Offshoring success: The country aims to maintain its lead in outsourced services

With European businesses bent on reducing expenses in cost-sensitive sectors, Morocco is becoming a leading provider of offshoring services, especially for the French- and Spanish-speaking markets. The kingdom has now begun emphasising nearshoring – the relocation of customer-oriented services to neighbouring countries – to spur growth and job creation.

ON TOP: Morocco was named 2012 “Offshoring Destination of the Year” by the European Outsourcing Association, validating the efforts expended in recent years to develop the industry. Its strategy, dubbed the “Moroccan offer”, aims to sharpen its comparative advantage in this sector by providing infrastructure, training and similar incentives, falling in line with initiatives like those of MedZ Sourcing, created to support the local offshoring industry and a subsidiary of the state-run Caisse de Dépôt et de Gestion. Supported by the National Pact for Industrial Emergence, offshoring, which earned Dh800m (€71.1m) in 2004, generated Dh7bn (€622.3m) in 2011. The industry created eight times more positions in 2010 than in 2004, reaching 46,000 jobs in 2010, up from 5500 six years earlier, according to the Ministry of Economy and Finance. Regulators believe the sector can create 70,000 jobs and earn over Dh20bn (€1.8bn) by 2015.

Currently, Morocco is said to account for up to half of all Francophone offshoring services. Its appeal includes wages up to half those in France, a relatively high proportion of university graduates and many French-speaking citizens. The cost of telecommunications infrastructure is brought down by the fact that early on Morocco placed an emphasis on making its offshoring industry cost-efficient.

RESTRUCTURING: However, while the kingdom has successfully attracted a high volume of clients, it is now looking to capture more of the value added market, particularly as more cost-competitive rivals in the region look to increase their share of the business. Until now Morocco mostly focused on call centres, which bring in less profit than other, more sophisticated services.

New segments that will help differentiate the kingdom include business processes, such as finance, human resources (HR) and information technology (IT). Offshoring services are typically grouped in three categories: call centres, business process outsourcing (BPO), where profit is higher, and knowledge process outsourcing (KPO), which is even more profitable and requires more skill. In BPO, the biggest potential is in customer relationship services, followed by HR and financial accounting. A ministry report predicted that HR could rake in Dh1.1bn (€97.8m) in 2013, while financial accounting could earn Dh300m (€26.7m).

Call centres are common, but bring little added value. Rachid Alaoui, director-general of CasaNearshore and Technopolis, told OBG that he envisioned basic call centre jobs moving south to Francophone West African countries after Morocco develops more sophisticated services. “A focus on value-added services will allow Morocco to stay competitive, even if it faces pressure from lower-cost countries.” The local offshoring industry has dedicated sites: Technopolis in Rabat housing a mix of BPOs; Fez Shore in Fez, which is to become a value-added location for customer relationship management and call centres; Casanearshore that is mainly IT-related in Casablanca; and Oudja Shore in Oudja.

MUTUAL BENEFIT: In a global context of job shortages and economic uncertainty in the EU, however, there has been political pressure in EU countries not to “export” jobs. Those who support offshoring usually say that protectionist sentiments are misplaced and that, far from reducing home-country employment, offshoring may stimulate economic growth at home as the country will then be able to concentrate on activities where it has comparative advantage. Additionally, home-country consumers benefit from the lower prices that result from outsourcing certain operations. “Offshoring should be seen as a form of co-development, whereby both countries benefit from the activity,” said Alaoui. “What is more, offshoring can even lead to adding jobs on the side of the country that saw operations move abroad.”