessment methods of training to transform agents Acquire legal force for the Guidelines in order to guarantee robust career growth and long-term opportunity Let the status quo remain – e.g. limited in-house training in BPO firms, resource-poor Multimedia University College to provide critical BPO training Create and implement a policy: • To incorporate BPO training into curricula across the education system (secondary & tertiary levels) • To provide training incentives for tertiary institutions to provide BPO training • To provide training incentives for in-house training • To encourage creation of Centres of Excellence for BPO training by private sector or based on PPP As part of the BPO sector strategy to be developed, develop a strategy on ICT-BPO skills requirements and mainstream it into relevant ministries for implementation Adapt recognized international standards for ICTBPO certification Regulate examinations and certifications in ICT-BPO
Policy Recommendations All
c)
Lack of a policy to support sustained development of specialized BPO skill sets to meet demand
a)
b)
b) & c)
c)
Absence of common certification of agents based on a common curriculum
a) b)
b)
5.3. Youth and Gender
From the findings, Table 5.5 synthesizes the critical issues on youth and gender for each of the four vendor countries.
Table 5.5: Critical issues on youth and gender India Mauritius Gender • Women in Leadership- • There is a Labour Act that IT Initiative by prohibits employment of NASSCOM aim at female employees in enhancing industrial undertakings participation of between 10 p.m. and 5 women into the a.m. workforce • Privilege for female workers to absent herself • An elaborate ‘Equal from work-during Remuneration Act, pregnancy. 1976 (Act 25 of 1976 • ICT Literacy, IC3 & ICT amended by Act 49 of Awareness courses by 1987)’ for ensuring National Computer Board equal remuneration for are provided to women in both genders different regions of the South Africa • Powerful Office on the Status of Women (OSW). Developed policy on women empowerment & gender equality, with section on “ICT and women” Provision for Family Responsibility Leave No gender affirmative action • Kenya Employee-friendly Kenya’s Employment Act, 2007 that provides for: o 3-months maternity leave o 21 days annual leave o 2 weeks paternity leave
• •
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India Youth • Strong legal system and compliance with international laws e.g. labour laws, international relationship, etc.
Mauritius country • There is a Labour Act that prohibits employment of young employees in industrial undertakings between 6 p.m. and 6 a.m. Labour Act prohibit employment of youth for more than 36 hours in a week •
South Africa
Kenya
•
National Youth Economic Empowerment Policy & Implementation Framework addresses youth development across all sectors (BPO included) and it endeavors to ensure that all young women and men are given meaningful opportunities to reach their full potential
•
A Government Ministry specifically for the youth
From the findings, Table 5.6 provides the critical issues and the policy options and recommendations on youth and gender for Kenya.
Table 5.6: Critical issues and the policy options and recommendations on youth and gender for Kenya Critical Issues Policy Options Policy Recommendations BPO working a) Leave the Employment Act 2007 as it is and let employers to b) environment not create a conducive working environment within the law conducive b) Amend the Employment Act, 2007 to explicitly regulate working hours for employees and to require employers to facilitate safe commuting at night Lack of awareness on a) Kenya BPO and Call Centre Society to create standards for All BPO as a source of career progression in standard BPO jobs viable employment b) Relevant public and private agencies e.g. Ministries of Labour, Youth and ICT, KICTB, KBPOCCS, Kazi Kwa Vijana, etc, to mount programmes to promote the industry among the youth c) Relevant public and private industry stakeholders to sensitise trainees and trainers in BPO-related courses that may open up opportunities in BPO for the youth and women 3 months maternity a) Reduce the maternity leave back to 2 months b) leave (Federation of b) The Government, through the Ministry of Youth and Gender, to Kenya Employers provide a social welfare kitty to compensate employers who launched a complaint) may be adversely affected by the female employees’ absence
5.4. Incentives
From the findings, Table 5.7 synthesizes the critical issues on incentives for each of the four vendor countries.
Table 5.7: Critical issues on incentives India Mauritius Tax incentives • 100% tax holiday for first 5 • 15% corporate tax yrs, 50% for next 5 yrs and (the lowest globally) South Africa • None • Kenya 10 yr corporate income tax holiday
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• • •
• • • • •
•
India 50% for balance 5yrs for ITBPO sector Excise duty and service & sales tax exemption Removal of domestic air travel tax 90% profits of software exports is exempted from tax zero customs duty for software imports Zero customs duty for software imports Zero duty on import of hardware for export projects Single point taxation for venture capital funds Enhanced rate of depreciation of computers 100% income tax exemption till 2010 *All the above benefits are limited to prescribed zones with a minimum of 25 acres
• • •
•
Mauritius Customs duty is based on world custom’s structure *Special tariff reductions on SADC or COMESA goods Zero duty on computers * Mauritius abolished all other tax incentives
South Africa •
• •
• •
•
Kenya for EPZ companies 25% tax rate for 10 yrs (except EPZ commercial enterprises) Vat and custom duty exemption Proposed Special Economic Zones wherever companies offices are located as well as in areas demarcated by government Stamp duty exemption on legal instruments 100% investment deduction in EPZ buildings and machinery for 20 years 100% foreign ownership permitted Ksh.900m for developing business park 3 fiber optic cables landing in Kenya by end of yr 2010 Bandwidth subsidy from World Bank National fibre optic cable Licensing of 2 more mobile companies to operate in Kenya Telecommunicatio ns liberalization
Infrastructure incentives • Amongst the world’s lowest telecom tariffs driven by free market competition • Amongst the world’s largest domestic satellite systems • Has 5 submarine cables with different landing sites • Has 3 satellite earth stationsaccelerated power development reform program initiated in 2001 to fast track power distribution • National highway development program ahead of its time line. • It has the 2nd largest road network in the world • Has 35 Government owned and 25 private owned software development parks with special IT- specific infrastructure Other incentives • Liberalized norms for investments of up to 100% foreign equity with full repatriation benefits. • Setting up of IT Venture Capital Fund. • Fast track clearance of goods
• • • • •
Good telecom system Has one submarine cable and one satellite system Mauritius Cyber City (business park) Incubation centre for ICT services Quality infrastructure ICT parks
•
•
• • •
Good road network Has SAFE fibre optic cable Has 3 satellite earth stations Most modern telecommunicatio n system in Africa Connecting to fibre optic cables by end of yr 2009
• • • • •
•
•
•
Free repatriation of capital and profits without any prior Central Bank approval. Dividends from companies resident in
•
Grants, including investment incentive grants, training and skill support grants, export market and investment
• •
Establishment of the Kenya ICT Board in 2007 Facilitate and manage ICT industrial incubation and
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• •
•
India imported by manufacturers of electronic goods. Deployment of additional resources for technical Manpower development. IT software and services industry has been accorded the status of a priority sector by the Government Export Processing Zones (EPZs) set up to provide internationally competitive infrastructure facilities
•
•
Mauritius Mauritius and from holders of Regional Development Certificates are taxfree. Enacted anti-money laundering and terrorist financing legislation while the business framework itself has been made simpler. A "Work & Live in Mauritius" department has been set up within the Board Of Investment (BOI) as a singlefacing service counter to expedite formalities for individuals and investors setting up in Mauritius.
•
•
•
South Africa assistance, technology industry finance, etc. Encouraging the growth of offshore outsourcing, through marketing the services of those exporting services. Competitive risk related rates based on prime interest rates for investments in technology intensive businesses. This is most suitable for software development. Govt funding of BPeSA and the Regional Associations get a good percentage of their funding from Government
•
Kenya technology parks Development and marketing Kenya as a competitive destination for Business Process Outsourcing services in Kenya and abroad.
From the findings, Table 5.8 provides the critical issues and the policy options and recommendations on incentives for Kenya.
Table 5.8: Critical issues and the policy options and recommendations on incentives for Kenya Critical Issues Policy Options Policy Recommendations Tax incentives – lack of a) No tax incentives b) specific tax incentives for b) Government to provide tax incentives for a specific time the BPO sector period to encourage BPO industry growth, especially in the rural areas Capacity building – lack of a) Integrate BPO training in curricula of all higher learning All adequate human skills to institutions grow the BPO sector b) A proper training framework modeled on international standards to be adapted for guidance to institutions c) Government to select specific institutions to provide training grants to develop capacity d) Provide training grants to majority local shareholding companies to encourage growth of SMEs in the sector High bandwidth and a) Review bandwidth subsidy requirements to enable more All telecommunications costs firms to qualify b) Reduction of bandwidth tariffs – the undersea cables Poor uptake of the landing in Kenya will sort this out bandwidth subsidy c) Ensure reduction in other telecommunications tariffs through competition and other regulatory interventions
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Critical Issues by CCK High start-up expenses
Policy Options
Policy Recommendations All
a) Provision of phased out incubation centres for start-up
BPO companies for 3 year periods b) Government to outsource BPO work to local majority owned centres a) Developing the domestic BPO market segment b) Marketing and funding local BPOs to market their services internationally
Inadequate marketing of Kenya as a BPO destination
All
5.5.Niche for Kenya
From the findings and SWOT analysis for Kenya, Table 5.9 presents the critical issues and the policy options and recommendations on the niche for Kenya.
Table 5.9: Critical issues and the policy options and recommendations on the niche for Kenya Critical Issues Policy Options Policy Recommendations Capacity a) ICT Board to enhance capability and capacity of talent pool to ad- i. b), c), d) & e) building equately service the identified niche areas b) Determine the current and medium term supply capacity of skills against current and forecast demand for BPO services in niche areas c) MoIC & ministries in charge of Education to work together to develop a policy/framework to institutionalize capacity building for BPO sector d) Provide training incentives to encourage creation of Centres of Excellence for BPO training in niche areas by private sector or based on PPP e) As part of the BPO sector strategy to be developed, develop a strategy on ICT-BPO skills requirements and mainstream it into relevant ministries for implementation Branding and a) ICT Board/Brand Kenya Board to develop specific positioning state- All positioning ments based on the identification of the niche areas b) ICT Board and Brand Kenya Board to develop robust branding strategy so as to increase awareness in Kenya’s target markets about the country’s capabilities in the niche areas c) Develop specific messaging and marketing collateral or materials for each niche area d) Identify and invest in on-going PR activities such as events so that there is continuous communication regarding Kenya’s capabilities in the niche areas Patriotism/ a) Introduce in school curriculum, training on positive attitude and na- i. All attitude tional pride b) Provide civic education against negativity as one of the mandates of a national body in charge of BPO c) Form a “Kenya culture” through a national policy Regional a) ICT Board should market Kenya as a regional hub for BPO services i. All advantage b) The Kenyan Government to continue advocating for the East African community as Kenya will benefit c) EAC to work together in marketing the region for BPO services to avoid unnecessary competition
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6. References
Computer Society of Kenya (2006). Kenya National ICT Workforce Skills Demand Survey Report. Government of Kenya (2007). Kenya Vision 2030: A Globally Competitive and Prosperous Kenya Government of Kenya (2007). The Employment Act, 2007. Kearney, A.T. (2009), The 2009 A.T. Kearney Global Services Location Index: The Shifting geography of off-shoring Kenya National Bureau of Statistics (2009). The Leading Economic Indicators, 2009. Ministry of Education (2006). National Information and Communications Technology (ICT) Strategy for Education and Training. Ministry of Education Science and Technology (2005). Sessional Paper No. 1 of 2005 on Policy Framework for Education, Training and Research Ministry of Information and Communication communications Technology (ICT) Policy. (2006). National Information and
Republic of Mauritius, Ministry of Information Technology and Telecommunications, National ICT Policy, 2007-11. Republic of Mauritius, Ministry of Information Technology and Telecommunications, National ICT Strategic Plan, 2007-2011. Republic of South Africa, The Skills Development Act No. 97 of 1998. Pillai A. (2006). Human Resource Issues in Business Process Outsourcing. Schramm W. (1971). ‘Notes on case studies of instructional media projects’; Working paper for the Academy of Educational Development; Washington D.C. Yin R.K. (1993). Case Study Research: Design and Methods. Sage Publications, California
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