“Bringing the Internet back
doesn’t necessarily mean that the client will depend on you as before,”
Alaa El-Agamawi, president of the
Federation of Commercial and Educational Software Producers in Egypt,
told Ahram Online.
The software and IT industry
lost about EGP159 million during the five days without service,
he said. After a 95 percent decrease
in February, March was better, but
“we are still working at 25 percent
of our capacity,” explained Mr. El-Agamawi, who doesn’t expect a full
recovery before June.
>>THE OTHER UPRISINGS
The Egyptian revolution was just one of many rebellions that swept
North Africa and the Middle East in late 2010 and early 2011. From
Morocco to Iran, protesters took to the streets—in some cases toppling
governments and forever altering the economic landscape.
What does the new paradigm mean for the region’s outsourcing
possibilities? Several Indian IT firms put plans on hold. Business pro-
cessor Intelenet postponed its plans to open a center in Oman and
Dubai or Qatar, citing political uncertainties. Spanco BPO, which has
operations in Oman and Qatar, postponed expansion and says it is
“watching the situation closely.”
The Egyptian crisis is forcing companies that outsource projects to
take a harder look at risk management and disaster recovery, regard-
less of the destination. That includes ensuring projects can transition
from one location to another if a site goes down, says Peter Ryan,
Ovum, Montreal, Quebec, Canada. “The best way to avert disaster is to
set up multiple locations so you can diversify your risks,” he says.
Up until the revolution, the
Mubarak administration had been
carefully crafting Egypt’s image as
the region’s go-to tech resource.
As recently as September 2010,
Egypt’s IT minister said the country planned to grow its outsourcing industry
to $10 billion by 2020, supported in part by
a $15 million investment by the government
to bolster local IT businesses and intellectual property protection. Whether that plan
departed with Mr. Mubarak remains to be
seen, as stunned companies sort through the
“The biggest surprise was that no one saw
this coming,” says Peter Ryan, who tracks
economic and political issues in outsourcing
destinations as lead analyst at Ovum, a global
research firm in Montreal, Quebec, Canada.
“We had heard nothing leading up to the riots.
Then all of a sudden 100,000 people were
marching in the streets.”
The Internet shutdown was a particularly
devastating blow to the country’s reputation for
being free and open. Many high-profile compa-
nies—including Microsoft, Infosys and Wipro—
pulled projects and staff out of the country in the
days following the unrest.
“It’s going to make individual companies seriously weigh the risks of outsourcing to this location,” Mr. Ryan says.
Egypt will be far less appealing for risk-
averse companies, Anand Ramesh, global
sourcing research director for outsourcing
consultancy Everest Group, wrote in CIO
magazine. “Given that Egypt is an emerging
[market], it heightens concern around risk, as
opposed to more established location like India
or the Philippines,” he noted. “The degree of
sensitivity to risk in emerging markets is much
Companies must closely monitor the politi-
cal situation. If there’s a rise in Islamic extrem-
ism, as was the case in Iran in 1979, “it could
be disastrous for business,” Mr. Ryan says.
However, if the new leaders support an open
economy and the service sector is represented
in discussions going forward, then it may
return as an attractive destination for out-
Mr. Ryan, for one, isn’t ready to give up on
the country just yet.
“Egypt still has a lot of value, notwithstanding
the political challenges of the last few months,”
he says. “The question now is to what extent
companies want to deal with a level of political
risk.” —Sarah Fister Gale