Kenya's efforts to compete with India, Mauritius and South Africa as a Business Process Outsourcing (BPO) destination have hit a snag, with many companies closing or scaling down operations.

Four years ago, the country was optimistic about BPO operations, with the cost of connectivity set to come down with the entry of fiber optic cables. Reliance on satellite had been cited as a major hindrance to BPO growth and profitability and the formation of the Kenya ICT Board was seen as a major marketing avenue.

The World Bank also weighed in with a grant that was expected to benefit the BPO sector. However, it took two years before the grant was disbursed and in the process some companies had collapsed or explored other business ideas.

"Unfortunately the initial subsidy investment did not deliver any benefits that can generally define the industry; we realized this just in time and restructured the support to focus on sector development," said Eunice Kariuki, Marketing Director, Kenya ICT Board.

Even with cheaper connectivity, the BPO sector was unable to compete with India, Mauritius and South Africa because the focus was on voice and contact sector services. The board, however, has had challenges working with BPO operators to expand operations from traditional data entry and customer care to IT enabled services and software development, which calls for higher skills set and longer periods of marketing and getting clients.

This has forced the board to focus on sectorwide initiatives like BPO training, software certification and business incubation.

"The sector now enjoys good infrastructure and the government continues to fix the legal issues that are often cited as setbacks; the board has also devised innovative ways to market the industry, leveraging on existing world bank funded projects," Kariuki added.

While the industry may look gloomy for voice and contact center services, companies that focussed on software development and IT shared services seem to be performing better.

"Yes, the industry has had challenges but it takes time," said Agosta Liko, CEO and founder of Verviant Consulting, a software development firm with clients in U.S., Europe and New Zealand. "For us it's one customer at a time, we have just finished one contract and got two more because our work was good."

Industry and business prospects may have been overestimated, which Liko said may have made some companies to expect too much too soon, affecting their performance and survival.

The local market had also been a target of the ICT board's efforts, which yielded fruit with Telkom Kenya signing an agreement with a local call center, and Airtel outsourcing to IBM, which handles Airtel services in India.

However, Safaricom opted to sort out its own call center, and says it has reaped benefits. While Safaricom is seen as a potential major source of business by local BPO, marketing efforts have been unable to convince the company that outsourcing will lead to lower costs and more subscribers.

"We see our call centre as a partner to our sales and product development that promotes product uptake," said Nzioka Waita, Safaricom corporate affairs director. "It partners with our marketing team to provide insights into and on marketing campaigns based on customer feedback and some of our call centre staff have grown to become experts when it comes to customers and what they want."

Asked why the company has not considered outsourcing to local BPO, Waita points at increased call uptake and query resolution because callers can access the company faster and the incorporation of social media- Twitter, Facebook and email in resolving client issues.

"Through data mining and continuous provision of feedback on customer experience to our internal product development teams, Safaricom has become a leader in innovation and made great inroads in building market share," added Waita.