Outsourcing to India

I’m sure you’ve all heard about the noble cause of the Kenyan government to make Kenya an offshore outsourcing destination. Companies like Kencall are, currently, the face of these noble and valuable efforts. I have been thinking about Kenya as an outsourcing hub and I still wonder, can we really make it a reality? Yes, companies like Kencall do very well but will Kenya ever be as big as countries like India when it comes to offshore outsourcing? I think not.

Last week, I was talking to some people who are interested in starting an egg (mayai) business. They want to sell eggs on a large scale. Do you know it is cheaper to import eggs from Egypt than it is to produce them locally? And that’s just one product – pick any industry in this country and you will quickly realise that producing goods locally if often several times more expensive than it is to just import them. What does this mean for us, as a country wishing to grow our producing and manufacturing industries?

You would think that imported products are cheaper, but those that are locally manufactured are of a better quality, yes? Well, this may be true in some cases but more often than not, it is not. A trip to Nairobi’s industrial area would leave you shocked at just how much of what we consume locally is outsourced – from packaging material to the whole manufacturing process. The people who outsource would like to use Kenyan alternatives but it does not make business sense to do so. Why pay more for something of a lesser quality?

What about services? We’re good at that, at least, eh? Well, not really. Undoubtedly, we have a very educated and extremely skilled workforce. But, it is still cheaper to get things done in India, or elsewhere. Case in point: Kenyan ‘technology’ firms (software producers, web design, web development, etc etc) often require to hire additional programmers, designers, etc to handle small tasks. The local labour force is very well equipped to handle these tasks. However, the local labour force is also nearly five times more expensive than offshore (often Indian) options. Who would you choose to go with?

Now, this post is not meant to bash Kenya and Kenyans. I’m a Kenyan too. 🙂

I’m just simply wondering: how can we compete with India as an outsourcing destination when we ourselves outsource to India? As a people and as a nation we have to ask ourselves: what are we doing wrong? Why is it cheaper to import sofa sets from China (and taking shipping costs into account) than it is to make the sofa set locally? Why is Kenyan stuff so expensive? Can we ever compete with economies like India or China? I do not know the answers to these questions. Do you?

What I do know is that the following are some of the things we need to address:

  • The infrastructure in Kenya is good, but hardly good enough. We still have frequent power losses and water shortages, not to mention many other things
  • The cost of doing business in Kenya has to be brought down
  • Our mentality as a people needs to change. The average Kenyan businessman is greedy – he would much rather do one job for a profit of 50,000/- than 10 jobs for a profit of 25,000 each

What do you think?

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  1. Paul Kevin says:

    I think Kenyans are lazy and want ot be paid big for small work

    • Surely not all Kenyans, ama?

    • i think Kenyan workers are greedy and lazy that is why they,re almost 5 times more expensive than china .
      you spent on average 300/= to pay someone kwa kazi ya mkono kama kujimba holes ya fence. you calculate all the costs of wire mesh , nails and posts plus labour costs. you will realise unskilled labour will be two times the cost of materials bought! Its still cheap to import ready to fix item from abroad than use local labour.

  2. Ken Thumbi says:

    Thanks for this good article.
    There are so many questions we need to ask ourselves on outsourcing in this global economy. But the main question I keep coming back to is “what gives us an advantage over the likes of Egypt, India or even Philippines?” let us not even imagine we (Kenyans) do not have an accent, from my experience, we generally have a distinct thick accent, which is an argument many like to put across. My main interest is how can an ambitious local company compete with the outsourcing giants of the world? Imo, service, cost, service cost, service cost. period. Do we have that edge? I leave it to other readers to post their comments.

    • One beauty in it all is that, through smart outsourcing, small ambitious local companies can compete with the local giants. Even maybe outdo them 🙂

  3. I have enjoyed this article and have to say you were spot on, on most of the points but i do not agree with you on some especially when it comes to outsourcing of services.
    Actually BPO in Kenya is bigger than most people think and i should know as i work for such a company. Examples of international companies outsourcing in Kenya

    You will realise most outsourced companies are of an ICT nature. The reason Kenya might have a slight advantage over India is mainly because we are more effective communicators (I disagree with Ken who mentions that Kenyans have very thick accents, infact Kenyans’ clarity of communication makes them stand out from other Africans) and also time difference between us and the West. Take UK for instance, the Outsourcing company will require the outsourced resource available during normal working hours to perhaps offer support services. Seeing as they are only 3 hours behind us, this doesn’t present logistical challenges.
    So why can’t we hold a candle to India;
    1) They got into the BPO business much earlier than we did
    2) They are ridicuously many more in terms of numbers meaning the number of people looking for jobs online will be greater.
    3) Lack of affordable internet connectivety in Kenya. Many unemployed youth would love to try their hand in rendering their services to companies beyond our borders but how do you that when a modem costs KSH 2,000 and a minimal 40MB bundle costs you KSH 250?

    That’s my 5 cents on the matter 🙂

    • Well, I agree with you almost fully. We have immense capacity and opportunity. But will we ever take full advantage of it all? I think not. By the time we have our house in order, it will be too late.

      Also, the fact that businesses in Kenya are starting to outsource offshore means that perhaps there are places better suited to be outsourcing havens.

  4. when you speak the truth you speak the truth… thanks for the article.

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