Regional services market remains on hold

The local services market is caught in a catch-22 situation, according to Meta, as services players are unwilling to invest and local companies remain reluctant to deploy.

  • E-Mail
By  Matthew Southwell Published  June 3, 2004

|~|vinnet_m.jpg|~|PricewaterhouseCoopers’ Vineet Chhatwal argues that the Middle East’s nationalisation programmes are holding back outsourcing.|~|The Middle East’s services market is caught in a catch-22 situation, according to Meta Group. It suggests that large services players such as IBM Global Services, EDS, HP and Unisys are unwilling to invest in the region as outsourcing remains minimal, while local companies remain reluctant to employ third party providers due to their lack of commitment to the Middle East. “The large names are not investing in this market, but then why should they if the demand is not there?” asks Stratos Sarissamlis, vice president of technology research services at Meta Group. “Currently, the market is fragmented. This means that each deal is small. At the minute it is the egg and the chicken when it comes to services,” he says. One of the key factors holding back the outsourced services market, according to Meta Group, is the short-term tenure of local IT managers as it means outsourcing deals have a shorter period in which to deliver value. “The Middle East has many expatriate CIOs with a three to four year lifecycle, which means the focus is on short-term benefits,” says Sarissamlis. “Fulfilling something over a three year period rather than ten years is short-term [thinking] and reaping the benefits in a piecemeal fashion. This does not work,” he explains. In turn, Sarissamlis believes the short-term thinking of local CIOs has influenced the service providers. Instead of investing in long-term relationships with a company they work to shorter delivery models and simply fly consultants into the region to complete projects rather than relying on local headcount. “All the engagements are being seen in an opportunistic fashion at the moment and companies are just looking at what they can invest to get the job done rather than build a long-term presence,” he says. Vineet Chhatwal, a director at Pricewaterhouse Coopers, also believes the local outsourcing market has not taken off as many had hoped. However, rather than point the finger at itinerant IT managers or unenthusiastic service providers, he suggests that government policies have stemmed adoption. “Companies cannot outsource too much if they are to meet nationalisation needs. It will also be difficult for the foreign companies to get government clients, for example, because they are under pressure to recruit locally,” says Chhatwal. While a lack of huge outsourcing deals certainly suggests that both Sarissamlis and Chhatwal are correct, HP believes the market is growing. The computing giant already boasts of numerous engagements for its professional services division and says more are imminent. “I’m not sure where Meta is getting its numbers from but we have been extremely successful with regard to our services penetration in the market regionally. We are seeing significant growth and taking market share within each of the regions in which we operate,” says Ian Jagger, marketing manager for HP services in the Middle East. “We have a head count of over 300 in our services division. There is a core of about 200 and about 100 contractors. We are the largest services company in the Middle East and we can also call on our local subsidiaries and there are 65,000 [staff] worldwide,” he continues. Furthermore, Jagger argues that while they may not be household names in the services arena, there are a raft of systems integrators operating within the Middle East that make up for the relatively small teams housed locally by international service providers. He also points to the growing influence of offshore providers such as Wipro. “There is a services presence in the market and to call some of the local companies just systems integrators does them a disservice due to the consultancy they offer. There is also an increasing competition coming from offshore sources. We face competition in each and every engagement we are working on and we welcome that. At the coalface we are finding strong competition,” Jagger adds. While the reality of the Middle East’s services market probably lies somewhere between the HP and Meta view, the fact that the suggested absence of companies draws such opposing views points to a market segment that is drawing increased attention. Last year’s figures from IDC certainly back this up for the UAE, as they revealed an IT services market that is slated to grow from US$234.3 million in 2002 to US$408.1 million by 2007.||**||

Add a Comment

Your display name This field is mandatory

Your e-mail address This field is mandatory (Your e-mail address won't be published)

Security code