By Jyoti Lalchandani, Group Vice President & Regional Managing Director Middle East, Turkey & Africa, IDC – The Egyptian government, through the Ministry of Communications and Information Technology (MCIT) and the IT Industry Development Agency (ITIDA), has taken an active role in developing ICT capabilities within the country and positioning ICT as a cornerstone of economic development and foreign investment. Investments in IT, including IT services, are likely to be central to the success of the many ongoing transformation projects that the Egyptian government is undertaking to restore the country’s economy. Two prominent national projects in which IT will play a crucial development role are the Suez Canal expansion and the Golden Triangle project.

MCIT’s overriding ICT strategy for 2014–2020, is the main driver for the onshore IT investment wave, which aims to achieve a digital economy through ICT, to provide prosperity, freedom, and social equity for all. In addition, the government has stated that IT is an important factor in its plans to transform the country’s education, healthcare, justice, culture, and tourism sectors. Key areas for investment have included ICT infrastructure, legislative reform, and IT industry programs aimed at boosting knowledge and business process outsourcing, electronics manufacturing and R&D, and cloud computing. The government’s goal of increasing IT-related contributions to over
8% of GDP by 2020 is viewed as ambitious but attainable with sustained investment.

Underpinned by the potential of the Egyptian ICT market, International Data Corporation (IDC) established its regional research center in Egypt in 2016. Leveraging the vast Egyptian talent pool, IDC has been successfully offering research and consulting services to clients throughout the EMEA region.

Egypt’s overall IT and ITeS revenues are expected to expand to $1.8 billion in 2017, and reach $2.6 billion by 2019, growing at a CAGR of 12.9%. Cloud and BPO services will be the most significant contributors to the ITeS growth in 2017, expanding at 34.8% and 14.0% respectively.

Ongoing investment in high-speed broadband infrastructure has accelerated the development and adoption of ICT services. In October 2016 the long awaited allocation of 4G licenses to telecom providers, with the prom- ise of faster mobile connectivity was completed. The widespread penetration of mobile devices in the Egyptian market, with ap- proximately 40% of all internet users using mobile internet, positions the country well to take advantage of new data services enabled by 4G technologies and cloud computing.

Initiatives such as Silicon Waha’s technology parks across Egypt follow international best practices in providing a business environment conducive to ICT organizations, particularly international firms looking to establish a regional presence. Egypt has successfully attracted numerous leading American and European technology companies, offering a combination of high-quality infrastructure, local skills availability, and competitive costs compared to other parts of the region.

Education is a significant factor in the success of Egypt’s IT indus- try; the country produces nearly half a million graduates a year, with 10% of those in IT-related fields, and other fields relevant to business or knowledge process outsourcing. ITIDA’s training and graduate placement programs and entrepreneurial support are key initiatives in this field taking the outsourcing FTE capacity from almost 61,000 in 2016 to around 70,000 in 2017, with more than 55,000 FTEs catering to the offshore demand.

Outsourcing has become a major growth industry in Egypt, driven by the successful contact center services like translation, HR, finance, and legal practice, and other high value services such as research, engineering, software development. Egypt has achieved significant success in establishing itself as a regional hub for contact-center outsourcing, with numerous small and large firms expected to operate more than 66,000 seats in the country by 2017.

The outsourcing sector – provid- ing IT and ICT services from Egypt to international customers – is expected to remain strong over the coming years. The business pro- cess outsourcing market in Egypt is particularly healthy, estimated at $1.3 billion in 2016, expanding to approximately $2 billion by the end of 2019 at CAGR 13.4%. Egypt has become well regarded on the international stage as a leading destination for outsourcing, culminating in being named as ‘Outsourcing Destination of the Year 2016’ at the Global Sourcing Association (GSA) European Awards with more than 67% of the business process outsourcing revenues coming from offshore service delivery and more than 86% of the revenue contribution from North America, Europe, the Asia Pacific.

Egypt has a broad base of skilled labor, that is multi-lingual across English, German, French, and Arabic. This base makes Egypt an attractive and a cost effective market with minimal communication barriers to provide outsourced services to Western, Asian, and Middle Eastern markets.

Egypt’s continued success in producing skilled graduates, particularly in the technology and engineering fields, will increase its ability to deliver outsourced research and development, and engineering services. Outsourced back-office services (HR, procurement, and F&A) are also growing segments and thus require a steady supply of skilled workers.

Outside KPO and BPO, the Egyptian government has placed specific focus on growing the export component of the IT industry. The Export IT program provides financial rebates to export business, while the go-to-market program Africa Together that was well received by the participants from Egypt as well as from the African region has contributed significantly to growing business prospects for Egyptian ICT companies.

The successful Africa Together project is designed to foster opportunities for local Egyptian ICT companies in select countries across East and West Africa. The aim is to validate target growth markets and solution areas in Africa that provide the greatest penetration opportunity for Egyptian companies, and to launch a go-to-market platform
for Egyptian ICT firms to interact with potential channel partners and end users in these target markets.

Africa Together is one of several projects IDC has conducted in partnership with ITIDA. Others include IDC’s CIO Summit series of events, and extensive research into the opportunities that exist within the outsourcing market place. IDC’s annual CIO Summits take place in multiple countries, including Egypt, and provide thought-provoking and actionable insights to CIOs and senior ICT executives through a mix of end-user presentations and case studies, global trends, ICT best practices, and discussions with colleagues and peers.

About the author: As Group Vice President and Regional Managing Director of IDC Middle East, Turkey and Africa, Mr. Jyoti Lalchandani is responsible for the planning, development, implementation, and coordination of IDC’s market intelligence and advisory services, sales, conferences and events, go-to-market services, and office development activities in the MEA region. With more than 18 years of experience in emerging EMEA markets, Lalchandani has been instrumental in establishing IDC’s presence in the region through the initial expansion of the Dubai headquarters and then by spearheading the development of IDC offices in Johannesburg, Istanbul, Riyadh, Casablanca, Lagos, Nairobi and Cairo.

Starting at IDC’s CEMA (Central and Eastern Europe, the Middle East, and Africa) headquarters in 1995 in Prague, the Czech Republic, Lalchandani served as IDC’s regional consulting manager. In this role, he headed several country-based project teams in advising multinational and local IT vendors about issues related to entry strategy, competitor analysis, ROI analysis, distribution and partner evaluation, and market segmentation. He later took on the additional responsibility of overseeing the CEMA software practice, in which Lalchandani was responsible for overseeing all related research (applications, system infrastructure, and tools) and advisory work across emerging EMEA countries.

This article was published with the Outsourcing Destination Guide Egypt, which is available for free download here

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