Obama administration will create new offshoring IT hubs

Outsourcing IT will increase as firms attempt to cut cost amid recession.

Outsourcing IT will increase as firms attempt to cut cost amid recession.

The new US administration will spread offshoring destinations wider with Egypt likely to become an important centre.

According to the Egypt-based Information Technology Industry Development Agency (ITIDA), US companies will increasingly look to Egypt as a destination for outsourced IT services.

It said Barrack Obama's government will play an important role in encouraging firms to take a global outlook to outsourcing.

Hazem Abdelazim, CEO at ITIDA, said IBM, Oracle, Orange Business Services, Satyam, SQS and Vodafone are working with the ITIDA to establish outsourcing operations in Egypt.

"We think that by the end of 2009 more than 20 Fortune500 companies will have key technology outsourcing bases in Egypt, which will become a new frontier for technology innovation," said Abdelazim.

Of all the countries in the Middle East, Egypt has the strongest position in the outsourcing market. It possesses a well educated workforce with strong multilingual capabilities, which makes it attractive to European companies.

However, Egypt faces hurdles, including outdated communications and transportation infrastructure, and the perception especially in the United States that it is a risky place to do work."

Phil Morris, managing director at sourcing consultancy Equaterra, says Egypt has all the ingredients for a good offshore location for IT outsourcing. "I do not see a lot of demand at the moment. But if Egypt can sort out some security issues related to the country and the North African reason there is no reason why it should not become an outsourcing centre."

In July the Yankee group asked if the Middle East could become an outsourcing hub in a report entitled "Can Middle Eastern Countries Fulfil the Eastern Promise?"

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