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South Africa: A Gateway to Africa

With its growing economy and business-friendly laws and conditions, South Africa (SA) is fast emerging as a global outsourcing destination. Learn about the country’s skilled talent pool, provider base and supportive government.
SA: An Emerging IT Outsourcing Destination

With remarkable investments by th e South African government, the country has developed appropriate conditions and IT skills: IT helpdesk, desktop support, data center operations, server and storage management, network operations, voice services, applications development, applications management and co-location amongst others.

Moreover, South Africa is also being seen as a provider of distinctive destination for Business Process Outsourcing (BPO) services. This is due to its deep domain skills and strengths as a provider of both voice and non-voice BPO. Besides, the country offers significant cost savings, which are 50 percent to 60 percent lower than other Asian outsourcing destinations.

It’s Got Talent!

SA produces 300,000 graduates per annum. Graduates are observed by the industry, which is knowledge-intensive and supports the provider base too.

To encourage the industry, SA has a especial incentive program for the outsourcing service providers; the country compensates companies for each employee that they hire. The program not only ensures the utilization of the abundant talent pool, but also helps the employers to drive down the cost of operation.

In addition, specific talent-development initiatives have also been initiated, to provide a high-quality talent pool for investors to draw from. The two training programs and grants aimed at building skills for the outsourcing sector are as follows:

  • Monyetla Work Readiness Program; and
  • Sector Education and Training Authority (SETA) Levy Grant and Tax Incentives System.

Another nationwide program, the National Skills Development, is aimed at building a globally competitive talent pool by encouraging life-long learning and training. Funding for these initiatives comes from the government and government agencies, such as SETA.

South African ICT Market’s Perception Towards Emerging Technologies

There is a sudden spurt in demand for valued-added ICT services, as corporates and Small and Medium Enterprises (SMEs) are looking for ways to outsource non-core business functions. For example, the telecom value chain is converging, and telecom operators are facing the opportunity and need of expanding their focus to serve corporates and SMEs market in a better way. By selling ICT services linked to the telecommunications, a telecom operator is better positioned to protect traditional revenues and grow new revenue streams. Also, the operator can manage margins on traditional services by avoiding competition on price per bandwidth, and reduce risks on investments in Next Generation Networking (NGN). This is reflected in the SA ICT Research and Regulatory Trends report (2010).

As a result, the ICT market will not be a sole preserve of an incumbent or traditional IT players. The altnets and the mobile players will be evaluating opportunities to expand their corporate and SME relevance — potentially complementing their HSPA and fiber infrastructure investments with femtocells, which provide wireless broadband access directly to a premise. With the right competencies and partnerships, SA is set to hold a strong position in the IT services market.

The South African industry is showing signs of welcoming Cloud Computing. Cloud Computing can be classified as “Software-as-a-Service” (SaaS), “Platform-as-a-Service” (PaaS) or “Infrastructure-as-a-Service” (IaaS). The ability of Cloud providers to offer on-demand, scalable computing resources provides IT, economies of scale dedicated to the mobile and ICT needs of corporate clients. And, they are acquiring businesses, such as Verizon and Gateway to deepen their expertise and product portfolios.

SA: A Hub for the Outsourcing Service Providers

Leading global IT services companies, such as HCL are, and can, leverage SA’s extensive global offshore infrastructure and network of offices to provide holistic, multi-service delivery in key industry verticals, including financial services, manufacturing, consumer services, public services and healthcare. HCL has already invested in this direction and has set up a remote infrastructure hub in Sunninghill, SA. This would form part of the growing outsourcing trends of “following the sun” so that a client, regardless of where they sit, can be assured of a 24-hour service from its IT service provider. Given that the South African government has a keen interest in improving its service delivery, an organization such as HCL should focus on 'transformational outsourcing', underlined by innovation and value creation. This could be augmented by offering an integrated portfolio of services, including software-led IT solutions, remote infrastructure management, engineering, R&D services and BPO for both the government and private sector in SA.

When BRIC Becomes BRICS

SA has been formally inducted into membership of the BRIC, encompassing Brazil, Russia, India and China in order to form BRICS (Brazil, Russia, India, China and SA). Together, these countries account for 40% of the world’s population and have a desire to use their combined size and economic might (Economist, 2011). South Africa, the country that decided to bury its bitter past and stood focused on the future opportunities, will continue to be a major economic player, with its government continuing to play a significant role in its growth. SA is marked for the ‘ease of doing business’; businesses just need to see it as an opportunity and leverage it.

About the author: Pumela Salela is the BPO and IT-enabled Services (ITeS) Consultant for the World Bank. She is also one of the imminent board members of Global Sourcing Council. In addition, Pumela is an African Ambassador for Sustainable and Socially Responsible Outsourcing.

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