Outsourcing has become a popular business strategy for many companies around the world. Outsourcing is the practice of hiring a third party to perform services or create goods that were traditionally performed in-house by the company’s employees and staff. It is a business practice that can affect a wide range of jobs, ranging from customer service representatives/ customer support, manufacturing up to the ICT sector to the back office.
One example of outsourcing is when a company hires a third-party vendor to handle its customer service operations. Instead of managing an in-house customer support team, the company contracts with an external call center or customer service provider to handle inquiries, complaints, and other customer-related issues. This allows the company to focus on its core business functions while benefiting from the expertise and resources of the outsourced vendor. This helps enterprises to focus most of their resources on the main activity.
Why business chooses Outsourcing
· Cost savings: Outsourcing can help businesses to reduce their costs by hiring third-party providers that offer lower wages and other operating costs.
· Increased focus on core competencies: By outsourcing non-core functions, businesses can free up their resources to focus on their core competencies.
· Improved access to specialized skills: Outsourcing can give businesses access to specialized skills and expertise that they may not have in-house.
Ethiopia’s Outsourcing landscape
In Ethiopia, there are various outsourcing service provider companies that have been operating for over a decade. However, many public and private companies are unaware of their existence, and the government has not provided sufficient coverage for this sector.
In 2020, the formerly Jobs Creation Commission and the now Ministry of Labor & Skills, recognizing the impact of the gig economy, established the Freelancing, Outsourcing, and Gigs (FROG) Taskforce. The aim was to place FROG at the core of Ethiopia’s service sector transformation.
A significant milestone in the sector is the recent establishment of the Ethiopian Outsourcing Association, which serves as the representative body for offshore outsourcing services and providers in the country. The association’s main objective is to promote Ethiopia as a global outsourcing destination, while also focusing on enhancing the policy framework and addressing talent gaps within the industry.
One of the primary advantages of outsourcing for Ethiopia lies in the creation of employment opportunities. Numerous companies from developed nations opt to outsource their work to Ethiopian companies due to lower labor costs compared to their home countries. This cost differential allows Ethiopian workers to be employed at a more affordable rate, making the outsourcing business model in Ethiopia highly attractive to foreign companies.
In addition, outsourcing possesses a distinct advantage over other sectors in Ethiopia due to its minimal resource requirements and conditions. Unlike manufacturing companies that demand substantial capital, equipment, and raw materials, or the tourism sector that necessitates extensive infrastructure and world-class hospitality standards alongside stable peace and security, outsourcing companies solely rely on skilled manpower, computers, and stable telecom infrastructure. As a result, outsourcing emerges as the optimal business model for Ethiopia, offering efficiency and accessibility without the need for extensive resources.
Why Ethiopia is attractive for outsourcing
Availability of abundant talent: Ethiopia has a large and young population, with more than 70% under the age of 30. It also has a high number of graduates in STEM fields, with over 200,000 students graduating each year from universities and colleges. over 42% of public university graduates are unable to secure employment after completing their studies. Of these graduates, more than 70% hold STEAM degrees, and considering that over 70% of the country’s population is under the age of 30, there is a significant need for job creation in the IT sector. These talents are eager to learn and grow in their careers and can provide quality services to global clients.
Very low attrition rate: One of the challenges of outsourcing is retaining employees who may leave for better opportunities or higher salaries. However, Ethiopia has a very low attrition rate compared to other outsourcing destinations such as India, the Philippines, and China, as its workers are loyal, motivated, and committed to their employers. This reduces the cost and time of hiring and training new staff and ensures continuity and stability of service delivery.
Strategic location and time zone: Ethiopia is located in the Horn of Africa, which gives it access to both African and Middle Eastern markets. It also has a favorable time zone, which allows it to work with clients from Europe, Asia, and North America with minimal overlap. This means that Ethiopian outsourcing providers can offer round-the-clock services and respond to customer needs quickly and efficiently.
In conclusion: Outsourcing companies can help fill the gap in the employment market for Ethiopian youth talented graduates by offering a stable and competitive employment market. By partnering with foreign companies, graduates can gain valuable experience across industries and technologies. They also stand to benefit from salaries, professional development opportunities, and access to cutting-edge technology. In addition to creating job opportunities, outsourcing companies can boost market visibility and generate revenue for the country, making them an important player in the Ethiopian economy.
