Market for Change

Many thanks to Michael Wheet, filmmaker extraordinaire.

Thanks to all who participated in our event yesterday — over 120 students and professional developers attended to learn about social networks and development and participate in East Africa’s first Facebook Developer Garage.  If you missed it, check out some of the content here.Special thanks to panelists Kevit Desai (Director, Kenya Private Sector Alliance), Eunice Kariuki (Deputy Director, ICT Board), Tony Omwansa (Lecturer, Faculty of IT at Strathmore University), and Marcel Werner (Director, Innovation Africa, Kenya ICT Federation. 

In an effort to better understand the outsourcing needs of US non-profits, socially-responsible companies, and small businesses, we’ve launched a brief survey.

Responses will be used to recruit vendors that meet our quality and social impact criteria for our pilot project, starting this month.

Latest news on fibre optic infrastructure in Kenya:  The Permanent Secretary of the Ministry of Information & Communication, Bitange Ndemo, confirmed yesterday to the Kenya Business Process Outsourcing & Contact Centre Society that the East Africa Marine System (TEAMS) is on track and will be completed by June 2009.  And by August 2008, the national terrestrial cable will be completed and will be ready to be hooked into the undersea cable once it is completed.

Ben Ling, Director of Platform Product Marketing at Facebook, offered some valuable insights on the direction of Facebook’s platform to attendees of Graphing Social Patterns in San Diego. His talk emphasized increased support for applications that add long term value (such as Causes, an app that helps users support non-profit organizations) and tools that eliminate friction for users and developers.

We think some of the features he described might make it easier for developers in Africa (including the students attending our upcoming Developer Garage in Nairobi) to use the platform to generate an income for themselves by offering outsourced application development. A couple of the most important ones:

• Developer Marketplace - a matchmaking site for developers and companies looking to build applications
• Platform Internationalization - a smart way for users to translate Facebook into different languages
• Tools to integrate users’ payment information across the platform to enable one-click purchases and more options for monetizing applications

Have any ideas on ways to make the platform better for developers in low-income countries? Please post your comments below.

As corporate competition rises companies are constantly looking for solutions to increase efficiency at manageable costs. Several companies have discovered that outsourcing certain operations of their business has provided these solutions and allowed them to leverage their competitive edge. The idea behind it is to outsource secondary operations that are not core skill areas of your company. This effectively allows your staff to focus on key, income generating areas of operations. Of course there are costs of outsourcing the secondary services, but they can be significantly offset by revenues generated from your staff spending more time on primary services.

Typically big companies have been able to take advantage of outsourcing and maximize their economies of scale. Safaricom recently joined the club with intentions to outsource their call center, which has been a weakness in servicing a rapidly growing clientele. However, it’s not just the big companies, small and medium enterprises (SMEs) can also benefit from outsourcing.

In fact, AccessKenya has just announced their venture into outsourcing services for SMEs with plans to offer them similar opportunities to enhance operations. This is good news for SMEs in Kenya, as AccessKenya have proven their customer satisfaction, riding on a strong annual performance of Sh600 million in retained earnings and Sh127 million in profits. AccessKenya will offer a range of OutsourcingIT services including network server and backup support, email maintenance and antiviral management.[1]

With major players such as Safaricom and AccesKenya entering into Kenya’s BPO sector, other companies are bound to join. The Kenyan government is also committed to boost these types of ICT developments in efforts to facilitate economic growth. In fact, the government could soon become a major BPO client itself by outsourcing services for its e-Government project.[2] As BPO opportunities continue to emerge domestically, companies in Kenya may not have to look to far for clients or services.

From Sam Imende, MfC’s program manager in Nairobi:

Kenyans are eagerly anticipating the construction of two major fiber optic cable lines that will greatly enhance internet services and significantly cut down the costs of telecommunications in the region. The current copper cables and satellite systems in Kenya have put ICT based companies at a major disadvantage in global ICT services. Most of the systems are routed through Europe, which is both costly and highly inefficient. A comparison revealed that in South Africa one megabyte of bandwidth cost $300 (Sh21,000) while in Kenya, the cheapest dedicated one megabyte of bandwidth costs $4,000 (Sh280,000).

To offset this cost disadvantage in the business process outsourcing (BPO) sector the Kenyan government has allocated $9mil (Sh630 mil), administered by the Kenya ICT board, to subsidize companies that qualify for assistance. The subsidy will cover the difference between current costs of bandwidth and costs anticipated under a fibre optic network. This is a strong incentive for companies looking to venture into the BPO sector and already half of the existing BPO firms in Kenya have applied for the subsidy. Tax-payers will bear the burden of this subsidy while constructions of the fibre optic lines are underway.

One of the lines, East African Submarine Cable System (EASSy), was expected to be completed by now, but was held up when Kenya pulled out of the project over a disagreement with South Africa on management. However the Franco-US firm Alcatel- Lucent picked up the EASSy contract in March 2007 to develop the first ever optical subsea cable link that will run all the way from South Africa to Sudan. Alcatel-Lucent also won the $82mil to construct a separate cable between Mombasa, Kenya and Fujairah, United Arab Emirates (UAE). The Kenyan government plans to allocate $50mil to upgrade the telecommunication networks by constructing domestic fiber optic networks in preparation of the two cables. These fiber optic networks are expected to reduce bandwith costs by up to 60%.

Kenya’s post-election crisis has taken its toll on the economy and may have delayed construction of the fiber optic projects. It is however prudent, that as the situation stabilizes, the Kenyan government makes it a priority to facilitate the construction of these two fiber optic networks that will offer widespread benefits to Kenyans through cheaper, faster and more efficient ICT services.

Tom Friedman wrote about the growing rural BPO trend in India last year after traveling to Ethakota, a small village east of Hyderabad where Satyam Computer Services, one of India’s outsourcing giants, set up a data center. In a New York Times Op-Ed, Friedman describes the challenge of setting up shop in areas with unreliable access to electricity (only 85% of India’s villages are wired, according to the most generous estimates) — one telemedicine center he visited was powered with car batteries.

Friedman seems to think that despite these infrastructural hurdles, rural BPO seems promising. For one thing, knowledge workers aren’t forced to leave their families back home to find work increasingly cramped urban centers:

Suresh Varma, 30, one of the data managers, was working for a U.S. oil company in Hyderabad and actually decided to move back to the village where his parents came from. “I have a much higher quality of life here than in an urban area anywhere in India,” he said. “The city is concrete. You spend most of your time in traffic, just getting from one place to another. Here you walk to work. Here I am in touch with what is happening in the cities, but at the same time I don’t miss out on my professional aspirations. … It is like moving from a Silicon Valley to a real valley.”

As outsourcing workers in India’s offshore hubs become increasingly frustrated at the poor lifestyle their jobs impose, the value proposition of rural BPO work for young professionals may be on the rise. This may also be true for firms like Satyam –  employee attrition, a major cost center for most firms in this industry, tends to be lower in areas where outsourcing jobs hold more prestige.

Unlike in the city, where outsourcing workers come and go, “in the village, nobody gives up these jobs,” said Verghese Jacob, who heads the Byrraju Foundation, which plans to gradually hand over ownership of the data centers to the villagers. “They are very innovative and positive, and because some of them had never worked on a computer before, their respect for the opportunity is so much more than for a city child who takes it for granted.”

Could the same be true for the relative prestige of such jobs in areas where outsourcing is yet to take off, such as most of Africa?

Bruce Cahan, an Ashoka Fellow and recent addition to Market for Change’s Advisory Committee, gave a TechTalk at Google’s Mountain View campus a few weeks back on the need for better feedback loops for consumers who wish to buy products that reflect their values.

The talk raised a couple of interesting points:

1. Ratings systems for ethical consumerism (including fair trade and over 150,000 other labeling systems) aren’t centralized, so it’s very difficult to figure out the net impact of your purchases on the issues you care about.

2. Attempts to quantify social impact for individual consumers haven’t met with much success because it’s not easy for consumers to share information about their social preferences with search engines and advertisers, or to view their social investments in terms of revenue dollars.

3. Case studies of “ethical banks” like Wainwright in the aftermath of the recent sub-prime crisis and data on individuals that use ethical criteria to decide what to buy have shown, not all that surprisingly, that socially responsible companies and consumers are a better credit risk.

Mr. Cahan’s talk highlights the need for tools that help consumers make the right choice in all kinds of buying decisions, including outsourcing services. We’re excited to have him on board.

Gartner, a Stamford-based consulting firm, recently named “green IT” as one of the ten forces that will shape business and information technology in 2008. Survey data seems to support this — according to Forrester Research, as of October, 38% of IT professionals said their companies use environmental criteria in their evaluation and selection of IT equipment, up from 25% six months ago.

SearchCIO.com recently posted a good summary of the green IT trend. Thoughts welcome.