Dubai, BPO, Infrastructure, Success, India

[SharedXpertise Commentary] Dubai set for success in global BPO industry

25 Aug 2006 | (News) | SharedXpertise Editor Commentary

For SharedXpertise Commentary, please see below

More than 70 international and regional companies, including ABN Amro Bank and AXA Insurance, have registered to operate in Dubai's new outsourcing free zone that opens in December, a top official said.

When the Dubai Outsource Zone (DOZ) development was first announced in the summer of 2004, Dubai Holding, the company behind the project, could never have dreamed it would be such a success so soon.

The companies will offer business process outsourcing (BPO) services mainly in banking and financial services, information technology, insurance and the healthcare industries.

Nearly 40 per cent of these are from Europe, 20 per cent from the US and the remaining from the Middle East.

"We have been surprised by the response," said DOZ executive director Al Naqi. "The outsourcing business is booming worldwide and we want to position Dubai as the leading outsourcing destination in the region." Naqi estimates there would be some 7,000-8,000 people working in the zone by the end of 2007 and another 5,000 will join each year thereafter.

Just to give an indication of the success of the project, the company had originally planned for phase one — a complex of just five buildings — to satisfy demand until 2008.

What has in fact happened is that both phase one and two have been completed and the developers are currently in the process of building phase three.

Infrastructure

The project, unveiled in June 2004 as part of a plan to boost knowledge industries in Dubai, hopes to grab a share of the $350 billion a year global BPO industry with facilities like a zero-tax environment.

Al Naqi estimates European companies could save up to 40 per cent in costs and American companies, 20 per cent, by moving business processes to Dubai.

The Zone hopes to exploit the weaknesses of regional BPO powerhouses like India, South Africa and the Philippines by reducing employee attrition, providing high quality infrastructure, an expatriate-friendly environment and less-interfaring bureaucracy.

"We want to complement India, which is moving up the value chain and some of the Indian companies could use this as a disaster recovery zone. We also have our advantages as we offer a better lifestyle for the expatriates," Al Naqi said.

Employees will not be allowed to move jobs within a year of joining a company. Some 60 per cent of the workers in the zone are expected to come from India, 20 per cent from East Europe and the remaining from the Philippines and the Middle East.

Agencies

Al Naqi said the zone has tie-ups with top recruitment agencies in countries like India, Jordan and Turkey that will allow businesses to hire from these countries. Work visas will be approved in 24 hours.

The zone's location close to a university will also help it access a ready talent pool and it has taken several other steps to keep costs in check, the principal threat to the BPO industry.

Office space will be available at about a third of the cost in the city proper.

Salaries in the zone will start at $1,000 a month and then scale up with the complexity and the sophistication of the outsourcing operations.

The Outsource Zone has a budget to spend up to $200 million in building infrastructure until the end of 2007 and will create some five million square feet of office space in the first phase. It expects to recover investments in 12 years.

Competing with India

Al Naqi believes that for companies wanting to establish outsourced facilities, Dubai offers a number of advantages that India lacks — particularly in terms of the country’s infrastructure and the skill levels of its workforce.

“We are trying to complement a lot of the weaknesses of India,” he claims, adding: “India has a lot of weaknesses today, the infrastructure is not as good as it is supposed to be and it does not support a multilingual capability.”

“You have a big attrition rate, a high employee turnover. It’s not an expat friendly environment where you could have executives move from the US or Europe,” Al Naqi claims, pointing out that such executives will find it “much easier” to live in Dubai.

Source: Gulfnews & ITP Technology

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SharedXpertise Commentary 

Dubai has had the golden touch of late - experiencing rapid economic growth over the last 10 years. Its far-sighted vision of preparing for the day its oil runs out has led Dubai into various markets, including BPO, where it hopes to be the market leader in the Middle East.

Dubai Holding, the company behind the Dubai Outsource Zone (DOZ), is taking a big risk. The 12 years to recuperate costs sounds like a lot considering that in more than a decade, the face of BPO could look very different. Though given the Dubai Midas touch, and the initial intense demand, it may be on to something...

DOZ director Al Naqi claims that Dubai is a complement to India, rather than a direct competitor. Competing on price is always a tough proposition as there can only be one low-cost leader. The strategy to provide a low cost, high-end BPO environment with excellent infrastructure is an excellent strategy. In the years ahead, India and other low-cost play destinations will lose their labor arbitrage advantage as wages rise. By then, established places like Dubai will look particularly attractive for all levels of BPO, making India play catch-up in terms of infrastructure.

Success lies in controlling costs and attracting good staff. DOZ has created a top-notch housing infrastructure, but not allowing workers to leave their jobs for a year may backfire. A resentful BPO worker will not solve the attrition problem.

Author: Commentary, SharedXpertise Editor
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