Was Egypt oversold as top offshoring spot?

Egypt's rapid descent into chaos contrasts with what analysts said just before it happened

WASHINGTON -- Before Egypt turned off the Internet, the country had been receiving increasingly high marks from leading analysis firms as a promising offshore outsourcing destination, despite the nation's political risk.

When it comes to outsourcing, there are some things that analysis firms can no doubt do well. They can assess the labor pool, the educational system, and cost of business -- anything that can be measured and quantified. But as Egypt's political turmoil demonstrates, it's very difficult to predict the sweep of history.

Management consulting firm A.T. Kearney released an annual index this week that measures the attractiveness of offshoring locations, and it put Egypt in fourth place, after India, China and Malaysia.

In December Gartner included Egypt on its list of the top 30 countries for offshore services.

These rankings, according to the analysts who did them, weigh many things (in Gartner's case 10 separate criteria), including game-ending political risks, with the final ratings based on an overall assessment.

Egypt's rise as an offshore and regional tech venue is relatively new and rapid. It has succeeded in getting a number of U.S. companies, including Microsoft, Hewlett-Packard and Oracle, to establish offices in a government-backed tech office park that opened in 2003.

But in the wake of the crisis, tech work is being shifted out of country.

With no Internet connectivity, Egypt has descended into what might be a modern version of the Middle Ages. What was missed?

"We shouldn't be particularly surprised that unrest has broke out in North Africa," said Ian Morris, who has studied historical trends for insights about future directions and is a professor of classics and history at Stanford University and the author of Why the West Rules -- for Now: The Patterns of History, and What They Reveal About the Future (Farrar, Straus and Giroux, 2010).

"The conditions for violence have been there for a long time, and even before Mubarak took power," Morris said by e-mail. Egypt's prior leaders, Gamal Abdel Nasser and Anwar El Sadat, "constantly had to be maneuvering to keep the lid on a powder keg."

"But I can also see why analysts might have ranked the danger in Egypt lower than that in, say, large parts of sub-Saharan Africa or central Asia -- the Egyptian dictators have been very good at crushing and buying off challengers, and at least since 1973 the army has had a lot of respect in Egypt," said Morris.

Long-term historical trends "can give us a rough sense of the likelihood of unrest in different places -- very unlikely in, say, Demark, very likely in Somalia," said Morris. But they can't help predict "the specifics of what will set off violence, when exactly it'll happen, or why some particular event like Mohamed Bouazizi burning himself in Tunisia will bring the Egyptian government to the verge of collapse, while the Libyan and Syrian rulers have survived, so far, anyway," he added.

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