Foreign firms beat locals to major ICT jobs

Two years to a self-imposed deadline of creating 30,000 jobs in the local ICT sector through Business Process Outsourcing, Kenya has managed to come up with only 10,000 jobs, both directly and indirectly.

A total of 650 ICT companies have been registered since the announcement was made five years ago. While players say the remaining time is adequate to meet the target, it is the current trend where all major jobs are being awarded to big multinationals without requirement for local partnership that is worrying.

Unchecked, local players say, this may reverse the gains made or achieve the target but with little to show in terms of capacity building locally.

The Kenya ICT Board, which was set up to promote growth of the local BPO sector and advise the government on ICT matters, says the coming of big multinationals is a clear sign that they are achieving their mandate.

“We have performed satisfactorily, having managed to attract some international giants into the market, which will help us develop our own firms,” says board chief executive Paul Kukubo, pointing out that the board’s marketing campaign abroad has seen global giants like IBM and Dimension Data set up shop in Kenya.

While it is true that five years ago these companies were not known to the Kenyan economy as much as they are now, the effect of this is that local firms are being overshadowed whenever it comes to competition for big assignments.

Lacks adequate capacity

Mr Kukubo says this had to happen as the country does not have adequate capacity to service international businesses to the required standards.

According to the permanent secretary in the Ministry of Information, Dr Bitange Ndemo, local BPOs are heavily challenged, mainly due to lack of developed facilities and space.

“Giant international companies that want to get into the business do not take as much risk with space as our local companies and their enhanced infrastructural and human resource capacities give them an upper hand. We still do not have facilities that meet international standards,” said Mr Ndemo.

He believes that the solution to our local BPO startups lies in the development of new facilities such as the proposed Konza City, which is expected to break ground this year.

Mrs Gilda Odera, chairperson, BPOs/Aittes Working Groups at the office of the Prime Minister and the founding chairperson of the Kenya BPO and Contact Centre Society, says the country is challenged in terms of capacity, adding that the board could have done more.

“We have limitations in certain areas in terms of capacity but this does not mean that we are not capable of bringing up strong SMEs which can then grow into big businesses,” she said.

According to her, the country needs as much intervention efforts for the current situation as the government is putting in middle and long term measures through such projects as the Konza City that is expected to revolutionalise the BPO sector.

“The country is still challenged in capacity development. We still need a big pool of people who are ready to work, not just graduates. Capacity building requires more input and the government should invest more budgetary resources in capacity building and marketing,” said Mrs Odera.

Mr Kukubo admits that Kenyan companies have had challenges on capacity, which has meant that some of the projects that require high level technical capability have gone elsewhere.

“The Kenyan market did not have the talent that is needed to spur such a fast growth. That is why we moved to launch a Centre of Excellence to bridge the gap,” says Mr Kukubo. The achievements of the said centre are yet to be made public.

Last year, the board partnered with IBM to conduct a study aimed at reviewing the status and availability of high-end ICT talent and to propose a framework to address the talent gap in both the short and the long term on a sustainable basis.

With the challenge of capacity, the board shifted its focus to attracting more international companies, hoping that they would transfer skills to local counterparts, in the process of executing their projects.

Late last year, the board awarded a $32 million contract to Dimension Data, an international firm, for Internet Protocol telephony project interconnecting all government ministries.

Some projects have gone to local companies but not in the magnitude of contracts given to international firms.

In its formative years, the ICT board had blamed higher bandwidth costs and harsh conditions of doing business — like lack of tax breaks and the time it took for companies to set up. The lack of overseas cables back then also featured in the reasons for the slow uptake.

In 2009, the Seacom fibre optic cable landed and, months later, the Teams fibre optic landed, reducing the cost of bandwidth from $3,000 per megabyte to $500 per megabyte.

But even with these arrivals, there is still a lot to be expected in the BPOs sector. “The country is ahead of its neighbours in fibre optics but we have not replicated this in terms of business development,” said Mrs Odera.

According to Mr Kukubo, lack of incentives has also contributed to the hesitance by international businesses to set up locally. “The international market is very incentive-driven and demands waivers. Lack of such has disadvantaged Kenya in terms of competition,” he said.

When it was formed, the ICT Board, backed by several grants from the World Bank, promised instant growth of the BPO sector through subsidies and outsourcing of central and local government services.

Research on the status of the BPO sector and its contribution to the GDP in India, South Africa, Ghana and Mauritius convinced several people in Kenya to set up companies.

But the expected growth of these companies took a different turn on the backdrop of stringent competition from international firms, which have accumulated experience and know-how.

For instance, after establishing its regional office in Nairobi, IBM has bagged contracts with local banks to set up and maintain their data centre infrastructure.

Given Central Bank’s requirement for disaster recovery mechanisms, local banks have preferred to outsource their IT infrastructure to recognised companies, to the detriment of local IT firms.

For IBM, its focus on the finance sector has led to more than $200 million in contracts from banks and governments in Kenya, Cameroon, Ethiopia and Senegal, among others. Their focus on solutions and ability to handle rising consumer demand has endeared them to high spending IT sectors.

“Many clients prefer established players like IBM who have the experience and expertise required for these kind of projects but who also have the flexibility to build unique solutions for local clients,” said Mr Tony Mwai, country general manager, IBM East Africa.

However, Mr Kukubo sees nothing wrong in having giants in the local market, noting that they present a good chance for locals to benefit from transfer of knowledge.