Market System Analysis BPO/ESO Outsourcing services in oPt January 2016

Market System Analysis: BPO/ESO Outsourcing services in oPt

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Market System Analysis: BPO/ESO Outsourcing services in oPt

“This Publication has been funded by UK aid from the UK Government; however the views expressed does not necessarily reflect the UK Government’s official policies.” “This Publication has been produced with the assistance of the European Union. The content of this publication does not reflect the views of the European Union.”

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Market System Analysis: BPO/ESO Outsourcing services in oPt

Table of Content Table of Contents Acronyms and Abbreviation: ...................................................................................................... vi Industry Terms .............................................................................................................................. vii Acknowledgement: ..................................................................................................................... viii Executive Summary .......................................................................................................................1 Study Approach and Methodology ...........................................................................................7 1 The Core Market System: .....................................................................................................7 1.1 Market Size of the BPO and ESO............................................................................................ 7 1.2 Segmented Demand for BPO and ESO .................................................................................. 7 1.2.1 International Demand ............................................................................................................ 7 1.2.2 BPO and ESO International Demand ............................................................................. 8 1.2.3 Contact Centre Market Demand........................................................................................ 10 1.2.4 Additional Identified Demand ....................................................................................... 12 1.2.5 BPO/ESO Buying Drivers .................................................................................................... 14 1.2.6 Market Access to International Markets....................................................................... 15 1.2.7 HR/FAA/Contact Centre BPO and ESO Local Demand ................................................ 15 1.2.8 End Market Quality and Regulatory Requirements................................................... 17 1.3 Supply of BPO and ESO Services .......................................................................................... 19 1.3.1 Global Trends ....................................................................................................................... 19 1.3.2 MENA Region Trends ........................................................................................................... 19 1.3.3 Supply Side Analysis............................................................................................................ 20 Analysis of Low Income Groups in the Sector ....................................................................... 24 Gender Analysis ......................................................................................................................... 27 Palestinian ESO/BPO Services Value Chain ......................................................................... 29 1.4 ESO/BPO Value Chain Constraint Analysis ......................................................................... 31 1.4.1 Lack of Coordination and Support ............................................................................... 31 1.4.2 High Costs .......................................................................................................................... 32 1.4.3 Human Capital and Education Skills ............................................................................. 32 1.4.4 Supporting Services ......................................................................................................... 34 1.4.5 Government Incentives and Ease of Doing Business Ranking ................................... 37 1.4.6 Political and Economic Stability ..................................................................................... 38 1.4.7 Limited Internal Capacity of BPO/ESO Companies .................................................. 38 1.4.8 Increased Competition..................................................................................................... 39 Vision of Growth for the Sector ............................................................................................... 40 Potential Synergy with Other Development Projects........................................................... 42 Potential Intervention ................................................................................................................. 44 Validation Workshop ................................................................................................................ 48 1.5 Introduction ................................................................................................................................. 48 1.6 Validation of the Constraints .................................................................................................. 48 1.7 Validating the Need for Coordination.................................................................................. 48 1.8 Validating the Importance of Quality and Upgrading Skills............................................ 49 1.9 Debating the Markets and Channels ..................................................................................... 49 1.10 Spurring Growth ........................................................................................................................ 49 Annexes ........................................................................................................................................ 51 Annex 1 – Objectives and Methodology ........................................................................................... 51 Annex 2 – Offshore Services Value Chain ........................................................................................ 53 Annex 3 - International Market Analysis ............................................................................................ 54 Annex 4 – Examples of Outsourced HR Services ............................................................................. 55 Annex 5 - Channels to the BPO and ESO Markets and Buyers ..................................................... 56 iv | P a g e

Market System Analysis: BPO/ESO Outsourcing services in oPt

Annex 6 – Local Market Growth Opportunities ............................................................................... 58 Annex 7 – Buyers Quality Requirement ............................................................................................. 59 Annex 8 - Cushman and Wakefield 2015 Country Example Report........................................... 61 Annex 10 – Summary of Interviews .................................................................................................... 79 Annex 11 – ESO/BPO Suppliers Profile Analysis ............................................................................ 83 Annex 12 – Price Comparison .............................................................................................................. 87

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Market System Analysis: BPO/ESO Outsourcing services in oPt

Acronyms and Abbreviation: ATM B-2-B B-2-C BIM BPO CAD CBI CCC CGGC University CSR DC ERD ESO EU EY FAA FDI FIT FAO FTE GCC GDP GSE HR ICT IS ISG ISSP IT ITO KPO MC MENA MTIT NASSCOM OCR OEM PACPA PalTel PCBS PMA PSI SEO UAE UK US or USA VAR VoIP WWB

Automated Teller Machines Business to Business Business to Consumers Building Information Modelling Business Process Outsourcing Computer aided design The center for the promotion of imports from developing countries Consolidated Contractors Company Center on Globalization, Governance & Competitiveness (CGGC), Duke Corporate Social Responsibility Developing countries Engineering Research and Development Engineering Services Outsourcing European Union Ernst and Young Finance, accounting and administration Foreign Direct Investment Foreign Independent Travelers Freelance Online Academy Full-time equivalent Gulf Cooperation Council Countries Gross Domestic Product Good Shepherd Engineering Human Resources Information and Communication Technology Impact sourcing Information Services Group Impact Sourcing Service Provider Information Technology Information Technology Outsourcing Knowledge Process Outsourcing Mercy Corps Middle East, Europe and Northern Africa Ministry of Telecommunication and IT National Association of Software and Services Companies – Trade Association of Indian IT and BPO Industry Optical Character recognition Original equipment manufacturer Palestinian Association Certified Public Accountants Palestinian Telecommunications Company Palestinian Central Bureau of Statistics Palestine Monitory Authority Palestine Standards Institute Search engine optimization United Arab Emirates United Kingdom United States of America Value Added Resellers Voice over Internet Protocol Work Without Borders vi | P a g e

Market System Analysis: BPO/ESO Outsourcing services in oPt

Industry Terms Business Process Outsourcing: When a company reallocates activities and services that it earlier used to perform in-house, to third party-providers. Onshore: Onshore refers to business processes that are handled within their home country. Nearshoring: Nearshoring refers to business processes that are handled in a country near the home jurisdiction. Offshoring: Offshoring occurs when the outsourced activities/services are performed in a foreign location. These are usually managed by means of a contract or service level agreement. Captive Centre: A contact or business process-outsourcing centre that is owned and managed by the organization for which the services are being provided. Contact Centres: Some examples include: inbound customer service, inbound helpdesk, inbound sales, inbound technical support, outbound data cleaning and data capturing, outbound debt collections, outbound customer interview, research and surveys, outbound telemarketing/sales, web sales and marketing, advertising creative processes and marketing research services. Inbound: Communications traffic that originates from customers and is received by agents in a contact centre; also refers to centres that handle such work. An example would be technical support calls. Outbound: An outbound call center is one in which call center agents make outbound calls to customers on behalf of a business or client. Calls made from the center can include telemarketing, sales or fundraising calls, as well as calls for contact list updating, surveys or verification services. Back Office Processes: Some examples include: administration, data entry/preparation, data entry – scanning and archiving, document management, translation and transcription service, forms and report generation. Impact sourcing: An emerging sub-sector within BPO which entails employing people from vulnerable socioeconomic groups into BPO centres to service clients both domestically and internationally. This task is similar to the BPO sector mentioned in this report. Freelancing: Online Freelancing is the process of working online through some special online platforms (such as freelancer.com, upwork.com etc.) which connect the client and the freelancer in a creates a professional business atmosphere.

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Market System Analysis: BPO/ESO Outsourcing services in oPt

Acknowledgement: PMDP would like to thank and acknowledge the following companies and organization that have participated in taking the survey: Transcend Support Outsourcing Solutions, Fusion, Coreions, Reach Contact Centre, The International Logistic Co., DallataQode, Unit One ICT, ALTARIQ Systems & Projects, StayLinked and Work without Borders have participated in the survey. GSE, Good Shepherd Engineering and RAI Consult took the engineering survey. Only HLB Samir B. Sahhar from FAA/HR sector responses. PMDP would also like to thank and acknowledge the following professionals that have participated in being part of the Buyers and Suppliers interviews: Mr. Sulaiman Zuhairy, Ministry of Telecommunication and Information Technology Mr. Ghassan Anabtawi, Reach Contact Centre Mr. Jerry Marshal, Transcend Support Outsourcing Solutions Ms. Enas Abu Laban, Office of the Quartet Mr. Gurmeet Chopra, Avasant Dr. PK Mukherji, on behalf of Rockefeller Foundation Mr. Paul Tjia, Advisory Sourcing Mr. Hgai Hetzroni, CISCO Mr. Judeh Jamal, Qatar Charity Ms. Abeer Abu Ghaith, StayLinked Mr. Russ Sandlin, Expert in Contact centres Mr. Mousa Abu Dayyeh – Al-Wafa Accounting Mr. Amro Abu Alia, the BIM Manager at Ramallah office CCC Mr. Saady S. Lozon, Unit One PMDP would also like to thank and acknowledge EnterVentures professional team for their services in support of this study that included Mr. Laith Kassis, Mr. Ibrahim Abu Kteish, Mr. Taysir Shaqalaih and Mr. Bashar Salameh.

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Executive Summary There are three distinct types of outsourcing. The first is the information technology outsourcing (ITO), which refers to outsourcing all or parts of IT functions to an external party. The second type is the business process outsourcing (BPO) that involves contracting of some parts of the business operations and responsibilities inside the company to a third-party service provider. The third category is the knowledge process outsourcing (KPO) that outsources core informationrelated business activities to third parties and requires advanced analytical and technical skills and specialization expertise. The objective of this study is to conduct a market system analysis for the engineering services outsourcing (ESO) that falls under the KPO category and the following Business Process Outsourcing (BPO) segments: contact centre services; finance, accounting and administrative (FAA) services and the human resource (HR) services in the occupied Palestinian territories (oPt). This market system study does not address the ITO outsourcing that typically includes software programming. As the total number of unemployed Palestinians soared by more than 25 percent in 2014 compared to the previous year to reach 338,300, creating job opportunities for the youth is paramount with higher unemployment rates amongst educated youth who are university graduates such as the below table: Field of education Teacher training and education science Humanities Mathematics and statistics Life sciences Social and behavioural sciences Personal services Journalism and information Business and administration Engineering and engineering trades Health Architecture and construction Computing Law Other disciplines

Unemployment rate 72.7 66.2 65.7 65.3 62.3 63.8 49.2 48.0 46.8 43.3 40.7 39.5 14.5 46.9

Period unemployed in months 14.6 17.2 14.3 11.3 16.9 11.5 19.4 14.3 14.4 14.1 12.3 10.9 11.0 11.5

The value proposition of educated and unemployed Palestinian youth present a low attrition rates at competitive pricing for the quality of service for outsourcing, offshoring and impact sourcing for ESO and BPO buyers such as contact centres, FAA and HR. BPO and ESO normally buyers choose a specific country destination based on a mix of factors such as price points, talent pool, language skills, economic and political stability, and cultural and geographical proximity. Advisory sourcing companies scanning the global markets for suppliers also influence these buyers. PMDP has conducted primary and secondary research and has analyzed the Palestinian suppliers, the potential markets for local and international BPO/ESO service buyers. The study also provides analysis on the market system constraints and how to develop interventions to improve the market system between suppliers and buyers of these BPO/ESO services. 1|Page

Market System Analysis: BPO/ESO Outsourcing services in oPt

The study identified to following key facts about the service side of the Palestinian BPO and ESO sector: 1. There is a diverse skill set available in the BPO market due to high number of graduates from different background such as humanities, social science, mathematics, business, information technology (IT), law, architecture and construction and engineering schools. 2. Palestinian BPO sector is competitive in terms of value for money for market entry English and neutral Arabic languages are widely spoken and used in many businesses. This is a competitive advantage over other countries in the region, except Jordan, where they have been able to pitch their services at 30% lower price and subcontract to Indian BPO providers. 3. The current size of BPO/ESO service providers is relatively small to meet the scaling requirement of international buyers. However, providers can scale by hiring from the pool of unemployed and educated youth; much easier for low-value than high-value BPO services or ESO services due to the specialization requirement. 4. The Palestinian BPO contact centres segment is still nascent as size of companies, constituting of only three companies providing dedicated contact centre services with two out of the three contact centres largely cater for their internal group of companies. However, these companies proved to be able to sign contracts with regional and international buyers and are providing 500 – 700 jobs opportunities. 5. While there are 12 – 14 small size companies, hiring in the range of 12 – 15 staff each, that provide finance and accounting as well as taxation services for income, sales and salaries in the local market. The big 4 accounting firms, estimated of average of 40 staff members each, are mostly engaged in conducting auditing practices and serve the donor community on donor projects and internal procedures. However, auditing services are not exported due to license requirement in other countries. There are no dedicated Palestinian BPO service providers for FAA/HR that caters to international buyers on large scale. 6. Likewise, over 500 ESO companies with 18760 registered engineers in the West Bank and 11000 in the Gaza Strip are mostly focused on the construction sector engineering services in the local market. Individual, private and public sector are the key buyers and few projects run in the millions of US$ dollars. The local market pose a limitation on growing the sector due to quota restrictions regulated by the Engineering Association on how much work they can perform per year based on the number of square meters of projects and disrupted cash flow from payment cycles received from the public sector. 7. At the same time, there are no in BPO/ESO captive centres by investors, multinationals or Diaspora groups. A unique exception is the CCC BIM Centre in Ramallah. The study identified the following key points regarding the buying trends for BPO/ESO services: 1. North America and European Union countries are more open than Arab gulf countries to offshoring BPO services. 2. Globally, BPO buyers are at stronger position than buyers to negotiate prices and quality of services as they can choose from a wide range of options: keeping it in-house, within country, near-shore before considering offshoring to many other developing countries option competing with the oPt. 3. Low-value BPO services do not require high level of skills and are suitable to recent graduates. These services include voice such as inbound and outbound sales and nonvoice services such as bookkeeping, basic accounting, data entry, digitization, social media, web chat support, email support. The Palestinian suppliers can compete in providing these services by offsetting a higher price points with better quality service. 4. High-value BPO services require specialization and experienced workforce. The skills would entail specialized knowledge in the vertical market itself e.g. health, telecommunication, oil and gas, etc, it also requires specialized knowledge in the 2|Page

Market System Analysis: BPO/ESO Outsourcing services in oPt

functions, processes and service quality requirement in each buyer’s country and its associated legal rules and regulatory requirement. Furthermore, as a knowledge process outsourcing (KPO), the ESO requires specialization by default. For example, specializing in an engineering body of knowledge includes building information modeling and knowledge in steel structures that this research has identified to be in demand in the Arab gulf countries. 5. Higher-value BPO attract higher wages for the services provided than low-value BPO services. 6. While international buyers have the willingness to offshore BPO services and their propensity to afford higher price points than Arab countries in the gulf; however, they are skeptical about the quality of the Palestinian BPO/ESO services. Furthermore, the study identified the following key points regarding the domestic and international markets: INTERNATIONAL MARKET

The research has identified the following international geographies for various sub-segment for the BPO and ESO services: 1. In general, the Arab Gulf market is price sensitive and is not a mature market as they prefer in-house, in-country operations to outsourcing and offshoring. However, for this market the following opportunities can be targeted: a. Voice services through subcontracting to Indian and other foreign BPO providers targeting after normal hours shifts. However, the oPt does not have a pricing competitive advantage with their neutral Arabic language compared to Jordan. The latter is providing 30% lower price points and has already developed linkages with Indian BPO providers subcontracting after normal working hours contact centre voice shifts. The value proposition is to talk Indian and foreign companies to diversify their locations to also include the oPt. b. ESO services in CAD drawings, interior design and Building Information Modelling ware identified as value proposition for Arab gulf market and Jordan. Channels to these markets include establishing a Diaspora captive market to serve their internal needs and subcontracting with Jordanian firms who have better access to markets. Consolidated Contractor Company (CCC) has developed its own BIM hub in Ramallah and engaged with local universities to provide BIM courses. These companies are also located in the Arab gulf market. The other growth channel is to subcontract to Jordanian countries lured with lower attrition rates. 2. European countries and North America are the largest market for BPO and ESO service. Compared to the Arab gulf market, these geographies can appreciate the price points of the oPt as they can realize higher cost saving compared to the salary structures in their own countries. These geographies offer language compatibility in English and some require Arabic language support. They are also more open to offshoring than the Arab gulf region. For this market the following low-value BPO services can be targeted: 3. US, UK and German markets. Recommended BPO business engagements are: a. Contact Centres can offer low-value voice services offering such as customer service inquiries, order fulfilment, initial complaint handling, inbound and outbound sales, account inquiries and loyalty programs). b. Contact Centres can also upgrade their services to include back office data entry, digitization and social media services markets are also large in these markets. c. Due to very limited international experience, Palestinian companies can start with market entry based on low-value FAA / HR services in the following services: general accounting; accounts receivables, collection and payments and fixed asset accounting 3|Page

Market System Analysis: BPO/ESO Outsourcing services in oPt

4. Netherlands and France markets. Recommended BPO business model is: a. Provide low-value BPO services where the markets are large for back office data entry, digitization and social media and language skills required for these services are limited. b. Low-value of FAA services can also be provided since it requires limited language skills and markets are large for them. 5. ESO services to these markets are more challenging to sell and no particular construction and architecture services has been identified as part of this research that can meet the requirement of buyers located in these geographies. The only opportunity remains is to cater to Diaspora groups and companies living in these countries such as the CCC with its headquarters located in Greece. DOMESTIC MARKET

Overall, the domestic market for the FAA/HR BPO industry is negligible since neither the supply not demand have reached a maturity level similar to the large markets in North America and Europe. Opportunities for contact centre services for voice and non-voice was identified in different sectors such as 1. Government: low-value BPO services such as customer service inquiries, order fulfilment and initial complaint handling to be ideal as market entry opportunities. 2. Banking for outbound voice marketing campaigns and non-voice digitization and data entry to update client records. Furthermore, contact centres can apply software as a service to help these banks in setting up their inbound call centre operations. Insurance companies can value an outbound marketing campaign since this is a very competitive sector. 3. Email and live web chat support for these companies connected with social media for the tourism and hospitality sector targeting free independent travellers Engineering services are predominantly required in the construction and infrastructure sector where buyers are characterized as individuals, private and public sector for new building and infrastructure construction and maintenance. Value of construction contracts can vary from small to large contracts. However, these are not necessarily the same type of ESO services demanded by the international buyers. PMDP research has identified many constraints that are inhibiting BPO and ESO segments from growing. These constraints exist on many levels the supporting functions of the market system, its rules and in the relationship between the suppliers and the buyers. As per the global industry criteria for country-level ranking for service location countries, the following constraints in the oPt requires addressing in relation to what other countries are offering: Country Branding Access to Finance 1. Indexing the country. Indexing has helped 1. Attract FDI. Also, encourage new company companies to do business and also helped in formation by accessing investments. The number of BPO companies is small; need to getting multinationals in launching their captive centre operations at these locations create a critical mass of capable outsourcing companies able to attract international contracts. 2. Financial products BPO/ESO exports Access to Markets Government Reforms 4|Page

Market System Analysis: BPO/ESO Outsourcing services in oPt

1. Integration with the global BPO and ESO 1. Reforms: Ease of doing business; telecom for markets and value chains on national level lower prices and quality services; Investment promotion incentives, Improve doing business in the oPt, 2. Travel restrictions upgrade education system and training; education and training as well as long-term government funds for subsidizing training of Country Infrastructure BPO employees, digital and data privacy 1. The oPt infrastructure is not in par with global laws and regional country offering e.g. business 2. Stakeholders’ coordination and aggregation. parks that houses more than 100 companies The establishment of an Outsourcing including multinationals; co-working spaces Association can be a strategic direction or and telecommunication advancement. establishing a local chapter for IAOP 2. Money bank transfer and e-payment (International Association of Outsourcing gateways as well supporting laws Professionals) in the oPt is another strategic 3. High input cost for utilities and office space. direction. Intermittent supply of electricity in Gaza based on 8 hours shift

On the other hand, there are many firm-level constraints that hinder the BPO/ESO companies from growing. These constraints are internal to the companies such as their own capacity, their own investment capabilities in developing sales and marketing channels and improving their quality of their services. These constraints include: Constraints Limited Sales and Marketing Capacity Limited access to market information Clear Value Proposition that can Compete Globally and in which markets Lack of export knowledge and channels to markets Inability to reach economies of scale by securing commercial trade contacts Can meet the reliability and quality service required by international markets for low-tier buyers Meets specialized industry knowledge Currently meet the quality certification required by international buyers Companies are able to integrate with global value chains and multinational BPO operations

Contact Centres   

FAA / HR

ESO

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 Not for High Value  Not all 

 Not for High Value 

 Not for High Value  BIM only 

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Based on the analysis of various opportunities, the suggested engagements plan for Palestine ESO/BPO companies is depicted in the table below: Area Domestic Market

Approach For the domestic ICT market of Palestine. 1. Improve local market through better stakeholder coordination and advocacy to develop and improve the industry 2. Support the government to roll-out the e-government initiative, services and application 3. Improve the supply side by upgrading the value proposition in outbound voice services, digitization and social media 4. Improve the regulation on the accounting, administration and human resource services to improve the quality of service in the local market 5. Improve Access to Finance Programs for better investment opportunities 5|Page

Market System Analysis: BPO/ESO Outsourcing services in oPt

Area

Approach 6. Improve situation of Gaza companies 7. Attract Diaspora and multinational to develop captive centres

MENA Region

For ESO companies, the MENA region can be accessed in the following channels: 1. Through Local Partners 2. Through Diaspora companies establishing engineering captive centres 3. Sub-Contracting ESO to Jordanian companies 4. Sub-Contracting Contact centres to Indian BPO companies 5. Advisory sourcing companies

Direct marketing is the best approach but also the toughest to pursue. It takes a longer time. In this approach Palestinian companies are pitted directly against local and regional companies that are larger and more formidable. These are the most open markets globally and present an opportunity to US, UK and Palestinian companies large and small in almost all niches that Palestinian BPO European companies want to target. Being open markets, these can be easily targeted. But Continental then the competition is also extreme. Countries The approach is to target high tier micro work projects and / or low-value BPO works as market entry strategy. Since the oPt is still an unknown BPO destination, this strategy is ideal to build experience and capability, which many Palestinian companies lack especially in the non-voice BPO space. For BPO companies, these countries can be accessed in following channels: 1. Through Local Partners and representatives 2. Through Advisory Sourcing companies 3. Sub-Contracting 4. Impact Sourcing Initiatives 5. Direct Sales

There is no one single vertical market for the Palestinian ESO/BPO companies to target, but rather road construction, oil and gas, telecommunication, financial and banking and construction firm are all potential markets. As service providers mature, specialisation and specific industry expertise will present the opportunity to distinguish Palestinian ESO and BPO from competitors. Likewise, Palestinian ESO and BPO suppliers would have a better fit with smaller customers based on quality and specialisation developed in personal relationship with clients or with larger customers based on staff augmentation model to access a talent pool.

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Market System Analysis: BPO/ESO Outsourcing services in oPt

Study Approach and Methodology The Study Approach and Methodology can be seen in Annex 1.

1

1.1

The Core Market System:

Market Size of the BPO and ESO

The global BPO market size in terms of size of contracts has been healthy. In 2012, the global (BPO) industry generated revenue of US$36.5 billion U.S. dollars 1. In 2013, it dropped to drop of US$27.7 billion and in 2014 it generated US$28.5 billion U.S. dollars worldwide 2. Other statistics indicates the forecast of continued growth for this industry 3 . The Middle East North Africa (MENA) market size potential in 2015 is $2.4 Billion 4. The current global market size for the engineering services outsourcing (ESO) ($930 billion in 2012) is expected to reach $1.4 trillion by 2020 – a 50 per cent growth in less than a decade 5. It is estimated that Africa and the Middle East represent 14% of the global industrial market 6. 1.2 Segmented Demand for BPO and ESO 1.2.1 International Demand 1.2.1.1 Geographical Distribution

The demand for offshore BPO services and ESO primarily originates from North America and Europe, and is met by service locations around the globe. These service locations can be categorized as nascent, emerging, or mature (e.g. those that have 5 – 15 BPO centres) as per the below map. The map indicates that 51.1% for offshore demand comes from the US and Canada and 30.6% comes from EU countries, 16.2% from Asia Pacific and 2.1% from the rest of the world.

51.1% US & Canada

30.6 % EU-15

2.1% Rest of the World 16.2% AsiaPacific

Demand for Offshore Services (%) Figure 1 Demand for Offshore Services. Source CGGC http://www.statista.com/statistics/189800/global-outsourcing-industry-revenue-by-service-type/ Other sources puts the BPO market size at $305Billion http://www.kpmginstitutes.com/content/dam/kpmg/sharedservicesoutsourcinginstitute/pdf/2013/hfs-finance-accounting-outsourcing-study-2013.pdf 3 Nasscom Strategic review 2013 and http://www.slideshare.net/nasscom-emerge/indian-itbpo-industry-fy2011performance-future-trends-bynasscom and http://www.slideshare.net/newtonsa1/trends-in-outsourcing-offshoring-in-the-financial-services-industry-20082012-elixirr-annualreport 4 http://www.slideshare.net/TanuChopra/menas-outsourcing-market-value-proposition 5 Information Services Group (ISG): Robust Growth for Engineering Services Outsourcing 6 http://www.marketexpansion.com/data/docs/download/43990/en/Outsourcing-study-long-version.pdf 1 2

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Market System Analysis: BPO/ESO Outsourcing services in oPt

The EU market consists of 28 countries that all have different characteristics. Some countries are more promising for developing countries (DC) (BPO) service providers than others based on the openness towards international outsourcing, market size, and language. For example, the Center for the Promotion of Imports from Developing Countries (CBI 7) reports in 2014 that in the European Union (EU) market, Scandinavian (Sweden, Denmark, Finland, and Norway), the United Kingdom (UK) and the Netherlands are the most open towards to international outsourcing. Germany, France and Spain, have traditionally been less open to international outsourcing, but this trend is deemed to be changing 8 to also becoming more open towards offshoring. Most of the EU countries have their preferred service location. For example, Germany prefers nearshoring to Poland and Romania, while France tends to prefer outsourcing to Tunisia and Morocco due to language compatibility, as well as other advantages in the labour market. CBI also reports that the UK and Germany have the largest BPO markets in the EU and offer wider opportunities. The UK is now one of the biggest outsourcing markets outside of the United States 9. The illustration below highlights how these three value chains: Information Technology Outsourcing (ITO), BPO, and Knowledge Process Outsourcing (KPO) that also includes the engineering services have all accessed these vertical markets segments. In each industry there are associated services that can be offshored. In the diagram, the Center on Globalization, Governance & Competitiveness (CGGC) Duke University 10 has captured the industries generate the highest demand offshore services globally. It is likely that industry-specific specialization will assist in bringing additional off-shoring business to Palestine over time. The industry-specific purchasers of BPO services are normally multinational corporations (of various sizes). They cover a large spectrum of industries (alternatively called vertical markets) such as Banking, Financial Services, Insurance, Manufacturing, Telecommunication, Energy, Travel and Transportation, Health and Pharmaceuticals, Retail and others. See Annex 2 for Offshore Services Value Chain. 1.2.2 BPO and ESO International Demand International market demand for Human Resources (HR), Finance, Accounting and Administration (FAA) and Contact Centre as BPO was analysed and so was the ESO international demand (See Annex 3 for more details).

The Human Resource (HR) BPO services include workforce administration, staffing and recruitment, performance management, learning and development, remuneration, retirement and advocacy services as per the table in Annex 4. In year 2013, the global HR market had a value of $2.8 billion worth of new contracts that were largely renewed with incumbent providers such as Aon Hewitt, Northgate Arinso,

Figure 2 Value of HR Contract. Source1

1.2.2.1 HR Market Demand

http://www.cbi.eu/ http://www.cbi.eu/sites/default/files/trade-statistics-europe-bpo-2014.pdf 9 “UK public sector outsourcing dominates the European market”, and “Oxford Economics: UK outsourcing across the private and public sectors” 10 Offshore Services Global Value Chain (2012) 8|Page 7 8

Market System Analysis: BPO/ESO Outsourcing services in oPt

IBM, Accenture and ADP. Some of these companies are ITO companies that are also providing BPO services. Many HR service buying companies in the United States and UK are moving towards downsizing their HR operations, and outsourcing functions to BPO service providers who can bring strong language, data protection, and communication skills to the table. CBI reports estimate that HR outsourcing can reduce corporate HR function costs by about 20% to 30%. In addition to industry-specific knowledge, BPO buyers require a knowledge about labour and tax laws of the Increase in offshoring of HR services. When it comes to offshoring, in 2012, 31% of UK target country companies said they were planning to offshore HR processes, which is an increase in order to compared to other years and a larger increase than in any other segment (IT, finance or provide quality contact centres). In 2013, India continues to be the most popular destination for offshoring services. HR services for UK companies according to CIPD and a study conducted by the University Other than the of Portsmouth. Ireland and Eastern European countries are popular nearshore locations due recruitment and to their proximity and English language skills. According to industry experts, workforce payroll administration, staffing and recruitment processes, performance management services and payroll are the most promising segments for nearshoring / offshoring as these services are administration less complex, more standardized, and require limited language skills. Source: CBI UK process, the Report on HR Offshoring. Source: CBI demand for specialised HR services in the Arab gulf region market is nascent 11. Normally, different size recruitment agencies including multinationals as well as online job board platforms located in the countries of that region have been providing the staffing services for the Arab gulf markets. The same applies to the location of the accounting firms have been addressing the payroll administration process services. 1.2.2.2 FAA Market Demand The 'Finance and Accounting BPO Market Landscape 2013.' Supported by KPMG Institutes puts the finance, accounting and administration (FAA) BPO market size at $25 Billion out of the $304 BPO market size with an expected growth of 8.6% in the Europe and Middle East and Africa 12. Buyers are seeking to reduce costs by improving operational effectiveness, transform and reengineer processes, and increase the efficiency of regulatory compliance. 1314. FAA services can be divided into transaction-intensive 15 and judgment-intensive 16 processes. Transaction-Intensive Judgment-intensive processes are close to the core of a company and are therefore often too sensitive to outsource, especially for smaller companies.

Judgment-Intensive Transaction-intensive processes are lower value processes that are often labourintensive. These processes are outsourced most.

Table 1 Types of FAA

The international demand is generated by different size of companies in different financial market verticals such as banks, funds, and payment processing companies. Leading service providers such as the multinational companies Accenture, HCL and Cognizant have been gaining 11 http://docslide.us/business/menas-outsourcing-market-value-proposition.html 12 http://www.kpmg-institutes.com/content/dam/kpmg/sharedservicesoutsourcinginstitute/pdf/2013/hfs-finance-accounting-outsourcingstudy-2013.pdf

CBI and http://www.ephorgroup.com/financialadministrationoutsourcing.asp http://www.slideshare.net/newtonsa1/trends-in-outsourcing-offshoring-in-the-financial-services-industry-20082012-elixirrannual-report 15 General accounting, accounts payable, accounts receivable 16 Budgeting, forecasting, analysis, regulatory reporting, treasury, risk management 9|Page 13 14

Market System Analysis: BPO/ESO Outsourcing services in oPt

the largest market share of these contracts and have global offices. Hence, they can be providing services out of any of these locations such as India or Brazil taking into consideration language match and talent needed by the buyers. The opportunity for Palestinian service providers is to subcontract with these companies to serve the Arab speaking markets. Other examples of North American and European buyers include BNP Paribas, HDFC Bank, National Bank of Canada, QBC, Bank of Montreal, Blue Cross and Blue Shield, Hartford, PIMCO, Allianz, Deutsche Bank, RBS and Capital One. Other main FAA BPO suppliers include: IBM, T-System services and Reliance. Advisory sourcing firms continue to influence the decisionmaking of buying where the US is the largest consumer of FAA outsourcing 17. The trends in the Arab gulf region is that Indian companies such as Tata Consultancy Services, which as a multinational software exporter are now serving companies like Saudi Aramco in the oil and gas sector and U.S. engineering conglomerate GE 18. 1.2.3 Contact Centre Market Demand In the Arab gulf region, a discussion with key BPO expert located in Qatar also revealed that Indian companies are operating most of the Contact Centres in the Arab gulf countries as ways of creating jobs to the local population. In the EU, the UK has the largest contact-centre market and has similar dynamics to the USA industry, which is the largest globally. Similar to the US and Canada, the UK contact centres not only serve national customers, but also serve international customers owing to their native English-language skills. Services provided by the UK and North America based contact centres include: Contact-centre activities Customer service & complaint handling (non-technical) Technical support Dispatching & event registration Pre-Sales activities (lead generation, appointments) Surveys (satisfaction, qualification, market research) Loyalty & retention Sales Credit collection

Contact-centre channels Telephone, Email, Voice Portal Services (Interactive Voice Response: IVR Self-Service) Internet (including chat & cobrowsing), SMS, Traditional mail, Fax, Other

Table 2 Contact Centre Activities and Services Channels

Unlike the FAA BPO, the global contact centre industry is one of the most mature segments in the international BPO market. This qualifies the services to be considered for nearshoring or offshoring. CBI statistics indicate that in 2011 the UK offshored 15% of its contact centre services - equating to 70,000 to 90,000 full time equivalent employment19. Of this offshoring, India attracted 73% market share, Philippines 16%, South Africa 5% and Egypt and other countries 3% each. Because of its maturity, contact centre services buyers have become more demanding in their requirements. In-depth knowledge of a specific industry is becoming very important, especially in industries such as financial services, insurance, telecoms, utilities or healthcare. Buyers are also focusing on non-voice contact-centre services, such as website, email and chat support. CBI reports that web chat volumes will grow at a compound annual growth rate of 24% to 2018 and mobile customer service app penetration will grow to 40% by 2018 in the UK.

https://www.elixirr.com/wp-content/uploads/2015/08/lix-irr-research_trends-in-fs-oo_2012_vfinal_v2.2.pdf http://articles.economictimes.indiatimes.com/2014-09-14/news/53903955_1_bpo-saudi-arabia-saudi-aramco and http://articles.economictimes.indiatimes.com/2013-09-24/news/42361564_1_saudi-aramco-ge-bpo-centre 19 http://www.contactbabel.com/pdfs/dec2014/UK%20SOITP%202015%20Marketing.pdf 10 | P a g e 17 18

Market System Analysis: BPO/ESO Outsourcing services in oPt

1.2.3.1 ESO According to the ISG report, ESO has expanded since the 1980s from basic scanning and digitizing engineering drawings to the outsourcing of new product development, valueengineering and engineering consulting 20. The ISG report also indicated that “Current global spend on engineering services ($930 billion in 2012) is expected to reach $1.4 trillion by 2020 – a 50 per cent growth in less than a decade. Outsourcing spend on engineering services stood at around $325 billion in 2012, with offshored spend comprising around $100 billion, or approximately 10 per cent of the total market. Allocation of ESO spend is shifting from the mature to emerging markets, with Asian counties such as the Philippines and India (excluding Japan) is expected to gain the most from this shift. Captive operations have grown significantly, although the rate of that growth is slowing as clients begin to recognize the need to optimize and focus on improving captive operations and begin to explore service provider options. Automotive original equipment manufacturer (OEMs) and suppliers are the largest drivers of spend on Engineering Research and Development (ER&D), driven by the need for superior performance, safety, reliability and fuel economy, of which many of these factors are also driven by government regulations. The next consumers of ESO services are consumer electronics and telecommunications firms seeking shorter product lifecycles and technology innovation. Industrial Automation Infrastructure Energy Construction/Heavy Machinery Medical Devices Computing systems Aerospace Semiconductors Telecom Consumer Electronics Automative

1% 0% 1% 1%

4% 4%

Estimated Global ER&D Spend by Vertical 6% 6% 6% 6%

8% 8%

5%

2009

11% 10%

13% 13%

0%

2020

8% 8%

10%

15%

18% 16%

20%

25%

Figure 3 Global ER&D Spend by Vertical. Source: ISG

26% 27%

30%

Similar to the BPO, the ISG report also indicated Europe and the USA are the largest buyers for ESO services comprising 73% of the geographic markets in 2009. For many engineering offices in the oPt, the vertical alignment in this industry would be in the construction and infrastructure sector, which represents only around 6% of global ESO spend according to the ISG report. The alignment is organic as it matches the experience of the local engineering suppliers, which is predominantly exhibited in this sector. The Deloitte’s Global Outsourcing and Insourcing Survey 2014 and beyond report indicates the following services to be in major global demand:

20

http://www.isg-one.com/knowledgecenter/whitepapers/private/papers/White_Paper_ESO_Market_Trends.pdf 11 | P a g e

Market System Analysis: BPO/ESO Outsourcing services in oPt

Construction Engineering Service Manage Design and construction services Document services Manage transaction processing for real estate Develop and Manage real estate portfolio Reception/guest services Office/meeting scheduling Define and develop real estate financials Manage assets/leases Manage and report financial performance

% of Respondents in Need of Service 53% 43% 39% 35% 31% 21% 20% 13% 11%

Table 3 Market for Construction Engineering Services

Another relevant service requested in the Arab gulf region would be the BIM, which is the Building Information Modelling. BIM is to Computer Aided Design (CAD)… as CAD was BIM technology enables creation of digital virtual building that to manual drafting with ink can be used to determine logistical planning and quantities as and paper. Source: AEC well as for cross-disciplinary coordination. Top construction Associates companies in the world take the help of ESO who use varieties of BIM software like Autodesk Revit that is capable of producing detailed BIM, core component of structural and architectural engineering that every designing detail is coordinated and drawn as per the exact specifications before any actual work begins. International and regional ESO buyers demand construction CAD drawing for steel structure for buildings. This way of construction is not used in the oPt as much as in the Arab gulf region and has been pointed out by interviewees as one weakness point in local expertise. Quality of service and deliverables is also impacted by not having the international experience to meet the international buyers quality standards. Construction codes in each buying country are also different. Furthermore, some ESO tasks require traveling to conduct site visits to other countries, which is also a constraint to issues travel visas to oPt passport holders. 1.2.4 Additional Identified Demand In addition to the scope of the study, two relevant international market demand were identified, which included the impact sourcing and global e-freelancing markets. 1.2.4.1 Impact Sourcing Another sector driver has been the Impact Sourcing (IS), which provides similar service parity to traditional BPO, but it introduces enhancement in specific training provided to untapped talent pool. It is also reported that IS cost is comparable or lower to traditional BPO, usually provides lower employees attrition rates by 15%-40%, and boosts higher employees motivation levels while leveraging sustainable corporate social responsibility (CSR) interventions from buyers 21. Leading BPO buyers have already created 235000 - 240000 IS jobs, representing 12% of total jobs in the global BPO market till 2014 in Africa (39%), India (49%) and Philippines (12%) with year-on-year growth is expected at 11%. Such buyers include the likes of Microsoft, Etisalat in UAE, SAP, and Deloitte. IS engagements has proven reliable service and meeting clients’ expectations. In India, IS provides 35% - 40% lower cost than traditional BPO, while in Egypt it provides 3%-4% only. There are two types of IS. The first is unintentional and is driven by Tapping into educated but unemployed rural population (e.g. youth) that provides lower attrition rates (e.g. South Africa and Kenya) or Attracted to cost benefit of the location of the service delivery (e.g. rural BPO vendor locations in India). These are the two main regions that have been attracting IS buyers and neither in the Middle East nor the oPt. 21 The Case for Impact Sourcing: Everest Group, supported by the Rockefeller Foundation (2014)

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Market System Analysis: BPO/ESO Outsourcing services in oPt

The second is intentional type of IS. It is driven by CSR policies and initiatives creating employment opportunities. While the unintentional type of IS constitute 63% of the market, the CSR Intentional type has 37% of the IS market. Everest Group 22 has identified IS services as below, which are not very different than traditional BPO: IS Service Type

Description

Sales and Marketing Sales data capture and validation Telemarketing Document digitization Finance and Invoicing including digitization and archiving Accounting OCR A typical OCR image validation process Documents prepared for scanning OCR software process converts document to TIFF, JPEG, and PDF image. Software reads text block by block and translates into machine language Agents validate translation by software Agents index data or text to enable content based retrieval Quality control by supervisor/manager QA releases to database or document management system Customer Service Voice support and technical help desk Human Resources Document Scanning: Employee expense claims form Data entry in HR Information System Table 4 Impact Sourcing Services

Furthermore, according to the Everest Group research, there are four segments of companies buying IS service as below: Segments Buyers

Description Buy Directly or from 3rd Parties

Traditional BPOs

Employ Non Intentional IS only Hire direct or through subcontracting Impact Sourcing Service Provider (ISSP)

ISSP

Employ Intentional IS workers only Impact Source Service Aggregators

Training Institutes

Provide Targeted Training to Disadvantaged Workers internal or external to where IS workers are employed

Example Microsoft Standard Bank First Rand Bank Valeo Teleperformance Infosys Fullcircle Aegis Serco DDD Digital Divide Data Cloudfactory Sama Source and Head Held High Impact Sourcing Academy Harambee Careerbox

Table 5 Impact Sourcing Buyers

The Everest Group has also provided price comparison for price difference between traditional BPO and IS where 5%-20% reduction can be expected on already low BPO wages. Some estimate that Impact Sourcing has the potential to grow to $20 billion by 2015, employing

http://www.everestgrp.com/2014-10-when-is-impact-sourcing-the-right-fit-with-your-global-sourcing-strategy-sherpas-inblue-shirts-15739.html#sthash.giNNaJm5.dpuf 13 | P a g e

22

Market System Analysis: BPO/ESO Outsourcing services in oPt

780,000 socioeconomically disadvantaged people globally 23 . Avasant estimates that the market has the ability to grow to represent twenty three percent of the total BPO industry by 2020 24. Impact Sourcing can be an ideal market for the oPt considering its unique situation as it leverages corporate social responsibility as an entry point to the mainstream market. 1.2.4.2 Global e-Freelancing Market The global e-freelancing market was estimated to be worth US$1.5 billion in 2013. By 2020, according to industry players, the market should be worth $10bn to $20bn, with a conservative estimate of the Middle East’s share being $100m. According to research from the McKinsey Global Institute, 160 million jobs can be carried out remotely, which is about 11 per cent of the world’s 1.46 billion service jobs 25. Unfortunately, some freelance market places do not include Palestine or oPt on their list while others have blacklisted Gaza such as Proz.com. In the MENA region, the freelance economy has grown substantially over the course of the past two years 26 . Nabbesh 27 , Mostaql, Khamsat and Krwah are famous examples of emerging Arabic online Freelancing markets. However, freelancers say that the number of projects posted every day on Arabic freelancing sites still small compared to those posted on international freelancing websites. Nevertheless, there is much optimism that Arabic freelancing market will grow and become substantial marketplaces for Arabic freelancers. The most advantage of freelancing platforms is outreach. When freelancers register in freelancing platforms they are able to view jobs posted by clients regardless of their places. Therefore, Freelancers do not face market access challenges as other classical outsourcing industries. 1.2.5 BPO/ESO Buying Drivers Companies are increasingly turning to ESO as a strategy to improve their global ER&D operations. The ISG report, referred to earlier, has identified seven key factors driving this trend with cost reduction pressures and the need to shorten product lifecycles being the top priorities followed by access to talent pool, product localization, shrinking budget, usage of embedded system and technology convergence (mobile and comfort for vehicles and consumer electronics). Legislation and regulatory issues are also driving the automotive industry e.g. to reduce carbon emissions. Similarly, companies are increasingly open to BPO as a valid means of cost reduction, particularly with regard to BPO and IT outsourcing so they can be competitive with lower cost structures to many of the business functions. Especially in northern and western EU countries, companies are strongly focusing on integrating their business processes and making them available online, for example through cloud computing and software as a service platforms (SaaS). Therefore, they increasingly ask their BPO providers to connect (interface) their systems electronically to their own platform and offer their services as a web-based service. BPO Buyers who outsource do so for several reasons: 1. Reduce costs, avoid training costs, avoid pay health insurance, pension contributions, etc. for workers 2. Improve quality of service, access and benefit from outside expertise 3. Focus on core business Monitor Inclusive Markets. Job Creation Through Build the Field of Impact Sourcing, June 2011. http://www.avasant.com/press-release/Avasant-releases-Impact-Sourcing-Report 25 http://www.thenational.ae/business/industry-insights/economics/online-freelance-seen-as-tool-to-fight-middleeast-youth-unemployment 26 Source: http://www.wamda.com/2015/01/freelance-economy-arab-region-data 27 Nabbesh was launched first with English interface; few months ago they launched their Arabic interface. 14 | P a g e 23

24

Market System Analysis: BPO/ESO Outsourcing services in oPt

4. Improve choice 5. Reduce risk (less investment, less direct employees) Access to specific knowledge, enterprise and tools

23%

Reduction in headcount objectives

24%

Improved focus on core busines

26%

Efficiency improvements

Particularly in Norway, Sweden and the UK

33%

Improvement in cost level of reduction

42%

Figure 4 EU Organisation most important reasons for outsourcing. Source EY 28

BPO providers need to also understand other concerns of North America and EU markets that are most open to offshoring. The most important risks for BPO outsourcing include: dependency on external service provider, loss of control, impact on quality loss of confidentiality and knowledge. Loss of confidentiality

29%

Loss of knowledge

29%

Impact on quality

Particularly in Spain

35%

Loss of control Dependency on external service… 0%

10%

20%

30%

40%

43%

51%

50%

Figure 5 EU Organisation most important risks for outsourcing. Source: EY

60%

1.2.6 Market Access to International Markets There are different channels to access buyers in North America and Europe and they include: subcontracting, using intermediaries and advisory sourcing firms, using online channels such as Freelance and Up Work, establish local sales offices and direct sales to end-users. Please see Annex 5 for more information on how to develop linkages with BPO Buyers. 1.2.7 HR/FAA/Contact Centre BPO and ESO Local Demand The study analysed the local market demand as an in Annex 6. Overall, the domestic market for the BPO and ESO is limited in terms of number of companies that would potentially buy such services and have the financial resources to pay for it in part to international markets; its maturity and need for quality services whereby buyers willingness to outsource is met with hesitation and many uncertainty. Nevertheless, the most promising opportunities are listed below.

28 Ernst and Young Report Outsourcing in Europe. An in-depth review of drivers, risks and trends in the European outsourcing market (2013) 15 | P a g e

Market System Analysis: BPO/ESO Outsourcing services in oPt

1.2.7.1 Geographic Distribution Ramallah city is the main city that spurs growth for the BPO/ESO contracts as many of the services cluster, government institutions, banking and insurance companies and other enterprises are located. Bethlehem and Jerusalem are ideal location for the tourism and hospitality cluster. There is negligible local demand for BPO/ESO services in Gaza. 1.2.7.2 HR Market Demand The high-value BPO HR services are negligible in the local market. Micro and small companies are only engaged in outsourcing their payroll taxation to small accounting firms and not the big 4 companies in order to file payroll taxes to the Palestinian Authority tax office. Only Paltel Group has engaged in outsourcing its recruitment process to a third party and it is contracting only one company for this service. Other companies have their own internal HR operations. 1.2.7.3 FAA Market Demand The high-value BPO FAA services are also negligible in the local market. Again, service consumption is dependent on micro and small enterprises that contract this service to small size accounting firms in order to prepare their bookkeeping, financial statements, sales tax and income tax statement to be submitted to the Palestinian Authority. 1.2.7.4 Contact Centres Market Demand In an interview with Mr. Sulaiman Zuhairy Deputy Minister, the Ministry of Telecommunication and IT (MTIT) already contracts it citizens complains handling to a contact centre that shares the call recording with MTIT in full transparency. The contact centre has installed its solution to be Software as a Service for MTIT as well. There is an opportunity in the government sector for contact centres to replicate the voice customer complaint service activated by the MTIT with other government ministries, agencies as well as local municipalities. Other BPO opportunities in the government sector include the following low-value services: 1. e-Services IVR and Citizens Support Voice Contact Centres 2. Software as a Service 3. E-Government and e-Services can be clustered on the “Cloud” to reduce overhead and service delivery cost 4. Procurement of IT consulting Outsourcing government BPO services to contact centres may prove to be long-term process. Availability of funds is a constraint for government. Hence, MTIT is seeking to launch innovative business models based on revenue sharing for selling of e-services as a private public partnership. For contact centre suppliers, there is also an opportunity is to assist tourism and hospitality companies in Bethlehem and Jerusalem in planning and selling their services not for in-bound customer care, but it is in the outbound voice services such as sales and marketing campaigns or IVR. Since information systems and automation are limited in this segment, software as a service (SaaS) might also become a service once this market matures. Another service needed by this cluster of tourism companies is related to social media, email and live web chat support services as well as search engine optimization. The constraint in this sector is the limited financial resources available to be invested by these companies. In addition to voice services for outbound campaigns, the local contact centres can also provide 16 | P a g e

Market System Analysis: BPO/ESO Outsourcing services in oPt

non-voice services to the financial sector. All banks need voice and non-voice BPO services for various reasons including competition, efficiencies and regulation by the Palestine Monitory Authority (PMA) that can spur many BPO business activities such mandatory updating of client account records by banks through data entry and cleaning services. The financial and banking landscape is composed of 17 banks, 10 insurance companies, 350 exchange offices, 10 securities companies, seven financial leasing institutions, two mortgagelending companies, and the Palestinian Stock Exchange. According to the PalTrade publications 29, the banking sector has grown steadily over the last few years. Currently credit volume is valued at US$4 billion and resident deposits are valued at US$7.2 billion. Furthermore, the 17 banks have made net profit of US$159,651,425 million in 2014 30. Banks have high concerns for loss of control; data privacy and lack of trust with BPO service providers as well as fear of loss of their own jobs if these business processes are outsourced. Another constrain in this sector, is that the procurement process for many banks in Palestine is mostly centralized in Amman, Jordan. For example, the Arab Bank (currently processing 1000 calls a day in the oPt) is now consolidating its contact centre operations in the region to be operated in-house out of Jordan and Egypt. Likewise, the insurance sector, which is highly competitive due to the limited local market and the fact that it is not regulated. Each company tries to capture a larger market share and they all consider their client database as highly confidential asset from a commercial point of view. None of them is outsourcing to contact centres for the fear of loss of data. At other companies, customer care culture is not prevalent in a structured way. Some of them do not In the case of Morocco, the country is not the lowest in even have an in-house contact centre or labour cost compared to Tunisia, India and Romania; yet it ranked number one to capture BPO business from France a hotline – and it seems for a good based on combined factors of proximity, language, reason. availability of resources, political and economic stability, infrastructure of business parks and telecommunication,

The insurance value chain is dependent government subsidies and data protection The sector on their value-added resellers (VARs) provided Morocco with a CAGR of 16% reaching 57000 located at different geographic workers in 2012 in call center, animation and gaming as locations. These resellers of insurance well as infrastructure management. It also provided 12% policies also become decision makers in CAGR in terms of exports reaching 7038Million MAD. the value chain in the industry. Hence, Source: Morocco: Opportunities in the ITO / BPO Sector. outsourcing to a contact centre becomes Invest in Morocco. difficult. Nevertheless, outbound campaigns remain to be a viable option for the contact centres. 1.2.7.5 ESO In the domestic market, individuals, private and public sector have been consuming local construction related services such as CAD drawing and some projects can be in the millions of US$ dollars in the infrastructure and construction sector. However, they may not be constituted to be similar to the ESO services that regional or international buyers would demand. 1.2.8 End Market Quality and Regulatory Requirements There are few regulatory barriers to enter the BPO/ESO industry globally and locally. This is facilitating for existing multinational ITO providers expanding their range of services to BPO and ESO, which are largely multinational IT companies hosting large engineering departments National Export Strategy, Functional Strategies Access to Finance 2014 – 2018 Association of Banks in Palestine: http://www.abp.ps/page.php?id=bfasJq9ZLEa59913AUOJs5xuAG9&ms_id=ae4zyeJ2Sfa6657AN96sQFuofQ&mn_id=54 17 | P a g e 29 30

Market System Analysis: BPO/ESO Outsourcing services in oPt

as indicated earlier. However, it is not easy to succeed in the BPO market due to factors such as distance, language, cultural differences, and lack of trust. BPO buyers require a professional counterpart for confidentiality, security and quality. BPO/ESO buyers have also become more demanding in their requirements in terms of quality, communication, technical expertise, experience, and certification. This means that BPO/ESO providers in the oPt must prove that they are professional companies that offer quality services. Certification helps in this regard, and a list of certification requirements is shared in Annex 7. Furthermore, research by ContactBabel 31, a leading analyst firm for the contact centre industry and interviews conducted with advisory sourcing companies who act as intermediaries between supply and demand, is showing that increasing customer satisfaction through quality services is the number one priority focus of BPO buyers. To North America and European buyers, it is even more important than decreasing costs. Given the emphasis on quality, one market penetration strategy that may be feasible for Palestinian BPO providers would be to acquire quality certifications and position themselves as high-quality suppliers. This would help to mitigate the impact of the often higher costs of operating in Palestine. There are no available online resources to identify the cost structures to acquire any of the certifications listed in Annex 7 with most BPO and Contact Centre specific ones are not offered in the oPt. However, most of them involve rigorous process of assessment: closing the gaps, training sessions, passing exams to qualify for the certification and go through post certification audits of 3 – 5 days for quality assurance to be renewed on annual basis. For one Palestinian contact centre, it has cost around US$54,000 to obtain the ISO27001 certificate and a subsequent US$3,000 – US$4,000 for annual auditing that includes site visit by an auditor for annual audit assessment. The contact centre has used this acquired certificate for marketing purposes targeting the financial and banking sector. However, such cost can be prohibitive to most companies. Individual and corporate certifications do carry a higher wage cost for the agents where a typical pricing structure for outsourcing agents’ hourly rates includes the following variables 32: Productive Agent Time, Supervisor/Manager for Customer Service Agents, Quality Assurance, Infrastructure: Workstations/IT support, Telephony, Facilities Cost and HR Support including: Recruiting, Payroll, Benefits Management. As such, the higher the input cost on any of these variable the higher the hourly rate will become. Furthermore, Data protection laws are mandatory to align with EU and USA buyers’ requirements. For example, Palestinian BPO providers need to be familiar with the EU/US laws on personal data protection. According to CBI reports, providers that do not respect the requirements may be subject to EU enforcement actions and/or possible claims, even if they are located outside of the EU 33.

For example, the creation of the Personal Data Protection Law in Morocco in 2009 formalized the data processing activities, created supervisory body to monitor personal data protection, and regulates personal data transfer to other countries.

31 www.contactbabel.com/ 32 http://customerthink.com/how_to_calculate_call_center_outsourcing_costs/ 33

CBI EU Buyer Requirements for Business Process Outsourcing (2014)

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Market System Analysis: BPO/ESO Outsourcing services in oPt

1.3 Supply of BPO and ESO Services 1.3.1 Global Trends Generally, global BPO supply has flown to destinations, which can offer competitive cost structures, an educated workforce, low attrition rates, language proficiency, industry knowledge, low tax rates, low inflation, and low infrastructure and rent costs. See Annex 8 for short report on the Philippines, Vietnam and Romania. While BPO buyers can be multinationals, small and medium in terms of company size and can cover all vertical markets as indicated earlier, these buyers have also been relying on the rising use of cloud and software as a service (SaaS) for their BPO service delivery. Furthermore, BPO services are often outsourced to BPO providers in cost-effective locations within the same country (onshore). For example, London-based companies often outsource FAA services to service providers in rural Wales before they get outsourced to nearshore location or offshoring. ITO multinationals have been playing a key role in attaining a large market share to supply BPO/ESO services. Some example of key BPO FAA buyers and providers include the following: 1. Wing Lung bank outsources their investment banking operations to Accenture. 2. ING signed a deal with Cognizant for their Wealth Management 3. BACS payment debt and credit processing services are outsourced by LB3 Law to Parseq for their retail banking operations 4. CITI contracted HCL Technologies for their back-end processes of loans, financial products and customer service for their retail banking 5. MidSouth bank outsourced their HR and payroll services to Inova Payroll 6. Zurich bank used Procurian, which was acquired by Accenture in 2013, for its procurement infrastructure Again, a majority of ESO suppliers are business units located at large ITO services organizations such as Wipro, Infosys and Tech Mahindra. Other illustrative firms that provide engineering services include Aricent Group, Calsoft Labs, Cybage Software Pvt. Ltd., EPAM Services, GlobalLogic, HCL Technologies Ltd., Infosys Ltd., Infotech Enterprises Ltd., IGATE Corp., KPIT Cummins Infosystems Ltd., Luxoft, Mindfire Solutions, MindTree Ltd., QuEST Global, Sonata Software Ltd., Symphony Teleca Corp., Tata ELXSI, Tata Consultancy Services, and Vanceinfo Technologies Inc 34. 1.3.2 MENA Region Trends Some countries in the MENA region benefit from their proximity to Europe and a large talent pool. A.T. Kearney provides the ranking categories for the global services location index in 2014 that includes financial attractiveness, people skills availability and business environment. Morocco (ranked 34), Egypt (ranked 10) and Jordan (ranked 20) are a good example thereof, but Egypt has dropped in popularity due to prolonged political turmoil. The oPt can also benefit from proximity to EU. Similarities in cost, human capital, and business environment mean that there may be an opportunity to position the oPt as a complimentary BPO destination, especially for buyers that are looking to diversify their Middle Eastern supply base. Furthermore, the MENA region has captive centres for large multinationals such as Microsoft, SAP, IBM, Nokia and others in Egypt who are serving the MENA Arab speaking market. Because the oPt is not ranked by any of the service location indexes, it is difficult to assess its competitiveness and benchmark it to other countries. However, these indexes such as the Cushman and Wakefield 2015 index that assesses the outsourcing service locations around the 34

http://www.grandviewresearch.com/industry-analysis/engineering-services-outsourcing-market

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Market System Analysis: BPO/ESO Outsourcing services in oPt

world, does so against selected criteria that include business conditions, risks and costs as per the distribution of weights in the below table: Ranking Category Conditions 30%

Ranking Criteria Talent / Labour Force 20% Business Environment 20% Time to First Supply 20%

Risk 20%

IT Infrastructure 40% Economic Risk 30% Corporate Risk 30%

Costs 50%

Total 100%

Energy Risk 40% Cost of Labour 60% Building Costs 20% Inflation 10% Property Costs 10%

Weights for the Detailed Assessment Criteria Labour Force 40% % of Population with Tertiary Education 30% English Language Proficiency 30% Corporate Tax Rate 70% GDP Per Capita 10% GDP Forecast 20% Building Procedures 40% Building Time 60% Connectivity 100% Economic Stability 100% Political Stability 50% Corruption Perception Index 50% Energy Security

Table 6 Cushman and Wakefield Index Criteria, Adapted to oPt

As can be seen from the above ranking criteria for the Cushman and Wakefield, it includes the conditions of the country itself such as: talent availability, their tertiary education, English language proficiency; business environment: corporate tax rates, GDP per capita and forecast; time to first supply; building procedures and time and IT infrastructure connectivity; the risks associated with the country: economic, corporate, energy and corruption perception index; costs: labour, building, inflation and property. For Palestinian ESO/BPO service providers, many of these ranking criteria elements are beyond their direct control - thus making it more difficult to position their services as a competitive destination. The message here is that positive country branding is very important to increase awareness about the oPt as a BPO destination. BPO companies alone cannot achieve this. With current limited resources, the Palestinian Authority alone cannot do this. What is needed is public and private sector cooperation with the assistance of the international community. 1.3.3 Supply Side Analysis The industry is nascent in Palestine, compared to its regional countries like Morocco, Egypt and Jordan. The BPO/ESO supply has very few successful outsourcing service providers with some suppliers providing contact centre services, data entry, engineering and staff augmentation to clients in the region (including Arab Gulf), and elsewhere, including North America and Europe. 1.3.3.1 Contact Centres There are three Call / Contact Centres companies (2 West Bank and 1 in Gaza) in oPt. (See Annex 9 for a summary on their services and where they are selling to). Two out of the three cater for internal company operation. However, the number of employment (e.g. 700) that these companies provide cannot be underestimated. The number of contact centres in the oPt is not growing. Their sales growth pattern is mixed, sometimes it grows sometimes it shrinks over the past few years. This is a recent segment in the oPt, with not enough track record to demonstrate quality and build credibility to become a stable call-centre destination. Palestinian BPO voice services to multinational companies in Israel prove to offer 30% reduction 20 | P a g e

Market System Analysis: BPO/ESO Outsourcing services in oPt

on cost. However, the oPt cannot compete solely on price compared to other MENA destinations including Egypt and Jordan where interviews indicated that the latter is cheaper than the oPt by 30%. Other constraints include VoIP technology. There is technical limitation in the Arab gulf market, such as the UAE, to make VoIP calls to the country, which can be blocked by the regulator. Palestinian contact centres find themselves competing with other developing countries such as Sri Lanka, Bangladesh to India and Philippines and in MENA with Jordan and Egypt. However, Jordan is the main competitor as they prove to be more affordable as indicated earlier for the similar voice value proposition and neutral Arabic accent and have been successful in subcontracting to Indian companies for Arab gulf market penetration providing voice services after official working hours in the Gulf. Similar to the oPt, other countries, such as Pakistan, Sri Lanka, Bangladesh, and certain African countries also carry the burden of negative perceptions. However, they have been able to find their niche as suppliers. Indeed, finding clients is a challenge for such countries as they are riskier than other more stable destinations such as India, Philippines and Vietnam. One of the advantage of the oPt though is that it closer to continental Europe than the Asian countries. However, the country needs to position its brand better, and as a supplier of quality services. 1.3.3.2 FAA / HR Suppliers The current size of BPO/ESO service providers is relatively small to meet the scaling requirement of international buyers. However, providers can scale by hiring from the pool of unemployed and educated youth; much easier for low-value than high-value BPO services or ESO services due to the specialization requirement. There are 12 – 14 small size companies, hiring in the range of 12 – 15 staff each, that provide finance and accounting as well as taxation services for income, sales and salaries in the local market. The big 4 accounting firms, estimated of average of 40 staff members each, are mostly engaged in conducting auditing practices and serve the donor community on donor projects and internal procedures. However, auditing services are not exported due to license requirement in other countries. There are no dedicated Palestinian BPO service providers for FAA/HR that caters to international buyers on large scale. In brief discussions with big 4 accounting firm local chapters in the oPt such as PriceWaterhouseCoopers, Ernst and young, KPMG confirmed that there business model and revenue stream does not target international FAA / HR BPO buyers. They mostly engage in providing auditing services targeting the donor community. Auditors are typically the highest percentage of employees in these firms. Other accounting firms do exist. The smaller companies do cater to the needs of the local private sector to file their taxation for income, sales and salary deduction. These services do align with the PA requirements. Accountants in these companies can be paid up to US$1500 per month whereby senior auditors can demand double this figure. While the auditing service is regulated impacting its quality service delivery, the FAA and HR segments are not regulated services. See Annex 9 and 10 for more analysis. A typical BPO model for these companies would be sub-contracting with a counterpart company in Jordan with staff augmentation model.

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1.3.3.3

Engineering Services Suppliers

ESO is a Knowledge Process Outsourcing (KPO) activity, not a BPO. As such, it normally demands higher wages than BPO. The majority of the engineering firms have less than 10 staff, and some have an average of 15 and few with more than 30 engineers. Women can take high positions in technical roles at the companies. Locally, there are over 540 mostly small engineering firms in the West Bank and around 200 in Gaza 35 . Other than the Consolidated Contractors Company’s (CCC) Building Information Modelling (BIM) captive centre, there is no major engineering company that has positioned itself business model entirely on an ESO offshoring model, Furthermore, there is no international presence of engineering firms in the oPt. There are 18760 engineers 36 in the West Bank and 11000 registered engineer in Gaza Strip37 in the first quarter of 2015. The Engineering Association has been reporting continued growth of engineering graduates by 8% year-on-year with limited local job opportunities available. Monthly salaries for the recent graduates can be around US$600. See Annex 9 and 10 for more analysis as it also indicated that some of these companies have provided CAD drawings for construction and interior design and few provide engineering consultancy to clients in Jordan, Saudi Arabia, UAE, India and France. However, these are small volume contracts and not on on-going basis. ESO is still possible with domestic firms and via the attraction of foreign firms including big conglomerate founded by Diaspora Palestinians similar to the CCC operation. Aggregating and clustering of Palestinian engineering companies has been suggested by one of the company owners as a way forward to meet the construction ESO buying requirement of ability to scale the number of engineers that provide the service and to conduct relevant training whether BIM or steel structures. There are many specific factors that have limited local ESO supply services: 1. Most of the engineering houses are focused on the construction sector 2. Engineering offices cannot exceed their quotas once a maximum square meter of buildings design or construction has been achieved. 3. Domestic ER&D spending has traditionally been extremely low to increase specialisation in this sector and spur local ESO growth 4. Delayed payment for engineering service from local clients causing disruption to their cash flow These combined factors have limited the size and capacity of companies to deliver ESO to international buyers, as it is difficult to grow the business in the local market and gain more experience needed by international buyers. 1.3.3.4 Additional Gaza Supply Models In additional to BPO/ESO companies providing services, West Bank and more so in Gaza, due to donor projects support targeting freelancers have been engaged in two additional service models: Freelance Outsourcing: 59% of freelancers in the oPt are aged between 20 – 25 reflecting high unemployment for recent graduates and 14% of them make more than US$1000 a month 35

https://www.paleng.org and www.mdlf.org.ps/Files/.../ContractorsListGazaStrip.xls https://www.paleng.org 37 http://www.enggaza.ps/EngAssoc/EngAbout 36

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from freelancing 38. However, no specific data has been found on the actual number of active freelancers in the West Bank and Gaza. However, Facebook pages promoting entrepreneurship and freelancing can attract more than 2000 - 4000 subscribers 39. However, freelancing is a promising solution, specifically for Gaza unemployment due to the limited job opportunity and its isolation from the world. Freelance offers employment and income for many Gazan youth who have been engaged in freelancing since several years (through online freelancing markets or through social media platforms such as LinkedIn, Twitter, Instagram, and Facebook 40), for local and international buyers. Infrastructure requirements are low, no need for physical presence, barriers of entry is low, and qualification requirements are not high. Gaza youth subscribe to online freelance marketplaces such as www.freelancer.com, www.upwork.com, www.elance.com or use social media to market their services. Gaza youth and graduates are forced into freelancing due to the strain of a struggling economy in Gaza. Each freelancer is a micro-company requiring a suite of skills, such as technical skills (for example graphic design, animation, Python or PHP course, etc), business skills, English language skills, and flexibility. Popular freelancing categories in Gaza include: Mobile and web development, Multimedia, graphic and web design, Translation/writing and Data entry/admin support where work in IT and multimedia is the highest paid. The biggest challenge freelancers face is getting their first client. In many cases, freelancers take from 2 to 5 months before getting the first job in case they did not receive any guidance from professional freelancers. Aptitude for freelancing is also another challenge. Unfortunately, it is not meant for everyone and does require entrepreneurial skills. Remote Employment: In contrast to small captive centres that are operated by the same company, remote staffing is done by an agency that provides recruitment, hosting and HR services to a different offshore client e.g. providing staff in Gaza that augments the existing capacity of client’s staff in Saudi Arabia. The main advantage assumed is providing access to low-cost and skilled employees who work remotely to augment existing staff in the buying country. Currently there are mainly three initiatives that provide this service in Gaza. The first organization is Work Without Borders (WWB), a non-profit company and the first and oldest in this business; the second is Qatar Charity, which is an international NGO and Ibtikar Zone, which is a start-up. See more about these organisations located in Gaza in Annex 11.

38 https://www.behance.net/gallery/21331719/Freelance-In-Palestine-Infographic and http://tamyaz.com/Report.pdf 39 40

https://www.facebook.com/groups/1429311370643390/members/ and https://www.facebook.com/groups/peeks.fb/ Each social medial platform has its clients, for example Arab gulf clients are active on twitter and Instagram. Future freelancing programs should consider developing capacities of would-be freelancers of how to use social media in marketing. 23 | P a g e

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Analysis of Low Income Groups in the Sector Palestinian Gross Domestic Product (GDP) in 2014 experienced its first year-on-year decline since 2006. In Gaza, real GDP per capita was nearly 30 per cent lower than in 1999. Furthermore, according to the International Labour Organization (ILO) 41 , too many young people in the oPt are not benefiting fully from the education system, with still more than onehalf of Palestinian youth finishing their education below the secondary level, and youth unemployment rates are amongst the highest in the region, with more than half the unemployed youth being affected by long-term unemployment. It also found that those with better education struggle to find work that suits their skills and education and the rate of labour force participation is extremely low, particularly among women. In 2014, around 92 thousand males and 113 thousand female graduates aged 20-29 years obtained an intermediate diploma or bachelor’s degree 42 . They were specialized in the following fields of education: Male (26.3%) (11.6%) (10.1%) (8.3%) (7.7%) (6.4%) (29.6%)

Fields of education

Female

Business Administration (19.3%) Teacher training and education science (21.1%) Health (7.5%) Engineering and Engineering trades Humanities (15.6%) Social and behavioural sciences (11.6%) Computing Computer Science Other fields (24.9%) Table 7 Palestinian graduates fields of education

Youth are particularly affected with high unemployment rates. In 2014 the highest unemployment rates among male and female graduates aged 20-29 years with an intermediate diploma or bachelor’s degree in Palestine were in the following fields of education are illustrated in the below table: Male

Fields of education

Female

(46.0%)

Personal services (93.8%) Life sciences (82.8%) (45.9%) Teacher training and education science (79.2%) (41.4%) Humanities (78.0%) Social and behavioural sciences (77.2%) (41.0%) Journalism and information (40.7%) Architecture and construction Table 8 Unemployment Rates Among Male and Females Tables based on PCBS data

In 2014, the highest rates of unemployment among graduates aged 20-29 years with a bachelor’s degree or an intermediate diploma are illustrated in the below table:

41 42

http://www.ilo.org/global/about-the-ilo/newsroom/news/WCMS_371179/lang--en/index.htm http://www.pcbs.gov.ps/portals/_pcbs/PressRelease/Press_En_Tawjehi2015E.pdf

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Gaza

Fields of education

West Bank

Life sciences (70.4%) (78.1%) Teacher training and education science (68.0%) (76.1%) Humanities Personal services (62.1%) (72.3%) Social and behavioural sciences (71.2%) Mathematics and statistics (57.0%) (67.5%) Engineering and engineering trades Social and behavioural sciences (52.8%) Table 9 Unemployment Rates Tables based on PCBS data

Unemployment rate and period of unemployment in months for graduates (20-29) years with an intermediate diploma or bachelor’s degree by field of education in 2014 Field of education

Unemployment rate

Period unemployed in months

Teacher training and education science 72.7 14.6 Humanities 66.2 17.2 Mathematics and statistics 65.7 14.3 Life sciences 65.3 11.3 Social and behavioural sciences 62.3 16.9 Personal services 63.8 11.5 Journalism and information 49.2 19.4 Business and administration 48.0 14.3 Engineering and engineering trades 46.8 14.4 Health 43.3 14.1 Architecture and construction 40.7 12.3 Computing 39.5 10.9 Law 14.5 11.0 Other disciplines 46.9 11.5 Table 10 Period of Unemployment in Months and Rates Tables based on PCBS data

Many of these fields of education are suitable for BPO/ESO offshoring engagements and can meet international buyer requirement to perform low-value BPO/ESO, impact sourcing services as well as high value micro-works. As can be seen from the above tables, unemployment ranges from 35% to 75% depending on the field of education. BPO/ESO global markets can provide sustainable job opportunities for this educated youth. It also means that youth will gain a foot in the workforce acquiring new skills that will enable them to later market themselves to other companies.

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Teacher training and education science Teacher training and education science Humanities Mathematics and statistics Life sciences Social and behavioural sciences Personal services Journalism and information Business and administration Engineering and engineering trades Architecture and construction Health Computing Law Other disciplines

Unemployment rate 72.7 66.2 65.7 65.3 62.3 63.8 49.2 48.0 46.8 40.7 43.3 39.5

Potential Employing Segment Voice Contact Centre for Arabic and English Support + Non-Voice Back Office Operations

FAA/HR Non-Voice BPO ESO ITO and support to BPO Operations KPO

14.5 46.9 Figure 6 Potential BPO/ESO Employment for Educated Unemployed Youth

As an example, contact centres can grow to five times this current 700 staffing size in five - ten years at minimum.

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Gender Analysis In general, women participation in the in the BPO/ESO industry range between 15% - 30% of total workforce face similar social and work structure constraints to rise up and in the rank similar to those experienced in other countries and other segments of the economy. These constraints include levels of education, foreign language skills, call centre service time, geographical location of contact centres, social, cultural and business norms e.g. maternity leave cost, and management skills. Female engagement in the workforce diminishes as many women leave the workforce to take on childcare and domestic responsibilities. Although the BPO and ESO industry typically employs young, single or recent university graduates who do not yet necessarily require childcare facilities, leveraging the experience of these individuals is important for upgrading the BPO offer to high-value. These abovementioned constraints limit potential women’s access higher-value technical, supervisory and managerial activities.

Women data entry and digitization operation centres tend to exist in Unit One company in Gaza with a client in the Netherlands employing 100 females at minimum. In the West Bank, no such large-scale digitization operation exists and furthermore mixed presence of male and female staff is normal in the latter BPO and contact centre locations. Unit One in Gaza has leveraged the services of an intermediary company GPIC in the Netherlands where Mr. Paul Tjia helped the company to land a Data Entry BPO contract in Gaza from another regional location. The services of the intermediary company normally include relationship management with the buyers, which are recommended for the Palestinian suppliers as they learn how to enter global BPO market and provide quality services. Furthermore, this study has identified the Netherlands as a large European market for digitization and should continue to be a target market to attract more business to hire more women similar to Unit one experience.

Gender-based policies are needed to free up women to allow them to participate in productive activities. These should include facilities such as childcare and care for elderly relatives, as well as work programs that adapt to women’s schedules. The below table summarizes the data collected from the BPO/ESO companies surveyed: Contact Centre FAA / HR ESO 16% - 51% of staff are females 28% - 70% of staff are females 20% - 30% of staff are females in Contact Centres Feminization of jobs does not prevail. In other words, there is no stigma that a certain job is meant specifically for females, such as for example nursing. Equal Training Opportunity – consider themselves gender neutral Equal Pay Opportunity Limited career path for men and Limited career path for women Limited career path for women women alike in managerial positions, but not technical No participation in Night Shifts There is no Night Shift in this There is no Night Shift in this segment segment Unequal access to higher-value Has access to higher-level Has access to higher-level positions e.g. Mid-Supervisory positions such as supervisory, positions in technical engineering and Technical due to lack of technical and managerial fields. professional experience and in some cases cultural constraints. No child care facility Table 11 Gender Mapping for Contact centres, FAA/HR and ESO

Women continue to be mostly in the lower segments of the BPO chain. Women lag in management and other skills that would allow them to move into higher-wage BPO segments. Higher-value products favour male employment due to lower availability of qualified female 27 | P a g e

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candidates. As can be seen from the below table, the female graduates constitute high unemployed rates. Fields of education

Female

Personal services (93.8%) Life sciences (82.8%) Teacher training and education science (79.2%) Humanities (78.0%) Social and behavioural sciences (77.2%) Table 12 Gender Unemployment Rates in Fields of Education

On the long run, continued gender constraints can reduce available Palestinian labour to international buyers compared to other developing countries; the relatively smaller Palestinian labour force compared to larger labour force in Egypt, Vietnam and the Philippines can significantly impede the BPO industry’s ability to compete and upgrade its services. Taking Unit One Company in Gaza as an example, one contract serving the Netherland market has created 100 jobs. This study estimates creating 2000 jobs for women if securing 20 similar contracts over the coming two - three years.

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Palestinian ESO/BPO Services Value Chain Input

Service Process

Channels to Markets

Direct Inputs

Type

Human Capital BPO Specialized Knowledge

BPO Types

BPO Models

Contact centres

Information System, Hardware, Electricity, Telecom Connectivity / Infrastructure, High Speed Internet, Roads and Transportation

Services Type

FAA

In-House

HR

Outsourced to Third Party Inbound, Outbound, Blended

BPO

IPR & Data Protection Innovation

Int’l / Domestic B-2-B B-2-C B-2-Internal Customer

Capital/Financing Real Estate Affordable Office Space Merger & Acquisition/Exits

KPO

ESO

MNE CSR / Impact Sourcing

Subcontracting to other BPO Service Providers Subcontracting to Impact Sourcing Service Providers Advisory Sourcing (Intermediaries / brokers) Commercial Trade Representative Government Trade-in-Services Outsourcing Associations Sales Offices Overseas Local consultant(s) Referrals Website Social Media e.g. Facebook, LinkedIn, etc Pilot Projects Online Channels e.g. Freelancer, ELance, Up Work Direct Sales Personal Contacts Exhibition and Conference Trade Mission

Venture Capital

Markets by Geography, BPO Service Type, Provider Type and Verticals Domestic Market Business Government Consumers Civil society Geographic EU Markets

Germany Denmark Norway Sweden Netherlands Finland Spain N. America

Advertisement Diaspora Palestinians

Quality System

UK

MENA

USA Canada Saudi Arabia UAE

BPO Service Type Various BPO Services (e.g. Digitization, Invoicing, HR, Accounting, etc) English / Arabic Voice) Impact Sourcing Various ESO Services AutoCAD BIM Interior Design BPO Service Provider Type / Size

Verticals Markets Education and Content Development Healthcare Banking, Financial Services and Insurance Energy / Utilities and Essential Services e-Government Initiatives Telecommunication / Wireless / Broadband services Engineering Legal / Law Tourism / Travel and Hospitality Oil and Gas Transport Pharmaceuticals Information Technology Manufacturing

Multinational / Impact Sourcing Service Provider

Retail / Catalogue Political / Government Fundraising

Bahrain / Qatar

Figure 7 Palestinian BPO and ESO Value Chain

Key Players

Ministry of Labour

PACPA – FAA/HR

PITA - IT

PalTrade

Ministry of Telecom & IT

PSI - Standards

Engineering Association

Financial Services

Ministry of National Economy and PIPA FDI, Policies, Services, Goods, IPR

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1.4 ESO/BPO Value Chain Constraint Analysis PMDP research has identified many constraints that are inhibiting BPO and ESO segments from growing. These constraints exist on many levels the supporting functions of the market system, its rules and in the relationship between the suppliers and the buyers. This research has identified that country indexing and being part service location ranking, as indicated earlier, would be the first selling point for the oPt suppliers. It has identified several national constraints that will impede any future country ranking compared to regional countries including: limited infrastructure e.g. business parks and co-working space; higher cost of input; lack of long-term government support of sector growth such as training subsidies. Furthermore, the slipping “ease of doing business” ranking, coupled with the political and economic instability does not enable getting multinationals to operative a captive centre operation nor would other buyers consider the oPt as a potential service location destination. On company level, BPO/ESO has internal firm-level constraints. These include: 1. 2. 3. 4. 5. 6.

Limited Sales and Marketing Capacity Limited access to market information Clear Value Proposition that can Compete Globally and in which markets Lack of export knowledge and channels to markets Inability to reach economies of scale by securing commercial trade contacts Reliability and quality service required by international markets for low-tier buyers 7. Specialized industry knowledge 8. Quality certification required by international buyers 9. Integrate with global value chains and multinational BPO operations

The following section expands on these constraints in more details: 1.4.1 Lack of Coordination and Support This research has identified the lack of stakeholder coordination as per the below table. Outsourcing companies are not represented by a one business association, which could better advocate for its members in areas such as: services export related activities, access to export markers, access to financial resources, human capital development, sector branding and promotion. Outsourcing companies have mostly been dependent on economic support from the donor community. Such support has typically been short-lived and is mostly as a firm-level assistance rather than sectorwide strategic support. Human Capital Developmen t

Access to financial resources

Access to Export, Market & Business Info

Export Related Activities

0 0

0 0

1 0

0 0

0 1

1 0

4 4

0 0 0

1 1 0

1 0 4

0 0 0

0 2 0

2 2 1

1 0 0

2 2 2

0

0

4

0

1

0

0

2

No Support

PITA PalTrade Private Training Providers Universities

Sector Branding and Promotion

Advocacy

MoNE MoTIT

Stake holde rs Coor dinati on 1 1

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Other Associations e.g. Chambers Donors PACPA 43

0

2

0

0

0

0

0

3

2 1

0 0

1 0

2 0

0 0

2 1

0 0

1 0

Table 13 Survey Respondent Feedback on Institution Support

1.4.2 High Costs In general the cost of living in the oPt is higher - [Gaza is more cost competitive than the West Bank in terms of cost structures] than in other countries in the region (excluding Israel) due to the provisions of the Paris Protocol and the consequent economic ties with Israel, including the cost of fuel, rent, utilities, salaries, internet cost, and others. Higher cost in the BPO sector may not attract buyers in certain segments such as translation as Jordan and Egypt are lower in price per page; however, StayLinked for example has been bundling translation with technical editing and proof reading as a quality deliverable in managing the project on behalf of the client to offset the price making it a higher value add BPO offering. Therefore, this falls in similar feedback from other interviewees that higher cost can be offset by higher quality delivery for BPO buyers.

The cost of Internet, in particular, is higher in comparison to Israel and other countries where international BPO buyers are located. For electricity, besides the high cost of kilowatt-hour (kWh) set by Gaze Electrical Distribution Company (0.5 NIS/kWh), any business should plan to have one or two back-up options such as back-up generators and UPS thus at least tripling the cost of electricity.

To certain markets and BPO buyers, low price points are critical for their buying decision, however, this research has identified that not all BPO buyers are price sensitive. Other factors come at play. This research does not advise for the oPt to market itself as a low-cost location similar to Egypt, which has put negative wage pressures on Egyptian industry workers, especially females, thus increasing higher turnover. Costs in the oPt are in close range [especially Gaza] to well-established contact centres, BPO and ESO service location destinations. The industry’s success depends upon its ability to offset higher price points with better service quality and product diversification. See Annex 12 for more details. 1.4.3 Human Capital and Education Skills Human capital is a key determinant of value creation, competitiveness, and success in service exports from developing countries. As identified earlier, BPO buyers take into consideration the labor market ranking based on its cost competitive and availability of qualified workers. The following presents an analysis for the education requirement for the BPO workers and how it matches a wider pool of educated Palestinians, as low-value BPO does not generally require a specialized level of knowledge or education like ITO and KPO.

43 pacpa.ps

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ITO

BPO – Rule Based

Project Manager: Master’s degree + Certifications + Interpersonal skills Team Lead: Bachelor’s degree + Certification + Interpersonal skills Software Engineer / Developer: Bachelor’s degree + Certifications Test Software: Associate’s degree + certifications Technical Writing: High school Diploma /Associate’s degree

KPO – Role and Analysis Based Account Manager: MBA+ interpersonal skills+ experience

Team Lead: Bachelor’s degree + company certification skills + interpersonal skills Project Manager: Bachelor’s degree + company certification skills + interpersonal skills Supervisor: Associate degree + interpersonal skills

Consultant: MBA+ interpersonal skills+ experience

Trainee: High school diploma/ Associate degree

Junior Business Analyst: Bachelor’s degree

Position: Education/Skills

Position: Education/Skills

Position: Education/Skills

Software Development

Call Agent

Senior Business Analyst: MBA + interpersonal skills Business Analyst: MBA

Business Analyst

Note: Interpersonal skills include those important soft skills that are required in all human interactions. These include personal qualities such as emotional intelligence, perseverance, motivation, self-discipline, assertiveness and creativity, and social skills such as teamwork, empathy, effective communication, conflict management and leadership

Table 14 Educational Requirements by Offshore Services Value Chain: Source 44:

As such, repetitive BPO activities require limited specialized tertiary education and they do not promote innovation. These BPO activities can take advantage of the current level of education presented by the unemployed youth. However, With the increasing demand for data science and the constraining factors for Palestinian business intelligence, an international multinational human capital include weak English has started to outsource reporting and analyzes language, soft, business, marketing tasks to Ramallah team. Collected data about the and technical skills. Recent graduates usage of some of the company products are sent to Ramallah where the team is using business possess limited problem solving, intelligence and data mining tools to generate creative thinking, flexibility, business reports for the headquarter. communication, self-confidence and creativity skills as these attributes are The driver for the multinational company is cost underemphasized at all levels of the reduction compared to Israel and easy mobility in education system. Due to the current case Ramallah team need to visit main office, socioeconomic situation in the oPt, fresh however, finding talent remains the major graduates are unable to pay training challenge to upscale the project. fees themselves. They need additional investment in terms of training to meet the sought standards. This scarcity in the supply of employees limits the ability of BPO/ESO companies to scale up their business and meet potential clients’ demand. Long-term subsidies by government or donor agencies to be able to attract BPO contracts can be expected from international buyers to improve the mentioned skills gaps. Nevertheless, the market entry point for Palestinians is the low-value BPO that needs to offset higher price points with quality service delivery. Another reason for the skills gap is the mismatch between the practices in target markets, which does not exist in the oPt. For example, many of civil and architectural Karina Fernandez-Stark, Penny Bamber, Gary Gereffi (2013). Costa Rica in the Offshore Services Global Value Chain: OPPORTUNITIES FOR UPGRADING. Chapter 5. 33 | P a g e

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Market System Analysis: BPO/ESO Outsourcing services in oPt

engineers are not qualified to find remote jobs in gulf countries as they lack experience in steel structures. 1.4.4 Supporting Services 1.4.4.1 Reform in the Higher Education Sector The education sector in the oPt requires major reform. Furthermore, most of the higher education institutions in the oPt are currently facing a severe financial crisis for about five years, and the crisis has intensified in Gaza following the 2014 war on the Gaza Strip. PMDP project has published Market System studies related to the Quality of Engineers and the education system 45. 1.4.4.2 Telecommunication As a platform, the telecommunication operator plays a key role for the development of the BPO industry by providing reliable telecommunication services at competitive rates to access telephony, Voice over Internet Protocol (VoIP) telephony and Internet connectivity at high bandwidth through fibre optics and redundancy and links with submarine cables to connect to EU and USA where the majority of BPO buyers exist. Telecommunication Penetration of ICT tools in the Palestinian economic networks in the oPt have establishments been resilient during Two third of establishments with ten employees or more have computer and a mobile phone and fixed phone and have an Internet conflict. Recently, Internet connection, while half of the establishments with (5-9) employees ADSL prices have have these tools, and one fifth of establishments with (0-4) dropped (a 30Mbps employees have these tools in 2011. (PCBS) ADSL line can cost only 800shekels cost for 6 months) while fibre optic high bandwidth is commercially available across main cities in the country. However, 3G and 4G wireless technologies are still restricted by the Israeli government. Voice over Internet Protocol (VoIP) usage is also limited through incumbent landline carrier. There is also VoIP technology connectivity limitation with major countries in the Arab market such as the UAE that bans or control the voice BPO services connectivity with other countries. Figure 8 Cables Communication in Middle East and Africa

However, dependency on Israel for the telecommunication backbone is of concern to some buyers in Arab countries. Furthermore, the perception of Diaspora and international buyers’ about the telecommunication service is that it is expensive to their countries in the West, not stable and causes a security concern for doing business in the oPt being controlled by Israeli government for accessibility.

45 http://www.pmdp.ps/MSAS

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Internet tariffs are still considered to be on the high side by enterprises and freelancers in Gaza and in rural areas in the West Bank as well as the international community. 1.4.4.3 Electricity Electricity supply has been hardest hit in Gaza and is a main bottleneck for the BPO industry there as it is supplied on 8 hours shift at best. Gaza firms report an estimated 22 percent of sales in losses because of 232 hours of power outages that occur on average each month 46. Intermittent power supply besides adding extra operational cost, it harms the image of Gaza in particular as a reliable outsourcing destination. International buyers of outsourced services usually consider infrastructure as one of the top criteria when selecting their suppliers. In the West Bank, cost of energy sources has been rising reducing the competitiveness of several industries as it has been contributing towards higher input cost. Companies and freelancers depend on electricity to accomplish tasks and work they have been awarded. Due to electricity shortages they usually face the following cases:• Inability to gain new jobs from freelancing websites on time • Delays on accomplishing current awarded jobs. This may negatively affect feedback from clients. Some freelancers were forced to cancel valuable jobs in order to avoid negative feedback from clients as this would hurt their reputation on freelancing marketplaces. Adoption of Alternative energy resources such as solar energy should be put on the national agenda. 1.4.4.4 E-Payments and Bank Transfers The lack of e-payment gateway infrastructure and restrictions on receiving payments from abroad and within country in the form of bank transfer from abroad to the West Bank and from the West Bank to Gaza adds to the complexity of doing business and to the transaction cost. For example the most used payment platform by freelancers in Gaza is Payoneer Prepaid MasterCard. Payoneer enables freelancers to withdraw money from local Automated Teller Machines (ATM). However, Payoneer limits each withdraw for up to $200 and taking $7 per withdraw adding to the transaction and business cost. PayPal for example is a cheaper method however it is not available in the oPt. Qatar Charity reported that these restrictions have contributed on cancelling a number of outsourcing contracts and has disrupted the cash flow, hence affecting the daily operations of companies and freelancing operations. Similar problems also face companies in the West Bank but to a lesser degree. Furthermore, freelancers in Gaza are unable to open current bank accounts in Gaza local banks as proof of employment before opening a regular account.

46

http://unispal.un.org/UNISPAL.NSF/0/AACBAABE5949C8D885257D500048657C

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1.4.4.5 Dedicated Business Parks and Co-Working Space Infrastructure Many local stakeholders undermine the importance of a brand and image of services business parks that can house over 100 companies in tax-free and export zone. The current office space leasing rate in Ramallah is around US$80 - US$100 per / sqm while in Gaza it is up to US$30, but it can be as low as US$3 for older rental agreement. A green business park that provides input cost discounts to current office space rates, lower utility cost by leveraging green technologies; provides business environment as well as tax incentives will provide a brand image to attract multinationals to set up their BPO captive operations in the oPt. It will also provide supporting services in par with what neighboring countries are providing. The oPt should be prepared to attract captive centres BPO providers who already have begun to locate their operations to locations such as in Morocco and Egypt. A BPO business park is no longer “a nice to have” for the economy, it is a must as long as its business model improves the competitiveness of its tenants in reducing operational input cost and in ease of doing business in the oPt, which also provides an export free zone. What applies to companies would also apply to freelancers in the oPt, where a subsidized co-working space offered to freelancers will solve many of their infrastructure and input cost problems. With government planning and support, the BPO has continued to evolve in Morocco. Morocco has been providing general and specific tax incentives to BPO vendors that include: Full exoneration for 5 years for corporate tax with 43% discounts for the following years for BPO vendors. Full exemption for 2 years for first hires out of ANAPEC, which is a government employment agency with income below €550 for income tax with one additional year for permanent contracts made. The income tax bracket is capped at 20% at the Nearshoring Business Parks located in Morocco. The government of Morocco also provides training subsidies for the BPO industry as below: (€/year/person) Upon Hiring (Y1) Continue Education (Y2 and 3)

Operator €550 €550

Qualified Admin. (BPO) €2 150 €1 400

Technician (ITO)

Engineer

Management

€2 700 €1 800

€3 150 €2 700

€2 700 €2 700

Source: Morocco: Opportunities in the ITO / BPO Sector. Invest in Morocco.

1.4.4.6 Travel Constraints The oPt broad range of free trade agreements, across MENA, EU, USA provides a large market for expansion. However, travel restriction and travel ban warnings by many western governments and at the same time the lack of control of borders makes it challenging for people to be willing to travel and actually have a smooth travel to the oPt. Obtaining Visa to travel to many countries including to promising target market in the Arab gulf is a challenge if not impossible to many Palestinian passport holders. Travel complexity for executive managers has been giving PMDP research negative response to visit the oPt and consider doing BPO business here, especially to those that do not know the exact travel arrangements and have never visited. There is also the added cost of travel to arrange for Visa through logistic companies and crossing the Jordan River to 36 | P a g e

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travel through Amman airport facility. Likewise, restrictions on the movement of people and goods continue to impede business growth, trade and investment in the Gaza Strip. The movement of people and goods through Gaza has become severely restricted. Moving from and to the oPt is crucial to outsourcing businesses as clients in many cases need to meet with their suppliers face-to-face before making any deal. Also, movement outside the oPt is very important for businesses to travel in order to introduce and market their services for international companies and hence create trust. Currently this is not doable except with difficulty, which restricts their businesses’ growth. Utilizing e-marketing as an alternative solution is one of the possible solutions to overcome this restriction, however, it could not be relied on alone. Furthermore, Israeli government imposes restrictions on transfer of some items into Gaza. Israel has a list of items that are not allowed to enter Gaza, and items that need specific authorization and security checks. Some BPO/ESO companies mentioned that there are restrictions on importing specific types of hardware vital to their outsourcing operations such as hardware used for network infrastructure including switches and routers for enterprise uses. Certainly, these restrictions on goods may inhibit companies from growing their businesses and add to the transaction cost as well as introduce unwarranted delays. 1.4.4.7 Investment Climate and Access to Finance Political instability, the result of the unresolved conflict and the restrictions on movement and access, remains the binding constraint in the Palestinian investment climate particularly in the oPt. As a result, private investors do not appear to be investing or planning to invest in new businesses including BPO/ESO captive centres. Furthermore, BPO/ESO companies appear to be constrained in obtaining credit when they need it. The banking sector is stable, however it’s conservative, making most of its lending in the form of personal loans backed up to a significant extent by salaries, rather than for business loans. Banks are not likely to grant loans for BPO/ESO for execution of their outsourcing operations as bank do not understand BPO/ESO sector and BPO/ESO do not have any collateral in most cases. 1.4.5 Government Incentives and Ease of Doing Business Ranking The lack of government incentives puts the oPt at a disadvantage compared to regional incentives such as Jordan, Morocco and Egypt who are all already listed in the top 20 A.T. Kearney index of service locations and have been providing incentives to BPO businesses as well as training subsidies. While training subsidy from the donor community in the oPt exist, it is a short-term project benefit and does not give the country a long-term competitive advantage. The oPt is also slipping in the “Ease of Doing Business” ranking to number 143 in 2015 from 139 in 2014 (out of 189 economies) on all categories but one, which is paying taxes. It is becoming more difficult to do business in the oPt, which includes negative change in rank starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, trading across

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borders, enforcing contracts and resolving insolvency 47 where these ranking are below countries like the US, China and India 48. Tax payments are also cited as constraints to BPO/ESO companies. The de-facto government in Gaza is continuously asking companies to pay income taxes for their employees. Companies see this as an obstacle towards growth. BPO/ESO companies are suggesting issuing legislations to exempt outsourcing companies from all sorts of taxes and even some asked to exempt them to fall under the Palestinian Labour Law as they are working with offshore clients. Another major government constraint to spurring more BPO work is the lack of digital laws that can accept the call recording and / or digital signatures for service authentication for voice BPO or non-voice filling-out form using software as a service. 1.4.6 Political and Economic Stability There are no assessment of the oPt service location ranking and indexing such as ranking on A.T. Kearey and Wakefield and Cushman index. However, the general perception is that the oPt is not the best location to brand as a new BPO service location country destination due to its political and economic instability. BPO/ESO buyers perceive this as a risk and shy away from doing business or to attract investors to establish captive centre operations in the oPt. Yet, the perceived weakness of the oPt is at the same time a strength. The international community has a vested interest to improve the economic conditions in the oPt. Many multinationals shares the view by taking measured risks and do ITO business in the oPt such as CISCO, Intel, HP, SAP and Microsoft. These buyers can also sign BPO/KPO contracts on commercial and / or Impact Sourcing CSR basis. Other developing countries are competing for global BPO market share and many of the countries listed on the service location indexes have been having their share of political and economic unrest at varying levels including Bangladesh, Sri Lanka, Morocco, Tunis and Egypt. For the oPt, it has an advantage over these Asian countries being closer to the European continent and workers’ unionization is not widespread strikes in the private sector are extremely rare. This is crucial in the BPO environment, as foreign investors will not want their BPO offshoring disrupted because of labour disputes. 1.4.7 Limited Internal Capacity of BPO/ESO Companies Knowledge of Markets: None of the surveyed and interviewed BPO/ESO companies have made successful access to markets on ongoing basis or has been able to link with the FAA/HR, Contact Centres, and value chain of global markets to scale their offshoring BPO/ESO business. Many BPO/ESO companies have limited access to information about regional and international clients this includes who they are, where they are, and who their decision makers are and how they can be approached. This could be related to heavy dependency on personal contacts, lack of appropriate marketing structure, lack of knowledge about market access tools and movement restrictions.

47 48

http://www.doingbusiness.org/data/exploreeconomies/west-bank-and-gaza/ http://www.wamda.com/country/info-center/palestine/business and http://static.wamda.com/web/uploads/files/PAL_3a_Incorporating_Business2.pdf

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Limited marketing capacity: BPO/ESO companies usually lack marketing and market intelligence skills and in some cases do not consider marketing as fundamental part of the business processes. Usually, marketing efforts are attached to busy managers/owners who are involved in day-to-day operations, therefore they do not recruit a dedicated and qualified marketing team who can speak international business language and able to communicate professionally with clients. High-value Marketing skills are scarce in the oPt. The research noticed that Palestinian companies; organizations and freelancers lack an effective internal and supporting sales infrastructure to provide technical assistance towards expansion. For example, Work Without Borders tried to employ a marketing agent in Saudi Arabia but the cost was $2500-3000 per month, which is beyond WWB’s current financial capacity knowing that WWB’s profit margin is very tight at the moment. Some BPO/ESO companies, such as Unit One, managed to utilize online marketing tools such as social media particularly LinkedIn in order to acquire new customers. However, not all BPO/ESO companies are aware or have enough knowledge and expertise to utilize e-marketing and social media. Retaining current BPO buyers and grow the relationship is another marketing related capacity. The quality of service and the higher cost of doing business especially that BPO buyers have many options to consider can be the main attributed reason to retain international clients. Limited business know-how: BPO/ESO companies do not currently demonstrate sophisticated understanding of the business and marketing aspects of the BPO industry to support rapid expansion. One CEO when asked “What type of support do you need to grow your business?” he replied by saying: “I need to know how to do marketing and how to establish business relationships”. Mid-high level managerial skills and quality of services need more development and capacity building to meet needs and expectations of offshore clients. Inability to reach economies of scale: due to limited financial, marketing and management capacities and access to skills, BPO/ESO companies are not able to achieve business growth and scale. 1.4.8 Increased Competition Every BPO DC destination is competing to get a market share including developing countries. Some of these countries have similar negative perception and image such as the conflict and bombings in Pakistan, Sri Lanka’s civil war and poverty and poor infrastructure in African countries and Bangladesh. Yet, these countries are also able to find their niche in the BPO sector with entrepreneurial zeal. However, finding clients is a challenge for all these countries as they carry higher risk to more stable countries such as India, Philippines and Vietnam. Overtime the competition has not only increased in the BPO services industry but has evolved to become fierce. Current BPO/ESO companies have to compete with already well-established brands in the sector in the global market. These businesses are offering the same services yet one has a well-established reputation and network, staff and finances. This makes it harder to enter the market.

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Vision of Growth for the Sector With global market size worth billions, the BPO industry provides employment creation opportunities to hundreds if not thousands of Palestinian graduates from different educational disciplines. Macro and firm-level constrains need to be addressed to improve the market system to further develop the core relationship between the supply and demand side. The vision for the sector in the oPt is to become a value for money service location in 10 years’ time, engaging entry level and highly skilled labour in low to high-value segment of the industry by engaging the unemployed and educated Palestinian youth to integrate with the BPO and ESO global value chain and to gradually increase their specialisation and innovative capacity as the industry continues to mature. The BPO sector can increase its employment by adding another 5000 overall over the coming ten years. It can add another 2000 jobs specifically for women by securing 20 contracts similar to what have been accomplished in Gaza within three to five years. Likewise, the ESO sector can also increase its employment by 3000 – 5000 engineers in the coming 5 – 10 years depending on how quickly the afore-mentioned constraints are addressed. The broad steps for the BPO industry is to realistically focus on market entry strategies leveraging the supporting functions of advisory sourcing services that exist in mature markets such as the US and UK. These two markets have similar drivers and constraints of offshoring their BPO. These markets are more open to offshoring and are less pricesensitive than the Arab gulf region. The EU has an advantage over the US in that it is physically close to the oPt. Working its way with low-value services as market entry strategy provides immediate employment opportunities to thousands of unemployed graduates who would have the technical skills to offer these low-value BPO services with training focus in soft skills takes the priority during this stage. However, it is envisaged that the industry and its workforce will continue to evolve in specialisation in the domains of FAA, HR, Contact Centre and ESO over time in order to target high-value services. For the ESO, however, it is recommended for this industry to focus on Arab markets such as Jordan and Arab gulf countries: United Arab Emirates, Saudi Arabia and Qatar. This region offers a large real-estate construction market and initial market traction is taking place with BIM and Construction related CAD drawing offered to this region. This is also a language matching market that offers growth. The strategy is to be able to scale the volume of offering through clustering of the engineering firms and provide the companies with technical assistant on more training in CAD and BIM for the engineers as well as soft and communication skills. The vision calls for industry stakeholders and companies to make contacts with key multinational companies that are providing BPO/ESO services to sub-contract with them to service Arab-speaking markets. This research has demonstrated that 85% of BPO markets are from North America and Europe. Hence, language match in English becomes critical for voice and non-voice BPO/ESO services along with improving the soft skills for low-value services and improving the specialisation through technical training on FAA, HR and Engineering as companies evolve to high-value services. Whilst challenging to attract foreign direct investment from multinationals, the 40 | P a g e

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Diaspora groups can be approached to increase their investments in captive centres that serve their BPO/ESO requirement. Last but not least, due to its global perception as an instable political and geographic service location, the Impact Sourcing, which is growing sub-segment of the BPO market aligns with the current conditions of the oPt to also sub-contract with Impact Sourcing Service Providers and target the corporate social responsibilities of multinationals. From the below international market analysis, the research indicated that the North America market is very similar in nature to the UK, only much larger. Conversation with a BPO expert also predicted that if the minimum wage increases to US$15 in the USA, then a new wave of offshoring will emerge and will be the new driver to reducing cost to buying companies. Likewise, there are opportunities in European Union (EU) market for Palestinian BPO companies such as 49 1. 2. 3. 4.

49

FAA and HR in the UK Social Media in the UK and Netherlands Digitization in the UK, Germany, France and Netherlands Contact Centre in the UK, France and Germany

http://www.cbi.eu/market-information/outsourcing-bpo-ito 41 | P a g e

Market System Analysis: BPO/ESO Outsourcing services in oPt

Potential Synergy with Other Development Projects Qatar Charity Qatar Charity is conducting a survey the BPO and ESP services needed in the Arab gulf countries, which will be useful to the BPO suppliers. Unfortunately, this study is not yet available. Qatar Charity has launched a pilot project that is financed by the Islamic Development Bank called Taqat that will support “remote work” in four sectors: Engineering, ICT, Translation and Business Management / Administration such as payroll. Lessons learnt from this pilot will help Qatar Charity to better design and scale a full project with US$5Million budget that will also include the West Bank and will involve the participation of the private sector. The Taqat project is currently employing an individual marketer (Job Hunter) in Qatar whose main duty is to market Gazan talents to Qatari employers. Based on the needs identified by Qatari employers, the marketer sends job description and skills required to Gaza office, which then works on recruiting qualified candidates. In two months (Starting from June 2015 – till July 2015), Taqat project was able to recruit 15 Gazan professionals on a long-term basis with Qatari employers working at different fields including IT, translation, graphic design and other fields. Those remote employees are hosted at a number of local businesses that a have space and directly contracted by Qatar Charity. For that purpose, Taqat team in Gaza is currently working with other local NGOs and Associations in order to identify best candidates for required jobs. Engineering Syndicate for example identifies best candidates for engineering jobs, while Palestinian Information & Communication Technology Association (PICTA) identifies best candidates for IT jobs 50. Recently, Qatar charity has contracted with WWB to provide hosting service for 100 remote employees as part of their Taqat project. The synergy with Qatar Charity is to codesign interventions and activities such as training, market access, clustering for the ESO services. International Trade Center Furthermore, DC such as Bangladesh for example has been receiving long-term support (e.g. 4 year project) implemented by the International Trade Center (ITC) that is funded by the likes of CBI on promoting the ITO and BPO services (reference). ITC is also implementing similar projects in African countries such as Kenya and Ghana. The synergy is to design international market access program for BPO providers. MTIT MTIT is currently seeking to revive such a business or knowledge project in Kadoori, Tul Karem. Nevertheless, MTIT intends on launching new innovative program to accept innovative e-services ideas from companies, universities, students, and government employees. This project will be supported by the Korean Development Agency. The synergy with MTIT is in providing the Ministry technical support on developing the business model of the business park. Furthermore, MTIT can also provide its training facilities located at the Ministry for BPO/ESO training. Mercy Corps (MC) MC in Gaza introduced structured projects to support freelance outsourcing and provided a 50 Qatar charity signed MoUs with both

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supporting environment for freelancers or would-be freelancers including: awareness about freelancing, training on how to conduct freelancing, initiated the freelance online academy (FAO) 51 targeting freelancers in different fields such as programming, design, translation, data entry/admin support and other fields. In 2015, Mercy Corps introduced a new project to support the freelance career growth for unemployed graduates from different disciplines. The 3-month project (for each round) aimed to accelerate the growth of participating youth as successful freelancers through providing an integrated package of support which included monthly stipend, continuous mentorship by professional freelancers, English courses, small coworking space at Mercy Corps premises, freelance skill building through FOA and a vibrant online community to exchange: ideas and information, challenges, successes, and provide support when needed. MC conducted an online survey for 40 freelancers who joined the 1st round of the program. They reported that in the first 8 weeks of the program they were able to accomplish 300+ jobs, and acquired $17,000+. 25% of those surveyed reported that they have got long-term contracts. The impact was not limited to people joined the program. However, the impact was extended to freelancer’s relatives, friends and others as our freelancers started to teach them freelancing skills. The synergy with Mercy Corps is to continue the support to Freelancers in Gaza with additional value-add interventions based on the current maturity level of freelancers. World Bank Organizations such as the World Bank are taking note of the potential for an industry that generates foreign exchange but requires very little capital outlay. 52 A synergy with the World Bank is for the development agencies to develop a Trust Fund that would support addressing some of the national constraints and facilitate coordination amongst BPO/ESO stakeholders. Quartet Office The Quartet Office is also keen on developing the BPO sector in the oPt. They have been approaching the UK diplomatic offices in Jerusalem and Tel Aviv to promote BPO work. The synergy with the Quartet Office to align political interest in the UK to support the BPO industry including opening up channels of business-to-business meeting with UK Buyers or multinational service providers that would consider sub-contracting to the oPt. There has been some talk about supporting Palestinian businesses from the UK with corporate social responsibility funding. Hence, Impact Sourcing BPO can start to take form with UK companies through UK diplomatic channels that the Quartet Office can facilitate.

51

www.foacademy.com http://www.reuters.com/article/2012/10/10/us-asia-freelance-idUSBRE8991MY20121010

52Source:

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Potential Intervention The following section attempts to describe the intervention strategies to grow the market system for BPO and ESO locally and internationally by addressing the market system constraints with the objective is to develop market entry in the BPO industry at a large scale. There are macro conditions that require government-level attention to improve the ease of doing business and investment conditions of the country. Key national constraints to address include: 1. Country branding and promoting its value proposition as well as indexing on service location indexes 2. Attract FDI and captive centres. Also, encourage new company formation and investment in better access to financing. As the number of BPO companies is small, it is vital to increase the number of companies working in that field in order to create a critical mass of capable outsourcing companies able to attract international contracts. 3. Infrastructure upgrade: large business park with lower operational cost, money transfer and e-payment gateways, improve electricity supply 4. Economic related reforms and improved supporting services: deregulate telecom for lower prices, investment incentives, improve doing business in the oPt, digital and data privacy laws, and work on easing travel restrictions with the international community, upgrade education and training, 5. Stakeholders’ coordination and aggregation. The establishment of an Outsourcing Association can be a strategic direction. Also, establish a local chapter for IAOP (International Association of Outsourcing Professionals) in Palestine is another strategic direction. IAOP offers a number of certifications in Outsourcing domain such as “Certified Outsourcing Professional (COP)”. That will help BPO/ESO companies to have a clear understanding of the end-to-end outsourcing process. Other certifications are provided by IAOP. However, there are also firm- level related constraints to address for each of the Contact Centres, FAA/HR, ESO and Freelancers segments as follows:.

Disadvantaged Group

Contact Centres The disadvantaged unemployed groups that can be employed in the supply side are: Field of education Unemployment rate Teacher training and education science Humanities Mathematics and statistics Life sciences Social and behavioural sciences Personal services Journalism and information Computing Law Health

Market entry activities

72.7 66.2 65.7 65.3 62.3 63.8 49.2 39.5 14.5 43.3

The recommended ways to enter the Contact Centre market: 1. Assist in Access to Markets to local companies – Match with Low-value BPO with trial projects 2. Improve Marketing and Sales Skills 3. Building Partnerships with international BPO firms 4. Building Partnerships with advisory Sourcing companies 5. Building linkages with Diaspora groups such as PALAID to serve the tourism 44 | P a g e

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Functional upgrading activities

Product upgrading activities

Process upgrading activities

Contact Centres sector 6. Train the trainers programs and acquire quality certification Since the contact centres are already exporting, they can also offer blended services (inbound and outbound), shifting from simple to more complex transactional operations. Can also diversify their value proposition to social media and digitization. Additional activities to address: 3. Train for better skilled labour 4. Reduce cost of operations and labour by relocating to rural areas 5. Demanding shift schedule (night shift work) 6. Skill development is needed for higher-level customer service Contact centres can shift from established basic BPO operations such as customer service to new more complex high-value transaction services including technical support and data management from mass-market operation to business-to-business operations. This requires higher skills and a more specialized workforce to handle complex transactions. Firms’ systems have to be integrated with their client firms and follow the same business cycles. The Contact centres firms can also offer a wide range of front -and back-office services including human resources, sales, finance and accounting, marketing, and administrative support. Additional Key Constraints to Solve: 1. Highly skilled labour 2. Demanding shift schedule 3. Depth of product knowledge - specialisation 4. Reliability and quality 5. Focus on higher value activities Contact centres can upgrade their processes by investing in information technology e.g. Software as a Service to help drive productivity and accuracy, especially in processes that requires significant data entry and data referencing. Contact centres adopt multichannel voice and non-voice technology: telephone and Web based support: e-mail, chat, voice-over-Internet, and cloud. Key constraints: • Adopting up-to-date software and technologies • Skilled, but low-cost labour • Improving processes and productivity and cutting costs Table 15 Contact Centres Potential Interventions

Disadvantaged Group

FAA/HR The disadvantaged unemployed groups that can be employed in the supply side are: Field of education Business and administration

Unemployment rate 48.0

Market entry activities

The recommended activities to enter the market: 1. Attract Multinational companies establishing captive centers 2. Indexing as a Service Location 3. Assist in Access to Markets – Match with Low-value FAA/HR with trial projects 4. Train the trainers programs: Skill development is needed for higher-level FAA/HR services 5. Improve Marketing and Sales Skills The constraints to solve are also similar as in the Contact centre, but are sector specific for the FAA and HR as below:

Upgrading activities

The recommended activities include: 1. Upgrade and train FAA/HR companies to gear up for high-level services and meet market knowledge specialization requirements and standards; 2. Fine-tune and professionalize their business operations. 3. Assist them in gaining sufficient number of relevant business contacts. 45 | P a g e

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4. 5. 6. 7.

FAA/HR Develop effective and implementable outsourcing marketing strategy. Building Partnerships with international FAA/HR firms Building Partnerships with Advisory Sourcing companies Train the trainers programs and acquire quality certification Table 16 FAA/HR Potential Interventions

Disadvantaged Group

ESO The disadvantaged unemployed groups that can be employed in the supply side are: Field of education Engineering and engineering trades Architecture and construction

Market entry activities

Upgrading activities

Unemployment rate 46.8 40.7

The recommended ways to enter the market: 1. Attract Diaspora companies establishing captive centers such as Khatib and Alami and others 2. Assist in Access to Markets – Match with Low-value ESO with trial projects 3. Train the trainers programs: • Skill development is needed for higher-level ESO services 4. Open sales and marketing hubs for Gaza companies in the West Bank The constraints are also similar as in the Contact centre and FAA/HR, but are sector specific for the ESO. The recommended activities include: 1. Cluster and adapt current ESO companies and its services to market requirements and standards; 2. Fine-tune and professionalize their business operations. 3. Assist them in gaining sufficient number of relevant business contacts such as in the Arab gulf 4. Develop effective and implementable outsourcing marketing strategy. Table 17 ESO Potential Interventions

Disadvantaged Group Market entry activities and upgrading

Freelancing All Recent Graduates that can Freelance in the oPt

The recommended ways to enter the market: 1. Establish co-working space and incubators for freelancers to solve infrastructure e.g. high-cost of internet, electricity problems, etc. 2. Increase use of social media as channels to markets 3. Train the trainers programs 4. Increased Engagement with Higher Education: Universities and colleges can play an active role in promoting the culture of freelancing as a career path among students and provide education for the skills constraints 5. Facilitate integration of all relevant stakeholders 6. Advocacy interventions: include Palestine on all online freelance platforms, local banks to open accounts and provide them with facilitations to send and receive money transfer easily, and low cost payment gateways in Palestine. 7. Improve access and linkages to Arab markets Table 18 Freelancing Potential Interventions

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Figure 9 Result Chain Map

INTERVENTION DIRECT IMPACT

Market System Analysis: BPO/ESO Outsourcing services in oPt

SOCIAL LEVEL CHANGE

Increased employment and incomes

Increased sales to BPO Buyers and increase business profitability

BUSIINESS PROCESS OUTSOURCING (BPO) & (ESO)

BUSINESS LEVEL CHANGE

Improved BPO destination appeal image

BPO / ESO Products, Functions, Process Upgrading

Improve Access to market Information

BPO Infrastructure and Business Parks Clustering

MARKET SYSTEM CHANGE

Stronger PACPA, PITA, PalTrade Engineering Association

Upsell and Cross Sell to More BPO Buyers

Increase Quality Certification

Improved KAP for Serving BPO Buyers e.g. Indexing

Improved Access to Markets through Trade Missions, B2B Meetings (Inbound/ Outbound), Digital Campaigns

Improve Overall Policy Environment

Improving Specialised Higher-Value BPO/ESO Skills Training / Education

Improved Industry Standards & Good Practices Sector coordination INTERVENTIONS

Branding Destination

Knowledge Development

Entry into Global BPO/ESO Value Chain: FDI, promote the country, and attract Multinational Captive Centres, Promoting BPO sector companies

Country level reports and global indexing by international consulting firms Expanding geographical & customer focus from low-value to high-value Diaspora Linkages

Market Access

Incentives & Compliance

Promoting BPO/ESO sector companies – Aggregate, Cluster, Web-portal project Matching with low-value market segments in Europe and North America through channels to markets

Policy Reform and Infrastructure: Business Parks, Telecom, Training, Incentives, Investments, Data Privacy Regulations, Laws: Labour Digital, Gender

ACTIVITIES

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Validation Workshop 1.5 Introduction The PMDP project held a Validation Workshop on the 31st of August at Ramallah and Gaza through a videoconference link. PMDP did not present its proposed study interventions at the workshop, not until it heard from the over 70 attendees who represented the private and public sector. In general, the workshop participants agreed with what has been presented.

1.6 Validation of the Constraints The participants have share their views and experiences in trying to get BPO business to the oPt. The participants have expressed many of the constraints during the workshop, which many of these points were already captured in the study such as the concern of international buyers such as in the UK for data privacy issues and what legal recourse is available in the event of data leakage or stealing source codes. In addition, one participant advised that the intellectual property rights have to be in part to what the international community expects. The study did highlight the Morocco as an example and how the government has addressed this issue and its impact on growing business. In addition to the data protection and intellectual property, participants also recommended improving the enabling environment, the corruption perception and the country branding prior to PMDP presenting its recommended interventions.

1.7 Validating the Need for Coordination Participants also advised that more coordination is needed to orchestrate different efforts whether they are regulatory or access to market. It is also needed not just for project initiation but more importantly for follow-ups. Other participants requested to involve the universities in the coordination effort with the public and private sector on skills requirement. One participant also advised to include the NGO and donor community in the stakeholder coordination efforts. Participants wanted a wider stakeholder base to be represented in the coordination effort to improve the business environment, education level and infrastructure. Likewise, companies are seeking technical assistance to improve their internal operations, staff training and support market access activities. There has been a discussion point regarding a need for a national strategy. A participant raised the similarity of the value chain presented and many of the constraints to be applicable to the ICT and Software Outsourcing National Export Strategies that were developed by PalTrade. However, the study would advise on developing an independent national strategy for the BPO and KPO as they are separate value chains and each segment has its own unique value proposition and specific constraints despite similarity. Another point made by the same participant. He recommended targeting investing in more companies to work on the outsourcing sector as a promising sector. He raised an issue regarding investment promotion, about the incentives that catered for the technology services sector that has been cancelled from the investment law. He emphasized on the enabling investment and the importance to work on creating the positive image.

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1.8 Validating the Importance of Quality and Upgrading Skills One participant also stressed the importance of skills, whether technical or soft skills. English and knowing how to deal and communicating with international clients are important – also highlighted in the study. New skills in IT such as Python and Word Press were also raised as being locally missing and internationally demanded. Furthermore, the participant advised that freelancers are pushing for higher wages all the time, but buyers are pushing for more competitive costing. Her business is under constant pressure to balance the two while also to be competitive regionally. Confidentiality of data was raised so was the money transfer constraints to receive payments from abroad and also to send to Gaza, which were also captured in the study. Other participant did express that the transaction cost of doing business for Palestinian companies is high e.g. fees, money transfer cost, etc. The issue of quality was raised in relation to pricing the BPO services. Since input cost is higher, participants do realize that they need to offer higher quality to offset the high price. Participants, however, believe that they can provide such high quality. The study did mention that the in the event of providing high value BPO services more specialisation will be demanded by the buyers. For the oPt, quality (not price) will be key to develop trust with international buyers.

1.9 Debating the Markets and Channels Some participants felt that the presentation delivered identified certain international markets and identified which are largest BPO markets in them. Private sector participants debated that it may have been better approach for the study to analyse the supply side first and then find the appropriate markets and not the other way around. A clarification point was made by PMDP that North America and the UK constitute 85% of the BPO buyers who look more favourably than other regions to engage in offshoring. Furthermore, they are less price sensitive than other regions such as the Arab gulf since they do nearshoring to East Europe who offers their services at higher price points as this study presented. What remains for consideration is developing market entry strategies with low value services to these markets with continuous upgrade of targeting higher-value. The point was made that if any company is capable of providing a specialized service then this is also a valid business model as the study verifies. However, the study believes that the oPt need to upgrade to meet what the international markets buy from low to high value services. There is no one size that fits all. This also applies to the access to market strategies. While some prefer direct sales targeting SMEs and not focusing on CSR projects from multinational, others are starting to find subcontracting and leveraging advisory sourcing as valid channels to market options. However, it was discussed that the study did present the growth of the Impact Sourcing and at the workshop did point out how CSR from CISCO helped in raising awareness about outsourcing software development to the Palestinian companies, which subsequently did convert to be based on business merit. Nevertheless, companies lacked market information to be able to penetrate new markets.

1.10 Spurring Growth A participant from the engineering services sector called for syndicating the large engineering companies under one umbrella to cater for regional buyers. He also 49 | P a g e

Market System Analysis: BPO/ESO Outsourcing services in oPt

raised the constraints of cash flow disruption due to the lack of timely payments made by the public sector, which also stifles development of the sector – both of these issues were captured in the study. All these points are addressed in the study and hence this aligns with the recommendations for the ESO sector.

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Annexes Annex 1 – Objectives and Methodology The objective of this study is to conduct a market system analysis study for the engineering services outsourcing (ESO) and the following BPO segments: contact centres, finance, accounting and administrative (FAA) and the human resource (HR) service, in the occupied Palestinian territories (oPt) (Both West bank and Gaza). The key objectives for this study are: 1. Have a clear understanding about the various segments that drives demand for BPO services 2. Identify and map the local BPO value chain and its connection to regional and global end markets (sources of demand). 3. Analysis of the supporting services: it will investigate the range of services required by the BPO industry (Information, infrastructure, finance, etc.) 4. Analysis of the rules and regulations: identify and describe how public policies, such as those set by the Ministry of Telecommunication and IT (MTIT) and other national and local agencies, shape the enabling environment for the BPO 5. Understand the position, potential and empowerment of low income and women in the market system 6. Identify the key constraints preventing the sector from growing In order to achieve the desired outcomes and objectives, this research study will provide an overview of Business Process Outsourcing in the West Bank and Gaza Strip. PMDP reached out to a diverse set of stakeholders in the industry and leverage a multipronged approach for data collection and best practices gathering through: 1. Web-based survey questionnaires 2. Primary interviews and discussions 3. Secondary research and EnterVentures experience

Web Survey Primary BPO Interviews

Demand and Supply Side

Interviews

Web Survey

Demand and Supply Side Secondary Research

Carry Out Extensive Secondary Desk Research. The following companies have submitted responses to the surveys: Transcend Support outsourcing solutions, Fusion, Coreions, Reach Contact Centre, The International Logistic Co., DallataQode, Unit One ICT, ALTARIQ Systems & Projects, StayLinked and Work Without Borders have participated in the survey. GSE, Good Shepherd Engineering 51 | P a g e

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and RAI Consult took the engineering survey. Only HLB Sahhar from FAA/HR sector responded. PMDP has made several phone calls to obtain further information. The suppliers were asked about their revenue, its source, location, infrastructure, office space, ownership, age of the suppliers in terms of experience, quality certifications, their BPO services, market segments, wages and workforce information. See Annex.

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Annex 2 – Offshore Services Value Chain Figure 10 Offshore Services Value Chain 53

High

Horizontal Activities

ITO Information Technology Outsourcing

KPO Knowledge Process Outsourcing

Software R&D

Business Consulting Business Analytics Market Intelligence

IT Consulting

BPO Business Process Outsourcing

Value Added

Software

ERP (Enterprise Resource Planning) Application Development Application Integration Desktop Management

Infrastructure Application Management Network Management Infrastructure Management Low 53

Legal Services Engineering Services

ERM Enterprise Resource Management Finance & Accounting

Procurement, Logistics and Supply Chain Management Content / Document Management

HRM Human Resource Management

CRM Customer Support Management

Training

Marketing and Sales

Talent Management Payroll

Recruiting

Contact Centre / Call Centre

Adapted from the Centre on Globalization, Governance and Competitiveness (2010) 53 | P a g e

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Annex 3 - International Market Analysis BPO/ESO Capability Segments

International Markets

Low



Contact Centre Simple "Tier 1" customer service inquiries Order fulfilment Initial complaint handling Outbound sales Inbound sales Account inquiries Loyalty programs

Promising Target

High Medium High Medium Medium High High

High Medium High Medium Low High High

High High High High High High High

High High High Medium Medium High High

      

UK is the largest Market in EU

Back office (e.g. data entry, digitization)

Medium

Medium

High

High



Established Market

Large

Largest

Social media responses

Medium

Low

High

High



2nd Most Active in EU

Most Activ e

3rd Most Active

Engineering Services CAD Drawings Interior Design Building Information Modelling

Medium Medium Medium

Medium Medium Low

Medium Low Low

Medium Medium Medium

  

Mature Market

3rd Largest / Language Mismatch

MENA / GCC

Medium

Jordan

Low

Denmark

Netherlands

Medium

Large

Large Large Large

Large Large Large

Open towards international i Small

USA/UK Largest

3rd Largest / Language Mismatch

Scandinavia

Target Segment      

France

Competitive Advantage High Medium Medium Medium Medium High

Germany

Capabilities Medium Medium Medium Medium Medium Medium

6th Largest in EU

Current BPO Experience Medium Medium Medium Low Low Medium

One of the most outsourced

Skills Set Availability High High Medium Medium Medium High

BPO Finance, Accounting and Administration General Accounting Accounts Receivable Billing Collections and Payments Payments Fixed Asset Accounting Human Resources

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Annex 4 – Examples of Outsourced HR Services Examples of HR Services Routinely Outsourced Workforce Administration Maintaining a full administration of staff Maintaining and processing timesheets Processing sick leave of employees Processing requests for absence and holiday and matching them against registered hours Staffing and Recruitment Building and publishing job vacancies Processes Matching responses and résumés against open positions and selecting candidates Setting up job interviews Creating job contracts and benefits packages Performance Management Maintaining a database of performance criteria Services Consolidating performance data into performance database Manage performance review processes Learning and Development Creating and maintaining education framework/curriculum Services Creating (eLearning) content Managing and maintaining eLearning platform Maintaining personal learning progress database Remuneration Processing remuneration system Processing remuneration-related changes (roles, salaries, bonuses, working hours, fringe benefits allowance) Creating (monthly) remuneration entitlement (salaries) and fulfilment (payment) Processing related administrative work (tax and social benefit declarations and payments) Retirement and Financial Managing and maintaining retirement benefit program and Services administration (pension, early retirement benefits) Fulfillment of periodic pension payments Fulfillment of other benefits Advocacy Services Legal or other expert support for personnel or HR department in clarifying or resolving benefit issues around for example contracts, remuneration, health insurance, and retirement benefits

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Annex 5 - Channels to the BPO and ESO Markets and Buyers According to CBI, there are different ways and channels for BPO providers in developing countries to be able to access EU BPO markets 54: Channels to Access Markets Subcontracting offers good opportunities to developing countries BPO providers. In other words, leading BPO providers can be buyers of services from Palestinian BPO providers

BPO Market Buyers Most EU end-user companies still prefer to outsource business processes to onshore (local) BPO providers. In turn, these onshore BPO providers can look for possibilities to subcontract part of their work to developing country providers, with cost reduction, access to skills and/or flexibility being among the main drivers. Examples of leading service providers from developing countries include: Company HQ Location IBM Accenture Hewlett-Packard CapGemini ACS (Affiliated Computer Services) Teleperformance Convergys Sitel Amdocs Teletech

United States United States United States France United States France United States United States United States United States

Examples of leading service providers from India include 55: Company Tata Consulting Services (TCS) Wipro Infosys Genpact Mahindra Satyam HCL Technologies

The same applies to subcontract with 1. HR Service Provides in the promising target country, 2. FAA Service Providers in the promising target country, 3. ESO Providers in the promising target country, Increasing use of local Small to Medium-Sized Enterprises (SMEs) are increasingly becoming intermediaries. interested in outsourcing. They generally prefer to work with a local Examples of intermediary to find a suitable outsourcing provider to reduce the Intermediaries are the risk of failure of the outsourcing project. Advisory Sourcing companies. Buyers still Intermediaries bring together supply and demand. This means that need implementation they bring together BPO providers and end users of business process consultants, strategy services. Or, in the case of the above subcontracting, BPO providers consultants, legal with other BPO providers. This can include both national and foreign advice etc. companies. Examples of leading advisory sourcing providers include 56: Company CBI Market Channels and Segments: Business Process Outsourcing (2014) http://www.iaop.org/Content/19/165/4129 56 http://www.iaop.org/Content/19/165/4149 54 55

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Channels Markets

to Access BPO Market Buyers Alsbridge Baker & McKenzie

Avasant PWC

Deloitte Bird & Bird

EY

KPMG

Increasing use and importance of online channels. Buyers are frequently adding their BPO requirements on Nabbesh, Freelancer, Elance and Up Work.

Like all aspects of social media, maintaining online professional visibility is very important for Palestinian BPO providers. Examples of online channels are websites, social media networks such as LinkedIn and Facebook, and online outsourcing market places such as Freelancer, Elance and Up Work.

Local sales office

Establishing a local sales office within the EU target market would be the ideal situation for DC BPO providers. However, reality shows as reported by CBI that DC BPO having their own sales office is very difficult. Most DC companies are simply too small and do not have the financial strength to establish and maintain a local sales office in the EU market.

Direct sales to endusers

This channel allows possibilities for BPOs to work directly with EU end users of business process services.

Channels to Markets These different market channels can be developed as interventions and applied in practice by the BPO companies to access the international markets. These market channels have not been practiced by the industry stakeholders, but rather have been relying more on exhibitions and conducting business-to-business meetings that have not resulted in breakthroughs in sales.

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Annex 6 – Local Market Growth Opportunities From the local market analysis, the following local verticals will be promising for the Contact Centre industry: Government, Banking and Tourism. BPO/ESO Capability Segments

Skills Set BPO Available Finance, Accounting and Administration General Accounting High Accounts Receivable High Billing Medium Collections and Payments Medium Payments Medium Fixed Asset Accounting High Human Resources HR and Payroll Medium Contact Centre Simple "Tier 1" customer High service inquiries Order fulfilment Medium Initial complaint handling Outbound sales

Inbound sales Account inquiries

Loyalty programs Back office Processes (e.g. data entry, digitization) Social media responses Engineering Services ESO

Local Markets

Capability

Competitive Advantage

Target Segment

Medium Medium Medium Low Low Medium

Medium Medium Medium Medium Medium Medium

High Medium Medium Medium Medium High

     

Fragmented SMEs



High

High

Low

High



SMEs



High

High High



Medium



Medium



High



Limited Market Opportunities and is Quota Driven



High

Medium Medium High High

Medium Medium

Current BPO Experience

Low

Medium High

Medium Low

High High

Medium Low

Medium High High High High High High High

High High

 

High



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Governmen t Governmen t Governmen t Banking, Insurance Banking

Tourism SMEs

Market System Analysis: BPO/ESO Outsourcing services in oPt

Annex 7 – Buyers Quality Requirement Type Organization Quality Management

Name COPC COPC-2000 COPC-2000 VMO

EN 15838

ISO 9001

Corporate Social Responsibility CSR Security Management

ISO 26000

ISO 27000 Series

PCI DSS

Individual Specialized

BPO Certification Institute BIM standards PAS 91 and PAS 1192/2

Description The COPC® standards are prestigious performance management system in the customer contact industry. Being COPC certified means that a contact centre is taking its business seriously. However, the relatively high certification cost can be prohibitive to Palestinian companies. The standard for vendor management organizations (VMO) sets minimum requirements for buyers of third-party customer contact center services. These requirements include leadership and planning, key business processes, key people processes, and goals. This is a new EU standard for contact centres. The goal of the standard is to provide quality-of-service requirements for customer contact centres, common to all centres, which exist independent of service providers, the service sector or technical approaches to the provision of the ISO 9001 is an important standard for service providers. The ISO 9001 standard represents requirements for the development and implementation of quality management systems in an organisation. A guideline to develop a company CSR policy. Many companies involve their suppliers in their CSR policies. The ISO 27000 series of standards cover security. Best practices for privacy data protection include limiting access to personally identifiable information to only those who have a documented need to know, such as payroll personnel, and privacy protection training for individuals with access to that data. ISO 27002 is the standard governing information security and management. It provides the industry-approved model for an Information Security Management System (ISMS) and addresses the confidentiality, integrity and availability of information within an organisation. Payment Card Industry Data Security Standard The standard increases controls on financial services to protect consumer information against fraud. For example, contact centres cannot record consumers’ confidential information, such as security codes. Covering all KPO/BPO domains like customer care, transaction processing, back-office services, Finance & Accounting and Technical Support http://bci.us.org/default.aspx BIM technology enables creation of digital virtual building that can be used to determine logistical planning and quantities as well as for cross-disciplinary coordination. For ESO, there is a (BIM) related certification, which the Royal Institution of Chartered Surveyors (RICS) has developed the first BIM Manager Certification in response to industry requirements to have a standard that

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Type

Name

Laws

HIPAA

EU Directive 2002/58/EC and Directive 95/46/EC TUPE

Description demonstrates the skills and competence of construction professionals in using (BIM) 57. HIPAA is the USA federal Health Insurance Portability and Accountability Act of 1996. The primary goal of the law is to make it easier for people to keep health insurance, protect the confidentiality and security of healthcare information and help the healthcare industry control administrative costs. EU companies have to take into account the EU legislation on personal data protection. The requirements relate to the protection of the privacy of EU users of technical services, which also include FAA, HR and Contact Centre services. The European Transfer of Undertakings for the Protection of Employees (TUPE)

http://www.rics.org/uk/join/member-accreditations-list/bim-manager-certification/ and Autodesk’s Revit software or UK BIM standards PAS 91 and PAS 1192/2. The certification scheme tests the ability of a business to meet the client’s needs in regards to delivering BIM. The scheme is in the same format as ISO 9000 (quality system) as it requires the organisation to show that they have the policies and working procedures required to meet the standards. 57

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Annex 8 - Cushman and Wakefield 2015 Country Example Report Vietnam has become particularly attractive due to a number of ongoing reforms that have been implemented by the Vietnamese government. Its significant movement up the index has been largely driven by its low cost environment, a perceived drop in political risk and strong improvement in GDP output per capita, which is forecasted to continue in 2015 at 6.2%. Large-scale investment in both education and training has helped many Vietnamese develop high levels of literacy and numeracy skills that have enabled its workforce to move away from low productivity agricultural jobs into higher productivity office work. With lower wages compared to some of its Southeast Asian neighbors, Vietnam is becoming an offshore destination. Vietnam is now home to over 1,000 software companies that employ over 80,000 people, making it one of the world’s largest software exporters and the second largest software outsourcer in Japan. It also benefits from a relatively sustainable source of labor. The median age of the country is under 30 and with 1-1.5 million people entering its labor market each year. The Philippines has hit a record $15 billion USD in BPO revenue, which saw it leapfrog India in terms of growth having lost some 70% of its voice and contact centre operations to its Asian neighbor. The number of call-centre workers in the Philippines reached 900,000 in 2013 and is expected to increase to 1.3 million by 2016, according to the IT Business Process Association of the Philippines. Whilst the rise in wages have been welcome news for the Indian economy one of the repercussions of this has been a significant decrease in the country’s value proposition as a BPO destination. This has also not been helped by the country’s climbing rate of attrition, which now stands at 26.9%, the highest globally as rising wages have left companies continually competing for the best talent. Philippines, which graduates some 470,000 English proficient college students every year and has a national English proficiency rating of 92.5% meets the international buyers’ language requirement. The Philippines is favored by US, British and other European companies as the country has a welleducated, English-speaking workforce which is willing to take on night work in order to match the client’s hours of business. The employability of Philippines students also remains a key factor in the migration of operations from India, where some 30% of students are regarded as employable compared to 10% in India. Contact centre work is popular with new graduates who cannot find work in their relevant fields of study. The pay is significantly better than other work available for young graduates – as much as double according to the ILO. However, contact centre workers face serious health risks, ranging from stress caused by the high-pressure environment, to sleep disorders. Bulgaria moved up 11 places in the C&W BPO rankings to third place and is establishing itself within the BPO market. Benefitting from a low tax rate and one of the lowest labor costs in the EU Bulgaria also possesses a strong labor pool suited to the BPO sector with in excess of 60,000 students graduating annually from all Bulgarian universities. Approximately 50% of the graduates obtain degrees in majors suitable for the needs of the BPO industry. The labor pool also provides a strong international language base, with 98% of the students enrolled in secondary school in Bulgaria studying a foreign language and 73% at least two foreign languages. Ranked fourth within our index, Romania continues to establish itself as a BPO location of choice. Affordable office rents continue to create a low cost environment, while the country also benefits from particularly strong internet connectivity speeds, which are ranked seventh globally. However, strong annual inflation is starting to tighten cost margins and this has led to a fall from first position in our 2014 index. 61 | P a g e

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Annex 9 – Summary of Survey Results Please rank the following constraints that are impeding your ability to expand your BPO outsourcing operations from highest (1) to lowest (5) * Engineering Very High

High

Medium

Low

1 2 3 4 5

0%

Very low 10%

Obtaining adequate financing

60%

20%

10%

Availability of skills

20%

20%

30%

10%

20%

1 1 0 0 0

Labour Costs

0%

30%

40%

30%

0%

1 1 0 0 0

Credibility as competitive BPO destination High cost of Internet and telecommunications services Regulatory barriers in home country Market access barriers in foreign markets Meeting international quality requirements Insufficient commercial trade contacts Lack of market information on demand Lack of export knowledge and channels to markets Obtaining travel documents / visa to visit foreign clients Client accessibility into Palestine and out IT Infrastructure

20%

20%

40%

10%

10%

0 1 1 0 0

10%

10%

20%

30%

30%

0 0 0 2 0

20%

20%

30%

10%

20%

0 1 1 0 0

60%

10%

30%

0%

0%

2 0 0 0 0

0%

40%

20%

30%

10%

0 0 1 0 1

0%

70%

30%

0%

0%

1 1 0 0 0

10%

30%

60%

0%

0%

1 1 0 0 0

10%

30%

40%

10%

10%

1 1 0 0 0

50%

30%

0%

0%

20%

1 0 1 0 0

30%

40%

10%

20%

0%

2 0 0 0 0

10%

30%

10%

30%

20%

0 0 1 0 1

Meeting the demands of night shifts Electricity Supply

0%

10%

20%

40%

30%

0 0 0 0 2

70%

0%

10%

10%

10%

1 0 0 0 1

Money Transfer

50%

10%

20%

10%

10%

0 0 0 1 1

Money Transfer Electricity Supply Meeting the…

Obtaining… Availability of skills Labor Costs

IT Infrastructure

Client accessibility…

Obtaining travel…

Lack of export… Lack of market…

Credibility as…

High cost of…

Regulatory…

Market access…

Meeting… Insufficient…

1 0 0 1 0

Very High High

Medium Low

Very low

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or your company, please select the demand level for the following BPO Customer Care Services in today's market (optional response and can select any of them applicable to your services) Demand Suppliers There is a Current Demand 66.70%

There is an Expected Future Demand 33.30%

There is a Current Demand 37.50%

There is an Expected Future Demand 12.50%

Don't Kno w 50%

100.00%

0.00%

33.30%

33.30%

100.00%

0.00%

33.30%

16.70%

33.3 0% 50%

Initial complaint handling Technical support

100.00%

0.00%

66.70%

16.70%

Outbound sales

100.00%

0.00%

60%

20%

16.7 0% 20%

Complex "Tier 2" customer service inquiries Inbound sales

100.00%

0.00%

40%

20%

40%

100.00%

0.00%

40%

20%

40%

Back office non-customer facing administration processes Social media responses

100.00%

0.00%

40%

20%

40%

66.70%

33.30%

66.70%

33.30%

0%

Billings and collections

100.00%

0.00%

40%

40%

20%

Account inquiries

100.00%

0.00%

20%

60%

20%

Loyalty programs

66.70%

33.30%

83.30%

0%

16.7 0%

here is a Current Demand

5

83.30%

There is an Expected Future Demand Don't Know

0

0%

1

16.70%

Simple "Tier 1" customer service inquiries Order fulfilment

Don't Kno w

What is the Percentage Role of Women Employees in the below Positions 10 Responses Back Office Positions Entry Level Positions Mid-Level Positions Supervisory Positions Technical Positions Managerial Positions Night Shifts

Highest Percentage 30% 20% 20% 20% 30% 20% 0%

Lower Percentage 10% 50% 60% 40% 30% 30% 0%

Lowest Percentage 60% 30% 20% 40% 40% 50% 100%

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Night Shifts

Back Office Positions 100% 80%

Entry Level Positions

60% 40% 20%

0%

Managerial Positions Technical Positions

Highest Percentage Lower Percentage

Mid Level Positions

Lowest Percentage

Supervisory Positions

Do women employees have equal pay levels Yes No

1 0 0

100% 0%

Do you provide child care facility? Yes No Other

0 8 2

0% 80% 20%

About Revenue What is the annual turnover (Local and International) of your company? Up to US $100,000 4 Up to US $250,000 0 Up to US $500,000 1 US $500,000 to US $999,999 1 US $1 million to US $5 million 1

57.10% 0% 14.30% 14.30% 14.30%

You annual turnover in the past three years has been Declining 3 Steady 1 Rising 4 Mixed 2

30% 10% 40% 20%

You Revenue is mostly from Business to Business - Locally Business to Consumers - Locally Serving Internal Customers to the Company

30% 0% 0%

3 0 0

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Business to Business - Internationally Business to Consumers - Internationally

6 1

Does your company work for international clients in the domestic market? Yes 6 No 4

60% 10%

60% 40%

About Building Facility Do you own or rent office premises? Own Rent

1 9

10% 90%

How many square meters does the office occupy 150 400 1000 2500 145 200 m 500 square meters

If renting, what is the rental fee in USD per square meter? 25 3 $52 for the square meter per year 3$ 89 50

What would be the ideal required bandwidth for your business in mbps? 12 50mbps 5000 50

What is the number of agent seat workstations available? 0 5 65 | P a g e

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16 14 88 120 75 260 Finance, Accounting and Administration For your company, please select the demand level for the following BPO Finance, Accounting and Administration Services in today's market (optional response and can select any of them applicable to your services)

There is a Current Demand General Accounting

80%

There is an Expected Future Demand 20%

Payroll

80%

20%

0

Accounts Receivable

100%

0%

0

Billing

40%

60%

0

Collections and Payments

60%

40%

0

Payments

40%

60%

0

Procurement

100%

0%

0

Fixed Asset Accounting

40%

60%

0

Travel and Entertainment

40%

60%

0

Travel and Entertainment

Fixed Asset Accounting

Procurement

Payments

General Accounting

Payroll Accounts Receivable Billing

Dont Know 0

There is a Current Demand There is an Expected Future Demand Dont Know

Collections and Payments

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Please select your demand level for the following BPO Information Technology Services (where applicable) in today's market There is a Current There is an Expected Future Don't Demand Demand Know Network (voice) 100.00% 0.00% Application maintenance and support Network (data)

75.00%

25.00%

100.00%

0.00%

Application hosting and support

50.00%

50.00%

Application development/enhancement IT Service Desk

66.70%

33.30%

100.00%

0.00%

Data Center

100.00%

0.00%

IT architecture and design

100.00%

0.00%

Cloud Computing

25.00%

75.00%

Network (voice)

Cloud Computing

IT architecture and design

Application maintenance…

There is a Current Demand

Network (data)

There is an Expected Future Demand Don't Know

Application hosting and…

Data Center

Application development…

IT Service Desk

Please asses the most relevant level of support you receive from each of the following Trade Support Institutions: In terms of coordination efforts, provide human capital and financial support to your business, advocacy, market access, market info as well as branding Stakehold Sector Human Access Advoca Access to Export No ers Brandin Capital to cy Export, Relate Suppo Coordinati g and Developm financia Market and d rt on Promoti ent l Business Activiti on resourc Information es es Ministry of National 1 0 0 1 0 0 1 4 Economy (MoNE) Ministry of 1 0 0 0 0 1 0 4 Telecommunications and Information Technology (MoTIT) PITA 0 1 1 0 0 2 1 2 PalTrade

0

1

0

0

2

2

0

2

Private Training Providers

0

0

4

0

0

1

0

2

Universities

0

0

4

0

1

0

0

2

Other Private Sector Associations e.g. Chambers Donors

0

2

0

0

0

0

0

3

2

0

1

2

0

2

0

1

PACPA

1

0

0

0

0

1

0

0

Engineering Association

67 | P a g e

Market System Analysis: BPO/ESO Outsourcing services in oPt

In what areas would you require support from government to enable your BPO business to succeed? Ease the government processes Taxes exemptions Build strategy to support the export of services cross borders - Involving the private sector in the work of the funded projects. - facilities in financial matters - build places with good it infrastructure equipped to work remotely, and financial facilities market Palestine internationally Commercial Registration , Financial transactions In what areas would you require support from private sector association to enable your business to succeed? business matching; linkages; JV's, etc. Human resources training on specific skills. networking and tradeshow participating Marketing and market access. In regards to the development initiatives undertaken by donor organizations to support the private sector, please list any shortcomings or suggestions for improvement follow up Some donors have no contact policy. Slow movement of projects. To responsive. Support the BP of the companies - Support Marketing for Palestinian companies. - The courage to work with companies directly. - Support products and services already exist. Please add any comments below that will aid in the development of the BPO outsourcing sector in Palestine Improve the communication infra structure I would like to add fundraising should be sufficient enough to complete all the cycle from developing product to market to outsource

Human Resource Services For your company, please select the demand level for the following BPO Human Resources Services in today's market (optional response and can select any of them applicable to your services) There is a There is an Current Expected Future Demand Demand Don't Know Call center management 75% 25% Expat administration 100% 0% HR Information System Maintenance and Support 100% 0% Payroll time administration 100% 0% Recruiting and staffing administration 100% 0% Total rewards administration 100% 0% Workforce analytics 100% 0% HR Administration 66.70% 33.30% HR Reporting 100% 0% Payroll 80% 20%

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Market System Analysis: BPO/ESO Outsourcing services in oPt

Payroll

Call center management

There is an Expected Future Demand

Payroll time administration

HR Administration

Engineering Services

There is a Current Demand

HR Information System…

HR Reporting

Workforce analytics

Expat administration

Total rewards administration

Don't Know

Recruiting and staffing…

For your company, please select the demand level for the following BPO Engineering Services in today's market (Just for Engineering) Demand Suppliers

CAD Drawings

There is a Current Demand 50%

There is an Expected Future Demand 50%

Interior Design

0%

100%

Building Information Modelling Project Management Construction management Construction documentation Structural design

0%

100%

66.70%

33.30%

33.30%

66.70%

0%

100%

0%

100%

Submittals

0%

100%

Document management system Presentations

66.70%

33.30%

66.70%

33.30%

Detail engineering

50%

50%

Conceptual scheme

50%

50%

Discrepancy report

0%

100%

Quantity estimate

0%

100%

Landscape design

0%

100%

Reverse engineering Material specification Energy audits and modelling Digitization of maps Code compliance analysis

0%

100%

33.30%

66.70%

50%

50%

Don't Know

There is a Current Demand

There is an Expected Future Demand

Don't Know

As built drawings

69 | P a g e

Market System Analysis: BPO/ESO Outsourcing services in oPt

How important are these criteria when making location decisions for BPO and EPO outsourced services? Economic and political stability

5

100%

Availability of qualified workers

3

60%

Skill and experience of workforce

4

80%

Cost-effectiveness of workers

5

100%

English-speaking capabilities

5

100%

Ability to scale workforce quickly

1

20%

Reduce operating costs

4

80%

Gain access to new business process acumen

2

40%

Transform / reengineer processes

2

40%

More effective operations at a global level

3

60%

Force change into our business operations

0

0%

Other

0

0%

Other

Force change into our business… More effective operations at a…

Transform / reengineer processes

Gain access to new business… Reduce operating costs

Ability to scale workforce quickly English-speaking capabilities

Cost-effectiveness of workers

Skill and experience of workforce

Availability of qualified workers

Economic and political stability

0%

20% 40% 60% 80% 100% 120%

Which of the below is or would be preferred your contact center channels you use? Telephone Email Telephone Voice Portal System (IVR) Web Chat / Instant Messaging SMS Fax Mobile Apps Social Media Other

5 100% 5 100% 2 40% 1 20% 2 40% 0 0% 2 40% 3 60% 0 0%

70 | P a g e

Market System Analysis: BPO/ESO Outsourcing services in oPt

120% 100%

80% 60% 40% 20%

0%

How interested are you to engage with Palestinian vendors in business process outsourcing? Very uninterested : 1 2 3 4 5 Already doing BPO business in Palestine: 6

0 0 2 1 1 1

0% 0% 40% 20% 20% 20%

How do you normally select, or would like to select, your outsourcing vendors? Advisory Sourcing (Intermediaries) Commercial Trade Representative Government Trade-in-Services Outsourcing Associations Sub-contracting to BPO Providers Sales Offices Consultant(s) Website Social Media Direct Sales Pilot Projects Online Channels e.g. Freelancer and Odesk Direct Sales Non-of-the above Other

4 1 0 2 1 1 3 2 2 6 3 2 6 0 0

80% 20% 0% 40% 20% 20% 60% 40% 40% 120% 60% 40% 120% 0% 0%

71 | P a g e

Market System Analysis: BPO/ESO Outsourcing services in oPt

Advisory Sourcing (Intermediaries)

Commercial Trade Representative

Government Trade-in-Services Outsourcing Associations Sub-contracting to BPO Providers Sales Offices

Consultant(s) Website

What BPO Standards and Quality Processes do you or your clients require? ISO 9000, 9001 Series ISO 10002 Series ISO 27000, 27002 Series PCI DSS - Payment Card Industry Data Security Standard COPC - Contact Centre Specific EN 15838 - European Contact Center Standard TUPE - Transfer of Undertakings (Protection of Employment) Data Protection Laws in EU HIPPA - Health Insurance Portability and Accountability Act SAS-70 - Auditing standard SOC-2 - Service Organization Control (SOC) 2 Service Level Agreements None I don't Know Other

3 0 2 0 1 1 0 2 0 0 0 1 1 1 0

60% 0% 40% 0% 20% 20% 0% 40% 0% 0% 0% 20% 20% 20% 0%

What Niche BPO Standards and Quality Processes is required by your company? Corporate Social Responsibility Green Practices Gender Policy and Support Disable Recruiting Policy and Support Other

3 2 2 1 1

60% 40% 40% 20% 20%

72 | P a g e

Market System Analysis: BPO/ESO Outsourcing services in oPt

Cultural Affinity Language Skills… Available…

Geographic… Time Zone Banking &…

Advantageous… Innovation

Turnaround…

Logistics Low Attrition…

P and Data… Quality…

Common…

Input Cost

Labor Cost Quality of Labor

Very Competitive Competitive Neutral

Not Competitive

Not at all Competitive

What is the primary deterrent to BPO outsourcing to Palestine? Attitudes and cultural barriers none in mind Political instability, perception BPO is a very fragmented market sometimes, specific languages are required (e.g. Dutch) there is a lot of competition from other countries in addition, the political situation and the conflict with Israel Perceived Poetical Stability Why do you think these constraints exist? Poor training and little awareness of global business practice It is very difficult for Palestinian BPO companies to conduct marketing & sales in the potential export markets. These companies are often small in size and do not have a representative (or marketing office) abroad. history, political environment, isolation The constraints exist because of its perception created in the media for being violent and unstable travel In your opinion, what are the main opportunities for the Palestinian BPO outsourcing industry? contact centres, Arabic speaking world penetration 1) Micro Works 2) Arabic Support & Localization 3) Data Entry, Image tagging Collaboration and effective supply chain management competition I did not have much experience in exploring actual BPO options for Palestine. Perhaps offering marketing services to European companies might be an option (e.g. marketing research in Gulf countries for EU software product companies). 73 | P a g e

Market System Analysis: BPO/ESO Outsourcing services in oPt

Have you engaged with BPO service provider in Palestine in the past 24 months? Yes 2 40% No 3 60% Was the engagement a positive experience? Yes No

2 0

100% 0%

Do you, or any of your networks, engage in Impact Sourcing, in order to create BPO jobs in disadvantaged areas and people? Yes 3 60% No 2 40% How many full-time employees does your firm employ? 1 7 6 32 8 16 100 580 70 50 Distribution of Full Time Staff

Agents

How many part-time employees does your firm employ? 280 3 2 0 6 12 10

Administrators

Engineers

Supervisor s

Freelancers

Highest Percentage

66.70%

25%

55.60%

25%

20%

Lower Percentage

16.70%

50%

11.10%

50%

20%

Lowest Percentage

16.70%

25%

33.30%

25%

60%

Avg US$ Daily Rates Agents

Administrators

Engineers

Supervisors

8

40

40

17

26

27

18

27

30

15

15

20

20

20

134

160

75

50

60

Freelancers

75 60 Percentage of Females from Full Time Staff 74 | P a g e

Market System Analysis: BPO/ESO Outsourcing services in oPt

25 0 16% 28% 100% 51% 70% 70 In which age group are most of your employees? 24 and below

2

20%

25-34

8

80%

34 and above

0

0%

Less than 19 months

3

30%

20 - 24 months

4

40%

25-34 months

1

10%

34 months and above

2

20%

Yes

10

100%

No

0

0%

In-house Trainers

5

50%

Local Training Service Provider Vendor

4

40%

e-Learning

0

0%

International Training Service Provider Vendor Outside of Palestine

0

0%

Other

1

10%

What is the average number of months an agent stays at the organization?

Does your company offer any form of training to employees?

Where do you conduct you employee training

In order of importance please state the three most critical skills you consider when recruiting your employees 1- networking 2- communication skills 3- marketing 4- social 3 C's - Commitment - Communication - Cooperation Communication skills Technical skills HTML / CSS Front end development. English Skills Computer Skills Communication Skills communications skill Technical skills (knowledge) Customer care skills Technical skills Problem solving Team working Self-confidence Adapting to pressure Motivated to work What suggestions would you make in relation to improving the training offerings for workers and potential workers in the BPO Industry To develop the idea and concept of the BPO by creating materials that will reflect the whole purpose of the BPO in order to expand within the market itself. Also, find a way to train the trainers and enrich their skills in order to reach that target. 75 | P a g e

Market System Analysis: BPO/ESO Outsourcing services in oPt

Specialized training in skills needed by the labour market. - make international training with successful stories around the world. - participate in sessions related outsourcing for "Companies not Individuals". on job training the best module i suggest , we believe that practical raining with examples rather than theoretical training and lectures.offer an international certification There should be an on job training in addition to specific training with semi real cases In your opinion, in what specific area is the greatest shortage of skill and experience for the BPO industry in Palestine? I believe we have a good skilled people, can make great products but we have the following obstacles: marketing the Palestine as country have great outsourcing skilled throw sessions, exhibitions, social media, business meetings... - Continuity and turn over. - Support companies products and services specially international. 1- sales and marketing 2- seo 3- proposal writing 4- networking The shortage in the skills comes from the lack of understanding in the candidates and fresh graduates for the industry and the Palestinian market in general. Candidates do not show limited signs of understanding regarding the company's duties and goals. This means that the greatest shortage of skills are the interview skills that are needed for the individuals to get hired. At the same time, if they do not get hired because of their limited skills, they cannot build the experience needed for the BPO or any industry for that matter. Gaza / West bank. Business Language International standards Offer sales training and target introductions and KPI's English Skills Programming Languages BPO Services and Clients What are your company’s current main BPO service lines? (horizontal activities) Customer centre services (non-technical inbound and outbound)

3

30%

Finance/Accounting/Admin Services

1

10%

Human Resource Services

2

20%

Data and Content (Data Entry, Analytics, Digitization)

4

40%

IT helpdesk technical support

3

30%

IT consultancy

6

60%

Procurement Services

0

0%

Engineering Services

2

20%

Legal Services

0

0%

Dispatching and event registration

0

0%

Pre-sales activities (lead generation, appointments)

1

10%

Surveys (Satisfaction, Qualifications, Market Survey)

2

20%

Loyalty and Retention

3

30%

Sales

3

30%

Credit Collection

1

10%

Fulfilment

1

10%

Lead generation

1

10%

Microworks

1

10%

Other

2

20%

Education and Content Development

3

30%

Healthcare

2

20%

Banking, Financial Services and Insurance

4

40%

Energy / Utilities and Essential Services

1

10%

Which sectors do you support (vertical markets)?

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Market System Analysis: BPO/ESO Outsourcing services in oPt

e-Government Initiatives

0

0%

Telecommunication / Wireless / Broadband services

4

40%

Engineering

0

0%

Legal / Law

1

10%

Tourism / Travel and Hospitality

0

0%

Oil and Gas

0

0%

Transport

1

10%

Pharmaceuticals

0

0%

Information Technology

6

60%

Manufacturing

1

10%

Retail / Catalogue

1

10%

Political / Government

1

10%

Fundraising

1

10%

Other

1

10%

6

60%

10

100%

Telephone Voice Portal System (IVR)

4

40%

Web Chat / Instant Messaging

6

60%

SMS

3

30%

Fax

1

10%

Mobile Apps

3

30%

Social Media

6

60%

Other

1

10%

Which of the below are your contact center BPO service delivery platform? Telephone Email

What is the size of international organizations that you typically outsource to? Small Firms (