Middle East calling

As rising wages and attrition rates in India spur some international companies to seek new locales for outsourcing operations, Southeast Asia, Eastern Europe and Latin America have all been competing to become new offshore hubs.Now, the Middle East and North Africa are elbowing into the race to host remote sales staff, service centers, tech support and the like, thanks to a favorable time zone, a multilingual work force and an oilfueled investment and expansion spree. Companies also are attracted by some efforts by some governments there to diversify and liberalize their economies, as well as the prospect of tapping into the growing local market.

The offshore industry faces challenges in the Mideast, which is better known for political instability and ingrained bureaucracy than customer support. But underscoring the regions promise, some of the biggest outsourcing companies operating in India the industrys undisputed powerhouse are establishing outposts there.

Satyam Computer Services Ltd. is hiring 300 people for a new center in Cairo that will handle clients in Saudi Arabia and the Arab world. Earlier this year, Wipro Ltd. set up an outsourcing joint venture in Saudi Arabia and recently announced plans to enter Egypt. Tata Consultancy Services Ltd. says it will soon start offering services from Morocco to Frenchspeaking European clients.

Indian companies pulled in nearly US dollar1 billion of outsourcing revenue from the region in the fiscal year ending March 2007, up from US dollar600 million the year before, according to Indias National Association of Software and Service Companies, a trade group.

There is a lot of money flowing in the region, and it doesnt make sense to not make best use of it, says Virender Aggarwal, Satyams director and senior vice president for AsiaPacific, Middle East, India and Africa.

Much of the Middle East offers the same appeal other outsourcing hot spots have, cheap, skilled labor. But companies are finding other advantages, including a time zone that roughly straddles the worlds three biggest economies North America, Europe and Asia. The regions geographic proximity to Europe and a multilingual labor force also help. And with business booming in much of the Mideast, there is more demand for Arabic speakers.

In recent years, Egypt, Jordan and the United Arab Emirates have all broken into the top 20 mostattractive offshoring destinations, according to an index published by consultancy A.T. Kearney Inc. Tunisia, Morocco, Israel and Turkey made the top 50 in this years list.

The Middle East region is going to be, I think, the next big destination, says Simon Bell, an A.T. Kearney principal, who has worked with the Egyptian government recently on ways to draw in more offshore work.

Despite growing interest, Mideast countries are still small players, dwarfed by India and China and lagging behind hot spots such as Malaysia, Brazil and the Philippines. There are also some big obstacles to boosting growth. First among them, the perception that political instability or conflict in places such as Iraq, Lebanon and Israel makes the region a risky place. And while structural changes have cut red tape in places such as Morocco, efforts to ease bureaucracy elsewhere have lagged behind the rest of the world.

Talent pools in many Middle Eastern countries are relatively small, too. Egypt, the Arab worlds most populous country, pumps out about 250,000 university graduates a year. But many of them need additional training to boost foreignlanguage and other skills before multinationals will consider them. Amid a wave of expansion, local informationtechnology workers are starting to see more job offers from regional companies. That could put upward pressure on wages and attrition rates.

Satyams Mr. Aggarwal says wages in Egypt, especially among the moreexperienced employees, may be slightly higher than in India. But with businesses expanding in the Middle East, hiring Egyptians still can be costeffective. Cairo has long been the regions cultural capital, and its export of movies and soap operas, makes the Egyptian dialect familiar across the Arabspeaking world.

Language is also a big plus in Frenchspeaking parts of Arab North Africa. In Tunisia, Parisbased callcenter operator Teleperformance SA employs more than 3,500 people catering to its Francophone market. The company is looking to hire for a contact center in Cairo that can serve U.S. and European multinationals.

New outsourcing jobs are a big boon for a region struggling with high unemployment and a bulging birth rate, and some countries have been recruiting the industry. The Egyptian government is offering to pay 80percent of training costs for new employees, and officials are offering cheap rates for voice and data links to major U.S. and European cities.

Dubai, in the UAE, is promoting an outsource zone, one of several zones aiming to attract specific industries. While wages in the UAE are relatively high, officials highlight its advanced hightech infrastructure and large talent pool, including educated Southeast Asian and Arabspeaking expatriates.

An outsourcing joint venture between Electronic Data Systems Corp. of Plano, Texas, and another UAE emirate, Abu Dhabi, is pouring US dollar100 million into a new center aimed at Mideast customers. EDS recently started hiring in Morocco to service its European clients. It already has 450 employees in Egypt.

We see the importance of this region both in itself as a market and as a center from which to service other businesses, says Charles Cox, EDSs regional vice president for Middle East and Africa.