Year in Review

The IT industry has had its share of troubles in the year 2004. However, it showed no sign of slowing down. The mega spending of the region’s governments and enterprises continued and ACN was there to track the key industry changes that took place. Vendors continued to tout faster, cheaper, better and all new improved versions of their ware... End users, however, were more interested in two things: TCO and ROI.

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By  Maddy Reddy Published  November 30, 2004

|~||~||~|The Middle East IT market continued to grow rapidly in the year 2004 despite the region’s turbulent political and business landscape. By 2008, the spending on telecom and IT services in the region, as well as North Africa, is expected to grow from approximately US$25 billion to between US$55 and US$60 billion. Mobile subscribers in the Middle East and North Africa grew to 38.8 million at the end of 2003, an increase of 40.1% on 2002, according to the EMC World Cellular Database.

The IT boom has also been fuelled by the initiatives of the region’s governments. Privatisation of state-owned enterprises is proving to be extremely lucrative for the Middle East. Apart from creating jobs and promoting efficiency among businesses, privatisation has also started to attract foreign investments. For example, with a trade volume of more than US$25 billion, the Middle East is now Singapore’s sixth-largest trading partner.

In the year 2004, the majority of hardware vendors continued to ship faster, cheaper and better products, while software vendors continued with their open-standards, cross platform approach with improved features and better integration with competing products.

End users however, were more interested in two things: total cost of ownership (TCO) and return on investment (ROI). They also focused on the basics — automation, training, security and cutting costs.

However, the trends that industry gurus expected to be the next big thing turned out to be not all that hot. Linux, outsourcing, wireless and utility computing remained on the back burner. Linux made some inroads and proved to be a viable alternative to enterprises seeking cost effective solutions.

As for outsourcing, organisations in the Middle East were not all that keen on sharing their data with third parties. Similarly, wireless usage remained low. Despite a few hundred public hot spots and limited corporate wireless LANs, the promise of a wireless enterprise with mobile workers remained low as well. Utility computing, despite its promises, also remained far from reality. Both vendors and customers in the Middle East struggled to find an acceptable proposition.

However, larger companies went up the value chain by actively reviewing or buying business intelligence (BI) solutions such as enterprise resource planning (ERP), customer relationship management (CRM) and supply chain management (SCM) to enhance performance. SMBs took to office automation, which turned out to be an untapped market for vendors.

The IT boom was further driven by countries such as Lebanon, Egypt, Bahrain and the UAE, which are all vying to better serve the greater Middle East region, thereby creating a self-sustaining market.

Issue: January 2004
Cover story: IT Managers of the Year

ACN’s first issue of the year started off with the news that Tejari, the regional business-to-business (B2B) market place, had finally practised what it had been preaching over the past three years by migrating its hosting facilities to Dubai Internet City (DIC).

On the software front, we reported that IBM had reorganised its US$13.1 billion business, so it could offer pre-built vertical solutions. Previously, Big Blue served most of its customer needs through a ‘one-size fits all’ approach. “We believe the Middle East market is demanding value add and we are now addressing that,” said Bashar Kilani, manager of IBM’s software group for Middle East & North Africa (MENA).

In terms of products, Sun Microsystems hit ACN’s business software section with the unveiling of its Arabised Java Desktop System (JDS), a pre-packaged corporate desktop offering that includes an operating system, office productivity suite and messaging applications. “By buying software that has been built to work together, customers not only reduce the head ache of integrating solutions, but benefit from out of the box solutions,” said Mehmet Iyimen, managing director at Sun MENA, explained.

To make sure that regional enterprises stayed up-to-date with compliance issues, both SAS and Captaris spent the first part of the year promoting their solutions to the region’s financial institutions, while EMC talked to us about its acquisition of VMWare for US$635.

The purchase formed part of the storage vendor’s information life cycle management (ILM) strategy and EMC argued that server and storage virtualisation could be merged so customers could run multiple operating systems and applications on a single machine virtually, thus helping IT managers consolidate their servers.
Networking giant Cisco Systems also hit the headlines in our

January issue following the introduction of its Network Admission Control (NAC) programme, which helps organisations remove viruses at the network level, rather than at the application level. The vendor also partnered with Trend Micro, Symantec and Network Associates.

Issue: February 2004
Cover story: Document Management

Having acquired most of their core enterprise apps over the past few years, we reported that IT managers set out to integrate these applications and the associated business processes in the February issue. This proved to be good news for enterprise application vendors such as IBM, Tibco and Microsoft, among others. “We rate the Middle East as a fast developing market for EAI – especially the financial services vertical in an emerging market,” said Julian Lloyd, vice president, corporate development, Mena eSolutions.

CRM consulting firm Peppers & Rogers talked to us about why it had set up shop in the Middle East, and how it would help local companies avoid the issues that have plagued companies abroad in terms of CRM investments. “The Middle East region is where Europe was about three years ago in terms of development of the market. It is still at a market preparation stage, with some exceptions such as banking. But it is beneficial for us to be here at this early stage,” said founding partner, Don Peppers.

According to Madar Research figures released that month, less than 2% of the region’s small-to-medium sized businesses (SMBs) had implemented specialised CRM applications, promising a huge market opportunity for ERP and pure play CRM vendors. “We estimate the CRM market, in the UAE alone to grow to US$90 million by 2008 with CAGR of 20%,” said Abdul Kader Kamli, the research firm’s president. Globally, Aberdeen Research predicted that CRM spending would hit US$17.7 billion by 2006, growing at an average annual rate of 6.7%.

In the February issue, we also reported that vendors were continuing to Arabise their solutions to cater to the needs of local businesses, especially in the aforementioned SMB sector. “Arabisation [will] be an issue as vendors go down lower in the market, which is why the likes of SAP are Arabising their applications as they dip into the SMB space,” said Torben Pedersen, senior analyst for software and services, IDC Middle East.

Acquisitions also remained a hot topic in February’s ACN as we covered Sage’s acquisition of ACCPAC for US$110 million, which beefed up the vendor’s product portfolio. We also covered Information Management Technologies’ new enterprise data recovery laboratory in Saudi Arabia, which has been built to help companies recover their data with class ‘A’ clean room.

The region’s governments continued to be the biggest spenders and drivers of IT in 1Q04 as more than four million smart cards were deployed in the Middle East through government-led projects. Such initiatives ensure a gamut of IT solution providers started to look at the Middle East as a lucrative market. “We are seeing a big demand primarily from the government, telecom, healthcare and the financial service sectors in the region,” said Joby Mathew, country manager at ACG MENA.

ACN’s Annual employment and training survey was also published in February. This year it revealed that the region was still suffering due to the vast number of semi-skilled IT engineers who weren’t in sync with the region’s demand for quality and quantity of IT professionals. The industry’s female employees, however, had a reason to smile because the number of women employed in the region’s IT sector increased from 11% to 17% in 2004.

Issue: March 2004
Cover story: Thin Clients

Business software stories dominated ACN in March as we covered the opening of Microsoft’s support centre in Egypt. The hiring of local developers also earned IBM some column inches as it ramped up recruitment at its own development centre in Cairo.

“The software development business in the Middle East is really healthy. As it grows so does the need to provide more local support to the developer community so they can compete on a international level,” said Nasser Khan Ghazi, .Net & platforms director at Microsoft MEA.

March also saw Bill Gates’ visit to the region, which was good news as it saw Gates reiterate the importance of the Middle East as an IT market. However, the software tycoon also confirmed disappointing news for his customers.
“It will be a few years from now before we ship Longhorn, our next generation operating system. We are not exactly sure when, because we are still inventing it,” he said. However, Microsoft did announce that it had opened up its source code to Bahrain as a part of its Government Security Programme (GSP).

The immature e-learning continued to have growing pains, as vendors coped with bandwidth issues and spend more time lobbying to the region’s governments and internet service providers (ISPs), still largely owned by state run telecom monopolies, to increase broadband penetration. “Broadband and internet penetration is definitely an issue for us, mainly for our consumer market,” explained Mohammed Hassoun, regional manager of Human Soft. “We are [still] hesitant to expand in a few markets here as users have complaints and resistance,” he added.

On the infrastructure side, we covered the increasing number of vendors that had begun to tout WiMax, or worldwide interoperability for microwave access solutions, in the region, despite the fact that WiFi has barely reached critical mass. Vendors did admit, however, that customers would have to wait for a while. “Right now, WiMax is still a maturing standard that chip set vendors are trying to sort out,” said Angelo Lamme, international product marketing manager for 3Ccom’s wireless division. “We don’t expect to see any WiMax compliant products shipping until 2005.”

Issue: April 2004
Cover story: Customer Relationship Management

Despite its promise to track performance levels of business processes, balanced score card software and performance management systems (PMS) turned out to be a case of premature arrivals in the enterprise space. Although we covered QPR’s release of an Arabised version of its product suite, and that the Al Masa Group partnered with Cognos to market the PMS solutions locally, uptake remained limited.

“Multinational companies have implemented such solutions as a global mandate. Few local companies operate on a professional level to implement them,” said
Ashraf Sheikh, sales and marketing manager, Inkture Consulting Group.

April also saw Dubai Municipality hit the pages of ACN as it unveiled its network operations centre and record its 300,000th online transaction since. Linux skills received an upgrade with vendors such as Red Hat, United Linux and Novell started offering certification programmes. However, technical superiority not withstanding, the open source operating system was caught in a catch–22 situation.

“Potential Linux professionals are thinking ‘I need to see jobs before spending thousands of dollars on certification and training,’ while enterprises are waiting to see [enough] Linux qualified professionals before they deploy Linux,” said Tewfik Zitouni, managing director of Open Net, Red Hat’s Middle East partner.

Although regional companies have been quick to adapt to some new technologies, the human element has sometimes lagged in the region. However, in April we wrote about Sun, which installed its own iWork hot desk offering in its local office to give its employees more flexibility while minimising office overheads.

Issue: May 2004
Cover story: Human Resource Management Software

Saba, the HR software vendor entered the market for its share of the US$28 million HRMS market in May with a promise to quantify and enhance employee competency through its enterprise-learning suite. With a customer portfolio of more than 260 multinationals, the vendor admitted to an uphill challenge in targeting local companies.”
The biggest challenge that we will face will be creating a mind set shift for key management of regional companies,” said Selim Edde, managing director of Mina Solutions which is Saba’s regional partner.

In the May issue, we also reported on HP’s efforts to court Linux users by shipping desktop PCs and notebooks loaded with Novell’s Suse Linux 9.1. Available on select number of models, HP intended to target the region’s cost conscious and expected less than 10% of its regional shipments to be Linux based. However, the vendor was quick to add that Linux would be an option not a replacement for vendors and customers alike.

“Will the Linux operating system ever take over Windows? If it ever happens it will be a long time down the line. In the meantime, Windows will remain dominant,” said Thomas Greve, desktops & workstations manager at HP Middle East.

Sun Microsystems also reappeared on the page’s of May’s ACN following its release of the latest version of its application server — the first major upgrade in nearly two years. Other vendors, including BEA with a new version of its Web Logic and IBM with 60 middleware solutions, decided to meet the market demand.

“Lot of customers are still looking at basic infrastructure components of the middleware. Only customers in advanced stages are reviewing these vertical specific solutions,” said Mazen Omair, WebSphere product manager at IBM MENA.
In an attempt to tap into security spending within the Gulf, which jumped 27% in 2003 to US$52.59 million, IMT introduced a managed security services offering by partnering with Symantec. When speaking to ACN, the security vendor claimed proactive end users prompted the move.

“Two years ago a lot of companies were against outsourcing their network security to a foreign company. But now [considering] the increasing complexity and issues of doing security internally, and after some education and market awareness, they are changing their mindset and planning to outsource at least part of their security operations,” said Mohammad Tahmaz, country manager for Symantec in Saudi Arabia.

Hitachi Data Systems (HDS) finally set foot in the Middle East in May as it established a direct presence in Dubai. AMD also arrived in the region, finally, by taking an office in DIC. However, with 64-bit chips fresh from the foundry and stronger partnerships with server vendors, AMD believed its prolonged absence helped it to arrive in better shape and plan its go-to-market strategy.

“This has taken us a little longer than we thought but we have been talking to the customers and we are now ready,” said Pierre Brunswick, regional sales director for Russia-CIS, Middle East & Africa.

Issue: June 2004
Cover story: E-government

Analyst reports pegged the enterprise apps spend in the region at US$133.77 million in 2003, while Madar Research estimated this number to increase to US$270 million by 2008 with 15% CAGR over the next four years — well above global growth figures. This may have also prompted Exact Software to invest in six more offices in less than 18 months, ramping up its presence through localised solutions.

“The figures are encouraging. They indicate healthy growth for the ERP market, but the region’s technology sector is one of the most dynamic in the world and there is potential for much more investment,” said Nizar Badwan, general manager of Exact software Middle East.

Security also dominated the June issue as spyware, phishing and identity thefts played on the minds of IT managers.
Vendors we spoke to tried to drive home the point that the region is as vulnerable as anywhere else in the world. “Security issues are not relevant for the US or Europe alone. It is worldwide as the internet has no boundaries…If someone gets hit abroad it takes as little as five minutes to be propagated here. It’s fair to say that the region is no more immune than anywhere else,” warned Samir Kirouani, pre-sales engineer, Trend Micro.

On the access side, WiFi adoption received a boost, as Batelco unveiled a series of 16 hot spots around the country’s airport, coffee shops and five-star hotels.

Issue: July 2004
Cover story: Supply Chain Management

After pulling out all the stops in the ERP space, SAP turned its attention to the EAI space. We covered the German vendor’s release of its Netweaver 2004 platform to the local market. SAP wasn’t alone. The past two years have seen SAP’s competitors such as Siebel launch universal application network (UAN) and People Soft with App Connect and Microsoft Business solutions with Biztalk 2004.

On the services side, we covered Emirates Bank Group (EBG), which spun off its service entity into a standalone company called Buzz Contact Centre, while Emirates Consulting Group (ECG) also featured as it tried its hand as a business process outsourcing (BPO) provider. “More and more companies are looking to outsource some of their non-core functions such as marketing, sales and HR,” said Mohamed Al Ali, ECG’s chief executive officer.

On the infrastructure front, vendors tried to dispel the promise of distributed computing by touting consolidation. Vendors including HP and Sun tried to convince customers that it was easier to manage all their eggs in one basket. Rich Evans, vice president for enterprise data centre strategy at Meta Group, stated that advances in virtualisation, workload and improved infrastructure management software will certainly make it a more appealing option to many end user organisations by 2008.

During July we also covered Apple, which extended its enterprise portfolio with the launch of a 64-bit Power Mac G5 workstation, Xserve G5 server, X-SAN in addition to a brand new version of its Unix-based Mac OS X, the Panther Server. The vendor recharged its fading enterprise visibility by targeting high performance computing customers from the oil & gas industry and server clusters.

Online, the much talked about application service provider (ASP) model made progress when Healthcare solutions (HCS) unveiled a portal service that facilitates the online booking of healthcare services by integrating with the clients existing health care information system all for a variable monthly subscription fee.

Issue: August 2004
Cover story: Change Management

In the summer issue of ACN we reported on Etisalat’s decision to consolidate two of its key business units, Emirates Internet & Multimedia (EIM) and Comtrust. Together, the two business units formed eCompany. “By creating a single unit we are positioned to maximise the efficiency of our operations, to exploit new opportunities that arise in the market, and to provide [quick] response to our customer requirements,” Ahmed Abdul Kareem Julfar, general manager of e-Company, explained.

We also covered Novell’s continued push into the open source sector and its launch of the Mono 1.0 platform. The open source development platform, based on the .Net framework, encourages cross-platform development by allowing Windows developers to work in a Unix environment. We also covered Intel’s efforts to ramp up its product line with the 64-bit Xeon, the vendor’s latest solution for workstation and server-oriented processing.

Issue: September 2004
Cover story: Outsourcing

In the September issue of ACN we reported that Epicor had finally completed its merger with Scala, which created the world’s largest independent mid-market ERP vendor. The deal, which was first announced in November 2003, created a company with annual revenues worth US$250 million.

BMC on the other hand, spoke to us about what it called the industry’s first comprehensive change and configuration management (CCM) offering, which it said would help organisations narrow the gap between the dynamic requirements of business and the fragile realities of the typical IT environment. What could be dismissed off as vapourware — software that is not yet written but marketed aggressively — could tackle the difficult issue of change provided the vendor lives up to its road map.

According to BMC, the new tool will be introduced by mid-2005. “There are examples of companies in the Middle East, where changes have been made [to IT environments] for good reason but without checking the impact it will have on the company,” said Tim Peck, general manager of BMC Software in the Middle East.

The September issue also carried an update on Omani e-business stalwart Oman TradaNet (OTN), which teamed up with eCompany to incorporate online settlement into its electronic data exchange. Although, e-payments have become a common place globally, its taken a while to reach the shores of Oman. “Earlier the country wasn’t ready for it, but now Oman is moving toward the acceptance of electronic payments. A year ago, or even earlier, it would have been a waste of resources and time, but now we [OTN] are ready for it, and Oman is getting ready for it too,” said Andrew Stafford, CEO of OTN.

Issue: October 2004
Cover story: Shared Services Centres

The long delayed Windows XP Service Pack 2 made its way to computers around the world in September and we covered the mixed reactions it received. UK-based security company Mi2g told us that only half of the IT departments in the world will use the automatic update feature to download Microsoft’s latest security initiative.

Another big story in the Autumn issue was Dubai’s foray into the much heated outsourcing debate. The emirate began positioning the Dubai outsource zone (DOZ) as a viable alternative location to neighbouring India. To be launched next autumn, DOZ is looking to compete as a global back office by embracing the factors that have made Dubai one of the fastest growing cities in the world.

“The very same advantages that powered Dubai’s growth in the traditional sectors will promote growth in the outsourcing sector — world class infrastructure, lack of red tape and tax, pro-business culture, the government’s proactive support and high quality services,” said Ismail Al Naqi, project manager, DOZ.

UAE’s Arab neighbour Jordan was no less proactive. Having doubled the size of its IT market in less than four years to US$177 million last year, Jordan positioned itself as one of the six Middle East countries with the highest minimum capital requirements, according to a World Bank report. We also reported on the region’s first gigabit public network, which Jordan has created to link 1.5 million students.

Issue: November 2004
Cover story: Outsourced Storage

The November issue of ACN was dominated by our roundup of the region’s largest IT trade show — the Gulf Information Technology Exhibition (Gitex). For those that couldn’t make it we shared with them the latest trends to emerge from the show, which revolved around the convergence of IT and telecom, network security and Linux. With over 800 vendors and more than 100,000 visitors, Gitex was definitely bigger if not better than ever before.

Also in the November issue was news of Computer Associates (CA), which established a direct presence in the Middle East. The software firm, which operated through a local partner until 4Q04, also opened a new call centre, and unveiled former Intel Middle East chief Gilbert Lacroix as its local vice president and general manager. He argued that CA’s investment would show immediate returns.

“Customers in the Middle East are very pragmatic. If you show them that you are committed to the region, then they believe in you. A good example of this is in Saudi. Where other multinationals are withdrawing staff, we are opening three offices there — this shows commitment to the region,” he said.

The region’s security scenario turned out to be as vulnerable as ever in November, despite increased vendor activity and security spend of more than US$52.59 million. According to Symantec, the Middle East suffers from the highest number of internet threats per capita in the world.

This was attributed to a reactive piece-meal approach to security, than being proactive and adopting a holistic approach. IDC confirmed Symantec’s suspicions. “Investment in security products continues to be dominated by efforts to combat specific threats rather than an understanding of the overall risks faced,” said Heini Booysen, senior analyst, IDC MENA.

The November issue also saw Microsoft make it onto the pages of ACN, as we covered the opening of its technology centre. Geared to replicate almost any enterprise environment, thanks to over 45 servers, a storage area network (SAN) and two terabytes of storage, Microsoft hoped Middle East customers would use its facility to mitigate risk by completing proof of concepts prior to investment.

Similarly, Wataniya Telecom, the Kuwaiti mobile service provider opened a US$1.5 million wireless centre in cooperation with Ericcson to allow developers can create mobile applications.

ACN also reported in November that the case for outsourcing was growing stronger, as 50 regional banks signed up with Eastern Networks Service Bureau (ENSB). “Due to compliance and operational pressures, banks are paying a lot of attention to their IT infrastructure. By outsourcing the implementation and management of non-core IT services, these organisations are able to focus on their core business,” said Hazem Mulhim, CEO of Eastern Networks.

Issue: December 2004
Cover story: IT in Education

Disaster recovery (DR) strategy remained a hot topic in the region, as evidenced by the December issue of ACN. A Dynamic Markets survey revealed that up to 75% of Middle East’s enterprises had a disaster recovery (DR) plan in order to deal with disruptions to their IT infrastructure.

While company concerns about unplanned IT downtime dropped sharply, regional businesses cited virus attacks, fear of natural disasters, potential terrorist threats and the benefits of changing technologies as the major reasons for investing in disaster recovery planning and solutions and reviewing them routinely.

Elsewhere in this issue, we have reported that Jordan Telecom (JT) has launched an international virtual private network (VPN) service, and that the majority of companies in the Middle East are considering implementing biometric technologies to increase workplace security, according to the findings of a survey commissioned by Hitachi Data Systems (HDS).

The study found that 55% of Middle East firms were considering the introduction of iris scanning and/or fingerprint recognition systems. This comes amid growing adoption of biometrics by border control officials. ||**||

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