Egypt has been ranked among the nine primary locations identified for outsourcing, shared services, and captives in Europe, Middle East, and Africa (EMEA), according to a recent report by Gartner, an information technology research and advisory company.
The “Evaluate Offshore/Nearshore Countries for Outsourcing, Shared Services and Captives in EMEA” report identified the main destinations in providing such services, including Egypt, Belarus, Bulgaria, Czech Republic, Poland, Romania, and South Africa.
Gartner said in its report that Egypt thrives, thanks to a skilled and abundant workforce, with enrolment for all levels of education rising considerably over the past five years and an outstanding location.
The report also identified a number of factors that contributed to the growth rates of the industry, attracting investors and the growth of business related to IT services in the country, including the abundance of labour due to the continued flow of graduates annually, with the spread of technological areas in most major cities.
One of Egypt’s key attractions for the sourcing industry is its competitive costs. Egypt is cheaper than many Eastern European countries that specialise in the IT sourcing industry. Egypt has low running costs, thanks to its abundant supply of workers, reliable energy supply, and cheap rental costs, all of which are significantly lower than Eastern Europe’s and other North African countries’— with office space in major cities, such as Cairo, competitively priced.
The report highlighted the doubling of cross-border services in terms of volume over the past five years through multinational and regional companies from Egypt to more than 100 countries.
The growth of the sector is also attributed to the ongoing investments in infrastructure and efforts to eliminate the bureaucracy in business, which included the reforms of 2016 to facilitate the establishment of companies and transactions with all types of investors.
The report added that Egypt has a strong telecommunications infrastructure with fibre networks, currently cover 36% of the country, with 17 submarine cables linking Egypt to the rest of the world, as well as he launch of 4G mobile services in 2016.
The low cost of Egyptian labour was highlighted in the report, since the cost of exporting services declined after floating the Egyptian Pound in November 2016. Gartner estimated that the software developer in Egypt, which has two years of experience, is paid about $5,000-$7,000 annually.
The Gartner report estimated the total investment in the global software market at about $395bn in 2017 at an annual growth rate of about 7% by 2021.
Capgemini, a French multinational information technology consulting corporation, said that Egypt is qualified to be the leading destination in the Middle East and North Africa (MENA) region in the outsourcing of embedded software thanks to its competitive advantages.
Business Monitor International expected the development of Egyptian software sales, from $182.5m in 2016 to $304.2m by 2020 with an annual growth rate of about 13.3%.
According to the report, previous estimates from IDC last year showed that the total volume of investments in Egypt’s IT market will reach $2.37bn with an annual growth rate of exports of IT services by about 15% since 2011. The IDC also predicted a growth in outsourcing business systems by about 14% during the current year.
The report analyzes Egypt’s position in the integrated software market and the outsource of such software to other MENA countries such as Morocco, Turkey, South Africa, or globally such as India, Poland, and Bulgaria.
These analyses in embedded software relied on a combination of success factors such as transaction cost, skills, support services, business safety, and related risks.
The report predicted that the total volume of integrated software market investments will reach $18.6bn by 2023 at an annual growth rate of more than 7%, thanks to growth in the Internet of Things (IoT), industrial automation systems, software based on specific models, cloud computing, and virtual reality.
In its report on Egypt 2017, Oxford Business Group cited Egypt’s outsourcing industry as going from strength to strength, with an annual growth rate of about 7.5% since 2014.
The growth of the outsourcing sector in Egypt contributed to the growth of the ICT sector in Egypt by 13% and recorded 4.1% of GDP, according to Intelligent CIO, a technology intelligence platform aimed at the enterprise IT sector to provide targeted updates and research driven data.
The report expected Egypt to continue attracting new outsourcing contracts as the country’s outsourcing sector becomes a highly valued service model, benefiting from the high quality of ICT services through the activation of the 4G license, which would help to provide more complex services.
The report praised Information Technology Industry Development Agency’s (ITIDA) role in 2016, notably the expansion in opening new technological areas, upgrading Egyptian companies, providing funding sources, development of information technology products and services, and assisting companies to enter new markets.
The report also highlighted the ITIDA’s role in the development of the software industry in Egypt through training programs, accreditation, technical and research financing, and the sponsorship of innovation and entrepreneurship in the field of ICT by local companies and developers.