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December 2008 Quick Hits - News, Trends & Analysis

Oil at $40 - Egypt To Benefit?
I spoke to a friend the other day who mentioned that even the palm trees of the golden sands of Dubai were starting to look a little dry. Sure enough Miss Credit Crunch has started to happy slap the economy of the Middle East, and with oil being cheaper than water, perhaps a new concept is hitting the agenda in the Middle East: Cost Cutting. Historically speaking, Middle Eastern companies prefer near-shoring in Dubai & Abu Dhabi which is great news for Egypt, recently voted by the NOA as the best outsourcing destination. A recent study by the Yankee Group, a US based consultancy firm, compared several Middle Eastern countries base for outsourcing services, concluding that Egypt has the strongest position in the outsourcing market. This also explains why Egyptian IT exports have attracted more than $8BN in foreign direct investment in the past 3 years from India and Europe. The country's multilingual capabilities make Egypt attractive to Europe based countries. The sector still need to improve old infrastructure and the political risk still works against them, but I have no doubt that the current environment presents a very exciting opportunity for Egypt.  
Indian Gaming Industry set for High Growth
Poker and online casinos have seen a big drop in revenue in 2008, but casual gaming (no money involved) is extremely hot. Most Western gaming companies have been reluctant to offshore as they felt that both the technology and creative mind-set was absent from destinations. But that is about to change. Ernst & Young recently released a report on the industry which totals $460MM split into:
- Entertainment: USD120 million
- Education: USD53 million
- Custom content development: USD187 million
- Multimedia/web design: USD100 million.
The gaming industry is poised to grow at a CAGR of 50 per cent. With improved skill set and the ability to develop and produce high quality work, the industry has moved up the value chain and this presents a major opportunity for Western Gaming companies to offshore development & Testing to help reduce costs in 2009. Though the players in the gaming sectors are bullish over future opportunities, they need to address some of the vital challenges like quality of resources, high attrition rates, handling of IP rights, and how will Western companies be valued if they have outsourced the development of their core offering.  
Outsourcing Trends for 2009 and Beyond
Which way is the wind blowing in the outsourcing market, how will the industry be impacted during times of economic crisis? These are some of the questions industry thought leaders and journalists have been discussing in recent times. In the coming years many agree that we will see 4 trends emerge across the outsourcing landscape:
1. Consolidation: The mid-market players operating in niche technologies and industries will be likely acquisition targets by the bigger fish. There have even been rumours of Infosys and CapGemini merging to better compete with the likes of HP/EDS & IBM.
2. Globalisation: Increasing globalisation of the outsourcing market, BRICM (Brazil, Russia, India, China, Mexico) is no longer alone in the outsourcing arena. Many smaller countries like Poland, Malaysia, Phillipines, are emerging with a strong case for offshoring as they have specialised in certain BPO work to differentiate themselves from the crowded marketplace.
3. Smaller deals: Most CIO's seem reluctant to sign up for long term deals in this deflationary environment as they believe they can get a better price at end of next year.
4. Green sourcing: It was reported on Silicom.com that many CIO's now consider environmental factors to play a key role in the selection of technology suppliers.

The global economy is entering uncharted territories, but as cost cutting moves up the agenda outsourcing and in particular offshoring should see an upward trend in the coming years, and the large suppliers with the economies of scale from a global green offering will benefit from this downturn.  

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