OUTSOURCING: Business Outsourcing a Real Possibility for South Africa
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Recent studies anticipate that more than 1.3 million jobs in developed countries will vanish by 2014 due to accelerated work to offshore locations. Adam Craker, Chief Executive Officer, The IQ Business Group, South Africa’s leading independent management consulting company, says that this is neither negative nor positive, but rather a reality that businesses in advanced markets need to face.
The Hackett Group, IQ’s strategic performance partner, headquartered in Atlanta US, recently conducted research into the dynamics of business outsourcing as the world emerges from the economic downturn. “The Hackett Group’s research highlights the pace of job erosion, which has nearly doubled this decade. What is apparent from our research is that the offshore market is growing and is driving the unpopular jobless recovery in the more mature markets,” says Craker. The global economic conditions will provide employment opportunities for South Africa. “What remains to be seen is whether South Africa is ready to exploit this trend.”
Craker believes that South Africa’s qualified workforce, stable business environment and constantly improving telecommunications infrastructure, will play a vital role in establishing South Africa as a viable alternative to traditional business outsourcing providers like India and the Philippines.
Labour rates in South Africa provide significant labour arbitrage potential over developed markets, with costs in South Africa being as much as 60% lower than in the UK. “South Africa’s stable economic environment and favourable costs make us a viable alternative to the Asian destinations,” says Craker. South Africa’s smaller talent pool, comparable to established offshore locations, is not hindering the success of outsourcing. In fact, South Africa is a feasible choice as a result of its qualified workforce, placing the country amongst the top three global locations providing English-language skills.
In 2010 the World Bank ranked South Africa 34 out of 183 economies in ease of doing business. This favourable ranking is as a result of the implementation of key economic reforms and the relaxation of exchange controls. “South Africa’s constructive business and legal environment is pertinent to its outsourcing growth,” says Craker.
The success of the 2010 FIFA World Cup has had vast effects and has further cemented investor confidence in South Africa. Offering a ‘first-world’ environment in terms of infrastructure and quality of life and boasting one of the most modern and developed telecommunications systems in Africa, making the access to South African operational locations feasible and easy.
Security concerns, the lack of an established public transport system and challenges around telecom bandwidth and outsourcing investment costs are real, however these do not seem to be hampering growth. Craker says, “Yes, there are inhibitors to our ability to truly challenge the business process outsourcing status quo, but recent and on-going developments will see these obstacles falling away in the near future.”
In conclusion, Craker says that the government still has a significant role to play in marketing South Africa as a viable offshore location.
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