How Ethiopia is Positioning Itself as a Competitive BPO Destination

This Blog is Written By Etenat Awol and Posted on

Meron Anteneh, a nutritionist in training and a communication consultant by practice, stumbled into the Business Process Outsourcing (BPO) sector by chance. “In 2018, while still in college, I got into Dereja Academy’s internship program and met a fellow intern who heavily utilized LinkedIn,” Meron recalls.

Initially, Meron thought LinkedIn was just another social media platform like Facebook. However, after joining the platform, she discovered its power for career networking and exploration. She diligently built and updated her profile, which proved fruitful. A year later, she received a direct message from a U.S. talent recruiter. “I got the job, and that’s how I ended up working for a company called Tech 1 Factory.”

Earning their trust, she transitioned into recruiting other talented individuals and eventually became a virtual HR manager. Meron worked for the company for over two years, which helped her understand BPO and working with different sets of people.

Meron is among many Ethiopians working in the BPO sector, which is seeing exciting developments. BPO involves subcontracting various business operations to third-party vendors. Although BPO initially applied solely to manufacturing entities, it now encompasses outsourcing various products and services. Many businesses, from small startups to large companies, opt to outsource processes to cut costs, free up internal resources, or gain access to specialized expertise.

According to Investopedia, companies adopt BPO practices in two main areas: back-office and front-office operations. Back-office BPO refers to contracting core business support operations such as accounting, payment processing, IT services, and human resources to outside professionals. In contrast, front-office BPO tasks include customer-related services such as tech support, sales, and marketing.

Currently, the world is witnessing a mass exodus of jobs fueled by the internet. Statista states the global BPO industry is valued at $370 billion in 2024 and is expected to grow to over $440 billion by 2028.

India has one of the largest BPO market sizes in the world, with its Business Process Management (BPM) industry generating $55.5 billion in revenue and employing around 1.4 million people in 2022. Meanwhile, South Africa leads the continent with $461 million in market size, according to a report by McKinsey.

Michael Thomas, a consultant at Shega Insight, states the remote revolution is fueled by a significant talent gap in meeting the increasing demands for skilled professionals in the Western world and employers taking advantage of wage differences to hire talented individuals who can deliver comparable outcomes at a lower cost.

“While McDonald’s doesn’t have a physical presence in Ethiopia, you might be surprised to learn some of their customer service calls are handled by an Ethiopian startup,” said Prime Minister Abiy Ahmed (PhD) during the launch of the Startup Ethiopia Event in April 2024.

The Ethiopian BPO industry is small compared to the global market and its African peers. Since the sector is relatively young, it is difficult to pinpoint a definitive figure for its size. However, the sector employed over 3,350 people in 2021 and had a market value of $34 million.

Baheru Zeynu, CEO of Africom Technologies and General Secretary of the Ethiopian Outsourcing Association (EOA), states the actual number is higher. “Currently, there are 25 registered BPO companies in Ethiopia, with around 15,000 people engaged in the sector, including remote workers on platforms like Upwork,” Baheru told Shega. “The sector also brings an estimated $50 million annually into Ethiopia.”

The EOA represents offshore outsourcing services and service providers, including firms such as R&D, MMCY Tech, Exellerent Solution, IE Networks, Nedamco, Africom Technologies, and other tech companies. These firms provide a vast array of services to a global clientele, serving big names like McDonald’s, Gilead, DSTV, ORTEC Sports, and Heineken. Telecom liberalization, a favorable time zone for Europe, government recognition, a significant number of graduates, lower wage rates, infrastructure improvement, and partnerships with ICT parks have all contributed to a positive operating environment.

When R&D was established in 2010, the outsourcing sector lacked a specific licensing category, resulting in the need for two separate licenses: software development and data processing. Now, with a unified licensing regime, the sector is recognized as a major strategic pillar of economic growth by the Ministry of Innovation and Technology (MinT).

Wondwosen Zewode, co-founder of R&D and the Association’s President views this as a key factor in the industry’s success and potential for generating high-quality jobs. His company, R&D, alone employs over 130 people, with the number increasing based on outsourcing demand peaks. MMCY Tech employs over 700 professionals and works with several companies globally, according to Tadiowos Tefera, founder and CEO of MMCY Tech. Africom, which provides software services, has 45 permanent employees and over 1,000 project-based employees.

In addition to EOA members, several other independent BPO firms operate in Ethiopia, such as Ablaze Labs, Manpower Ethiopia, Target Ethiopia, and Gebeya, the pan-African tech talent marketplace and one of the nation’s most prominent startups.

Ethiopian BPO companies address potential clients’ concerns about Africa’s unfamiliar business environment by offering flexible contracts ranging from a couple of weeks to years. This flexibility can encourage global executives to consider commercial collaborations on the continent.

The nation’s lower wage rates position the country as a more affordable option compared to other popular outsourcing destinations like the Philippines and India, allowing businesses to experience significant cost savings. A source revealed that the base salary of a call center worker is 5,500 birr at one of the local BPO companies.

Proficiency in English and availability to work nights when contracted by U.S. companies are requirements to land a call center job.

In addition to local BPO companies, many Ethiopian professionals secure international jobs in the remote job market. A growing number of researchers, writers, and developers work on platforms like Upwork, Fiverr, Turing, and Djinni.

Bisrat Yisaflgn, a 31-year-old graphics designer, is one of them. Bisrat started working on Upwork at the end of 2023. Since his first project, which paid him $50, Bisrat has made over a million birr and averages $1,000 monthly. “The highest I made in one go was $1,800,” he says. He also outsources other talents when working on big projects.

Layoffs are part of the BPO sector too. CCI Ethiopia, part of CCI Global, the largest African outsourcing company with over 11,000 employees, was a major player in the Ethiopian BPO sector, employing over 100 Ethiopians until its “shutdown” in December last year. The company outsourced talent, mainly call center workers, from the U.S. and European markets before ceasing operations without any official communiqué.

Can the BPO Sector Drive Employment?

Baheru highlights the BPO sector’s potential to benefit from Ethiopia’s large pool of tech-savvy graduates at a competitive cost.

“With supportive government policies, forex generation from the BPO sector is estimated to reach over $1 billion annually by 2030. Furthermore, the sector has the capacity to create over 500,000 decent jobs in a conducive environment,” said Baheru.

Ethiopia’s higher education system produces a significant number of graduates, yet 42% of public university graduates remain unemployed. Baheru believes that with job-specific training, the BPO sector can absorb a significant portion of these graduates annually.

However, to achieve this, the sector needs a “conducive environment, reliable internet connectivity, infrastructure, and incentives for importing necessary utilities”. Baheru discussed these needs during a presentation at the Science Museum, where he highlighted the potential, challenges, and opportunities of the BPO sector in Ethiopia on behalf of the Association. Since its establishment in 2022, the Association has lobbied for strategic policy shifts to promote Ethiopia as a global outsourcing destination.

“We have succeeded in unifying the multiple licensing regimes for BPO, but achieving full success doesn’t come without a special economic zone privilege,” Wondwosen told Shega. The association hopes to emulate the achievements of India and other leading BPO nations, believing that government backing for Special Economic Zones (SEZs) is crucial. SEZs generate positive economic growth by offering favorable economic regulations, including tax incentives and lower tariffs, which attract foreign direct investment.

The Ethiopian government’s recent startup reform plans also hold great promise for the local BPO sector. One of the promised changes grants startups the freedom to retain all foreign currency earned from service exports, directly benefiting BPO companies.

Building a Talent Pipeline

Talent management is crucial for BPO companies to thrive. It involves effectively identifying, attracting, developing, and retaining skilled employees. Coinciding with this demand, several initiatives are equipping Ethiopians with the skills needed for both the local and international job markets.

In March, IE Network Solutions launched its Tech Talent Academy, aiming to train 5,000 tech talents over the next five years. ALX Ethiopia and Gebeya are also prominent names in the tech talent space.

“ALX Ethiopia has trained and graduated over 1,000 tech talents in software development, cloud computing, Salesforce, data science, and other emerging technologies, with many graduates securing work on Upwork,’ said Mirafe Gebriel Marcos, Country Manager at Sand Technologies, the firm behind ALX.

“It’s important to understand the specific sectors or technologies with the most potential for excelling in the BPO space,” Marcos added.

Gebeya, on the other hand, recently partnered with Microsoft to empower 300,000 African talents over the next three years with cloud and AI skills.

BPO firms also provide short training to build their talent pool by partnering with Ethiopian universities to recruit skilled graduates. “Once on board, our Learning and Development team invests in our young professionals through diverse training programs, maximizing their potential,” said Tadiwos of MMCY.

However, to fully harness this potential, “universities need to equip graduates not only with technical skills but also with strong soft skills, English language proficiency, and a robust work ethic,” adds Baheru.

Bernard Laurendeau, founder and managing partner at Laurendeau Associates, in a commentary published in 2022 stated that Ethiopia’s labor environment presents many challenges, including limited labor laws and workers’ rights, high unemployment, and a significant informal sector. However, he sees this as an opportunity to embrace flexible work arrangements, where skilled individuals can take on various projects and tasks, earning a competitive income while utilizing their diverse talents.

Meron, who began her career in the BPO sector with a profile on LinkedIn, is now working with four different companies, including R&D. While shifting to virtual workspaces and managing remote teams has its challenges—and she has made mistakes along the way—she now navigates this environment effectively, managing to work with a range of clients and projects.

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