Offshore Outsourcing: Kenya Shows Promise

With India's rising costs and employee turnover encouraging information technology executives to look beyond the subcontinent for providers, a country like Kenya could be poised to win more IT services business from abroad. The East African nation boasts a big pool of English-speaking professionals and its government has invested millions to .

However, recent events have conspired to slow Kenya's growth potential in the near term.

Most dramatically, a disputed election at the end of 2007 ignited two months ethnic tensions and violence in the country, leaving hundreds of citizens dead and hundreds of thousands more displaced. In late February 2008, former negotiated a power-sharing deal between the two presidential candidates that established a coalition government. But uncertainty about the new government continues. "Kenya has a young democracy that will result in more growing pains," says Ralph Schonenbach, president of Zurich-based sourcing consultancy Trestle Group.

Geopolitical concerns are never good for IT services business. ", offshore outsourcing even more, offshore destinations with political instability even more," Schonenbach explains. "Kenya's disputed presidential election, post-election violence and civil unrest raised a significant red flag for decision makers considering . Watching riots and chaos broadcast around the world makes a very tough sell inside the board room."

"(Political instability) has derailed the Kenyan economy from its growth momentum," agrees Eugene M. Kublanov, CEO of San Ramon-Calif.-based sourcing consultancy neoIT. Early estimates put the cost of the political crisis to the Kenyan economy at US$1 billion, with some revising Kenya's 2008 economic growth projections from 7 percent down to 3.2 percent. The economy is expected to recover in the mid-term, says Kublanov, with growth estimates for 2009 nearing 5 percent.

And the IT services sector may be poised to persevere.