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Was Egypt oversold as top offshoring spot?

Patrick Thibodeau | Feb. 2, 2011
Egypt's rapid descent into chaos contrasts with what analysts said just before it happened

Similarly, A.T. Kearney looked at Egypt's political risk as well as a broad spectrum of its business environment.

Johan Gott, an A.T. Kearney manager who is the author of the firm's Global Services Location Index, said political risk is assessed as part of the overall business environment, which includes such things as IT security, infrastructure and level of corruption. But Egypt received strong marks because of its workforce, which includes a large number of college graduates in engineering and an increasing number of workers who have earned certifications.

Egypt had been moving up in Kearney's rankings, said Gott.

Five years ago, Egypt was an unknown in outsourcing, he said. "Egypt was a latecomer," he said. "[But] Egypt exhibits many of the same quantities that India had when India started to grow."

The Egyptian government estimates its outsourcing market at more than $1 billion, but Frances Karamouzis, an analyst at Gartner, estimates that Egypt's offshore services, measured as an export, account for about a $150 million in revenue.

Karamouzis said she reviewed three years' worth of material from key Egyptian entities, included presentations and written material, "and there was never a single slide that had extensive data and positioning regarding geo-political risk, government issues, treasury risk, crime, safety issues, and other items," she said by e-mail.

"[Egypt] will now have to be in crisis mode to create materials, marketing collateral, substantiated data and factual information in order shift perceptions and reality," Karamouzis said.

Morris said that long-term patterns are good for predicting general trends and statistical probabilities but not so good for predicting details, such as the fact that former Tunisian President Ben Ali would have to flee his country or that Egyptian President Hosni Mubarak might have to resign.

"And, of course, taking the long-term view, it could well turn out that after a few weeks of violence Egypt settles down again and emerges from all this with a stronger government and becomes an even more attractive location for offshoring," Morris said.


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