Outsourcing refers to subcontracting a business function to a third-party. It is the act of acquiring a product or service from outside supplier rather than producing it in the organization. IT processes outsourcing is the main form of outsourcing - this may range from infrastructure, to software development, maintenance and support. U.S. and European firms are increasingly partnering with firms in developing countries for cost effectiveness and efficiency reasons. The outsourcing industry has emerged as a major global trend with expected annual growth rate of about 50% for the next five years.
The application of outsourcing is in its infancy stage in Ethiopia. Currently there are a few companies that are engaged in providing limited outsourcing services. Yet much more international outsourcing opportunities are there for ambitious young Ethiopians and their Diaspora counterparts. In fact, a 2004 OECD report ranked Ethiopia among the world’s five fastest-growing exporters of ICT services. The country is capable of benefiting from the industry for the following reasons.
First of all, the wage rates in Ethiopia are low compared to countries like India whose rates are rising fast. As studies indicate companies would be comfortable starting at a rate that’s not only less than a tenth of what a graduate of his caliber can expect in the US, but also less than half the going rate in Malaysia and below the rate in India – all three of them booming job markets.
Secondly, not only is Ethiopia finally building the infrastructure it needs to compete, but among the urban population, demand for high-tech skills has surged. Schools everywhere offer technology training courses, from “Word/Excel/Access” to Cisco certifications and Master’s degrees.
And third Ethiopia is near Europe, only two time zones east of France, with a well-established Diaspora. The idea that Ethiopia can’t compete with other developing countries is self-defeating and, as shown by entrepreneurs, false. To win foreign contracts from a poor country will be a challenge; but not a new one.
The Diaspora has a huge role to play, especially at the beginning. Ethiopians abroad know the culture and the universities, probably have contacts there already, and can start dealings from a higher basis of trust. The knowledge and networks already developed can easily be turned to mutual business advantages.
Some of the services most commonly outsourced to developing countries include professional services such as accounting, architecture, construction, engineering, customer support, internet research, software development, web site design and maintenance and also other information processing services.
Businesses in Ethiopia should pursue these opportunities through friends or relatives abroad, but they should dream bigger, too. The Ethiopian company can earn the same dollars as American competitors if it consistently delivers top-quality results. A small project for a cousin should be seen mainly as a chance to build an impressive reference for a bigger customer next time.