Is Egypt The Next Offshoring Giant?

Published: June 4, 2007

by Timothy Prickett Morgan

As one of the cradles of earlier generations of information technology based on hieroglyphs and papyrus and as the former center of the civilized world many thousands of years ago, Egypt might seem like a logical place for computing to have started. But it didn't start there, because no civilization gets to ride at the top for long at historical timescales. However, if the analysts at Yankee Group are right, Egypt may get a second chance at being a center of technology.

Last week, when the news was a bit slow, Yankee Group put out a reported entitled Is the Future Bright for Outsourcing IT Services to Egypt?, which asks the question the name of the report suggests. You may not know it, but apparently there is a fairly large IT and business process outsourcing business in Egypt, and the government and local businesses are doing all that they can to try to quadruple the amount of money Egyptian companies generates from outsourcing by 2010, to $1.1 billion annually.

According to the report, Cisco Systems, Google, IBM, Microsoft, and Oracle are already trying to case the depth and breadth of the Egyptian IT skills base. The reason they would want to do this is obvious. The success of outsourcing in India, which had over $17 billion in sales of outsourcing related services in 2005 and which is expected to hit $60 billion or so by 2010 in some projections, has meant that outsourcing costs have risen. The laws of supply and demand are in effect in India, and the rising standard of living there means that India is finding it tough to compete. In the race toward the bottom, IT companies that sell programming, systems management, and business process engineering services have moved on to China and other Asia countries with lower standards of living. But it is always tough to get a skilled pool of IT talent.

Yankee Group is not suggesting that Egypt can take away business from India, China, Russia, and other companies as these areas have absorbed IT jobs from the Western economies. For now, the analysts are merely suggesting that, given the state of the infrastructure and education available in Egyptian tech centers like Alexandria, Egypt could become "the India of the Middle East." Yes, that sounds weird. All the IT industry and some IT shops know is they want to pay less money for coding and other services, and all the Egyptian government knows is that if it can give more jobs to more people, it may be able to keep a revolution from happening.

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