Kenya's IT-Enabled Services and Employment Consequences of Offshore Linkages

Inspired by the successes of India and the Philippines, Kenya has embarked on a road to develop its own information technology (IT)-enabled services sector in contact centers, business process outsourcing, and software development. This chapter examines how Kenya’s IT-enabled services cluster emerged in the first decade. It starts by mapping out concepts from clusters to understand the regional context. It then provides a short history of Kenya’s nascent IT-enabled services cluster, focusing on early firm formation, and government support of the sector and key recent developments. Next, it looks at the constraints for sector growth with respect to labor, telecommunications infrastructure, integrating into offshore markets, policies and incentives, funding, and domestic and global exogenous developments. The chapter concludes with lessons learned in the first decade of this nascent cluster. First, the perceived potential of the sector along with challenges faced in growing its firms led to institutional creation and reform. Second, weak offshore linkages created an opportunity for the sector to diversify into domestic and nearshore markets, potentially averting enclave economic effects.