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REPUBLIC OF UGANDA

BUSINESS PROCESS OUTSOURCING (BPO)STRATEGY AND MODEL FOR UGANDA

2008-2011

BY

THE MINISTRY OF ICTBPO-THINK TANK TEAM (TTT)

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TABLE OF CONTENTS

1.1 BACKGROUND .........................................................................................................8

1.2 CATEGORIES OF BUSINESS PROCESSING OUTSOURCING SERVICES

.............................................................................................................................. 10

TABLE 1.0 CATEGORIES OF BUSINESS PROCESS OUTSOURCINGSERVICES .............................................................................................................10

1.3 REASONS WHY COMPANIES OUTSOURCE ............................................ 16

1.4 UGANDA - COUNTRY PROFILE .................................................................17

2.0 BPO STATUS IN UGANDA ..........................................................................18

2.1 INVESTMENT ENVIRONMENT ..............................................................................182.2 LEGAL AND REGULATORY FRAMEWORK ........................................................192.4 HUMAN RESOURCE DEVELOPMENT ..................................................................20

2.4.1 EDUCATION SYSTEM ...............................................................................20

2.4.2 ENGLISH LANGUAGE IN UGANDA ...................................................................222.4.3 PROFESSIONAL TRAINING IN IT ......................................................................222.4.4 TARGETED BPOSPECIFIC TRAINING ............................................................222.5 CURRENT INITIATIVES .........................................................................................23

TABLE 2.0 BPO INITIATIVES IN UGANDA - 2007 ....................23

2.6 LESSONS LEARNT FROM OTHER COUNTRIES ......................................25

2.6.1 KENYA ................................................................................................................252.6.2 SOUTH AFRICA ..................................................................................................262.6.3 EGYPT .................................................................................................................272.6.4 TUNISIA ...............................................................................................................272.6.5 INDIA ...................................................................................................................28

3.0 OPPORTUNITIES FOR THE BPO INDUSTRY ............................................29

3.1 ENTRY LEVEL REQUIREMENTS ..........................................................................30

3.2 REQUIRED SKILLS SET ..............................................................................31

FIGURE (A) CONCEPTUAL CONTEXT OF THE MODEL .......................34

4.1 ELEMENTS OF THE BPO MODEL ........................................................................34TABLE 3.0 ELEMENTS OF THE BPO MODEL ...........................34

4.1.1 SUSTAINABILITY OF THE BPO MODEL ...........................................................354.1.2 RISK ANALYSIS AND MITIGATION FRAMEWORK ..........................................36

............................................................................................................................37TABLE 4.0 RISK ASSESSMENT AND MITIGATION FRAMEWORK

...............................................................................................................................37

4.2 UGANDAS BPO STRATEGY .....................................................................39

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4.2.1 KEY ELEMENTS OF THE BPO STRATEGY .....................................................39TABLE 5.0 UGANDAS BPO STRATEGY ..................................39

4.2.2 GOVERNANCE MODEL ......................................................................................41

5.0 COSTS AND BENEFITS OF THE PROPOSED BPO INDUSTRY IN

UGANDA .............................................................................................................43

5.1 BENEFITS ..............................................................................................................435.1.1 JOB CREATION ..................................................................................................435.1.2 REVENUE ............................................................................................................44

TABLE 7.0 PROJECTED REVENUE OVER A THREE YEAR PERIOD...............................................................................................................................44

5.1.3 CAPITAL INVESTMENT: ....................................................................................445.2 MATHEMATICAL MODEL .....................................................................................44

.................................................................................................................45

5.3 COSTS ....................................................................................................................45

TABLE 8.0 PROPOSED BPO BUDGET FOR YEAR ONE ........46TABLE 9.0 FORECASTED BUDGET FOR THE SECOND AND THIRD

YEAR ..................................................................................................................... 48

Data Entry Operators 1,200,000,000 1440,000,000

1,728,000,000Managers 22,500,000 27,000,000

32,400,000 Training Of Trainers 22,500,000

27,000,000 32,400,000 Entrepreneur training

6,000,000 7,200,000 8,640,000 Entrepreneur training

72,000,000 86,400,000 103,680,000 Secretariat

6,000,000 7,200,000 8,640,000 Facilitators

12,000,000 14,400,000 17,280,000 Marketing Branding

500,000,000 600,000,000 720,000,000 Advertising

1,000,000,000 1,200,000,000 1,440,000,000 Public Relations

400,000,000 480,000,000 576,000,000

Exhibitions/Conferences 80,000,000 96,000,000

115,200,000 Sponsorship 160,000,000 192,000,000

230,400,000 Conference Participation 640,000,000

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768,000,000 921,600,000Hosting Annual BPO Conferences

600,000,000 720,000,000 864,000,000 Mentoring

Programme 100,000,000 120,000,000

144,000,000 Bandwidth4,320,000,000 5,184,000,000Utilities

1,036,800,000 Total 14,281,200,000

17,134,440,000 ....................................................................................................49

6.0 INCENTIVES FOR THE BPO INDUSTRY IN UGANDA ..............................54

7.0 CONCLUSIONS ............................................................................................ 55

7.1 KEY RECOMMENDATIONS .........................................................................55

8.0 REFERENCES .............................................................................................. 58

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LIST OF ACRONYMS AND ABBREVIATIONS

ICT Information and Commnucation TechnologyBPO Business Process Outsourcing

ITES Informtion Technology Enabled Services

PSTN Public Switching Telephone Network

SME Small to Medium Enterprises

ETS Education Testing Service

MoICT Ministry of Information and Communications Technology

E-Gov Electronic Government

EAC East African Community

COMESA Common Market for Eastern and Southern Africa

TOFEL Test of English as a Foreign Languag

UNIDO United Nations Industrial Development Organisation

MoJCA Ministry of Justice and Constitutional Affairs

NPA National Planning Authority

MoFPED Ministry of Finance Planning and Economic Development

UCC Uganda Communications Commission

BoU Bank of Uganda

MoES Ministry of Education and Sports

UEPB Uganda Export Promotions Board

MoFA Ministry of Foreign Affairs

MoTTI Ministry of Tourism Trade and Industry

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EXECUTIVE SUMMARY

This report provides an analysis and evaluation of the current andprospective profitability, liquidity, and the overall economic, social, andpolitical benefits and challenges of the Business Process OutsourcingIndustry in Uganda.

It has three major sub headings and these are;

Part 1: Background to Business Process Outsourcing (BPO)Part 2: Proposed Business Process Outsourcing Model for UgandaPart 3: Incentives for the Business Process Outsourcing industry inUganda

The first part looks at the various categories of BPO services, Ugandascountry profile and current initiatives put in place to support theindustry. It provides information on lessons learnt from countries likeIndia, Tunisia, South Africa and many more. This section also providesinformation on why companies outsource and provides information onopportunities for the BPO Industry in Uganda.

The second part proposes a conceptual model for the BPO Industry inUganda clearly defining the inputs and expected outputs. It looks atthe current strategies that are vital in the creation of an enablingenvironment and also proposes a governance model. This section alsodiscusses the sustainability and risk mitigation strategies.

The third part looks at the costs and benefits of adopting the BPOIndustry in Uganda, proposing a mathematical model of the benefitsbeing a function of inputs like Finance, Policy, Human Resource,Infrastructure, Entrepreneurship and Marketing, collectivelycontributing to produce the desired outputs. Some of the projectedbenefits include creation of 20,000 jobs and an estimated revenue of$345.6m in wages for employees over a forecasted period of threeyears

The last section of the report looks at the government incentivesavailable to prospective investors in BPO Industry and also highlightskey recommendations that will facilitate the growth of this industry inUganda. This section has forms which are to be filled by prospectiveinvestors in the Industry to enable government determine the kind ofincentives it can offer dependant on the needs of the business.

The report emphasizes;

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The English Language

High Levels of Skilled man power

And a conducive investment environmentAs being the key drivers for BPO Industry in Uganda.

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PART ONEBACKGROUND TO BUSINESS

PROCESS OUTSOURCING(BPO)

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1.0 BUSINESS PROCESS OUTSOURCING

1.1 BACKGROUND

In the world today, the convergence of Information Technology (IT) andCommunications Technology (CT) has resulted into a new sectortermed as Information and Communications Technology (ICT). ICTshave now linked the entire globe through better and faster (digital)communications networks thereby rendering time and distanceirrelevant. As a result, companies in developed countries havebusiness models that capitalize on these global communicationnetworks. These business models cut costs and improve efficiency byoutsourcing services to a distant skilled work force.Business Process Outsourcing (BPO) can be defined as the strategic

use of a third-party services provider to perform activities traditionallyhandled by internal staff and resources. This releases the organizationto focus more on their core businesses.

BPO is often divided into two categories: back office outsourcing, whichincludes internal business functions such as billing or purchasing, andfront office outsourcing, which includes customer-related services suchas marketing or technical support.

BPO that is contracted outside a company's own country is sometimesreferred to as offshore outsourcing. BPO that is contracted to a

company's neighboring country is sometimes called near-shoreoutsourcing, and BPO that is contracted within the company's owncountry is sometimes called onshore outsourcing.

The most common examples of BPO are Customer Support Servicessuch as call centers, Policy Maintenance/Management such as humanresource, Data Process Services such as payroll outsourcing, and Technical Support Services. BPO is dependent on InformationTechnology; hence, it is also referred to as an Information TechnologyEnabled Service (ITES). BPO is one of the fastest growing segments ofInformation Technology Enabled Services.

There are activities that require greater skill, knowledge, educationand expertise to handle and these form an offshoot of BPO known asKnowledge Process Outsourcing (KPO). An insurance company mightoutsource data entry of its claims forms as part of a BPO initiative, itmay also choose to use a KPO service provider to evaluate newinsurance applications based on a set of criteria or business rules. TheKPO work would require efforts of a more knowledgeable set of

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workers than data entry would. The current definition of KPOencompasses

Research and Development, Product Development and Legal ProcessOutsourcing, as well as a number of other business functions.

BPO as a business model has gained rapid momentum and has grownto phenomenal market levels estimated to be over US$1.1 trillion perannum. Many emerging economies have engaged in this new industry.Countries like India Philippines and Mauritius of recently have cashedin on this industry and have made billions of dollars through provisionof ITES to American, European and Asian companies. According to theFinancial Times of February 15th 2008, it is estimated that India willearn US$ 40 billion by March 2008. This is expected to grow by 50% toUS$ 60 billion by 2010. India now controls between 5-8 % shares of theworld total BPO Industry. Other countries like South Africa, Egypt,Kenya, China and Hungary are positioning themselves to have a sharein the global BPO Industry.

Business Process Outsourcing (BPO) can be technically defined as thedelegation of one or more IT-intensive business processes to anexternal provider that in turn owns, administers and manages theselected process based on defined and measurable performancecriteria. Few of the motivation factors as to why BPO is gaining groundare Factor Cost Advantage, Economy of Scale, Business RiskMitigation, Superior Competency and Utilization Improvement.

Generally, in business terms, outsourcing is where an organizationenters into a contract with another organization to operate andmanage one or more of its business processes. BPO differentiates itselfby either putting in new technology or applying existing technology ina new way to improve a process.

Many developing countries with good communication infrastructurefind BPO business lucrative. It creates employment and generatessubstantial income for the citizens be it skilled or semi-skilled,

particularly the younger generation. In addition, the countries benefitfrom the foreign exchange earned. BPO business is very competitiveand companies that provide the BPO business require very strictadherence to set standards as well as strict operating procedures thatcannot easily be met without support from the host governments.

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1.2 CATEGORIES OF BUSINESS PROCESSINGOUTSOURCING SERVICES

a) TRANSACTIONAL LEVEL BPO SERVICES

TABLE 1.0CATEGORIES OF BUSINESS PROCESS OUTSOURCING SERVICES

TYPE OFSERVICE

DESCRIPTION EXAMPLE(S) LEVEL OFSKILL/TRAINING &

COMPETENCIES1.Customer

SupportServices

A virtual customerservice center tomanage customerconcerns and queriesthrough multiplechannels includingvoice, e-mail and chaton a 24/7 and 365days basis.

Customers calling tocheck on their orderstatus, customers callingto check for informationon products andservices, customerscalling to verify theiraccount status,customers calling to

check their reservationstatus etc.

- Basiccommunicationskills

- Basic IT Skills (e.g.Keyboardhandling,browsing, troubleshooting)

- Knowledge ofproduct

- Fluency oflanguage (English)

- Articulate &pleasantpersonality

- Accuracy anddiligence

2.

Telemarketing Services

Interaction withpotential customersfor generating interestin products andservices online orcomplete the sales

process online.

Calling households to sellleisure holidays, callingto existing customers tosell a new rate card for amobile service provider,etc.


- Basic IT Skills (e.g.Keyboardhandling,

browsing, troubleshooting)




Accuracy anddiligence

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TYPE OFSERVICE


COMPETENCIES3.Data Entry

Services /Data

ProcessingServices

Data input/entry fromroutine hard-copy/paper-based

documents toelectronic storagemedia for furtherprocessing, archivingand/or generaldatabase operations.

Data entry fromPaper/Books with highestaccuracy and fast turn

around time (TAT) - Dataentry from Image file inany format- Business TransactionData entry like sales /purchase / payroll.- Data entry of E-Books /Electronic Books- Data Entry : YellowPages / White PagesKeying- Data Entry andcompilation from Website- Data Capture /

Collection- Business Card DataEntry into any Format- Data Entry fromhardcopy/PrintedMaterial into text orrequired format- Data Entry intoSoftware Program andapplication- Receipt and Bill DataEntry - Catalog DataEntry.- Data Entry for Mailing

List/Mailing Label.- Manuscripting typing into word processor- Taped Transcription into word processor.- Copy, Paste, Editing,Sorting, Indexing Datainto required format etc.



- Excellent typingspeeds

- Good knowledgeof English

- Functional literacyof data handling


4.DataConversionServices

Document conversioninvolves transformingan electronicdocument from onestorage mediaspecification toanother type(s).

Conversion of dataacross various databaseson different platforms- Data Conversion viaInput / Output for variousmedia.- Data Conversion for

databases, wordprocessors,spreadsheets, and manyother standard andcustom-made softwarepackages as perrequirement.- Conversion fromPageMaker to PDF



- Additionalunderstanding ofspecialized ITsoftware e.g. Forscanning,conversion, etc.


- Articulate &

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TYPE OFSERVICE


COMPETENCIESformat.- Conversion from Ms-Word to HTML format -

Conversion from Text toWord Perfect.- Conversion from Text toWord to HTML andAcrobat- Convert Raw Data intorequired MS Officeformats.- Text to PDF and PDF toWord / Text / Doc- Data Compilation inPDF from SeveralSources.- E-Book Conversion etc.

pleasantpersonality

- Accuracy and

diligence

5.Scanning,

OCR withEditing &IndexingServices

Transcribing

hardcopy/paper-baseddocuments to imageson electronic media.

High speed Image-

Scanning and Datacapture services- High speed largevolume scanning- OCR Data FromScanned page / image- Scan & OCR paper Bookin to CD.- ADOBE PDF ConversionServices.- Conversion from paperor e-file to variousformats

- Basic

communicationskills






b) SKILLED VALUE ADDED BPO SERVICES (KNOWLEDGEBASED PROCESSING)

TYPE OFSERVICE


COMPETENCIES1 .Technical

SupportServices

Round-the-clocktechnical support andproblem resolution forcustomers andcomputer hardware,software, peripheralsand Internet

Customers calling toresolve a problem withtheir home PC, customerscalling to understand howto dial up to their ISP,customers calling with aproblem with their


- Midlevel IT Skills(e.g. Knowledge ofhardware &software systems)

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TYPE OFSERVICE


COMPETENCIESinfrastructure.. Theseinclude installationand product support,

up & running support,troubleshooting andUsage support.

software or hardware. - Knowledge of otherspecialisedsoftware

applications/products- Fluency of

language (English)- Articulate &

pleasantpersonality


2.EmployeeIT Help-deskServices

Technical problemresolution and supportfor corporateemployees.

System problemresolutions for staff relatedto PCs, connectivity,printers etc., officeproductivity tools supportincluding browsers and

mail, new service requests,IT operational issues,product usage queries,routing specific requests todesignated contacts andremote diagnostics etc.


- Midlevel IT Skills(e.g. Knowledge ofhardware &software systems)

- Knowledge of otherspecializedsoftwareapplications/products




3.InsuranceProcessing

Specialized solutionsto the insurancesector and support forcritical businessprocesses applicableto the industry rightfrom new businessacquisition to policymaintenance to claimsprocessing.

New Business / Promotion:Inbound/outbound sales,Initial Setup, CaseManagement,Underwriting, Riskassessment, Policyissuance etc. PolicyMaintenance /Management: RecordChanges like Name,Beneficiary, Nominee,Address; Collateralverification, SurrenderAudits AccountsReceivable, Accounting,

Claim Overpayment,Customer care service viavoice/email etc.


- Basic IT Skills (e.g.Knowledge ofhardware &software systems)

- Knowledge of otherspecializedsoftwareapplications/products for Insuranceprocessing


- Knowledge ofInsurance sector

- Articulate &pleasant

4.BookKeepingandAccountingServices

Professionalaccounting/book-keeping services.

General Ledger- Accounts Receivables andAccounts Payable- Financial Statements- Bank Reconciliation- Assets / Equipment


- Basic IT Skills (e.g.Knowledge ofhardware &

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TYPE OFSERVICE


COMPETENCIESts for varioussectors

- Fluency of

language (English)- Knowledge ofresearchmethodologies



c) HIGH-END SKILLED VALUE ADDED SERVICES

TYPE OFSERVICE


COMPETENCIES1.Software

DevelopmentServices

Development ofsoftware productsas final end-usersystems ormodules/inputsinto largersoftwaresystems..

Financial AccountingsoftwarePayroll ProcessingSchool ManagementSystemsEducational SoftwareHealth ManagementSystemsERP SolutionsRecreational software(games),Etc.

- Basic communicationskills

- Highly specialised ITSkills (e.g. Softwareengineering, computerscience, InformationSystems, SystemsAnalysis, etc)

- Knowledge of varioussoftware developmentlanguages

- Fluency of language(English)

- Knowledge of researchmethodologies

- Accuracy and diligence2.Legal Support

ServicesProvision of legalresearch andanalysis services

Legal research on casestudies, precedents, etc.


- Basic IT Skills (e.g.Keyboard handling,browsing, etc.)

- Knowledge of legalsystems



- Excellent writing skills- Accuracy and

diligence3.Medicalservices

Provision ofmedical diagnosisservices.

Remote diagnosis ofmedical cases.


- Basic IT Skills (e.g.Keyboard handling,browsing, etc.)

- Knowledge of medicalsystems

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Excellent writing skills4.Engineering

Service

Designs for parts;

Architecturaldesigns and Billsof quantities

AutoCAD - Basic communication

skills- Basic IT Skills (e.g.Keyboard handling,browsing, etc.)

- Knowledge ofengineeringsystems(Engineeringgraduates)



- Excellent writing skills- Accuracy and diligence

1.3 REASONS WHY COMPANIES OUTSOURCE

There are a host of reasons why companies outsource, below are someof the reasons;

Increasing the overall company effectiveness by outsourcing some

activities to firms with specialized expertise.

Expanding technological advantages and manufacturing

capabilities.

Cutting managerial costs.

Improving technical support and customer service.

Concentration on core activities.

Lack of qualified personnel.

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1.4 UGANDA - COUNTRY PROFILE

Uganda has a great potential for becoming a preferred BPO destination

in the East and Central African region. It is a member state of the EACand COMESA.

The following is a brief description of the profile of Uganda in terms ofeconomical, geographical, demographical and political characteristicsas of 1st April 2008:

Location: Eastern Africa, 1 00 N, 32 00 E Area: 241,551 sq km Population: est.30.9 million People; annual growth rate is 3.2% Official Language: English GDP: USD 11.14 billion (Dec 2007) Main industry: Agriculture 31.7% Mobile phone subscribers: approx. 5,800,000 Fixed phone subscribers: approx 168,000 Economic situation: Developing Political Situation: Stable

Uganda has also got the following advantages over its competitionwithin the region;

Weather- Nature has been and is still friendly to Uganda withtemperatures ranging from 16 degrees to 32 degrees Cellisiusthroughout the year,

Location Uganda is located in the centre of Africa 3 hours Eastof GMT implying that while Ugandans work, BPO source countriesboth in the West and East will be sleeping allowing for processingof the information and submission in time for them to find it liveon their systems when the open for business the following day.

Political stability Uganda has generally enjoyed PoliticalStability since 1986 in most of the areas and the democratizationprocess has grown over the years.

The investment climate is favorable The tax, legal andregulatory frameworks have been and are still revised to caterfor the stringent requirements of BPO and incentives rangingfrom accelerated depreciation to tax holidays are offered by theUIA and other government institutions to investors in BPO.

The cost of labour is very competitive.

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The skills base is solid the 27 Ugandan Universities produceover 10,000 graduates annually who require a little tailored BPOtraining to be employed in the BPO industry.

The infrastructure is improving by the day.

2.0 BPO STATUS IN UGANDA

2.1 INVESTMENT ENVIRONMENT

In 2001, the Government of Uganda recognized the potential ofInformation Technology Enabled Services (BPO in particular) and tookpositive steps by providing a number of interventions. The Governmentsetup the Strategic Intervention Program focusing on 6 sectors of the

economy including ICT which were considered key for quick economicdevelopment and job creation. Incentives were offered to attractinternational technology companies like. HP, DELL, IBM, Microsoft,CISCO and Oracle setup operations in Uganda. In 2002 the governmentreduced and also waived taxes on computers and computer relatedequipment to encourage the growth of the ICT sector and its services.The tax advantage has helped reduce the price of PCs by more than50% to approximately $700 for branded models and $500 forunbranded models.

Similarly under the General Incentive Regime computers and Data

Handling Equipment enjoy a Deductible Annual Allowance of 40percent.

Further to all the above, the government through the UgandaInvestment Authority (UIA) commissioned studies by PerwittInternational a Canadian company to assess Ugandas readiness forBPO. A study was carried out which found Uganda to be very suitablefor BPO given the advantages that were identified at that time. Due toa number of constraints existing at the time, the project did not pick upas expected. Today, Uganda is just ripe for BPO and there are alreadysome Ugandan companies providing BPO services to foreign and local

companies.

Some of the driving factors are;

Since liberalization of the business environment 10 years ago,there is competition which allows the thriving of BPOs. This hasprovided opportunities to create linkages in order to accessmarkets.

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Good policies and the legal and regulatory environment havebeen evaluated to ensure that the environment is right andmatches with what is offered by the competing countries for BPObusiness.

The legal and regulatory framework like laws governing e-transactions are being put in place to ensure confidence andtrust.

The government is working on removal of non-tariff barriers likethe cost both in time and money of setting up a BPO operation inUganda. Issues like setting up industrial clustering like Mauritiusand India are in advanced stages. An example is the NamanveIndustrial Park.

The Uganda Investment Authority is working to attract more

organized private sector local and international BPO operators toattract BPO business into the country.

The incentives are currently under review by the UgandaInvestment Authority (UIA) and the Ministry of ICT where issueslike purchasing of bandwidth in bulk for sale to BPO companies tosignificantly reduce its cost are being considered among others.

2.2 LEGAL AND REGULATORY FRAMEWORK

The existence of ICT Laws and regulations that support ICT areessential to the BPO industry. The Uganda Law Reform Commission

drafted ICT related laws referred to as Cyber Laws based oninternational standards and norms as set-out in the following:

United Nations Commission on International Trade Law(UNCITRAL) Model law on electronic Commerce

World Intellectual Property Organization (WIPO) CopyrightTreaty(WCT)

WTO Basic Telecommunications Agreement.

Other regulatory Issues that are addressed in the draft Cyber Lawsinclude;

Intellectual Property for software development, etc

Privacy and Integrity laws

Policy issues for usage of Internet resources

Regulation and standards of Computer hardware equipment andaccessories

Capacity building and

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Software standards

To date, the principals and objectives of the Electronic TransactionsBill, the Digital Signatures Bill and the Computer Misuse Bill have beenpassed by Cabinet.

The following Sector Policies, Laws do exist;

National ICT Policy Framework (2003)

Communications Act

Draft Postal Policy

Revised Telecommunications Policy 2006

National Information Technology Authority- Uganda (NITA-U)

2.3 TELECOMMUNICATION INFRASTRUCTURE

Ugandas liberation policy of the telecommunication sector hasresulted into a non discriminatory access and nationwideavailability of telecommunications services. The communicationsinfrastructure network put in place by the major communicationsservices providers (MTN, Uganda Telecom, Celtel, Warid, HitsTelecom and others) today covers almost all the districts in thecountry. And to ensure good quality service delivery more than80% of all the Public Switching Telephone Network (PSTN)switching systems in the country are digital.

There is a huge BPO industry worldwide but very competitive.The cost of Bandwidth is still very high compared to competition(i.e. $5K compared to $0.5K in India and now Kenya withgovernment intervention). It poses a significant challenge.

A National Fibre Optic Backbone is being built by theGovernment and expected to be completed by 2010. Its roll-outis in three (3) phases; Phase 1 linking Kampala, Bombo, Entebbeand Jinja already in place; phase 2 linking to the boarder withKenya and extending up-to Mbarara in the West; Phase 3 will linkthe North and North West and Masiindi. It will ensure Ugandasreadiness for connection to the sub-marine cable systems that is

being laid from the East African coast to take advantage of theHigh Speed Band Width.

2.4 HUMAN RESOURCE DEVELOPMENT

2.4.1 EDUCATION SYSTEM

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Training and Education is a critical enabler for the BPO industry.Ugandas education system attracts tens of thousands students everyyear and from neighboring countries. Uganda is termed as an EastAfrican Regional Education Hub. Ugandas 27 Universities andnumerous tertiary institutions churns out over 10,000 graduatesannually of whom 5,000 are IT graduates and other with different skillsand professions such as; Human Resource, Law, Medicine, IT,Computer Science and Technology, Statistics and Mathematics, appliedeconomics, Public Healthy and Nursing, Management, LeadershipCommunication and Customer Services, Business, Hospitality, Finance,Accounting, Banking, Engineering, Sales and Marketing, Languages,Theology, Islamic studies, Secretarial studies, etc.

The strong education system positions Uganda to become a significantBPO player that can supply and sustain low-cost labour pools for someof the types

of business processes categories and jobs that can be outsourced oroff-shored which include;

Back office processes; (Administration, data entry/preparation,scanning & archiving, Document management, E-Translation &Transcription service, Forms and report generation),

IT Services; which require Certified IT Agents and IT qualitymanagers in (Cisco with 4,700 graduates, Microsoft with 1,006Microsoft Certified Professionals (MCPs), Oracle, Intel) forNetwork management and maintenance, Software design, webdesign and development).

Human Resource Functions such as; payroll administration,Recruiting and termination and Training

Contact Centers which can offer (Inbound customer service,Inbound helpdesk, Inbound sales, Inbound technical support,medical transcriptionists, Legal transcriptionists, Outboundtelemarketing/sales, e-translations, Outbound debt collections,Outbound customer interview, Research & surveys, Web sales &marketing, Marketing research services).

Finance and Accounting Services such as; Loan processing,

Portfolio management, Financial reporting, Treasury & financialmanagement, Tax consulting & compiling, Tax management,Auditing , Accounting services, Accounting preparation andreconciliation, Asset management, Corporate claims processing.

Engineering services such as engineering researchdesign.

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2.4.2 ENGLISH LANGUAGE IN UGANDA

English is Ugandas official language and the language of instructionsin the school system right from Kindergarten for at least 15 years of

education. Good-English speaking and good-communication skills aregained from long school experiences through Primary, Secondary, Highschool levels to University or tertiary Institutions. Such experiencespolish the students written and verbal proficiency, wordspronunciations and clear accent during their long education paths.According to Education Testing Service (ETS) an organization thatconducts Test of English as a Foreign Language (TOEFL) program, in its June 2005-July 2007 average score, placed Uganda with the highestscore in the region. Source: ETS www.ets.org/toefl. This is one of theindicators used to choose BPO destinations and further position thecountry with a polished English speaking Critical Mass as one of the

strategic tools to brand Uganda as a preferred BPO destination.

Ugandas strong ties through cultural exchange and learning of French,Germany, Russian and religious ties with Arabic speaking countrieshave exposed foreign languages to Ugandan for the last 40 years,therefore building a Critical Mass in such languages which further putUganda at an advantage to offer BPO services in those languages aswell as e-translation in any one of the International languages.

2.4.3 PROFESSIONAL TRAINING IN ITAccording to records at Cisco Headquarters, Uganda has the largestnumber of CISCO graduates in the region after South Africa givingUganda an edge over other countries in the region to handle CiscoSystems and other communication related jobs. The number ofMicrosoft and Oracle Certified Professionals has increased steadily inthe last three years and more training institutions are increasinglyaffiliates to IT Academy programs for IT certifications.

2.4.4 TARGETED BPOSPECIFIC TRAINING

The Government through Ministry of Education and Sports embarkedon a BPO pilot training and sensitization program in Universities to re-tool graduates for job-skills for the industry.

Computer-based online-training at;http://campus.easylearning.org/uganda has been established to accessbasic level job-skills in Customer Care, Call Center related courses, ITskills, Human Resources etc, at a more affordable cost of UGX 12,000

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per module to enable quick build up of a Critical Mass required tosustain the BPO industry in Uganda.

Universities have been designated as learning centers and are willingto provide their computer labs for trainees and potential BPOemployees to create this critical Mass. Skill-sets for; Call Center agents,Call Center operation Managers and Supervisors, PC Technicians,Network Administrator have been provided to Universities by theMinistry of Education and Sports and recommend that such coursesshould be part of their curricula.

2.5 CURRENT INITIATIVES

The Google initiative to link Universities in Uganda is a public-private sector project that is on-going coordinated by the MoICT.

The Microsoft initiatives for Schools with Computer AidInternational; e-parliament; the District Business InformationCentres jointly with UNIDO to build 20 business information centreswith government intervention, where 8

have been built so far; Microsoft Innovation Centre in Uganda Software economy to setup software standards; Re-furbrishment ofPCs mainly addressing SMEs

Phase 1 of the National Data Transmission Backbone/E-Government

Infrastructure project being implemented by Huawei Technologiesunder a Concessionary Loan from the Chinese government to theGovernment of Uganda is already completed. It consists of voice,data and video transmission leading to video conferencing facilitieswhich have been installed in all government ministries connectedthrough the fibre optic cables. Subsequent phases shall have thefibre optic cable installed to cover the country.

The following table highlights some other initiatives and investments inthe BPO industry in Uganda.

TABLE 2.0BPO INITIATIVES IN UGANDA - 2007No

Service CurrentPlayers

Skills available Remarks

1 Contact CallCenters

TechnologyCentre

16 take 9months tosetup

Setting up aTraining Centre

RokeInvestments

A 25-seater CallCentre

Currentlyterminating 2mil

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No



minutes/month

Jinja Call

Centre

300 call centre

operators

Setting up a

Training CentresTailored to meetthe specificoperators needs

Faculty ofComputingandInformationTechnology

300 call centreoperators

Putting up12,000 m2 callcentre

ComputerFrontiers

International

Operates 6 callcentres in

Africa based onopen-source in-house builtplatform

Handles USEmbassy visa

appointments for10 countries

2 Data Entry CaymanConsults

500 Data Entryoperators

Takes 6 monthsto train a skilleddata entryoperator

DataSolutionsInternational

CurrentlyEmploys over180 people

Digitalizing ofmachinegeneratedinformation

Specialised services3 Software

developmentCrystal ClearSoftware

8 Visual Fox ProProgrammers

Sold in 53countries to 356clients in English,French, Spanish& Russian

HelikaInformationSolutions

15 Websitedevelopers

Has clients inUganda & abroad

4 IT andTechnicalServices, e.g.,Networksystemadministration

Faculty ofComputingandInformationTechnology,MakerereUniversity

The Facultyproduces over250 graduatesevery year

Setting upsoftwaredevelopmentstandards basedon differentlevels of theCapability

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No



Maturity Model(CMM ISO 15504)

5 MobileApplicationSoftwaredevelopment

Faculty ofComputingandInformationTechnology,MakerereUniversity

Both atUndergraduateand MastersLevel, MobileApplicationDevt is in itsinitial stages

Nokia and SonyEricsson haveoffered to workwith faculty tooffer training andsupport

6 Engineeringand Design

Faculty ofTechnology,MakerereUniversity

100 specialists& 60 graduatesannually

on Boeings SolidEdge & Uni-graphicssoftware & takes18 to train.

7 Medicaltranscription

Makerere andMbararaMedicalSchools

A combinedtotal of 250graduatesannually

Graduates inscience ormedicine with atleast 3 months

training inmedicaltranscription

8 Legaltranscription

LawDevelopmentCenter(MakerereUniversity

Law graduatewith at leastthree monthstraining in legaltranscription

2.6 LESSONS LEARNT FROM OTHER COUNTRIES

2.6.1 KENYA

Identified competitive advantages

The Kenyan economy is also blessed with a dynamic and vibrantprivate sector with many industries and has been a tourist destinationsince its independence.

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Harmonious Industrial relations-The Kenya government has putin place the industrial laws and provided incentives like taxexemptions for industrial investors.

Preferential market access- Kenya is located along the EastAfrican cost and has one of the biggest commercial ports (Mombasa)

Convenient time zone

Kenya has over 50 universities that produce many graduateshence easy access to highly qualified individualsThe Kenyan political environment and good will has played a positiverole in encouraging investors in to the country for last two decades. There was Government intervention to establish competitive BPOsector through;

Reduction of bandwidth cost from $5,000 to $500 per 1 MB.

Provision of subsidy to BPO operators for consolidated / groupparticipation at international ICT fora and PR and advertising.

Provided appropriate legislation for BPO-drivers i.e. ecommercelaws, data privacy and protection, cyber taxation, etc.

Supported strengthening of BPO Private Association & and theICT industry association to mobilize private sector and increasecompetitiveness.

Supported strengthening of BPO Private Association & and theICT industry association to mobilize private sector and increasecompetitiveness.

Enhanced BPO Public-Private Partnership.

2.6.2 SOUTH AFRICA

Most BPO hubs are located in the urban centres of Johannesburg,Cape Town and Durban. The City of Johannesburg in the provinceof Gauteng has the highest number of call centres at more than360 employing some 35,000 call centre agents in outsourced andcaptive (in-house) call centres in ICT, financial services, banking,tourism, hospitality and business-to-business.

South Africa has long invested in its own brand, both inside thecountry and internationally.

"The success of creating and consolidating the South Africanbrand has been its comprehensive and people-centric approachto country branding". So the South African brand emerges astangible as Coca-Cola or Nike and it is the sum of all its parts -tourism, economic potential, and human diversity andtogetherness."

South Africas strengths in the BPO sector play to the USsneeds. South Africa offers a high quality, value-based destination

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for off-shoring business processes, in a stable investmentenvironment supported by world class infrastructure.

The South African Business Process Outsourcing (BPO) sectorcontinues to seek increased investment from the USA.

The government has provided a big investment incentivesbudget over the next five years to lure international businessservices to South Africa.

Through participation in international fora and expos throughBPO Seminars local & International.

2.6.3 EGYPT

This is the country that we dont know much about, however it ismaking major strides in the BPO arena. Egypt is already unparalled inthe Arab world in BPO and is now targeting the likes of India.

The competitive edge of the BPO industry in Egypt is the direct resultof many factors;

Plentiful workforce with more than 200,000 University graduateseach year growing at 28% annually.

88% of relevant workforce enrolled in secondary schools.

45% of population is of age 15-39

Egypt ranks among the best in average wages and the lowest ininfrastructure cost-A.T Kearny.

Rich with talented, skilled and multi-lingual labor.

Major foreign universities reside in Egypt such as the American,British, Canadian, German and French Universities.

Internationally accredited language institutions exist in Egyptteaching English, German, French .Italian, Spanish and otherlanguages.

Due to its historic, touristic and geographic heritage, Egyptsculture is open and used to westernized cultures.

Egypt is centrally located between US, Europe and Asia with afavorable time Zone of GMT+ 2 allowing it to serve the globeround the clock.

Egypt possesses a healthy commercial atmosphere that isbacked up by international country agreements.

2.6.4 TUNISIA

Tunisia is exceptionally placed as a destination for IT business. Withmodern facilities and a highly educated workforce, it offers all the

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opportunities of the developing world on the door step of thedeveloped world. It cites the following strengths.

Tunisias GDP is comparable to the income of a smallAmerican state.

Average GDP growth of 5% during the last 10 years

In the next 10 years, I million new students will graduate fromTunisian Universities.

Large number of graduates ensures 1) an adequate supply ofskilled resources and 2) a relatively stable or diminishing salarybasis

With a sound theoretical grounding, requiring minimal training tobecome excellent R& D and engineering resources.

An impressive Diaspora with a high international educationstandard, looking for any opportunity to do business in Tunisia

with an International partner Central position between Europe, the Middle East and Africa.

The Government of Tunisia has committed its support by establishingan enabling environment for the development of a world-classknowledge-based outsourcing industry, allowing duty free imports ofcapital goods and providing tax exemption on export of IT-enabledservices.

Establishing Software Technology Parks with state-of-the-art ITinfrastructure and telecom facilities providing a single-window

clearance for all regulatory compliances have helped Tunisia emergeas promising outsourcing hub in Africa.

Free Trade Agreements

Tunisia has free trade agreements with several economic zonesincluding;

Arab Magreb Union

European Union

Targeted African countries

2.6.5 INDIA

India is the market leader for the BPO industry with projections ofrevenue in excess of US$80 billion by 2015; last year revenue was inexcess of US$ 30 billion.

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Indias government strategically markets India to create the IndiaBPO Brand equity through the following:

Use of Government diplomatic missions for marketing.

Use of International Expo through group participations; country

delegations; Hosting International BPO expo annually; IndiaSoft.

Indias Key Selling points:

Critical mass of targeted skill-sets

English speaking

Geographical-location advantages

Excellent infrastructure

Investment incentives in the sector

Strong Industry support

Strong supportive BPO Association (NASSCOM) Electronics & Software Exports Promotion Council (provides

marketing function)

The key to success in ramping up talent in a BPO environment is arapid training module. Since ICTs are so dynamic, these trainingcomponents require constantly re-engineering.

In general a person with any education level can join any of the BPO.Some BPO's like to take people with MBA but then again thespecialization of an individual hardly makes any difference. Again, thisis the industry; where there are no reference checks and very oftenpeople don't even specify their exact age. Therefore Outsourcing isbecoming one the largest job creating innovations as education leveldoesnt matter, BPOs offer good working environment and one canwork from home. There is flexibility of time and attractive life style

3.0 OPPORTUNITIES FOR THE BPO INDUSTRYThere are a number of factors that should be considered in establishinga BPO Industry, that include among others:

Language in particular, English (However, we should alsoconsider that there are a number of Ugandans that are fluent inFrench, German, Russian, etc. There is need to liaise with the Instituteof Languages at Makerere University to assess this potential)

Costs of establishing a BPO facility (in both time and setup costs)

Costs for running BPO facility

Telecommunication costs

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Telecommunication regulation

Location (for client convenience, employee convenience,strategic convenience and cost of operations)

3.1 ENTRY LEVEL REQUIREMENTS

In this section we consider the entry level requirements for potentialemployees as well as the required skills sets that Uganda needs totake into consideration as it sets to become the preferred BPOdestination in the region.

Unlike the IT industry, BPO reaches out to the masses. Any universitydegree and good communication skills are enough to enter theindustry, and there can be plenty of opportunities for employment forgraduates who have some aptitude, and are willing to work hard. It

should however be noted that the initial unfamiliarity with clientprocesses, stiff metrics, need for quality all translate into a verysignificant training requirement. All new BPO employees need toundergo rigorous training and certification.

In Uganda, we could emulate what some states in India have donewhere they have taken measures to determine a candidates suitabilityfor the BPO sector. In general, irrespective of the level at which oneseeks to enter the BPO area, the first prerequisite is excellent writtenand spoken English skills. They have also gone ahead to introducecareer-oriented courses and training modules to asses a candidates

communication skills, accent, clarity and grammar besides his/herpersonality and aptitude.

Aptitude is a key issue as the BPO sector in general experiences a highrevolving door phenomenon. Questions potential employees couldask of themselves include:

Do you like to perform repetitive tasks, without getting bored?

Are you a people person, meaning do you like making newcontacts, conversing with new people, etc.?

Are you a patient listener, unlikely to get hassled if the person on

the other end is rude or aggressive? Do you want to start earning early and plan for a mid-career

break to pursue higher studies?

Are you an independent person with strong family ties and enjoygood support from your family?

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An example that highlights the wide-ranging entry level requirementsfor the BPO industry is drawn from a South African survey of 13 BPOcompanies in Western Cape. The survey found that the most commoncompetencies required

by contact centre and BPO&O employers in entry level staff in theWestern Cape include:

Good communication skills

Confidence

Problem solving

Telephone etiquette

Interpersonal skills,

Customer focus, adaptability

Planning and organizing Pro-activeness

Target, money driven

Ability to work under pressure

Positive attitude

Decision making

Attention to detail

Being productive

Understanding various English (language) accents

3.2 REQUIRED SKILLS SET

Except for the specialised services, any university degree together withgood communication skills are typically the minimum requirements foremployment in the BPO Industry. Nevertheless, training potentialemployees to meet all the entry-level requirements for the BPOindustry is key.

As an example for what additional input is required, we can considerthe JFK Business Process Outsourcing Training Program. While thisprogram is tailored for BPO opportunities in the United States, it still

serves to show the set of skillsthat would be required for the BPO industry. The basic BPO trainingprogram for those interested in employment includes:

How to Access Available Job Opportunities

Overview of Careers in BPO Industry (with emphasis onrequirements for different sectors, e.g., Human Resources, Insurance,etc.)

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Effective Resume Writing and Interview Skills

Business and Office Etiquette

Financial Literacy

Goal Setting

Leadership Values

Problem Solving and Decision Making

Multi-tasking Skills

Basic Telemarketing Skills

Fundamentals in Customer Service

Telemarketing Skills

Confidence, Self Esteem and Assertiveness

USA Culture, Geography

The training program has also made available online its course outlinesat: http://www.jfkcenter.org/bpo.htmIt was further observed in India that one of the steps large BPO firmswere taking to beat the high attrition rates is to hire retired people whoare in the 40-55 age bracket as well as those who are outside theformal working sector, like housewives. Advanced age workers couldbe a good source of higher-level supervisory BPO tasks and/orspecialised tasks due to their work experience. This is also another

opportunity the Uganda BPO sector could consider.

With the ever increasing numbers of graduates from Ugandanuniversities of whom only 40 percent are absolved in the formal jobmarket coupled by our use of English as the language of instruction,the BPO industry would be able to engage a large number of graduates both for basic routine functions as well as for specialised services.However, assessing for aptitude, work ethic and good personality aswell as training for the BPO industry will be key factors in ensuring therequired skills

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PART TWOPROPOSED BUSINESS

PROCESS OUTSOURCING(BPO) MODEL FOR UGANDA

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4.0 MODEL DEFINITION

A Model is a representation of a system that allows for investigation of

the properties of the system and, in some cases, prediction of futureoutcomes.www.investorwords.com.

THE PROPOSED CONCEPTUAL CONTEXT MODEL FOR THE BPOINDUSTRY IN UGANDA

FIGURE (A) CONCEPTUAL CONTEXT OF THE MODEL

From the Figure (A) above, we conceptualise the BPO Model startingwith the real world that interprets the salient inputs like infrastructure,policy framework, entrepreneurship, finance and human resource thatcan be transformed to produce required results like employmentopportunities, revenue and investments that are verifiable andquantifiable in the real world as benefits.

4.1 ELEMENTS OF THE BPO MODEL

THE BPO MODEL INCLUDES INPUTS AND OUTPUTS AS INDICATED INTHE TABLE BELOW

TABLE 3.0 ELEMENTS OF THE BPO MODEL

INPUTS OUTPUT/BENEFITS

FinancePolicy FrameworkHuman Resource/SkillsInfrastructureEntrepreneurMarketing

Employment/JobsRevenueInvestment

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The figure (B) below further clarifies the BPO contextual concept modeldiscussed in figure (A) showing the relationships between the desiredinputs needed to produce the desired output/benefits.

FIGURE (B) UGANDA BPO CONCEPTUAL MODEL

4.1.1 SUSTAINABILITY OF THE BPO MODEL

The Model stipulates that the government is going to support theindustry through an incubation system that is expected to last overthree years. The companies that qualify for the intial support areexpected to up be fully operational and able to run on thier ownwithout any government incentives. The sustainability loop shows thatinvestment, revenue and Jobs created within this period are translatedinto commercial viable entities allowing opprotunities to otherentrants. In the long term, the Government will consider technologyparks that are adquately serviced with infrastructure to support thegrowth of this industry beyond the initial 3 years.

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Policy Framework

Infrastructure

Entrepreneurship

Human Resource

Marketing

INPUTS

PROCESSES

OUTPUTS/BENEFITS

JOBS

REVENUE

INVESTMENT

Finance

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The money (Finances) saved from income during the first 3 years ofgovernment support should be used as additional working capital torun the

business. Further, the customers of BPO operators will continue to payfor the services.

The supportive Policy Framework will have been tested during theyears of government support and will have been improved on toensure its suitability for future survival of BPO business in Uganda.

Proper Human Resource capacity will have been built within the

supported companies. Other human resource developmentorganizations will have come into play to fill the gap of providingthe required human resource for the BPO industry.

The infrastructure built during the government support period withbe used to further develop the industry.

New BPO operators will come into the business based on theentrepreneurial capacity that will have been developed in thesector.

The markets developed during government intervention willcontinue to provide business to the operators as well as newmarkets that will be acquired based on the reputation developed

during the government support period and the right markingstrategy are employed to ensure sustainability of BPO operations.

In the next 3 years, Uganda is expected to be enjoying servicesfrom fibre submarine marine cables that should have reached thehinterland. These include SEACOM, ESSAY, UHURUNET and TEAMSwhich will substantively reduce the cost of Bandwidth and henceimprove the profitability of investing in the BPO Industry.

4.1.2 RISK ANALYSIS AND MITIGATION FRAMEWORK

In the business of outsourcing, customers take risks when they puttheir faith in contractors who oversell their capabilities, negotiateincomplete contracts, or do not properly manage their outsourcingrelationships. The negative outcomes from these risks include excesscosts, poor service, loss of competitiveness, loss of revenues, and lossof customers.

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There are risk mitigation strategies that have proven to be useful by alarge number BPO companies worldwide. However, business managersfind that best practices cannot be mimicked effectively in everysituation. Instead, each company must decide for itself appropriate riskmitigation tactics.

Below are some of the risks and their recommended mitigationstrategies. Assessment and Mitigation Framework

TABLE 4.0 RISK ASSESSMENT AND MITIGATION FRAMEWORK

RISK MITIGATION STRATEGY1. Unrealistic customer expectations. Align stakeholder expectations through

detailed contract negotiations; disseminatecontract highlights to entire user community

2. Inflexible contracting

Short-term contracts that include mechanismsfor change; use performance-basedcontracting where possible.

3 Inexperience and lack of maturity in theBPO Industry

Source incrementally start small to gainexperience with capabilities required tosuccessfully outsource.

4. Reputation riskErrors, delays, oromissions in information technology that

become public knowledge or directly affectcustomers can significantly affect thereputation of the serviced institutions

These can be overcome by having asupportive policy framework that ensures

clients are protected from that happening.Further, having the right human resource tocarry out the transactions correctly isimportant as provided for the Uganda BPOStrategy.

5. Oversold contractors capability.

Vetting contractors, making sure they haveproven track records; demand customerreferences that illustrate turnaround cases.

6. Security breaches

Cyber laws and a strong BPO Policyframework emphasizing data encryption andsecurity controls to avoid any securitybreaches.

7. Slow response time and Applicationunavailability

Negotiating service level guaranteesfor response time variables within the

contractors control; restrictapplications to thin client versions forInternet delivery.

Negotiating service level guaranteeswith penalties for non performance forcontractors- caused failures.(Contractors cannot be heldaccountable for Internet failures.)

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8. Contractors going out of business Select contractors with sound financialposition, stable customers, and stablestrategic partners; understand howcontractors earns a profit; require notificationof premature termination of contract; requiretransfer clause to facilitate moving the

activity back to the client or to anothercontractors

9. Contractors inability to manage the clientrelationship(s)

Ensure contract monitoring, coordination, andclient-contractors liaison capabilities

10. Compliance (legal) riskOutsourcedactivities that fail to comply with legal orregulatory requirements can subject theserviced institution to legal sanctions. Forexample, inaccurate or untimely consumercompliance disclosures or unauthorized

disclosure of confidential customerinformation could expose the servicedinstitution to penalties or litigation.

BPO operators have to agree to comply with

the regulatory framework and comply with set

benchmarks as stipulated in the law

governing BPO operations.

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4.2 UGANDAS BPO STRATEGY

4.2.1 KEY ELEMENTS OF THE BPO STRATEGY

TABLE 5.0 UGANDAS BPO STRATEGYInput Description Proposed Action Plan for

Government of UgandaResponsi

bility

Policy Framework National ICT Policy

Cyber Laws

Revise ICT Policy to incorporateBPO modelUpdate Cyber Laws bill toincorporate strong Dataprotection and privacy laws.The laws should be enforced andawareness on the laws spreadacross all key stakeholdersEstablish guidelines forinvestment in the BPO industry

MoICTMoJCANPA

Finance Financial support forstartups in form ofGrants, Incentives

Support should be extended toBPO operators to meet start upcosts of the following

Infrastructureo Telecommunications

costso Bandwidtho Computer hardware

and related softwareo Furniture and fittingso Power backup

systems Skills development

Premises rentals andConstruction

Provide incentives such as taxholidays,

MoICT

MoFPED

UIA

UCC

TelecomOperators

Infrastructure Bandwidth andTelecommunications infrastructure

Electricity

Premises

Accessibility

Water Supply

The National TransmissionBackbone to be connected tothe submarine cable system;

Provision of sufficient powersupply should be ensured;

Set up well servicedInformation Technology Parkswhere premises can beprovided at subsidized rates.The IT parks would alsoenable defining SpecialEconomic Zones (SEZ) forfirms that operate withinthese IT parks.

Allow and encourage privatesector to develop, build andoperate IT parks as PPP or aspurely privately ownedventure .this would helpGovernment in avoid heavyinvestments in the

MoICT

MFPED

UIA

PrivateSector

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Input Description Proposed Action Plan forGovernment of Uganda

Responsibility

development of the facilities

Entrepreneurship EntrepreneurshipdevelopmentProgramme

Potential Entrepreneursshould be sensitized andencouraged to invest in BPOindustry.

The Banking sector as wellshould be brought on boardand offered training tounderstand how BPO industryoperates and encouraged toextend equity financing.

MoICT

PrivateSector

BoU

Commercial Banks

HumanResource/Skills

Training for bothManagerial CategoryandOperator Category

HR Training should be ofhighest priority, as it is apeople intensive business.

Training courses to bedeveloped and arranged tomeet major segments of theBPO industry.

The HR training should besubsidized by the GoU foremployees and thecompanies by:

o Providing grants for

BPO Trainingso Training of Trainers

o Accrediting Centres to

offer training in BPO

MoICT

MoES

TrainingInstitutions

Marketing A marketing strategytaking care of thefollowing components

Branding

Advertising

Public relations

Participation inInternationalExhibitions &Conferences

Hosting AnnualBPO Conference

InvolvingUgandans in the

Diaspora to helpwith the marketingof the BPO industryin Uganda. Alsoencouraging themback in the countryto make use oftheir internationalexposure(globalisation)

Carry out an aggressivemarketing campaign including thefollowing

Have a clear strategy onattracting the BiggestPlayers in the BPOIndustry World Wide e.g.(GENPACT,ACCENTURE, HCL, IBM)

Branding the Uganda BPOIndustry

International and LocalAdvertising campaigns

should be conducted toattract investment andvendors. The local mediacampaigns would boostlocal investorsconfidence.

Marketing should beundertaken throughparticipation in targetedinternational exhibitions

MoICT

UIA

UEPB

OP

MoFA

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Input Description Proposed Action Plan forGovernment of Uganda

Responsibility

and conferences.International conferences shouldbe held in Uganda forinternational vendors as well as

local investors.

Subcontracting To Kick start theindustry in Uganda, thePublic/Private sectorcan subcontractbusiness fromcountries like India,Israel and Irelandwhich havesubcontracted tocountries likeMauritius, Ghana and

India.

The Government shouldsend out teams to thesecountries to study andattract subcontractedbusiness to Uganda.

MoICT

UIA

MoFA

4.2.2 GOVERNANCE MODEL

The governance of the BPO industry in Uganda shall be defined atthree levels as follows:

a) Governance Tier 1

This consists of an Inter Ministerial Committee composed of:

Minister of Information and Communications Technology;

Ministers of State or their representatives of the following subsectors Investment, Higher Education, Industry and Technology,Presidency.

The Minister of ICT will be Chair of the committee with the PermanentSecretary of the Ministry of ICT as the Secretary to the committee.

b) Governance Tier 2

This will consist of a multi sectoral technical team appointed byMinister responsible for BPO composed of the following:

BPO Technical Committee

The BPO technical Committee is proposed to comprise the following:

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1. Permanent Secretary, Ministry of ICT - Chair2. Executive Director, Uganda Investment Authority (UIA)3. Executive Director, Uganda Export Promotion Board (UEPB)4. Commissioner responsible for Investment, in the Ministry of Finance,

Planning and Economic Development (MoFPED);5. Commissioner responsible for Information Management Services

(IMS) or Information Technology (IT) in the Ministry of ICT;

6. Commissioner responsible for Higher Education, Ministry ofEducation and Sports (MoES)

7. Commissioner responsible for Trade and Industry, Ministry ofTourism, Trade and Industry (MoTTI)

8. Representative from the Office of the President;9. Representative from the MoFA10. Representative from the Private sector;11. Representative from the Academia at a level of Dean faculty with

BPO related training ;12. 2 Representatives from the Business Process Outsourcing

Association; and Project Manager/Coordinator responsible for theBPO project in the Ministry of ICT.

BPO Project Management Unit/Office

The BPO Project Management Unit /Office should be set up in theMinistry reporting to the permanent Secretary. It should be headed bya competent Project Manager with skills in Business Administration,Information Technology, Project management, among others. Theproject manager is the secretary to the technical team in tier2 (b)above.

Other

The BPO Technical Committee in tier 2(a) should consist of thefollowing subcommittees:

- Promotion and Marketing Subcommittee- Finance and Planning Subcommittee

- Compliance and Control Subcommittee

C) Governance Tier 3This level consists of the operators of the BPO industry and relevantservice/facilities providers under the umbrella of the BPO association.The association will nominate 2 (two) representatives to be appointedto the BPO technical committee.

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Proposed Roles/Duties.

Tier 1 - To act as an advocacy and lobbying committee for the wholeBPO Industry and its activities in Uganda. An example is the steeringcommittee for the National Backbone project.Tier 2 - This is the board for Policy guidelines and approval of BPOprojects in the country.

BPO Project Management Unit/Office - Responsible for the OperationalLevel for the BPO Industry like receiving and Vetting of bids.Tier 3 - Representing needs and grievances for the BPO operators andService providers in the country.

It is recommended that all consultations between the different tiersshould not last for more than 14 days and action on grievances to takea maximum of 30 days.

5.0 COSTS AND BENEFITS OF THE PROPOSED BPOINDUSTRY IN UGANDA

5.1 BENEFITS

The envisaged benefits of the BPO industry in Uganda once the Modelis implemented include the following but not limited to; job creation,increased revenue to the country and additional capital investment inthe economy.

5.1.1 JOB CREATION

The Model suggests that initially Government supports 30 BPO firmsthrough an incubation period of 3 years, each with a minimum capacityof 200 call centre agents/data entry operators, per shift working fortwo shifts per day. The minimum operating area of 5000 sq. metreswould be required to achieve this. Total number of jobs created will be30 firms x 200 agents x 2 shifts = 12,000 jobs in the first year.

Supporting 10 more firms in two subsequent years yields 4000 morejobs each year as indicated in the table 6.0 below.

TABLE 6.0 PROJECTED JOBS CREATED OVER A THREE YEAR PERIOD

Year 1 Year 2 Year 3

No of jobs 12,000 16,000 20,000

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5.1.2 REVENUE

For the low end BPO transactions such as call centre services and dataentry, agents and operators in countries where the Industry hasdeveloped earn a minimum of $8 per hour. In order for Uganda to becompetitive in the BPO industry, each agent/ operator is envisaged toearn $6 per hour.Consider an 8hours day work at a rate of $6 per hour for eachagent/operator working for 30 days per month, for a period of 12months, i.e. one year. Then

revenue earned from 12,000 jobs created by the BPO industry in thefirst year is given by $6 x 8hrs x 30days x 12months x 12,000jobswhich totals to US$ 207,360,000. However, it is proposed that due tostart up arrangements, in the first year only 6 months would be utilised

by BPO firms effectively. This yields to total revenue of about $103million in the first year. In the subsequent 2 years the amount willincrease to US$276.5million and US$276.5m respectively as in thetable 7.0 below:

TABLE 7.0 PROJECTED REVENUE OVER A THREE YEAR PERIOD

Yr1(1/2 yr) Yr2 Yr3

No of agents 12,000 16,000 20,000

AnnualRevenue

$103.68m US$276.5m US$345.6m

Revenue projections are based on the assumption of average earningsof US$ 6 per agent per hour for an 8-hours shift. However it should benoted that the projections will change when BPO work is done over a24/7/365 cycle as is the norm in other countries. This will imply thatthe revenue projections double especially from year 2, hence(US$276.5m x 2) and (US$345.6m x 2) respectively.

5.1.3 CAPITAL INVESTMENT:

For every centre opened:- Computers- Furniture- Internet connections- Relevant software

5.2 MATHEMATICAL MODEL

A Mathematical model has also been developed showing the benefitsof the BPO Industry as a function of the required inputs. as follows:

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B = f (F, P, H, I, E, M)

= 1F + 2P + 3H + 4I + 5E + 6M +

= 1; i 0 B=Benefits, f=function = Random Events

where;Partnership

F - Finance Public/PrivateP - Policy framework Public/PrivateH - Human resource Public/PrivateI - Infrastructure Public/PrivateE - Entrepreneurship Public/PrivateM - Marketing Public/Private

FIGURE (C) UGANDA BPO MATHEMATICAL MODEL

For the BPO Industry to succeed, from lessons learnt from othercountries, none of the coefficients should equal to zero as all the coreinputs are vital in insuring the overall success the industry.

5.3 COSTSThe Table 7.0 has the first year estimated costs of setting up the BPOindustry and it is followed by Table 8.0 that has an estimated costprojected over the period of the two subsequent years.

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TABLE 8.0 PROPOSED BPO BUDGET FOR YEAR ONE

BPO BUDGET FOR YEARITEM QTY/DESCRIPTIO

NUNIT COST ANNUAL TOTAL(Shs)

A.Premises

Rental 5000 Squaremeters

$13/sqrmetre

13 x2000 x5000x12months

1,560,000,000

B.HR Skills 1 MonthsTraining for 30firms/ year

Call CentreAgents

200 pple @ firm 200,000= 200 x 30 x200,000

1,200,000,000

Data EntryOperators

200 pple@ firm 200,000 200 x 30 x200,000

1,200,000,000

Manager 3 pple @firm 250,000 3 x 30 x250,000

22,500,000

Training OfTrainers

3 pple @firm 250,000 3 x 30 x250,000

22,500,000

BANDWIDTH 1 MB/Sec @ firm $5000/MB 5000x2000x30x12month

3,600,000,000

UTILITIES (electricity&water@ firm)

$1000/firm 1000x2000x30x12month

720,000,000

C.EntrepreneurshipDevelopmentprogramme

6 Sessions peryear for 200participants

Venue Hire Conference/trainin

g space

1,000,000 6x1,000,000 6,000,000

LogisticalSupport

Refreshments,meals duringtraining sessions,for 1 day

60,000 @

60,000x200x6

72,000,000

Secretariat 1,000,000per session

1,000,000x6 6,000,000

Facilitators (ofinternationalrepute in BPOIndustry training)

2,000,000per session

2,000,000 x 6 12,000,000

D.Marketing

Branding Developing aBrand for theUganda BPOindustry

500,000,000 500,000,000 500,000,000

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Advertising International Media(Print, Electronic)

1,000,000,000

1,000,000,000

1,000,000,000

Public relations 400,000,000 400,000,000 400,000,000

Participation inInternationalExhibitions &Conferences

20 participantssupported toattend at least 4sessions in a year

8,000,000@ 20x8,000,000x4

640,000,000

Acquisition spacefor Ugandanexhibitors. (20sq.mtr) for 4events

$500/sq.m 500 x 2000 x20 x4

80,000,000

Sponsorship atinternationalconferences

$20,000@event

40,000,000x4events

160,000,000

Hosting AnnualBPO Conference

Support to hostinginternationalevents in Uganda.

600,000,000 600,000,000 600,000,000

MentoringProgramme

Support toUgandanIndividuals(professional,Academia, BPOentrepreneurs to

present papers,etc)

100,000,000 100,000,000 100,000,000

TOTAL (Yr 1) 11,901,000,000

Costs for Policy Framework, Infrastructure Development and BPOGovernance are covered under the Ministry of ICT Budget.

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TABLE 9.0 FORECASTED BUDGET FOR THE SECOND AND THIRD YEAR

ACTIVITY COST20% Increase, 2ndYear

20% Increase, 3rd

Year

Incubation Center

premises

1,560,0

00,000

1,872,000,00

0 2,246,400,000

-

-

Training Subsidies

Call Center operators1,200,000,000 1,440,000,000 1,728,000,000


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Data Entry Operators 1,200,000,000 1440,000,0001,728,000,000Managers 22,500,000 27,000,00032,400,000 Training Of Trainers 22,500,000 27,000,00032,400,000 Entrepreneur training 6,000,000 7,200,0008,640,000 Entrepreneur training 72,000,000 86,400,000

103,680,000 Secretariat 6,000,000 7,200,0008,640,000 Facilitators 12,000,000 14,400,00017,280,000 Marketing Branding 500,000,000 600,000,000720,000,000 Advertising 1,000,000,000 1,200,000,0001,440,000,000 Public Relations 400,000,000 480,000,000576,000,000 Exhibitions/Conferences 80,000,000 96,000,000115,200,000 Sponsorship 160,000,000 192,000,000


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230,400,000 Conference Participation


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000 768,000,000 921,600,000Hosting Annual BPO Conferences600,000,000 720,000,000 864,000,000 Mentoring Programme100,000,000 120,000,000 144,000,000 Bandwidth4,320,000,0005,184,000,000Utilities 1,036,800,000 Total 14,281,200,00017,134,440,000

PART THREEINCENTIVES FOR THE BPO

INDUSTRY IN UGANDA


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6.0 INCENTIVES FOR THE BPO INDUSTRY IN UGANDA

In order to boost the Business Process Outsourcing Industry,Government of Uganda through the Ministry of Information andCommunications Technology in its financial year Budget should allocatefunds for incentive grants to up-coming and existing BPO companieswith the aim of creating employment opportunities and investment. Theincentive program is proposed to position Uganda as a preferredlocation for BPO operations, alongside the sector skills developme

Documents

Bpo Model-startegy Edited 26 Jan 09