Madagascar Business Process Outsourcing – A Guide

Madagascar Business Process Outsourcing – A Guide

Where in the world?

This might well be the question asked by an outsourcer today, wherever he is, while trying to identify a suitable location for outsourcing his business processes to.

Thanks to advances in telecommunications technology, he has the whole world available to him for his business.

This is important not just for the outsourcer, but the provider too, who needs to be constantly on the lookout for locations that will help him gain a competitive advantage.

But it was not always like this.

Around the middle of the last century, as consumer franchises started to grow, and major contribution to revenue coming from major urban centers, the need for relocating processing activities that were not customer-facing, away from expensive downtown real estate, started being felt.

This is where the first stage of outsourcing, as we know it today, perhaps started, when this business looked at options which were not far in physical terms, but where processing could be done in a much more inexpensive manner, and perhaps more efficiently. At this stage, if the business was operating from New York, it moved its large-scale processing activities from expensive New York to a lower cost option in the state of New Jersey.

As volumes kept rising, communication technology improving and air travel becoming frequent, the time and distance between locations kept reducing. At this stage, having had experience of outsourced processing, and having become comfortable enough with it, businesses started to move processing activities much further into the hinterland, even though most documents would still need to be moved manually. At this stage the processing might be moved inland to Des Moines in Iowa or Sioux Falls in South Dakota.

Competition and margin pressure kept rising. Communications technology kept improving. Increasing volumes, comfort with outsourcing and pressures of core business brought professional outsourcing outfits into the picture. Large outsourcers started outsourcing what they considered non-core functions to professional Business Process Outsourcing (BPO) companies.

Competition and margin pressure kept rising. Communications technology kept improving. It became possible to move data and voice communication lines, at a commercially viable price, to anywhere in the world. Eager to take advantage of labor cost arbitrage, which would more than make up for higher telecommunications cost, large-volume work, like Contact Centers, started being taken offshore, to locations like India and the Philippines.

The footprint has continued to grow to cover many more geographies around the world as modern communications technology has expanded rapidly, bringing hitherto lesser known Madagascar Business Process Outsourcing onto the map.

The mix of processes outsourced has also continued to evolve. Functions earlier considered core and kept inhouse have been outsourced. Modern technologies have given rise to new processes requiring outsourcing, like data entry for Ecommerce businesses and data annotation for Artificial Intelligence (AI) models.

 

Madagascar – a new hub of Business Process Outsourcing

The fourth largest island in the world, larger than France in area, situated more than 200 miles off the Eastern coast of Africa, is in the fray for Business Process Outsourcing and is competing with and winning business away from Tunisia and Morocco as a new hub of francophone BPO activities.

The current population of Madagascar is estimated at 28 million and forecast to double to 54 million by 2050. Approximately 42.5 percent of the population is younger than 15 years of age, while 54.5 percent are between the ages of 15 and 64. Those aged 65 and older form 3 percent of the total population. A large percentage of the population is in the working age, and poised to grow further, making it easier to hire and retain resources. With the move to fiber optic cabling a few years back, Madagascar boasts one of the best internet speeds in the continent. It also has the advantage of being not more than 3 hours away from any time zone in Europe.

 

Criteria for choosing a BPO location

Choosing a place for locating a business or service is a normal business decision. As an outsourcer, you need to ensure that the outsourcing decision adds value to the business, like any other decision you take for the business.

With BPO being a global business, while it provides you with plenty of choices, it also makes the decision more complex. What are the factors that might be relevant when you choose a location which will become the primary delivery point for a process that is a part of your business?

Political Environment

The political environment sets the tone for the rest of the nation to take cues from and chart their respective courses. Business requires investment which thrives on predictability in the economic environment which, in turn, depends on the political climate. It is difficult for a business to make an investment decision based on a certain set of regulations if it has experienced that the rules keep changing on the whim of the person or persons in power. What seemed like a good business decision yesterday has become a bad one as a result of the last such change and the same could happen again.

With a chequered political climate ever since attainment of independence, as with many newly independent states, Madagascar has its share of challenges in governance, with international agencies alternately pledging and withdrawing support depending on the state of affairs. Over the last few years, the importance of stability and continuity in decision-making does seem to be dawning on the people in charge, leading to opening up of opportunities for private businesses like oWorkers to start its Madagascar BPO operations.

Human resource availability

This probably is the most important variable, as much of BPO work is people dependent. One should ascertain the availability of suitable manpower that can be employed for the different kinds of services on offer. Some of this assessment may need to be done with the use of surrogate variables as there may not be any direct indicators that provide this information like the number of colleges which offer course which match requirement of the business, like Accounting if the need is for F&A, number of fresh graduates passing out every year, migration trends from location; how many people choose to relocate for want of employment prospects, other employers hiring a similar profile; this could work both ways – while others hiring similar profile indicates availability of a pool, it also means that there is greater competition for that resource.

With a young population of 28 million that is forecast to double to 54 million by 2050 which consists of approximately 42.5 percent younger than 15 years, while 54.5 percent are between the ages of 15 and 64, there is a large, growing talent pool available to Madagascar BPO providers. Flexible labor laws allow oWorkers the flexibility to offer quick ramps, up and down.

Resource Cost

Related to resource availability is the issue of cost at which resources become available to Madagascar BPO providers. In addition, one needs to also factor in the cost to acquire and retain that resource. In other words, is a lot of effort required to attract the right talent? Effort will translate to cost, and the greater the effort the greater the cost. What about attrition? Is it high? Each time someone leaves the hiring machinery needs to be cranked up all over again, which is a cost.

oWorkers taps into the Madagascar Business Process Outsourcing talent pool that is available for $130 per month. This is less than half the starting salary in competing locations like Tunisia and Morocco, while being thrice the minimum wage stipulation in Madagascar. Attrition remains low, reducing pressure on hiring and training.

Telecommunications Network

Telecommunications is the lubricant that has oiled the wheels of the BPO industry and allowed it to expand to the far corners of the world. Even though it is almost a given in today’s context, from a business perspective we still need to tick the boxes and satisfy ourselves that the available infrastructure will meet business needs.

According to thehustle.co “With the fastest internet in Africa, Madagascar has grown to be a major player in the BPO sector for French-speaking markets” and “Madagascar has the fastest internet in Africa — even faster than some first world countries such as the UK, France, and Canada.” Plugging into this fiber optic cable network, with quadruple redundancy in the form of Fiber, 4G, ADSL and satellite, allows oWorkers to offer efficient transaction processing to its clients out of its Madagascar BPO centers.

Time Zone

The world is generally visualized as being spread out in an East-West direction, with time changing as you go more East or West from a certain point. But we know the world is round. One could also travel vertically in a North-South direction from a starting point. Whatever distance we travel we will be in the same time zone. Being in a different time zone could have benefits as well as limitations. Being in a time zone with a large difference from the client might enable speedier, overnight processing. On the flip side, requiring staff to work off hours in the BPO center might increase costs.

oWorkers in Madagascar is on East Africa Time which is UTC + 3 and shared with Eastern Europe Summer, Israel Daylight and Moscow time. This helps us in providing regular daytime shifts to most employees who work on projects for European clients.

Physical infrastructure – Electricity

Infrastructure required for running a business can be of various kinds, like power, water, food, cooling (or heating) as the case may be. We will focus on power, which is the most time-critical resource for a business to run. The others being requirements that can perhaps be borne even if missing for short periods of time.

Power supply is required for running any sort of equipment, whether it is a PC, or a fan, or lighting, even most of the telecommunications equipment. Adequacy and continuity of power grid power needs to be ascertained. Many BPOs tend to be set up in developing economies where some of the infrastructure, like power, is less than robust. In such cases, it needs to be ensured that backup arrangements, like power generating units, are available so that the shortfall can be met.

oWorkers believes in redundancy in physical infrastructure in its Madagascar BPO, so that client delivery is not hampered. With 2 Electric generators on the standby, we have adequate supply of power to meet all our needs.

Multilingual capability

Language is the medium through which human beings communicate. While the technical part of communication is handled through telecommunications networks, human interaction can only happen through language. Not only the language in which the outsourcer and provider can communicate, but in each language in which the outsourcing business needs to interact with customers and other stakeholders in the outside world.

Perhaps on account of being a French colony till 1958, proficiency in French is high, making it an ideal location for serving the francophone market for Madagascar BPO vendors. oWorkers leverages its centers in Madagascar for the services it offers to clients in French apart from other languages that derive from Latin.

Civic Services – Local Transport

While telecommunications connects the world making it possible to transfer information and knowledge between locations, a system of civic services, like transport, like law and order, is required for not only the business to operate but also employees to commute to and from work when working out of a physical facility.

The urban Antananarivo, the largest city in Madagascar, provides multiple public transportation options which locals use quite comfortably, though visitors might find them uncomfortable and confusing. Staff of oWorkers relies on this system to travel from home to either of the two Madagascar Business Process Outsourcing centers, both located in Antananarivo.

Economics

Finally, the economics of the decision need to make sense.

It helps if there are incentives available from the authorities, as BPOs have the potential of creating jobs in a sluggish market.

Competition also has an impact on both sides. The existence of competition means available resources will be in greater demand and could become more expensive as a result. On the positive side, the existence of competition means that you are perhaps in the right place for a BPO.

Also, just like the political environment, the economic environment needs to be governed by policies that are stable and transparent for private businesses to get confidence to invest.   

A business does not exist in isolation. It exists in an ecosystem where there are many other players. We need to ensure that the ecosystem we seek to place the business in, is one that will provide a supportive environment.

oWorkers Madagascar BPO is in a position to offer most services at a rate lower than many established locations like India for similar services without sacrificing quality, with the availability of a large pool of experienced data entry operators, moderators, moderation experts and accountants and many others.

 

In Conclusion

With its temperate climate despite being located in the tropics, Antananarivo, the capital city, largest urban center and where both the centers of oWorkers are located, offers a pleasant year-round climate, apart from the business benefits we have discussed earlier.

Many of our clients are already working with us from our centers in Madagascar.

As a Madagascar BPO services company, with a management team that has a cumulative experience of over 20 years, with oWorkers you engage a provider that will enable you to get the benefit of working from a center located in a developing economy while managing the downside risks for you.

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