Lebanon Looking to Break into the Outsourcing Arena

Lebanon Map. Image source lonelyplanet.com

Lebanon as a country is seeking to move into the outsourcing arena. Local entrepreneurs for a long time now have mourned the lack of Governmental support in branding Lebanon as a destination for value-added business services. The business owners, both small and large believe that the country is on par with other major BPO destinations in terms of service abilities.

Lebanon more than a tourism destination

The Government has concentrated all their public relations efforts on branding the nation as a tourism haven. The historical and cultural aspect highlighting has overshadowed the more modern technology ready capabilities of the economy.

IDAL changing the tides in favor of BPO

The Investment Development Authority of Lebanon (IDAL) shook up the inertia in the State institutions since the Government resigned in March by participating in an international forum for outsourcing.

The IDAL has affiliations to the Sate of Lebanon and it chose to show support to the cause of promoting BPO by attending the International Outsourcing Forum held in France on the 3rd of October. The participation of the organization meant that Lebanon was introduced to the world of multinational companies as a competitive outsourcing destination.

Two local companies received the opportunity to present their services through service meetings with large multinational companies like British Petroleum, Altcatel Lucent, DHL Express, Llyods and General Electric amidst various other companies.

IDAL making strides in promoting Lebanon as a business destination

The organization approached a lot of local organizations in order to increase participation in the International Forum in France. Of the 50 companies approached, 25 participated in workshops and expressed their interest through the workshops chaired by Nabil Itani, the president of IDAL.
Despite the organizers of the Forum slashing prices of participation by 50 percent for Lebanese participants, only 2 companies were able to participate in the Forum finally. Logical obstacles and the various fees proved to be big hurdles for the small entrepreneurs.

Project Manager for IDAL, Leila Sawaya El Khoury, one of the participants in the Forum spoke to the Daily Star and said, “Our objective was to position Lebanon on the global map as a potential center for high value-added services. Though our efforts might take time before they materialize, the initiative is a first that needs follow up in a consistent manner.”

The Lebanese outsourcing arena

There are currently over 5000 employees in the outsourcing arena placed across 200 local companies. The three main sectors of outsourcing in Lebanon are Business Process Outsourcing Services, Call centers and Information Technology outsourcing. IDAL found this information through a study they conducted especially for participation in the Forum.

The study also found that the majority of the local talent was harnessed in the IT arena with 4,143 employees. The call center arena was the second largest with 854 jobs in 13 companies.

Despite having the markings of a competitive outsourcing market, they have as a collective body, failed to attract multinational clients or the big fish in the sea of clients. Most of the clients are small local companies or small foreign companies with a smattering of multinationals like Nestle, Toshiba and Samsung.

Whether the IDAL’s participation in an international forum will change the fate of the companies or not is a waiting game currently. Many industry insiders like Majid Khoury, CEO of SmartSource, an outsourcing and consultancy firm in Lebanon, believe that it is too early to decide the impact of the international forum on the Lebanese firms.

Khoury, a part of the new breed of Lebanese entrepreneurs, is establishing a new call center in Beirut. He believes that making Lebanon visible to the global market is more critical at the moment than signing on new clients. He, like many other entrepreneurs, believes that the Government’s role in leveraging the country’s position as a viable business option is what will help attract multinational clients. He thinks that the Government should channelize their energies into making Lebanon a business rather than a tourist destination.

Samer Hanna, CEO of Capital Outsourcing, an ITO and BPO company based in Lebanon concurred with Khoury when he said, “We didn’t go to sign clients, but it was rather a more informative participation as IDAL took the opportunity to portray Lebanon as a good destination for outsourcing activities.”

Hanna’s company has over 60 employees and has mostly local and foreign clients based in the Gulf countries.

The changing perception of outsourcing and the Lebanese advantage

Over the years the major consideration of companies in choosing business partners has shifted from cost to quality. While Lebanon cannot hope to compete with countries like the Philippines and India in terms of cost, they can offer quality work that can compete on a global level. This changing consideration has pushed the Eastern European countries ahead in the competition over Asian destinations.

Khoury said, “Lebanon may not be as cheap as global outsourcing giants like India and the Philippines but given its high skilled labor it should be compared at the level of productivity with eastern European countries where the labor cost is significantly higher.” The average labor cost in the country stands at $9.60 for one hour compared to the $13.20 in the Czech Republic for every hour.

In addition to the lower cost as compared to other Eastern European destinations, Lebanon also has the bi-lingual advantage that is coveted. Khoury also spoke of the language advantage when he said, “For instance, Canadian firms usually outsource their services to companies that employ individuals who can speak both English and French, and this is rare to find in Eastern European countries besides Romania, whereas Lebanese firms offer such a service.”

The Forum was an opportunity for the IDAL to witness how other countries market themselves as viable outsourcing destinations. The forum was also an eye opener as it lay bare the areas where Lebanon fell short. Hanna noted that Lebanon fell short in the business environment and infrastructure as those are key factors that help companies chose able business partners.

Experts say that rankings such as the World Bank Location Readiness Index and the AT Kearny affect decisions about outsourcing destinations. Last year Lebanon was ranked 115, this year the country moved up to the 111th position according to the 2013 business index from the World Bank.

Lebanon on the path to reform

The improved position of the nation in the eyes of the World Bank’s Business Index was attributed to various reforms made by the Government. The business registration process was changed to be more user friendly. The new streamlined process meant a lot less time was spent setting up new businesses. Also the new system made paying taxes easier through the electronic payment method.

Despite these reforms and turning new leaves, a lot of entrepreneurs have complained about the red tape, corruption and a startling lack of regulatory reforms. The list of complaints was topped by the excruciatingly high costs of import for technological equipment required for Information Technology Outsourcing operations. Some business owners reported to the Daily Star that the costs of shipping equipment were four times as high as shipping the same equipment to European countries or even to the US.

The high cost of shipping is attributed to the TVA fees on the shipment and its parts, the courier delivery fees and the clearance fees apart from the TVA at the point of entry. Many industry insiders believe that streamlining regulations and improving infrastructure will make Lebanon appear more appealing. These efforts might mitigate the security concerns that most multinationals list against the nation.

Further, introducing a skilled and industry ready workforce through ITO-focused school training programs will help Lebanon make the transition from call center to the more skilled IT industry. An industry source said, “This will strengthen Lebanon’s positioning as a provider of high quality provider of high quality (sic) provider of back office operations, especially for accounting and finance, sales and marketing, technical support, transaction processing and customer care.”

The source also said, “we were about to secure a deal with a large multinational firm to establish a shared revenue center in Beirut but they backed away at the last minute because a bombing took place.”

While research centers and shared service centers are being considered in Lebanon, the nation has yet to consolidate its place as a viable business destination because of the near constant security threats. The fragile future of the country needs Government support in promoting the business aspect.

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