A Strategic Shift: Morocco's Evolving Offshoring Landscape in the Face of Global Challenges

In the early 2000s, Morocco embarked on a strategic journey, forging a pact with foreign businesses: relaxed regulations and tax incentives in exchange for job creation. This calculated move propelled the offshoring sector to become the nation's second-largest employer, solidifying Morocco's position as an industry hub, bolstered by its widespread use of French and a strong service culture.

However, as the global market undergoes a metamorphosis and fierce regional competition emerges, coupled with a burgeoning mobilization of workers into unions, Morocco must look beyond fostering a business-friendly environment to safeguard the steady job creation the sector contributes.

The genesis of this saga can be traced back to the early 2000s when Morocco astutely recognized an opportunity. Preemptively constructing industrial zones, offering tax incentives, and supporting programs swiftly bore fruit, and within a decade, the country surged ahead of competitors as a coveted offshoring destination.

Today, the outsourcing sector in Morocco is experiencing an annual growth rate of 10%, surpassing the global average. In 2023, it generated an additional 10,000 jobs and nearly 18 billion DH, figures that took industry specialists by surprise when announced by the Exchange Office earlier this month. Media headlines heralded "Against all odds" and "Surprising results," alluding to the challenges that have long plagued the sector and the new hurdles that emerged last year: regional competition and artificial intelligence (AI).

African economies are rapidly shifting their focus from traditional reliance on agriculture and fossil fuel exports toward expanding services sectors, with a keen eye on outsourcing. As a manager of one of Kenya's largest BPO firms explained to researchers, "Something like 70 countries have written Business Process Outsourcing on their Vision 2030, 40, 50, so they're all competing for it."

This has created a buyer's market scenario, where more goods or services are available than the demand. "So, if I'm a foreign business going into Togo, Kenya, Uganda, or Botswana," he said, "the question becomes: 'What are you [the receiving country] going to pay me as a business?' What are you going to pay me to come in here? And if you're going to pay me what I want, then I will comply with your rules. But if you're going to tell me, 'Come in and build your own place and all that stuff, and then pay more for your staff,' then I'll go to Uganda, I'll go to Botswana. So there's that competition."

While Morocco is an established offshoring destination in Africa, it remains more expensive than emerging African markets with younger populations, better language proficiency, and the ability to deliver proficient and capable results. Simultaneously, Morocco, along with these emerging markets, faces the challenges posed by AI.

Plamen Tsekov, a Forbes Council member, suggests that artificial intelligence will not entirely steal jobs but will transform the services offshoring companies solicit in receiving countries, primarily those involving automating routine and lower-added-value tasks.

In fact, the automation of many low-level tasks is already well underway. A Swedish company called Klarna introduced earlier this year an AI that it claims handles customer service tasks for 700 employees, driving the Paris Stock Exchange to record a sharp decline in the shares of the global call center giant Teleperformance. Concentrix+Webhelp, the world's second-largest BPO company, dropped 11%. Both are key employers in Morocco.

Klarna claims its AI-powered customer support, available 24/7 in 35 languages, could generate $40 million in profit, likely through reduced staffing costs.

As companies like Teleperformance automate with AI or relocate for cheaper labor (like SFR with Madagascar in 2015), a pertinent question arises: What happens to their low-skilled workforce?

Call centers offer 60,000 Moroccans an entry point into the workforce without any educational requirement, often with competitive salaries. However, once employed, there is little opportunity for skill development. Imand Laaroussi, who spent the last 15 years working at call centers around Casablanca, said his career has taught him very little, gave him an ear disease, and worsened his anxiety.

The 40-year-old described exploitative and toxic work environments he endured for over a decade. "When you demand your rights, you are labeled as a troublemaker," he said. Laaroussi was laid off from his job at the Casablanca B2S call center for his offense: unionizing.

In April 2022, Laaroussi and six other employees were blocked by twenty security agents at their workplace. Their salaries were frozen, they were suspended from work, and the company filed a complaint against them, all because they were members of trade unions who participated in a strike on April 21, 2022.

The union leader, Ayoub Saoud, said call centers exploit Moroccan labor laws, extend working hours, mandate work on Moroccan holidays, and resist unionization. Saoud also noted poor skill development in call centers despite available vocational training and state support.

One remedy to the issue, suggests Aicha Elgoute, a member of the PJD party, which, while in government, implemented tax breaks on training for workers in offshoring companies. Now she says training must be required so that "It becomes challenging for such companies to abandon their workforce after having contributed to their skill enhancement."

Unlike call centers, IT companies, although a smaller part of the offshoring market in Morocco, invest in their workforce. A case in point is Arrow Electronics, an IT and distribution company in Casablanca's offshore site.

Ismail, a 25-year-old with a diploma in English studies, had found himself in a nearly 2-year job at a call center, monotonous and devoid of skill development opportunities, but has since amassed valuable transferable skills in software use, finance, marketing, and order purchase processes in his current role at Arrow Electronics, skills he is certain will land him career opportunities in the future.

Arrow employees like Leyla (39, with the company for nine years) and Farah (41, with the company for eight years) say they too were given opportunities for skill development and transferability within the company.

Leyla, for instance, successfully applied her security expertise acquired at Arrow to a different role after a brief stint at a Moroccan distribution company. Farah spoke of how Arrow's learning environment attracts headhunters seeking skilled individuals.

"We are confident in our employees' abilities and believe that their skill set guarantees them employability even if they leave our company," said Tarik Bounouail, a manager at the company. However, industry specialists argue that training alone isn't enough.

"It is crucial for Morocco not to limit itself to outsourcing basic services like call centers or low-value IT tasks; rather, a significant investment should be directed towards high-value areas such as artificial intelligence, blockchain, cloud computing, and DevOps," said Sofiane Gadrim, director of new technologies (CTO) and co-founder of Atela, a fintech specializing in algorithmic trading, blockchain, and AI, in an interview with Finance News Hebdo.

As the global artificial intelligence market is set to reach $300 billion by 2026, Gadrim said that "By investing in these cutting-edge technologies, Morocco can not only create quality jobs but also secure a place of choice in this growing market."

A simple mention of upskilling the digital workforce and showing interest in tech-related operations earned Morocco 12 points in the 2024 report by the world's most trusted offshoring index by the American consulting firm Kearney.

Morocco's minister of digital transition announced that in the 2024 school year, new fields that include digitalization, artificial intelligence, and cybersecurity have been introduced in Moroccan schools, demonstrating the nation's commitment to navigating the turbulent waters of the offshoring industry with foresight and adaptability.