University of Chicago
Type of paper: Thesis/Dissertation Chapter
Mauritius – The Scope of Ict
Mauritius is a small beautiful island in the Indian Ocean, which locates 800 kilometers east of Madagascar and some 2000 kilometers off the southeast African coast. Mauritius had been served as a colony of Dutch, French and British for long. The Dutch rule started in the late sixteenth century. They named the island Mauritius after prince Maurice Van Nassau, Governor of Holland and introduced sugar cane and domestic animals in the country. The Dutch abandoned the island in 1710, and France took possession. Renamed Isle de France, Mauritius was a strategically important location in the colonial drive for dominance and used as a base for the French to attack British ships.
The British captured the island in 1810 and gave it back its name Mauritius. After slavery was abolished under the British rule in 1835, Indian immigrants began arriving to work in the sugar cane fields. A small group of Chinese traders followed later. Mauritius obtained independence on 12 March 1968 and became a republic in 1992. The Republic of Mauritius consists of four islands namely Mauritius (the largest at 1’865 square kilometers), Rodrigues (104 square kilometers), the Agalega Islands (70 square kilometers), and the Cargados Carajos Shoals (1.3 square kilometers). The country is divided into municipalities and villages. It has five municipal councils in the urban areas and 126 village councils in the rural areas.
The economy of Mauritius was mainly dependent on sugar and textiles. Sugarcane is grown on about 90% of the cultivated land area and accounts for 25% of export earnings. In the last few decades, Mauritius had undergone through massive developments in both its economical and social arena. From a monocrop economy, depending mainly on sugar, it diversified its economic activities into, textile and apparel industry, tourism and financial services during this period. But the island-nation’s new vision is to become a regional IT or ‘dotcom hub’ and kick start its flagging economy, hit hard by fierce international competition and the removal of preferential access to European markets for sugar and textiles. The government has identified the potential and scope of their country in the IT outsourcing business and has set frontline priority for this sector in the economy of the nation.
2. Environmental appraisal analysis and evaluation of IT Outsourcing for Mauritius.
Mauritius as a new entrant in the IT outsourcing industry, has to ensure that its micro and macro-environments are supporting to its optimum for the development of industry in the country. The PLEEST and SWOT analysis will help to understand the country’s potential to become an active player in the world IT outsourcing industry by 2010.
2.1 PLEEST analysis
This analysis takes into consideration the political, economical, legal, socio-cultural, technological and environmental factors that affect the operation of the industry in the country. To create a better market for the IT out sourcing activities, these factors should be supportive to the industry and encouraging for future developments.
Political: Mauritius is a republic where elections are held on a democratic style. The present MLP (Mauritian Labour Party) government led by Prime Minister Navin Chandra Ramgoolam has strong majority in the parliament. The Ramgoolam government is taking keen attention in continuing the efforts of their predecessors to make their country an outsourcing hub. The previous government has initiated strong commitment to develop the ICT industry. Three Ministerial task forces have been set up to look into the establishment of a Cyber City, the implementation of the e-Education and the e-Government projects. The government had already secured a line of credit of US$100 million from the Government of India for the implementation of these projects. Setting up of Ebene Cyber City fits in with this strong Government commitment.
Economical: Mauritius has a strong economy with no foreign direct investment (FDI) control; double taxation avoidance and treaties with many other countries. Mauritius enjoys the status of a developed country in many aspects of development, which will encourage the growth of ICT industry. The Mauritian economy is dominated by five or six families, most of whose business have major operations in the IT sector. And the importance of computer in the day-to-day business operations has increased spontaneously. A 2001 survey by the National Computer Board (NCB) showed that over 80% of businesses posses at least one computer.
Socio-cultural: The use of computer and Internet among the Mauritian society is steadily increasing. According to the results of a survey by NCB both home computer ownership and Internet connection of Mauritian households having telephone connectivity increased to attain 29.4% and 23.8% respectively. Today around 80% of population have telephone connection. But only 13% have own PC. All primary and secondary schools have computers. Several hundred teachers have taken computer training, which they are now applying in the classroom. There are plans to use ICT as a pedagogical tool across the curriculum from 2006, by when all teachers will have received necessary ICT training. But computerization in the tertiary level of education is less than adequate. Mauritius has a vast pool of English and French speaking population.
Technological: Mauritius has very good telecom infrastructure especially with the SAFE project that places the country on the super highway. It has widespread access to both landline and mobile telephony. Preferential and highly competitive rates are proposed: the tariff for a 512 Kbps downstream / 128 Kbps upstream ADSL link is only Rs.5,500 per month. Furthermore, good redundancy is assured through both cable and satellite.
Legal: The Data Protection Act was introduced in June 2004.Its main objective is to protect the individual’s rights to privacy while ensuring that personal information is lawfully and fairly obtained, processed, protected and disclosed. It also provides a framework to govern the use of customer data, hence preventing any misuse. It will give greater confidence to investors and foreign companies to invest in Mauritius. Mauritius is a signatory of the WIPO convention and it has introduced The Computer Misuse and Cyber crime Act recently. Previous laws enacted in this field were: Information and Communication Technologies Act 2001 (December 2001), Electronic Transactions Act (July 2000) and Copyright Act (September 1997).
Environmental: Mauritius has a modern banking system, courier services, major brands representation and easy acquisition of equipment. Regular air and sea transport facilities are available to and from major destinations. An Incubator Centre is already operational for start-ups to encourage entrepreneurship. The NCB Incubator Centre provides facilities such as furnished office space, telecommunication facilities, etc to start-ups in the ICT sector. The country provides high quality of infrastructure with relatively lower cost than many of its competitors.
2.2 SWOT analysis
Strengths: Mauritius locates in a strategic place with a unique time zone (GMT +4), so that they can work with Americas, Europe, Asia and Africa conveniently on a single day. A Bi-lingual population that speaks English and French is an advantage in doing business with countries that speaks the same language. As far as the political willingness and infrastructure is concerned Mauritius has a well defined national vision and strategy to develop the ICT industry and enhance a high quality infrastructure with relatively low cost of operation. The other features of Mauritius in favour of IT outsourcing are:
•Special incentive packages
•Availability of modern office space
•Quality of labour
•Low labour turnover
•Appropriate legal framework
•Strong support services
•Close relationship with India
Weaknesses: Low scalability is the major weakness of the country. As a small Island with only1.2 million populations it lags far behind of the industry giants like India, China and Philippines in the number of skilled manpower. Training in this regard is also poor. Poor marketing skill and absence of adequate recruitment agencies are another area of weakness. Without getting proper career guidance the right candidates are seeking other shelters than IT. High cost of financing and telecommunication create hindrance for new ventures to come and existing one to survive. Labour related issues are another problem to be rectified.
Opportunities: Connection to the South Africa-Far East (SAFE) fibre optic submarine cable, which connects 40 countries, provides Mauritius a great opportunity to link with the global digital economy. Having a population with expertise in English and French, they have opportunity in the UK and France. Low labour turnover in Mauritius is another attraction. Decision of leading global financial institutions to outsource their activities gives abundant opportunity to Mauritius. As Mauritius follows the same accounting standards as UK, it can benefit from this opportunity by outsourcing financial activities to this country. Proper training to its accountants should be given in French accounting standards also to target French market. Many outsourcer countries, when they seek offshore outsourcing, rely on quality rather than cost. This will be an opportunity for Mauritius.
Threats: There are severe threats to Mauritius from new potential competitors like Czech Republic and Hungary for both English and French segment. Legislations against offshore outsourcing causes another threat to its goal of becoming a frontline outsourcing destination.
2.3. The world Out Sourcing market
The worldwide IT Outsourcing market is rapidly growing, which is estimated to grow around $400bn in 2010. The US remains the leader in the outsourcers list with around 60% of the world market while India stood first in the recipients list. But the picture is changing rapidly. The outsourcing countries are increasing both in terms of number and revenue stream. Europe has now been turned as a potential outsourcer. Studies shows that outsourcing spending of Europe is growing faster than the US. In which UK register a dramatic rise in growth with a amazing 45% growth in 2002 and the trend is continuing. Another trend in the market is that the increasing number of countries which strives to become potential outsourcing destinations and achieving success in this field. For instance Maghreb countries like Morocco, Tunisia and Algeria are emerging as strong outsourcing destinations and Czech Republic and Hungary proved potential from Europe.
2.4 Market segmentation: French and English speaking countries
As a nation which strives to become an IT outsourcing destination for other countries, Mauritius should adopt macro- segmentation i.e. segment their markets on the basis of geographical location, industry and organisational size. Being a bilingual society that can speak both English and French and with close cultural tie up with these two societies, Mauritius should concentrate on French speaking countries as well as countries which use English. In the case of Mauritius, it is difficult for them to concentrate on large organisation as they are a novice in the field of outsourcing and has been treated as less experienced and expertise in relation to the outsourcing giants like India, Philippines and China etc. Another common macro-segmentation variable is industry sector. Different industries may have unique requirements from products. In the context of IT outsourcing, Mauritius can provide outsourcing service to various industries like banking, manufacturing, healthcare, education and so on. By understanding each industries needs in depth, a more effective marketing mix can be designed.
In the case of IT outsourcing, it is very common that countries adopt geographical segmentation because the geographical location of the outsourcer country vis-à-vis that of the outsourcing country plays a vital role in getting order. For example, India has a unique geographical location with US. Both these countries locate in the opposites on the globe. By outsourcing business to India, the US companies can do business 24 hours without any interruption. Mauritius has got a convenient geographical location with a favourable time zone (+4 GMT), which helps them to provide service to Europe, Asia and Americas.
As the US and Europe contributes the lions share of outsourcing activities, there is harsh competition prevails between the major outsourcing recipient countries. Most of the American MNC giants prefer outsourcing their activities in India because of its high skilled and low cost characteristics and unique time gap it has with India. The trend in the US is that, majority of their outsourcers prefer leaders like India, China, Philippines, Russia and Malayasia. So, it will be difficult for Mauritius to succeed in this market.
3. Target Markets
A target market consists of a set of buyers who share common needs or characteristics that the company decides to serve Kotler,P. et. al (1996).Having man power strength that is expertise in both English and French, Mauritius can set France and UK as their target markets. The details of each target markets are given below:
Most of the existing outsourcing companies in Mauritius have as origin France and UK. In 2003, out of 20 outsourcing companies in Mauritius, 3 were UK based company and 7 were French. There were another 5 companies with capital of Mauritius and France/ UK. Mauritius has then already a good relationship with these two countries. Mauritius has got a strategic advantage over their competitors in terms of linguistic skill when working with these two countries. As Mauritius had been a colony of both Britain and France for long, they have inherited from these countries many aspects of their culture including language. A bi-lingual population who can speak both English and French is an asset if they work with these countries. Mauritius’s unique time zone with these two countries, the existing good relationship with those industries and the growing outsourcing market in UK and France are extending huge opportunity to Mauritius to operate in those markets.
UK is a rapidly growing market of IT outsourcing. Studies have proved that the number of companies in UK that outsourcing its operations are increasing. Both the private and public sector industries in the country are now giving preference to outsource their activities to offshore. It is the UK which stood second after the US in the worlds largest outsourcers list and this trend will continue because of the more liberal employment and labour laws (McKinsey, 2004).As a result of which competition is becoming aggressive in the UK market. A study conducted by kable Market Intelligence Services reveals that the IT and business processing outsourcing market is to grow by a staggering 78% by 2007 with annual spend reaching £6bn.
According to this study report, It is the public sector like local government, criminal justice and education, which will grow faster during this period. There is a rapidly increasing trend among the businesses in the UK for outsourcing their activities offshore. The management of many companies believe outsourcing their business will add their corporate value. The report conducted by the Centre for Economic and Business Research shows that companies that outsource business will outperform their peers and could create additional shareholder value. As a result, new and new companies join the group of outsourcers each day. One economic forecast shows that outsourcing has the potential to be worth $648 billion by 2010–up 52 per cent on 2004.It shows that UK will be one of the biggest outsourcer countries in the next decade also.
3.1.2Financial and Public sector services
Recent Studies show that there would be an amazing hike in the outsourcing activities of UK’s public sector and financial service industry in the coming years. According to them these two industries are planning invest millions of pounds for outsourcing activities by 2010.
Financial service sector: Financial services sector is the second largest outsourcer in the UK after the manufacturing industry. With the expansion of globalisation and aggressive competition followed by it, the leading banking and investment companies plans to outsource their primary activities in order to reduce cost and concentrate on their core activities (Logica CMG report, 2004). Most of the companies think outsourcing is an essential tool of their success and without it they may ultimately loose in the industry. Mauritius has a good pool of skilled chartered accountants, who have experience and expertise in UK accounting standards. India’s patronage to Mauritius is an advantage to them to enter in to this segment. Mauritius should use its connection with India for getting training to its workforce and get entry to the UK market.
Public sector services: A study conducted by Kable, an organisation that provides technology research and analysis on the UK government and public services sector, suggests that almost one fifth of public sector services (£60bn) could be delivered through outsourcing to private and voluntary bodies. Principle sectors targeted for this treatment appear to be the health and education sectors, which are subject to frequent reforms with very uncertain success to date. Here, quality is more concerned than cost Mauritius can make use of this situation by extending highly accurate and good quality service at an industry competent price.
3.1.3 PESTLE analysis of UK
Political: Government and political parties have high concern for liberalisation process. They encourage the outsourcing activities because they believe it will bring prosperity to their nation. Economical: The economy of UK is the most liberalised on in Europe. High competition existing in the market demands more and more ways of cost reduction from the part of businesses. As a result, outsourcing jobs to other countries continues its growth. Social: British society is highly concerned about profit and better performance.
They are not much worried about job security and protection. This gives confidence to companies to go ahead with outsourcing activities. Technological: Almost 100% of businesses in the UK use computers and Internet. They are very fond of new technologies. As a result more and more companies come to the list of outsourcers. Legal: UK enjoys a liberal employment and labour laws, which in turn result in the high performance of businesses. They have more freedom to choose their strategy of operation and so, companies are exempted from legal barriers to offshore business.
3.1.4 Competitor analysis
Potential new entrants: Threat from new entrants will be very high in the UK market, because unlike France UK deals with industry giants like India, china, Philippines and other European countries. It is not very tough for a potential new entrant to enter into British market, as the language skill is not a barrier for these countries. But surviving in the market is very tough because of the presence of India and China; they can provide high quality of services with amazingly low cost. Bargaining power of buyer: UK has high bargaining power over Mauritius because they have so many suppliers to provide excellent services with low cost. But in the case of Mauritius they have not many suppliers, so that they will force to take stringent measures to improve the quality of service in each time.
Industry competitors: Competition in the UK industry is tough with the presence of almost all the leading out sourcing countries in the world. Still the opportunity there is increasing for potential new countries as a result of increased liberalisation and competition followed by it. Out sourcing recipients are competing in reducing cost While maintaining the high quality of their service. But studies in this regard reveals that they can’t go beyond a certain level because the bargaining power of their suppliers (Skilled labour) increasing. Competitive differentiation: Mauritius can use their high skilled accountants to give services to financial sector companies in the UK. As the country uses the UK accounting standard, it will be an advantage to them. Studies have proved that the global financial giants are going to offshore their activities by 2007.
3.1.5 Positioning: Cost is a concern for many outsourcers in the UK. As cutting operational cost is one of the prominent aim behind outsourcing, companies that go for outsourcing their activities will turn to clients who provides quality services with low cost. In the present situation Mauritius is far behind other competitors in the industry in terms of cost and size. It cannot compete with leaders in the industry on cost in the near future. In this context, Mauritius has to provide high quality service in order to attain business from UK. Leading companies in UK is following a multi-country strategy for outsourcing their operations after the terrorist attack on Sept.2001. In such a circumstance they are avoiding the cost concept and giving much attention to quality and safety. This gives opportunity to Mauritius to position themselves in UK by offering high quality service.