The promise of fiber optic - NRBuzz presentation by Laura Mann
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This document summarizes a presentation given by Dr. Laura Mann on the promise of fiber optic internet for business process outsourcing (BPO) and information and communications technology (ICT) in Kenya. The presentation discussed Kenya's vision to become East Africa's leading outsourcing destination through infrastructure like the new undersea cables and the planned smart city of Konza. It also examined Kenya's BPO value chain, the role of intermediaries, and challenges like image and positioning Kenya as an export versus import market. Fieldwork was presented on the impacts of the cables on various industries through interviews with managers in tea, tourism and BPO.
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The promise of fiber optic - NRBuzz presentation by Laura Mann
- 1. Laura Mann and Mark Graham University of Oxford Timothy Waema and Charles Katua, University of Nairobi Felix Akorli, Claude Bizimana and Grace Magambo, National University of Rwanda Funded by: Economic and Social Research Council, UK Department of International Development, UK „THE PROMISE OF FIBRE OPTIC INTERNET‟ FOCUS: BPO AND ICT IHUB, NAIROBI, 29TH OF JANUARY, 2013 DR. LAURA MANN Email: Laura.mann@oii.ox.ac.uk Website and Blog: www.lauraelizabethmann.com Check out our project at: www.oii.ox.ac.uk/research/projects/?id=59
- 3. THEORETICAL SKETCH Distance and Time: Does the internet remove geographical boundaries and bring about a „global marketplace‟? (Cairncross 1997; Gillespie and Williams 1988; Friedman, 2005 and Gates, 1996) Intermediation: Does the internet remove intermediaries? (Javalgi and Ramsey 2001; Benjamin and Wigland 1995; Zook 2002; Leinbach 2001; Drucker 1999; Couclelis 2004; Janelle and Hodge 2000; French and Leyshon 2004; Zook 2005) Positionality: Does the internet allow individuals and communities to forge new positionalities and identities? (Couclelis, 1996; Graham, 1998; Goodchild, 2004; Massey 1993, 1994, 2005; Sheppard, 2002)
- 4. VALUE CHAIN
- 5. Kenyan company Human Intermediary (Samasource, consultants or middleman) American company (GM, Google, Amazon) European company (Nokia, BT, French Health Services) Technical intermediary (Elance.com or guru.com) American company (GM, Google, Amazon) THE VALUE CHAIN OF THE „BACK OFFICE‟ FASTER INTERNET
- 6. Media Analysis of the Arrival of the Cables Fieldwork in Kenya: 40 Tea Managers (growers, cooperatives, producers, transporters, traders, buyers, warehouses, etc.) 40 Tourism Managers (ticketing, tour guides, hotels, transportation, informal guides) 40 BPO/ITES Managers (call centres, software developers, Big ICT companies, system integrators, etc.) Interviews with Policy-makers and other relevant stakeholders. Fieldwork in Rwanda: The same process METHODOLOGY
- 7. VISION 2030 “the top offshoring destination for Africa” “sector of choice for employment for youth and young professionals”
- 8. BPO‟S FALL FROM GRACE
- 9. HANGING ON…
- 10. Kenyan company Human Intermediary (Samasource, consultants or middleman) American company (GM, Google, Amazon) European company (Nokia, BT, French Health Services) Technical intermediary (Elance.com or guru.com) American company (GM, Google, Amazon) INTERNATIONAL INTERMEDIARIES PERSIST FASTER INTERNET Kenyan company International Intermediaries American company European company Kenyan Government and Kenyan company 100% 2008 10-20% 80-90% 2013
- 11. BPO TURN AROUND
- 12. SOFTWARE AND ENTREPRENEURSHIP 88mph incubation lab, Jan. 2013
- 13. 1 RE-POSITIONING KENYA Groundbreaking of Konza City, Jan 2013
- 14. 2 BPO AS A EXPORT OR IMPORT?
- 15. 3 IMAGE
- 16. ANYTHING BUT FLAT 1)Opening sales offices in other countries. 2)Buying foreign companies in other markets with existing clients. 3)Using Kenyan diaspora to bring work and make connections. 1)Using Kenya‟s diversity at home to negotiate work in other countries.
- 17. Laura Mann and Mark Graham University of Oxford Timothy Waema and Charles Katua, University of Nairobi Felix Akorli, Claude Bizimana and Grace Magambo, National University of Rwanda Funded by: Economic and Social Research Council, UK Department of International Development, UK Questions? Laura.mann@oii.ox.ac.uk www.lauraelizabethmann.com You can also check out our project website: www.oii.ox.ac.uk/research/proj ects/?id=59
Editor's Notes
- Laura MannFrom the Oxford Internet Institute. Working with…Funded by ESRC and DfID, simple explanation is that we are looking at the impact of broadband internet on the econoimes of Kenya and Rwanda. I am going to focus on BPO (outsourcing) and IT.
- So most people in this room probably know that before 2009, Kenya and the rest of East African relied on sat. for their internet connections. This meant internet was slow, expensive and unreliable. In 2009, the first of four cables landed in Mombasa and there was great expectation about what this would do the economy. Our project is really trying to compare those expectations with what has taken place on the ground.We picked three sectors.The tea sector- a classic export product, so something leaving.The tourism sector- in order to capture something coming in.And BPO- outsourcing- something that has the potential to change the international division of labour.
- Our project focuses on a few key ideas about the internet:Distance and Time: the internet removes geographical boundaries. Friedman- classic idea that the world is flat. --- that Kenyan companies will be able to reach out and communicate with companies and individuals in other countries more easily. That a Kenyan company can compete with an Indian company on an equal, individual basis. Is globalisation about producing ‘sameness’ and cultural flattening? Is everyplace going to look the same in twenty years?Intermediation: the internet removes intermediaries and makes it easier to facilitate direct communication with others. Similar to the first, except we are not just talking about space but social and economic hierarchies. Positionality: the internet allows individuals and communities to forge new positionalities and identities online. Internet is not just an enabled of communication, but also a space of representation. African countries are generally associated with gloomy news reports. Can the internet allows Kenyans to change that image, in addition to its structural and legal position in the world economy?
- So when people think about the impact of the Internet- they tend to focus a lot on use- how many people are accessing the internet. That tells us a lot about consumption, but not production. So the way that we are trying to look at impact, is to look at value chains. So the chain of actors who add value to a product. In tea, the value chain is easy- tea leaves are picked by the farmers, the factories process the leaves, the trucks transport it to Mombasa, the traders negotiate a good price and interact with buyers, the buyers know the international market, the producers blend the tea and package the tea and market the tea. Our project is trying to understand whether actors in Kenya can use the internet and better information to move up that chain- add more value to the tea closer to the farmer.
- When it comes to BPO and ICT, we are interested primarily in data. How data services are conducted internationally and whether Kenyans can carve out a better position in the chain. So here is a simple BPO chain. Kenyan company at the topInternational work at the bottomAnd in the middle intermediaries.Human and institutionalTechnological. Kenyan companies find it very difficult to get direct access to clients and international work. The faster connection was seen as making this easier.
- So in order to show this…Today I had my final interviews for the BPO and ICT sector and tomorrow, I am going to Kericho to meet with Charles from U. of N. to help finish off the tea sector interviews.So basically we are at the stage where we have a lot of interviews and notes, but we haven’t had much time to analyse it.I am therefore, going to focus on the big picture and the general trends. In short, I am going to try to tell a story about the rise and fall of BPO in Kenya.
- Vision 2030 envisaged Kenya to be “the top offshoring destination for Africa”. The flagship projects are establishment of a:BPO park at the Athi-River Export Processing Zones (EPZs);undertaking marketing campaigns; conducting targeted training programmes; development of a BPO incentive framework; and formulation of BPO and Contract Centre (CC) policy.It was expected to be “the sector of choice for employment of the youth and young professionals”.expected to create at least 20,000 direct BPO jobs and increase its contribution to GDP by Ksh. 10 billion. (Progress Report on Vision 2030)
- Tell a little story about BPO. International advisors described how this would be a great sector of growth for Kenya- particularly call centres, due to the high levels of educated Kenyans with neutral accents.Government used World Bank Subsidy to help companies struggle with bandwidth, made investments into infrastructure and set about building Konza City50 companies opened shop, Things were looking good. THENGlobal RecessionObama’s speechMiddle Management/Matrix of profit (exploitation)Difficult to ‘pull away’ business from India and other places (In many cases, Indian companies are passing on work)Not enough people to get big contracts, but not enough work to get enough people No strong industry voice. Former BPO society collapsed.Government has changed its approach. Money for promotion has not materialised.All money diverted to Konza City. I am going to talk a little bit about why this is the case later. But basically, a lot of BPO managers feel a bit abandoned by the government.
- Nevertheless, there are some…Big companies and a few smaller ones that have held on (Kencall, Horizon, Technobrain, Direct Channel, Adept, IT Solutions)Difficult to say how they are all doing. Some seem depressive, others buoyant. Renewed focus on internal outsourcing market.Some are still relying on international intermediaries. Emergence of more Impact Sourcing (Digital Divide Data, Samasource, Enablis)The ones that have survived are more savy, more tough. They know what makes money and what doesn’t. but feelings of exhaustion and a new ‘inward’ attitude prevaiThey employ anywhere from twenty to three hundred workers. There have been reports of late payments. There is still some instability.Many of them say- that it is a learning process and now they are ready for the global market, but the government gave up on them at the first hurdle.
- One of the most striking things about BPO is the shift to the local market. Most of the firms I interviewed had mainly been getting international work back in 2008, but now they are depended mostly on local and domestic work.Some have different percentages. Some smaller companies have a higher international component, but this is more piecemeal or more exploitative. Good international work is hard to find.
- Government has openly switched from using the words BPO to ITES. From BPO to IT Enabled Services.Techno-city- no longer focus on BPO. Clearly stated at the groundbreaking. Money for BPO promotion hasn’t been allocated to Kenya ICT Board. All funds are going to Konza City.New emphasis on software development startup culture. Celebration of M-Pesa and Ushahidi. Launch of competitions. Drive to bring international companies here. Not just Google, IBM but also Indian call centres and American financial companies. Local outsourcing and automation efforts within government are partnered with international companies. Curious kind of re-configurations going on: Kenyan BPO firms desperately trying to get international work. International firms getting local Kenyan work. It is not clear how these internationals will handle their back-office. Will the work stay in Kenya?
- Why the switch? A lot has to do with the problems within BPO, but also because of the government’s realizing the profits of automation. Important to ask how hasty this switch is?The BPO policy had been initially driven by the McKinsey Report. Was BPO the wrong focus for Kenya or did they not give it enough time to succeed? Is the focus on software the new right focus, or is it being driven by a similar ‘take an idea and run with it’ approach?Pay attention to Kenya’s niche, from the words of clients and investors.In terms of software, here the project is going to focus on:Again, we are interested in the issue of intermediation. To what extent do mobile and web applications rely on intermediaries to access markets? Think of platforms that run on SMS- need big telecoms to give them access to their networks. If you want to get your banking or SME application to a large number of businesses, can you go through a big bank or financial institution. This discourse about disintermediation and direct communication pervades but to what extent are small entrepreneurs dependent on big companies and intermediaries?What succeeds and what doesn’t? And understanding why and how success happens. The high rate of failure. social applications vs. back-office applications. Social applications depend on advertising for revenue. Here international companies seem to make it profitable, so in a way social applications will also increase the penetration of international influence. Back-office applications may find themselves competing with international applications- especially in the business and humanitarian arena. Existing ERPs and Cloud computing are creeping into the economy. What kind of advantage can Kenyans carve out here? Do they understand the local market better? Do they understand SMEs more? How can they protect their innovations when it comes to exporting them to other countries?Mixing of technical and social infrastructure. A lot of the tech entrepreneurs I have interviewed spend much much more time on sales and marketing, on the offline practical logistics than they do on the software. How can we better prepare techies?Related to that- It’s often the existing professionals in an industry that make the best kinds of software- they understand their clients’ needs because, to a certain degree, they are their clients. How can we re-create that? What is the right kind of support? Supporting young people but also giving them realistic ideas about their future. What do they need? Funding or time/exposure? Tough love within a controlled environment? What is the right kind of training and education? Mass education vs. narrow CMU kind of work in Rwanda. Informal experimentation vs. technical certificates that international companies understand? Internships, but internships that make sense both for the student and the employer. How can software become an export and job creator on a massive scale? The government is talking about how e-government in Kenya can be an exportable model to other countries, but how will they manage their relationships with international companies like Accenture and IBM to ensure that these projects do not see their back-office jobs outsourced to other countries and their innovations taken outside without them. What kind of relationship will there be between the big internationals and the local developer community?Next slide…. So I have talked a bit about what we have found from our research. Now I want to talk a little bit about what this all means, in terms of those core ideas of the project.
- Do the fibre cables make geographic boundaries less important? Does they allow a re-positioning of Kenya in the global economy?Despite almost all of our interviewees giving personal anecdotes about geographical re-configurations (it allows me to talk to my sister in the US, it allows me to buy things from Europe, it allows me to arrange travel arrangements much easier, people actually talking about ‘the world is flat’), when it comes to Kenya’s niche in the BPO/ICT sector, it seems like Kenya’s geography matters a lot. Getting US and EU work directly is hard. Intermediaries and physical visits are necessary to assure clients in the BPO sector. Kenyan firms do not compete with Indian firms on an equal spaceless footing. They are seen as ‘KENYAN’ firms, whereas Indian firms are very much seen as ‘Indian firms’. There is no global marketplace for work. Often firms think about timezones, having geographical variety in their backoffice arrangements (offices all over the world). For BPO to work in Kenya, the country as a whole has to carve out a name for itself. Nevertheless, Kenya has been successful in other aspects of ICT and these actually have a lot to do with geography.Bringing in international actors. Kenya vis a vis other ‘African hubs’- Egypt, Nigeria and South Africa. Kenya seems to be doing well partly because other hubs are doing badly.Kenya is seen as the ‘gateway’ to East Africa. For example, one big BPO firm opened its regional HQ in Nairobi even though it didn’t have clients in Kenya (it had work in other E. African countries). -Kenya already has a lot of finance and IT professionals in other countries. It can mobilize these guys. 2) Selling applications and the expectation of future applications to other countries. Kenya’s and Rwanda’s position vis-à-vis emerging markets. It can carve out a niche in applications for building applications for specific kinds of economies, similar to Kenya’s. This is where Kenyans and Rwandans seem to be doing best. Mobile money applications, but also agricultural systems, health systems, etc. If this is legitimately a big part of the economy, what role for ‘tech NGOs’? Enabling the delivery of international aid? But taking away jobs from local developers? Long and short term (interesting discussions in Rwanda about this). It would seem that the arrival of fibre optic, rather than diluting the importance of geography, is actually allowing Kenya to take advantage of its geography better.
- BPO was originally conceived as a source of export earnings. The idea was that Kenyan companies could provide services to other countries over the internet. As we have seen, what has happened is very different.In a sense, BPO has been imported into Kenya. You can’t master globalisation; it masters you. The need to get local work- demonstrate competence, but also make oneself less susceptible to foreign shocks. Modernization of Kenyan businesses. Not just in terms of encouraging outsourcing, but introduction of common global systems like ERPs and cloud computing. This ‘standardization’ further simplifies the outsourcing of components to others. Improve efficiency and revenue streams (This seemed to be a big motivating factor in the government’s shift away from BPO to ITES). One interesting (but deeply cynical) way of thinking about this could be: a re-configuration of corruption from the bottom to the top. Not just practices, Introduction of foreign BPO companies with different working relations. The SPANCO strike is a case in point. How will the government coordinate the efforts of the big internationals and local companies. What can facilitate partnerships?What does this mean for Kenya’s future? More efficient government services. More government revenue. Use of data for analysis and policy-making. Better health and education services. Creation of jobs or shifting of jobs to rural areas (Enablis).Informalisationof work? Flexible working hours? Pensions? Constant shifting in employers? Lack of protection for workers- much harder to unionize workers in an industry with high turn-over. Experience of security guards in Kenya. Education and inequality? Technically trained people vs. low skilled people. Skills GAP- two kinds of workers- technical professional class and back-office class. New politics. Comparison with India- the rise of BPO and ICT created a very different model of social mobility and ‘middle class’- instead of permanently employed civil servants, flexible, entrepreneurial class with different ideas about politics and the role of the state.
- The last big thing I want to talk about is image and representation. In a lot of the news articles about the arrival of the cables, it talked about how they were ushering in a new future for Kenya- modernization theory. Projecting a new image abroad. However, in the BPO and ICT field, there are two distinct narratives taking form: Kenya as a global space like all others and Kenya as a distinctive place. Impact sourcing vs. other kinds of workTo what extent does the promotion of Kenya as a site of ‘impact sourcing’ diminish the country’s wider reputation. If you start selling the image of slum residents doing call centre work in the BPO sector, will that stop other kinds of companies getting work? Can these two parts of the industry co-exist? Trust issues- interesting how impact-sourcing does require foreign intermediaries and offices and a wider system. Lower levels of revenue for Kenyan firms. Similarly, the projection of Kenya as a modern space- business hubs like any other place in the world…… or should Kenya be telling the world, it has a really interesting niche. The rest of Kenya as being an asset, the physical environment of Nairobi being an asset, not just liabilities. The rest of Kenya and Nairobi as a kind of technology laboratory for the rest of the developing and emerging world. Difficult to change the image remotely. Visits, international certificates, other benchmarks that foreign clients and investors understand. Making sense of place still matters.
- One of the things I love about doing this kind of research is really getting a sense of how the economy works outside of the models of economists. Economic models are often constructed as if space did not exist, as if economies operate by universal rules.Globalisation is also construed in a similar way- the expansion of global capitalism erases difference and makes all economies similar and characterless.But really what our project shows is how geographically rich the global economy is. How much space and unfortunately, race, still matters. Even in the most high tech sector in an age of global connectivity. This is not just a theoretical point, but also reveals something important about the practical ways that countries like Kenya can change their position in the economy and try to get around intermediaries….Opening offices in other places? Buying foreign companies in India, US, other markets? Using Kenyan diaspora? Using Kenya’s diversity- Indians and African workers- negotiating work can often be very racialised. African Kenyans are sent to negotiate Uganda and Tanzanian work, but Indian Kenyans are used in the Middle East and Latin America.