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UAE outsourcing industry to witness 10% growth: DOZ

Lindsey McDonald, Consultant MENA, Frost & Sullivan

Dubai Outsource Zone (DOZ) today, on the occasion of their fourth anniversary released a report entitled “Outsourcing opportunities in the MENA region” focusing on the current status and future prospects of the outsourcing industry at a  regional and local level.

The report revealed that while the global outsourcing markets will register a CAGR of 8.35%, the MENA region is expected to witness a CAGR of 8% and the UAE will record a 10% CAGR during the forecast period of 2009-2016.

The report, which was issued by DOZ in collaboration with business research and consulting firm Frost & Sullivan, suggests that the MENA region is considered an attractive destination for outsourcing services due to the better quality of life, availability of a multilingual population, savings in tax payments and increased customer centricity.

“The MENA region’s leading outsourcing markets are Jordan, Egypt and the UAE. While telecoms and financial services will still contribute to the growth of the outsourcing industry in the MENA region, more specialised industries such as healthcare and education will show significant investment in outsourcing in the region,” said Lindsey McDonald, consultant Middle East and North Africa at Frost and Sullivan, while announcing the results of the report.

Growth levels in Egypt are expected to be driven by utilisation of outsourcing services in the telecommunications sector, where IT support and services are likely to be the key service types used and report a CAGR of 15%.

Jordan stands head to head with Egypt at CAGR of 15% within the first three years of its development, with outsourcing activities related to financial services, travel and hospitality.

“The UAE’s growth is expected to be marginally lower than the above two at 10%. The report suggested that this is due to the fact that the Emirates felt a greater impact from the recession than other markets in the region. At present, Dubai accounts for over 90% of the UAE’s outsourcing market and the UAE’s outsourcing revenue currently stands at $0.66 billion and is expected to touch $ 1.08 billion by 2016,” said McDonald.

According to McDonald, while currently, the UAE market is primarily focused on services associated to customer support in the financial services, telecoms, travel and hospitality sector, the public sector is to account for a stable proportion of the revenue generated from the outsourcing industry in the Emirates in the near future.

According to DOZ, this is largely because of the services utilised by contact centres in the region to extend support to citizens and expats for government services and is part of a broader government initiative to promote the use of e-government services in the country.

The report highlighted three key drivers for growth in the outsourcing industry in the UAE beginning with the increased focus among organisations in the region on OPEX reduction. Due to the repercussions of the financial crisis, organisations have shown a greater commitment to reducing internal costs and outsourcing services provides an easier and effective means to reduce expenditures associated with labour and training among others.

The second contributing factor, according to the research, is the variety of languages spoken in the region. The outsourcing industry benefits immensely from the availability of these skills, as the industry is able to support a larger population of customers and offer better customer support into more geographical locations on the globe.

Finally, the fact that organisations spanning the tourism, telecommunications, financial services and other industries in the UAE have shown commitment to delivering a comprehensive customer experience is also reported to contribute to the growth of the outsourcing industry in the region. This results from increased competition across various industries as well as the realisation that customers are bound to move to a vendor who provides them better services and therefore increased customer centricity in organisations within the region has resulted in investment in specialist CRM activities.

Although the report is largely, optimistic about the future of the UAE’s outsourcing industry it does point out there are still elements within the country’s infrastructure that need to be addressed, the first of these is the fact that many respondents felt that the general level of expertise in the region doesn’t quite justify the high labour costs.

Many respondents felt that although the UAE is able to rely on a great pool of talent for basic outsourcing services, it is not as well positioned to provide more specialised services and the skills that are available are heavily priced as compared to countries like India and China.

“The second deterrent is the high telecommunications and service cost in the country. Respondents felt that the telecommunication tariffs in the UAE are also much higher than India, Philippines and Europe making outsourcing here a stressful move on an organisation’s budget. The final reason behind the apprehension that organisation’s feel when investing in the UAE for outsourcing activities is the lack of regulations and legislation meeting international standards that guarantee data security and privacy. Respondents felt that without these regulations, security it too much of a concern to invest in outsourcing in the region,” said McDonald.

Addressing this fact, Malek Al Malek, MD, Dubai Internet City and Dubai Outsource Zone said, “The industry in the region is still young and we’re still evolving. With time we will be able to address all the infrastructure requirements associated with the growth and development of the outsourcing industry in the UAE. The government and DOZ are committed in their initiative to deliver services that meet the standard of the industry that we have created.”

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