Evolving Emirates

The United Arab Emirates provides both vendors and end user organisations with ample opportunity to expand through the careful use of IT.

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By  Matthew Southwell Published  January 25, 2004

|~|jyoti.jpg|~|There is more B2C than B2B activity in the UAE, according to Jyoti Lalchandani.|~|The vision of General Sheikh Mohammed bin Rashid Al Maktoum, Crown Prince of Dubai and UAE Defence Minister, is continually cited as the main reason for Dubai’s dash into the knowledge economy. While the auspices of His Highness have certainly driven the Emirates’ e-government initiative and helped create a tax free haven where companies from abroad can operate in specific free zones, the great man himself cannot establish, operate and grow every technology company, nor deploy, manage and administer each user implementation. Rather, those working within Dubai and the UAE as a whole have bought into Sheikh Mohammed’s vision and used it as a catalyst to propel themselves into the digital age. As such, the local market remains a hotbed of information technology activity as companies large and small invest in technology to automate their operations, cut costs, enhance customer services and differentiate themselves from the competition. “The UAE is a very service driven society and the services offered here, when compared to what is available elsewhere in the region, show a very clear difference. [The UAE] has an economy that is so service driven that it is always going to invest more in IT to get the edge,” says Jyoti Lalchandani, regional director of IDC Middle East. As a result of this continued adoption, vast numbers IT vendors have established a presence in the local market and a quick tour around Dubai Internet City (DIC) reveals both the big names in the industry and a host of smaller, more specialised technology companies. Each of these operators are here for two things — to tap into the country’s continued growth and leverage its hub status to target the rest of the Middle East. “With its strong infrastructure, the emphasis on IT by the government and large enterprises, in addition to its role as the IT hub of the region, the UAE remains a focus market for most IT vendors in the region. The country has proved to be an early adopter of technology not only in the region, but also at the global level,” says Ned Jaroudi, Intel’s regional enterprise manager for the Middle East, Turkey & Africa. The eagerness of the UAE’s end users to invest in technology early on means the country’s IT market is rapidly maturing and becoming more sophisticated. Evidence of this comes not only from the number of marquee projects carried out, but also from the hard facts surrounding its spending patterns. According to Lalchandani, a mature market spends more on software and services while hardware becomes a replacement market. And, although 65% of the UAE’s billion-dollar-plus IT spending still goes on hardware, it is software and services that is witnessing the highest growth rates. “In the UAE there is a very high share in software and services and we see more growth in spending in this rather than hardware and infrastructure. Most of the large businesses, and even many of the small-to-medium sized businesses (SMBs), are well equipped with hardware and we are seeing a shift to software and services. This trend tells us that the market is maturing and that companies are looking to invest in other areas of IT,” Lalchandani explains. In relation to the rest of the Middle East, the UAE boasts one the best infrastructures available and, despite its monopoly status, Etisalat continues to unveil a range of new services. Currently, the PTT is spending a significant about of time and energy pushing its broadband connectivity to users through its Emirates Internet & Multimedia (EIM) division. And, so far, the programme appears to have garnered a certain level of success as the number of SMBs adopting its BusinessOne broadband packages rose to over 4000 last year. Elsewhere, the operator’s higher end broadband package, Al Shamil, also continues to do well and local vendors are confident that such adoption will lead to greater investment in IT. “Today, the UAE’s infrastructure is one of the most developed in the Middle East, making the UAE one of the highest Arab countries in broadband and internet penetration rates,” says Jaroudi. “We believe that the introduction of broadband is one of the most important advents in the infrastructure because it enables and drives new usage models in the enterprise, SMB and consumer sectors,” he adds. Although most users are publicly more than satisfied with the current infrastructure available within the UAE, others feel the status quo needs to change if the country is to take its next steps in terms of ICT development. For instance, Lalchandani believes a competitive environment would see even more packages on offer and lower prices.||**||Infrastructure|~|tim.jpg|~|There is a market for advanced software in the UAE, says PeopleSoft’s Tim Caulkett.|~|“The UAE’s infrastructure is definitely going to get better and competition is the key to this,” he says. “If the telecom sector opens up then we are going to see a lot more investment in IT and new technologies. If you look at other parts of the world the regions that are growing are the ones that are open. Here in the Middle East competition will drive investment,” Lalchandani explains. On the end user front, virtually all enterprise users within the UAE have erected a solid network infrastructure comprising of wide area networks (WANs), local area networks (LANs) and often other, technologies such as virtual private networks (VPNs). As such, these companies are now looking to leverage investments and extend network capabilities by embracing converged technologies such as voice over IP (VoIP). “Convergence is now both mature and proven. Many organisations across all industries have moved to a converged voice and data network. This year the growth in converged services, such as IP telephony, wireless, security and software applications, will ensure continued investment in network architecture,” says Ghazi Atallah, general manager, Cisco Systems Middle East. “Almost all vertical sectors have taken converged infrastructure as an effective way of increasing efficiency. Those fastest to adopt new technology include government, manufacturers, hotels and hospitality, universities, banks and the oil industry,” he adds. In addition to convergence, the adoption of wireless local area networks (WLANs) is also on the up as enterprises look to boost productivity and allow users to access information on the move. Currently, it is the UAE’s big businesses and the education and hospitality sectors that are driving wireless adoption. “At the beginning of 2003 there were only a few hotels and businesses with [a wireless] service. But today you can access the internet through WLANs at a large number of exhibition halls, sports stadium, hotels and internet cafes,” says Atallah. Although the UAE’s hardware market is maturing and end users are beginning to settle into established three or five-year buying cycles, there is still a fair amount of innovation and early adoption on view. Currently, the overriding trend is for mobility, with organisations arming their sales forces with the tools they need to do business on the move and service customers with data at their fingertips. “The UAE is showing strong adoption of Centrino, and we believe that this will increase in 2004… We’re expecting demand for the latest and greatest technologies to continue in the UAE, not only in the server segment, but also for desktops and notebook computers. We expect mobility to be one of the leading trends this year,” says Jaroudi. “The UAE [has] status as a serious market for advanced hardware… [and we] remain successful in the supply of… our innovative mobile computing products,” adds Philip Ashkar, director of sales & marketing at Acer Computer. While this adoption of mobile devices is taking in everything from ruggedised handhelds through to smart phones and PDAs, the undeniable king is still the notebook. IDC’s market figures for 3Q03 support this view, as they reveal year-on-year growth of 49.7% for laptops. “The UAE market has a more mature market and we are seeing a greater demand for mobile computing. There has been huge growth in terms of shipments and we expect 18% growth for last year, despite there being the war,” says Omar Shihab, research analyst, IDC Middle East & North Africa. “A number of corporates are opting for mobile computing rather than desktops and they are replacing desktops and moving towards the mobile office. The UAE stands out in terms of the whole region for notebook shipments,” he adds. Another key driver in the UAE’s mobile market is the thirst for hardware displayed by home users. Despite having a PC at home and one at work, many still want a mobile computer because it is the latest piece of kit one should own. This, in turn, has an impact on the corporate market as IT managers either choose, or are badgered, into incorporating such tools into the enterprise environment. “When people start adopting technologies at home they also want to use it at work. This in turn may drive their colleagues to buy it and the company will then look to have a structure that can optimise that usage,” confirms Nasser Shashaa, research analyst, IDC Middle East & North Africa. At the opposite end of the hardware segment, the UAE’ server market is also growing. Currently, the number of PC servers being sold is on the rise, with IDC reporting year-on-year growth of 66% for 3Q03. While growing IT investment from SMBs that have little need for big iron servers is a key factor in this growth, the growing adoption of Intel-based servers in the UAE is also a factor. “The Intel Itanium processor has been recording a healthy success in the UAE, especially in the energy and government sectors, [and] we are confident that we will keep on seeing adoption in the UAE for this new platform,” says Jaroudi. Moving forward, while end users will undoubtedly continue to adopt the latest devices such as tablet PCs and so on, SMBs will follow enterprises by establishing set buying cycles. However, due to the UAE’s desire to stay ahead of the curve and adopt the latest technology, it is unlikely that these cycles will slip. ||**||Software|~|hari.jpg|~|There is a demand for office automation in the UAE, says ICICI Infotech’s Hari Padmanabhan.|~|As the UAE technology market matures, spending on software and services is increasing. In terms of the latter, the market is still dominated by deployment & support services, along with system integration. However, other market segments are starting to boom as value added services such as IT training and outsourcing will contribute heavily to a total service market value of US$408.1 million by 2007. On the software front, the UAE market is split into two distinct divisions. On one hand there is the enterprise sector, in which most operators have mature enterprise resource planning (ERP) implementations and are now looking at extended ERP functionality, and on the other there are SMBs that are only now beginning to leverage back office automation. “The enterprise market for ERP is saturated, as it is for security and other areas,” confirms Lalchandani. “The SMB space is the market that is growing, which is why it is very important for vendors in the UAE to look at their channel structures because that is the way to penetrate many of the SMB accounts in the UAE,” he says. To cater to the SMBs’ apparent hunger for ERP applications, a number of software vendors are targeting the UAE’s smaller companies with cut down versions of their full scale enterprise applications or offering specific midmarket packages. For instance, of the tier one vendors, Oracle, PeopleSoft and even SAP are touting SMB suitable applications, while the likes of Sage and Microsoft Business Solutions are trumpeting their midmarket roots. Locally, other players are also having an impact on the market with Emirates Computers developing a customised Oracle ERP for small businesses and ICICI Infotech touting its Orion package. “Growth areas for IT in the UAE include implementation of right sized, quick to implement ERP solutions that meet the specific requirements of the business and the region and are well supported locally,” says Hari Padmanabhan, executive director & president of ICICI Infotech. “There is also growth in demand for solutions that increase the level of office automation and those that integrate office automation with document management,” he adds. For larger enterprises, the focus is very much on applications such as customer relationship management (CRM), supply chain management (SCM) and business intelligence (BI). Each of these applications allows users to leverage ERP investments and mine the data they have already gathered to better understand and serve customers. “The UAE is certainly a mature market, but as with all mature markets, that means more opportunities in terms of the supply of advanced technology,” says Tim Caulkett, PeopleSoft’s regional director for the Middle East. “Sectors such as retail, construction and real estate continue to experience strong growth, which means an expansion in the market for technology to support those industries,” he adds. The e-business thrust within the UAE has undoubtedly been business-to-consumer (B2C) as the government continues to add service after service to its online portal and banks build up basic internet offerings into fully fledged suites. Furthermore, this rapid adoption appears unlikely to grind to a halt anytime soon as Dubai eGovernment continues to invest in not only the services themselves, but also in education and marketing programmes. “Dubai eGovernment, as the central gateway through which various government departments deliver their eServices to the public and businesses, has a strong role to play in the growth of e-commerce,” says Salem Al Shair, director of services at Dubai eGovernment. The government’s enthusiasm for the web has spread throughout the country and a growing number of local sites are emerging to provide Arabic content. Additionally, e-learning has begun to take off as users turn to the internet to learn not only about technology but other business-focused skills. “We expect to see more pick up of e-learning in the coming couple of years,” says Jaroudi. However, while B2C e-business has boomed, business-to-business (B2B) e-commerce appears to be lagging somewhat. According to Lalchandani, this is due to the strength of existing, offline business relationships and deep seated cultural attitudes towards doing business. “In terms of B2B there is far less happening and there are not that many [companies] doing online procurement. It is still very traditional and B2C is where the UAE action has been so far,” he says. However, this could be changing as the country’s pioneers continue to lead the way. For instance, Tejari is expanding throughout the region from its Dubai base and end users are beginning to open up their back office systems to facilitate easier and more efficient communication with customers and suppliers. “No company, supplier, dealer or distributor can afford to stay out of it. For companies, it is not enough to have a web site; it is critically important to join online marketplaces,” says Al Shair. Moving forward, it will be the acceptance of the internet as a valid business tool by the UAE’s SMB segment that will drive B2B forward. Furthermore, as these companies buy into the online world they will require the necessary hardware, software and infrastructure. As a result, the UAE market will continue to grow and investment will drive innovation as SMBs join enterprises as mature users of IT. Between them, both the large and small businesses with the country will ensure the Emirates continue to evolve. ||**||

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