Connecting the Kingdom

Large organisations are driving technology developments and implementations within Saudi Arabia, however, moves are also underway to encourage small enterprises online.

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By  Zoe Moleshead Published  May 26, 2003

Opportunities|~||~||~|Saudi Arabia completed yet another stage of its e-government plan recently with the Ministry of Commerce’s completion of a 2200 node network. Connecting the ministry’s head office and 36 distributed branches and locations around the Kingdom, the infrastructure will form the basis for future IT implementations designed to enhance employee efficiencies, communications and IT skills.

“We used to have a link to only 12 branches and laboratories, now we will have all 36 [connected.] We are using Frame Relay solutions to link the different branches and laboratories all over the Kingdom, and we will have a centralised information centre in Riyadh, which everybody will be connected to,” explains Mohammed Almeshari, director of information & computer centre, Ministry of Commerce, Kingdom of Saudi Arabia.

The network, which is a mix of Cat 6 cabling at the passive level, Cisco Systems solutions in the local area network (LAN) and Nortel Networks products in the wide area network (WAN), is designed to reduce the amount of paperwork carried out by employees and also provide them with access to internet and e-mail facilities. “When we are finished, all staff should have their own e-mail account,” says Almeshari

Furthermore, in conjunction with the ministry’s web site, the upgraded network will enable a host of secure license and permit transactions to be processed online.

“We are now at the testing stage for all the applications... None of the services are online now, this the next phase of development — phase two of the web site,” says Almeshari

The Ministry of Commerce’s project, however, is not unique within Saudi Arabia. Similar network and IT implementations are being replicated within other government departments, while large organisations such as SABIC and Saudi Aramco continue to invest in IT infrastructure upgrades. Consequently, the Saudi market is yielding the strongest regional growth opportunities for networking vendors.

Cisco’s regional manager for Saudi Arabia, Dr. Marwan Al Ahmadi, says that the total IT spending in the Kingdom is around US$3 billion and represents 50% of the total GCC countries spending.

“The total [IT spending in] GCC countries is US$6 billion, and if US$3 billion of that is in Saudi, you can imagine how promising and huge this market is,” he comments.

“The Saudi market is the largest IT market within the Middle East. If you talk about the LAN hardware [spending in 2002] it was about US$83 million, and the datacoms market must have been about US$100 million,” adds Wael Fakharany, regional manager, 3Com Middle East.

Fakharany also says there are three distinctive geographical sectors within the Kingdom, each with their own requirements in terms of IT infrastructures. Oil & gas companies are predominantly found in the Eastern part of the country, while government departments are housed in the centre of Saudi. The Western area is home to the large trade conglomerates, he reports.

“We are talking to different organisations with different requirements and pace of deployment. People in oil want to implement the latest and greatest technologies in the world… The government is quite physically diversified so we are seeing a lot of demand for deploying wireless and building to building bridges because of the high cost of laying fibres across the different parts of the government. The trade organisations are quite price sensitive with distributed architectures,” Fakharany explains.

Despite these differences, there is an all encompassing drive towards connectivity in the Kingdom. While large vertical sector companies are undoubtedly setting the pace in terms of technology, moves are also underway to encourage small to medium sized businesses (SMBs) to move online, even if this just involves having an internet connection. Although the poor and often limited infrastructure within Saudi Arabia has caused problems, the increasing rollout of ADSL and the introduction of a MPLS VPN (virtual private network) service by Saudi Telecom (STC) is helping to overcome these issues.

“In the past, connectivity was not as available or as affordable as it is today. They [SMBs] can now use a VPN over the internet using ADSL. They can use also MPLS VPNs — the Akeed service — which is offered by STC, and they can use this to connect multiple sites at a much lower cost compared to point to point solutions like digital leased line,” says Dr. Al Ahmadi.

“These are the enabling factors that will give smaller enterprises the opportunity to be connected and they are much better connected compared to two years ago or even a year ago,” he adds.

Vendors such as Cisco have already begun conducting seminars and awareness programmes in Saudi Arabia, the aim of which is to educate smaller enterprises about the benefits of internet and network connectivity. Furthermore, the networking giant recently signed a Memorandum of Understanding (MoU) with the Government of Medinah to increase internet adoption among Medinah’s SMBs.

Cisco will be offering the government consultancy and training tools, as well as rolling out a ‘Jump Start’ package, which is designed overcome the financial constraints faced by some SMBs and provide them with internet business solutions, applications and technology foundations. “Connecting a business to the internet is the first step to improving performance,” explains Dr. Al Ahmadi.

||**||SMB push|~||~||~|Despite this somewhat immature IT uptake at the SMB level, large organisations are very much at the cutting edge in terms of their network infrastructure. Vendors report great demand for Gigabit Ethernet solutions, while enterprises with multiple affiliates or groups are investing in metropolitan area networks (MANs) and migrating towards 10 Gigabit Ethernet.

“The elite organisations like Saudi Aramco, King Abdulaziz City of Science & Technology (KACST) and the R&D sites are moving towards new technologies very quickly. They are evaluating the latest technologies, such as 10 Gigabit Ethernet,” confirms Walid Al-Najjar, country sales manager, Foundry Networks, Saudi Arabia.

“We see requirements for large enterprise networks especially in the MAN arena — this is for big companies or groups that have many affiliates. The affiliates themselves are investing in Gigabit Ethernet,” adds Hani Nofal, technical manager, 3Com Middle East.

While Nofal says that the falling cost of Gigabit Ethernet has helped push the uptake of such solutions, he also reveals that network convergence is gaining momentum within the Kingdom as enterprises look to reduce communication costs by running Voice over IP (VoIP) and implementing IP telephony solutions.

“Everybody is looking at VoIP… They are preparing for it and ensuring that their infrastructure is capable of doing convergence and running voice,” concurs Al-Najjar.

Evidence of this comes from Zamil Industrial Investment Co. (ZIIC), which completed a WAN and LAN upgrade at the end of last year. Zaki Sabbagh, chief information & technology officer with the company, says that although ZIIC doesn’t having any immediate plans to run voice over its network, it is in the enterprise’s long term roadmap and was a consideration when it upgraded the network infrastructure. Elsewhere, the Ministry of Commerce has already deployed IP telephony within its main office.

“The most important thing is going to be the increase in efficiency — this [IP telephony] is going to make it a lot easier to make telephone calls, conference calls, forward calls, and different branch calls. Even for our offices in the same building, it will be more efficient for them to use IP telephony rather than have another network,” explains Almeshari.

Vendors also suggest that running voice over the LAN or WAN can help improve productivity and cut the costs of telephone calls, which given the size of Saudi and the geographic diversity of many enterprises’ businesses is a key benefit.

“For example, telephone charges between Riyadh and Jeddah are about 1.5 Riyals (US40 cents) a minute and you can imagine that companies, especially big ones, will pay 1000s and 1000s of Riyals every month for telephone bills. [As such,] the private sector has started to deploy voice, especially within branches, because it will save them large amounts on their call costs,” explains Nofal.

||**||Voice considerations|~||~||~|However, it is not just within the business sector that voice is becoming popular. Efonica, which specialises in VoIP and internet telephony solutions, reveals that many internet cafes are investing in its PC to phone products. Ibrahim Choueiry, director of worldwide sales with the vendor, explains that the large ex-pat community within the Kingdom is utilising these devices to make cheaper phone calls home.

“There is something like seven million ex-pats in Saudi Arabia. Most of them are Indians and Pakistanis, or from Middle East countries like Syria, Jordan, Lebanon and Palestine. They call their home land, but they are concerned with saving money, so they search for the cheapest rate and the best quality,” he says.

Despite the increasing popularity of running voice over networks, there still remains some confusion over the legality of doing so. Although VoIP is allowed within the LAN, some sources suggest it is not allowed over the WAN.

“Although the rules say it [voice] is not allowed over the WAN, in other words between branches or cities, because the country is so huge it is impossible to monitor all of the leased lines and the WAN connections. Also, most of the companies now use VPNs over the internet so it is very difficult, if not impossible, to monitor that,” comments 3Com’s Nofal.

Choueiry, however, questions whether using the WAN or internet to make voice calls is in actual fact illegal. He argues that the immaturity of voice technologies means that they have not yet been covered in the telecom laws.

“All the telephone laws are dated by 10 or 20 years, so this technology is not mentioned in any law. They say it is legal, they say it is illegal, but there is no legislation concerning this type of technology. Additionally, even if we [Efonica] didn’t [physically] exist in the market we could still sell voice [through the internet,]” Choueiry explains.

Consequently, VoIP and other IP telephony solutions are likely to become more popular as the technology matures and the awareness of the cost savings and efficiencies that such solutions can bring becomes more widespread. As such, enterprises are examining their core infrastructure to ensure that it is capable of supporting network convergence. This is leading many of the larger enterprises to invest in the latest horizontal and fibre cabling solutions.

“Enterprises are very aware of the latest technologies and the need to pursue them. So from the infrastructure side they are looking to maximise their bandwidth and are investing in fibre and Cat 6 on the horizontal side,” says Dominic Morris, country manager, connectivity solutions, Avaya Saudi Arabia.

||**||Vendor expectations|~||~||~|In contrast to the network infrastructure investments of private enterprises and government bodies, the public infrastructure within the Kingdom is still dogged by concerns over cost and quality. “The only problem that we are facing in Saudi Arabia is that the internet and VPN infrastructure is very expensive and weak,” says Sabbagh.

As a result, enterprises are finding that wireless solutions offer a practical and cost sensitive solution to quality and infrastructure concerns. “Wireless is taking off, especially as fibre is still very costly in Saudi. The solution is for people to go to wireless,” says Foundry’s Al-Najjar.

“In some areas, the infrastructure available from the local telco is not that great. It is very difficult for some companies in certain areas, and even in the big cities, to get connections like leased lines or alternatives between their branches. So wireless bridging between buildings — if they are within the 10-to-15 km range that the technology can support — is very attractive for these companies,” adds 3Com’s Nofal.

Wireless hotspots are also expected to emerge over the next couple of years, and in conjunction with the increasing demand and investment that is taking place throughout the Kingdom, vendors have high expectations for the Saudi market. As such, they are ramping up their own investments. For example, 3Com is in the final stages of establishing an office in Riyadh, Avaya has appointed a dedicated country manager for its Systimax range of solutions, while Foundry also has plans to augment its local staff as demand increases.

Given the vast geographical and IT market size, it is surprising that vendors are only now dedicating more time and resources to Saudi Arabia. The vendors, however, argue that this is a direct response to the maturity that they are only now witnessing in the market. Furthermore, they suggest that only by investing more heavily in the Kingdom can they expect to garner greater revenues and market share — a case of reaping what they sow.

“Having a dedicated team in country allows you to improve the education in the market, not only from the sales side, but also in terms of the [technical] support in the design, engineering and implementation stages. It is a commitment that we need to show to the market — that we are here and that we are prepared to invest to develop this market,” explains Morris.

“Over the next six-to-nine months we are expecting to quadruple our revenues in Saudi. Because we are investing in the market and putting in a team, we are expecting our business to improve and this is how we justified setting up the office in Saudi,” adds Fakhrany.||**||

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