Outsourcing in Africa: How do the interactions between providers, multinationals, and the state lead to the evolution of the BPO industry?

Abstract

We explore the evolution of Africa’s business process outsourcing (BPO) industry. In so doing, we seek to derive policy and managerial implications on how African suppliers can grow and become more attractive to foreign multinational corporations (MNCs). We discuss insights from the literature on (BPO) clusters and how these evolve. Our conceptual arguments are supported by a case study of the evolution of the Kenyan BPO cluster through three broad stages: embryonic, early, and developmental. We argue that this evolution has been hampered by factors including the small and sometimes informal nature of local suppliers, the reluctance of foreign multinationals to make long-term commitments, and the intermittent devotion by the Kenyan government to supporting BPO clusters. Accordingly, we suggest direct and indirect policy initiatives to grow the industry toward a more mature stage, increase knowledge spillovers and formalization levels, and improve working conditions.