Business Daily (Nairobi)
Okuttah Mark
7 November 2007
Starting a business venture is a daunting task requiring innovative ideas especially if it has no known related feature or information on risk and opportunities in the wider market.
Business Process Outsourcing and Call Centres are turning to be some of the innovative ways to do business. There are signs that if tapped and well marketed, the industry can create employment and wealth in the country.
"Kenya can take advantage of the rising wage costs in India, the top BPO destination at the moment" said Dr Bitange Ndemo, the Permanent Secretary, Ministry of Communications and Information.
BPO involves handling of various aspects of a business on behalf of a local or international client using information communication tools such as computers installed with special software, high speed Internet connection and trained personnel who have excellent command of language of trade. Legally, one will get a licence from the telecommunication regulator, the Communications Commission of Kenya.
Most local and international companies are turning to outsourcing their non-core functions to concentrate on their core business and reduce the cost of labour.
Call Centre operations differ from data entry as regards the of mode of communication of transactions and the hefty capital.
While Call Centre business is mainly done real time through voice communication, data entry is not and requires less capital expenditure.
In addition to this, in the Call Centre, an investor needs to have qualified staff by training and ability to handle the work. This type of investment also requires larger amount of money but one can either start small or partner with other players who have already invested in infrastructure and also offer training opportunities to the clerks at a fee.
Other than starting big, an investor can opt to start small by first engaging in data entry where the proprietor will require computers and Internet connection though not necessarily high speed and an office space.
Businessmen already doing cyber café business are at a high advantage of maximising on their existing investment. As it is today where most cyber cafe operate only during the day, the premises could be turned into data entry centres at night to maximise the use of the equipment, office space and, as is expected, generate more cash and earn higher profits.
Cascade Global, a BPO and Call Centre consultancy firm, says, on average, it would cost an investor $600 (Sh40,200) per seat per month to set up a data entry business and up to $ 3,000 (Sh201,000) per seat per month for a call centre. The average cost per seat involves the labour cost of one clerk per month, one computer, the Internet cost per computer and the software and training.
However, according to an industry player, the cost involved in setting up the business could be reduced to half by sharing resources and opting for software that can do multitasking. Although only a handful investors are trying their hands on the business, Kenya is well placed to tap into the business expected to be worth $145 billion globally by the year 2008.
Other advantages due to Kenya were a well-educated labour force, which is fluent in English, the leading international business language. While at the moment the biggest challenge still lies with the high cost of bandwidth charged by the Satellite providers, this should be short lived as the government has embarked on an initiative to connect the country through an undersea fibre optic cable that is expected to reduce the cost from $1,700 (Sh113,900) per mega bit per month to less than $500 (Sh33,500) for the same capacity.
The East Africa Marine Systems (TEAMs) will connect the country with Fujairah, in the United Arab Emirates. The project is expected to be complete by the first quarter of 2009. Other than the undersea fibre optic cable, the government through the Communications Commission of Kenya (CCK) has embarked on another initiative to ring the whole country with terrestrial fibre optic cable.
Currently in urban areas, private companies have also laid metro fibre optic. All these initiatives are to boost the speed of Internet connection with an aim or reducing the cost of doing business.
Other incentives targeting this niche of business is that the Export Processing Zone current strategic plan indicates that any BPO that is located in the EPZ's enjoy tax breaks.The investors are exempted from corporate tax for 10 years, withholding tax for 10 years, stamp duty and the Value added Tax (VAT).
In acountry where red tape is a hurdle, investors have been assured of clinching project approvals within 30 days, facilitation of work permits, import logistics, tax registration and utility connections.
For a start-up getting clients is also another hurdle and can determine if the enterprise will stay afloat or close shop. While in the past the government trade promotion and marketing was mainly on tourism, the government last year formed an ICT board whose mandate, among other things, was to market Kenya as an BPO destination.
A Call Centre
Among the world hot spots in BPO are India, Philippines, Ireland, the Netherlands, and China. In Africa, South Africa leads the pack followed by Ghana, Senegal and then Mauritius.
While most lucrative contracts normally come from the international companies, some local companies have started showing interest in providing their non-core business to the Outsourcing Companies. Currently, Safaricom limited, the biggest mobile telephone operator in the country is looking for an outsourcing firm that can handle its customer care services.
Another mobile operator from Tanzania has already signed customer care contract with KenCall, the first BPO in Kenya. Both local and international companies normally consider, the cost of labour, data security, the availability of high speed Internet connectivity and the level of education in a country before signing a contract with a firm.
On the other hand, the most crucial areas taken into account when signing a BPO account are the regulatory reforms on whether there are adequate laws within the business territory to protect intellectual property rights and software copyrights contract management.
Besides, before setting shop, the investors are keen on standards and code of ethics; whether the company can adhere to international standards, contract payments, financial regulations and the accounting principles.
In Kenya, the Kenya Business Process Outsourcing Association was formed three months ago to look into concerns including the standards of doing the business. The association's core duty is to bring all the players in this sector together, lobby the government and ensure that there is a standard training regime.
The effort by the government is in collaboration with the private operators to make Kenya known in the BPO global map. The current efforts by the government to make more people venture into the BPO sector are looking into how this start up can be financed.
During a recent tour to Atlanta, the ICT board, among other things, looked into ways of enticing capital ventures who could team up with the locals to invest.
Paul Kukubo, the ICT board Chief Executive Officer, notes that lack of venture capitalists in the country is stifling the investments in the sector, however, he notes that there are efforts in place to bring such investors into place.
According to market monitor, Forrester, in 2004 worldwide the BPO market was divided into four segments, the largest being simple bulk transactions. Forrester projected it will grow to $58 billion by 2008, including transactions like credit card and stock trade processing.
The second largest will be broadly shared services, representing $57 billion by 2008; including functions like finance and administration, indirect procurement and human resource.
Thirdly, high volume vertical process will present $6 billion by 2008 and includes functions like policy administration, claims and loan process applications.
The fourth largest is vertical application which stands at $5 billion currently but will grow after customers become more comfortable with outsourcing tasks, reaching $24 billion in 2008.
Industry players predict the sector may end up being the top employer in the next five years by offering 30,000 direct jobs and hundreds of thousands of indirect opportunities.
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