Is Unrest a Threat to Offshoring’s Viability?

Are you watching the news? If you’re like me and a news junkie, well, then I’m sure you’ve trolled some of the Internet news sites or caught CNN on the telly from time to time in the last few days to check in on what’s happening in Egypt. If you are an IT manager who has outsourced work to that country, I’m sure your glued to any and every source that’s got information on the unraveling situation.

There may be more said IT managers than we think. Remember back in October 2010, when I shared with you that Egypt has had its sights set on IT outsourcing in this blog. At that time, the country’s IT minister, Tarkek Kamel, said the IT outsourcing sector had brought in almost $1.1 billion in exports that year. For some time, Egypt has been a relatively strong provider of call center and support services, creating about 40,000 jobs per year.

If the voice of Egypt’s IT minister doesn’t convince you, consider that companies including IBM, Microsoft,  and Vodafone have a presence there, and in the last year EMC, Stream Global Services and Sykes Enterprise have invested in Egypt’s outsourcing industry by outsourcing some of their business there. Moreover, in the 2009 A.T. Kearney Global Services Location Index, Egypt ranked sixth in the world.

CIO.com writer Stephanie Overby has covered the situation quite well in this article, and she speaks to a variety of experts on how the current uprising might affect Egypt’s IT outsourcing push. The article also offers great advice on what to do to ensure continuity if you have outsourced operations to Egypt.

If you don’t have operations there, might you consider doing so in the future? I’m willing to bet that the current situation will have an impact on Egypt’s ability to grow its outsourcing business at least in the near term. At this point, after all, there are still plenty of outsourcing options. India’s big IT outsourcing companies, and even the mid-sized ones, are doing quite well for themselves, thank you very much, despite increased completion from places like Vietnam, China and yes, Egypt.

The question is, just how much of an impact will the events occurring as I write have on outsourcing in Egypt? The latest news coming in is that the government offices of Egypt’s ruling party are burning. The U.S. State Department has issued a travel warning. Vodafone reported that the Egyptian government ordered cell phone companies to shut down service in selected areas. I’ve seen reports that Egypt’s Internet has gone dark. Delta will make one last flight leaving Cairo and then suspend service. This is a lot of unrest, and it appears to be intensifying, not dying down.

Six months ago I thought the big threat to offshoring was going to come from the anti-offshoring sentiment that has been growing in our country since the unemployment has been fixed at way-to-high (but alas, refer back to my comment that India’s IT outsourcing industry is growing. And growing). Perhaps now the threat will come from political, social and economic instability in parts of the world where so many of our companies turn to for IT services.