Shared services

A Capacity Boost with the Submarine Cable

Call center operation is a segment within the outsourcing trend. Outsourcing occurs when one company delegates responsibility for performing a function or series of tasks to another company. Outsourcing services span a wide range – from call center functions (outbound tele-marketing campaigns, data-cleaning, surveys, help desks, inbound services) to business process functions such as fulfilling financial, insurance, healthcare, human resource, tax compliance functions, data conversion, and IT services. In sub-Saharan Africa, where the sector is still nascent, outsourcing is almost exclusively in call center operation, with the exception of South Africa. Offshore outsourcing now represents a USD 100 billion market that is growing at more than 30 percent per annum. The majority of current demand for offshore outsourcing services comes from developed countries: the United States and Canada (15.9 percent) and Western Europe (44.8 percent). The primary countries exporting services to satisfy this demand include Ireland, India, and Canada. In sub-Saharan Africa, South Africa and Mauritius are the only countries that have begun to emerge on the radar screen of investors, but their estimated market size is still miniscule compared to competitors around the world.

Behind the rapid growth in offshore outsourcing are the improved quality and lower costs of telecommunications and Internet infrastructure. The development of the industry has led to an increased general knowledge and experience in offshore outsourcing. This means there is now less risk associated with including offshore outsourcing in the evaluation and implementation process of a company’s business plan. As a consequence, there is international competitive pressure to include offshore outsourcing as a component of overall business strategy to reduce cost and/or to increase productivity.

The factors making a foreign country an attractive base for offshore outsourcing services, according to an index developed by A.T. Kearney, are the following: financial structure, people skills and availability, and business environment. The market growth of offshore outsourcing does not necessarily lead to higher levels of FDI in the industry, as the relationship between offshore outsourcing service providers and their clients is generally contractual. Nevertheless, there is plenty of opportunity for FDI growth.

Trends in offshore outsourcing indicate a promising future. As with any maturing market, offshore outsourcing moves up the value chain, reflecting increased levels of provider competence and confidence among their customers. Customers will multi-source from more than one provider (and country), depending upon type of services required, costs and risks. Due to increased competition and risk management, providers extend their services offerings (e.g., call-center services extend to back-office services) and offer new value-added services. Mature offshore markets then outsource to new, lower cost countries or locations within the same country. Higher value outsourcing services (IT and financial) migrate to those countries with greater protection of intellectual property and privacy. Increased demand and competition for offshore outsourcing services is likely to lead to rising labor costs, resulting in decreased service levels and the tendency to move offshore to lower cost countries.

Shared Services Sector Survey Profile

Companies interviewed: 51

Shared Services (Call Centers) Brief

• The third party shared services sector is not well developed in Madagascar, but a few firms are engaging in outsourcing activities to customers in francophone markets.
• Shared service companies in Madagascar import computers, software, and office supplies from France and Singapore.
• Malagasy firms in this sector have developed marketing relationships abroad with home offices or brokers that bring in clients.
• Within Madagascar, interviewed companies generally chose locations in office buildings in Antananarivo, with close access to public transportation, and near the best international communications infrastructure.
• Firms generally require that workers hold a minimum of a high school degree, and prefer workers who already have some experience in the industry. Training represents an important cost to companies, as it may take from two to twelve months before workers are fully operational.

Comparative SWOT Analysis for Shared Services (Call Centers) Madagascar vs. Snapshot Africa

Breakdown of cost motivations reported by shared services (call centers) firms

Breakdown of quality motivations reported by shared services (call centers) firms

Total annual cost to employer per function in USD (millions)

* Among Snapshot Africa countries

Annual lease costs in USD (thousands) for a suburban office space of 1,000 meters squared