Kenya BPO firms suffer from worsening job losses in the West

Local technology enterprises that thrive on running operations of foreign firms are bracing for stiffer competition this year as growing unemployment levels in the West signal fewer opportunities.

Poor funding of the segment, slow Internet, and the high cost of bandwidth are expected to work against Kenya as more countries in Africa raise investments on their business process outsourcing (BPO) industry to improve international standing, experts said.

“Kenya is still ahead of her East African neighbours in this segment, but the level of government support that BPOs get in countries such as Uganda means this dominance may not last for long,” said Mr Jeremiah Okello, the CEO of Collins Consulting International.
Generally, large companies in the developed world turn to BPO firms to handle non-essential day-to- day business tasks such as customer care or document management, allowing them to save costs and concentrate on core business.

Data compiled by the EU indicates that 23.816 million people were unemployed by end of last year, an increase of 923,000 compared to 2010. The US had an unemployment rate of 8.5 per cent by December 2011 compared to four per cent in 2000.

A signal that tough times lay ahead emerged last month when president Barack Obama proposed in his State of the Union speech to stop US multinationals from “moving jobs and profits overseas”.

In a move aimed at addressing soaring unemployment, Mr Obama proposed to scrap current tax breaks that US has been giving companies that outsource operations from developing nations.

“High unemployment is just a temporary economic issue, but my guess is that most US companies will continue to outsource operations because of huge savings involved,” Russ Sandlin, Chief Operating Officer of US-based Benprise LLC, told Business Daily.

“But this is the right time for NGOs, the private sector and government of Kenya to act together to defend their position because every other country will be competing for shrinking opportunities”.

Mr Sandlin has been in the country for the last two weeks to help link local BPO vendors with US companies.

Players in the BPO sector across East Africa are already working together to position the region as a potentially viable destination for Europe, North America, and Australia in a bid to topple Asian dominance.

Top on their agenda is to bring down the cost of operating call centres in East Africa to levels below competing destinations such as India, China, South Africa, and the Philippines.

Map out strategies

While the five EAC states have similar time zones, the true shape of the region’s BPOs will be known when sector players gather in Nairobi in June to map out strategies of creating a regional BPO hub.

Kenya has already taken initial strides towards this end. Since 2005 the government has increased spending on the IT sector by about eight per cent annually with the bulk of the money going into marketing, research and development, and infrastructure improvement, experts said.
This increase in spending, said Mr Okello, had attracted major corporations like Google, HP, Fijutsu, Vodafone, Nokia, GE, and Huawei, to set up shop in Kenya which is the regional IT hub in the region.

However, a training policy that helps graduates to spruce up their English and French could allow local BPO vendors to widen their market beyond the US and the UK to countries like France, experts said.