Connected Kingdom

Although Saudi Arabia was undoubtedly late in embracing the internet, the Kingdom is now making up for it with an increasing number of end users and companies getting online and reaping the rewards of doing business via the world wide web.

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By  the Gitex Times Staff Published  April 13, 2005

|~||~|Entering the Saudi Arabian market has been a priority for business-to-business online marketplace Tejari for sometime, says the firm’s chief executive officer, Sheikha Lubna Al Qasimi.|~|Earlier this year, the general manager of Saudi Arabian Airline’s public relations department, Qahtan Balkhair, announced that the airline was to install an internet service system on one of the company’s 747-468 aircraft. The system is on a six-month trial and, should all go well, the internet and e-mail services will be installed on the majority of Saudi Airline’s aircraft and made available to passengers. Such an initiative would be impressive anywhere in the world - Boeing only started looking at building WiFi connectivity into its airplanes late last year - but the fact it is happening in the Kingdom is cause for celebration. After all, this is the country in which internet access was only introduced in 1994, and only then to state academic, medical, and research institutions. Even when internet access was extended to the rest of the population in January 1999, expensive access rates and slow connection speeds curbed adoption - so much so that even as late as last year, Arab Advisors Group was bemoaning the Kingdom’s poor internet penetration rates. It stated that Saudi Arabia’s internet penetration rate was a paltry 6.7% by the end of 2003. Various initiatives, such as a repeat of Egypt’s free internet model, were considered in an attempt to increase internet usage, but few saw the light of day. But today the story appears to be different. The total number of users in the region will grow from 8 million to 25 million by 2005, according to Madar Research Group, and the increase in internet usage is set to drive demand for all related hardware and software. In fact, several internet dependent technology sectors look set to boom. The first of these is business-to-consumer electronic commerce, better known as B2C e-commerce. The GCC as a whole is set to witness a boom over the next few years, crossing the US$1 billion mark by the year 2008, with Saudi Arabia taking the lions share of these revenues. Of the total B2C e-commerce transactions, more than one-third will be accounted for by online bookings for airlines and hotels. Other popular categories for online shopping include books, clothing, gifts, flowers, electronic products including music CDs and DVDs, computer software and hardware. “Globally, B2C e-commerce has seen remarkable growth, despite the setbacks suffered by a few players. Independent studies estimated that the global B2C e-commerce market would be worth more than US$428 billion by the end of 2004,” comments Diyaa Zebian, regional manager in the Middle East & Egypt for eSolutions BEA, which is hoping to persuade Saudi end users to base their IT environments on its application infrastructure software. “With secure payment systems in place and the respective governments’ efforts to accelerate internet penetration, the GCC and Saudi Arabia in particular is poised for a dramatic growth in B2C transactions,” he adds. Either just behind or ahead of B2C e-commerce, depending on which figures are to be believed, is business to business (B2B) e-commerce, which is also taking off in the Kingdom. Evidence of this comes from a number of sources, including online focused projects such as the Council of Saudi Chambers of Commerce and Industry’s (Saudi CSCCI) move to process documents via the web and Saudi Aramco’s well known move to get suppliers interacting with the oil giant via the web. Another indicator of Saudi Arabia’s willingness to embrace B2B e-commerce is the arrival of Tejari in the Kingdom. Announced late last year, the Dubai-based online marketplace’s entry into Saudi Arabia is being carried out in partnership with the Al-Ghabban Group. “Tejari has now reached the operational maturity and critical mass of trading partners necessary to enter the Saudi Arabian market, the largest in the Middle East for e-business and e-government services, as well as related internet hardware and software... The Saudi government has already undertaken significant steps to incorporate e-government into its services. It is now Tejari’s job to communicate effectively to both the public and private sectors in the Kingdom the numerous advantages of e-procurement, including the reduction in paper-based tasks, faster time to market, enhanced customer awareness, and increased profitability,” says His Excellency Sultan Bin Sulayem, chairman of Tejari. “Tejari has been at the forefront of e-business and online procurement in the region for the past four years and entering Saudi Arabia has been among our top priorities. Our objectives in the Kingdom will focus on delivering more key information and trading opportunities for local businesses while creating new services and areas of market reach to serve their interests,” adds Sheikha Lubna Al Qasimi, UAE minister of economy & planning and CEO of Tejari. Prior to finalising their franchise agreement, Tejari and the Al-Ghabban Group conducted intensive feasibility studies on the potential for online procurement in the Saudi market. The duo believes the industry sectors in the Kingdom most likely to adopt the online procurement model are construction, banking, government, and technology. “Middle East businesses are proving increasingly receptive to the online procurement model and Tejari itself - especially once they take into consideration the cost-savings and improved efficiency that this business process delivers. As we have seen recently in Kuwait and Iraq, the combination of Tejari’s e-procurement model and the expertise and experience of the Ghabban Group is set to significantly change the way the Saudi business community buys its goods and services,” says Mohammad Al-Ghabban, chairman of the Ghabban Group. Just why exactly the Saudi Arabian internet market is starting to look healthier is not easy to fathom. None of the initiatives embarked upon by a single entity have been so impressive as to boost penetration by themselves. Instead, it is a combination of factors that have got more Saudi Arabians accessing the internet and using it for B2C or B2B e-commerce. Having said this, the fact that the Saudi Arabian internet market is maturing covers the two key elements that have driven change - reduced costs and greater access options. In terms of the latter, the growth of internet cafés in the Kingdom of Saudi Arabia is a good example of alternative access points being sought out and delivered to users. Rather than invest in a PC and a dial-up line at home, users can instead access the web from a café. In fact, Madar Research estimated there were as many as 105 such outlets in late 2002 and that the number will continue to increase. With regard to reduced costs, the fact that the Kingdom was later than many other markets in the Middle East region to introduce the web to users means it has taken longer for prices to come down. It was only in May 2002 that King Abdul-Aziz City for Science and Technology (KACST), which acts as an intermediary in international bandwidth provisioning, reduced its charges to ISPs, which were then able to pass savings on to subscribers. However, it then took another two years for these charges to be reduced again. “Although Saudi Arabia has a relatively high PC penetration per household, widespread use of the internet has been curbed by excessive access rates and slow connection speeds,” says Paul Budde, founder of Paul Budde Communication. “However, it is now predicted the number of users will reach 3.8 million in 2007.” Cost is also being reduced for users by companies driving adoption through certain offers. For example, in April last year National Technology Group launched OneCard, the Kingom’s first prepaid online card allowing users to access ISPs, communication services, mobile services, subscriptions and paid content from the web. Saudi Telecom has also made getting connected to the internet easier for Saudis with its Easynet service. Easynet allows Saudi users with a telephone landline to connect to the internet, using any ISP. In the past would-be surfers in the Kingdom who wanted to get online had to first purchase an internet card from their preferred ISP, before setting up an account on their PC with the proxy and port addresses, and the relevant connecting number. Easynet simplifies the entire process as users now simply need to reconfigure their PC settings and change the connecting number to that of the ISP they wish to use. Although figures measuring the impact Easynet and similar initiatives have had on the number of Saudis using the internet were unavailable at the time of going to press, it is clear that Saudi internet services providers are not only looking to drive demand but deliver services to an increasingly web-hungry end user population. Should this trend continue, the high figures predicted for B2B and B2C adoption in the coming years should be easily achievable and Saudi Arabia will become one of the most wired places in the region.||**||Saudi Arabian internet service providers|~||~||~|Internet service provision is the most competitive sector of the Saudi telecoms industry. It was reported in mid-2003 that, following consolidation in the market, there were 23 ISP licence holders, of which 21 were operational. However an earlier report in 2003 stated that although 25 licences had been issued, only 15 ISPs were fully operational. A further report in June 2004 quoted a figure of 22 ISPs. Whatever the precise number, the market is dominated by a handful of the larger ISPs. Prepaid internet access cards are common, making precise subscriber numbers difficult to ascertain. Only recently has post-paid access become an option as STC had planned to offer a post-paid service in December 2004 under the brand Easynet. Atheer: Atheer is the trade name for the ISP belonging to Batelco Jeraisy and was established in 1999. Batelco Jeraisy is a joint venture between Bahrain Telecommunications Company (Batelco) and Jeraisy Group. Jeraisy Group is a holding company with subsidiaries providing office furniture, equipment and materials, telecom and IT equipment and solutions. AwalNet: AwalNet was created in April 2002 after three ISPs merged together, claiming to be the largest with more than 100,000 subscribers representing over 20% of the individual market and serving in excess of 400 private and public sector companies and organisations. Cyberia: In July 2002 TRInet, OgerTel, Dallah Telecom and Nournet signed a merger agreement creating Cyberia, a new holding company. Cyberia also operates in Lebanon and Jordan. Nesma: Nesma Internet is owned by the Nesma Group (National Engineering Services and Marketing Company). ISP-Planet ranked it ashaving the largest number of subscribers in early 2003. Sahara: Sahara Network was established in 1989 as a small hobby Bulletin Board Service (BBS) to serve IT professionals. By 1994,it was the first company in Saudi Arabia to offer internet and e-mail services to the public. Sahara was approved and licensed as an ISP in mid-1998. Saudi Internet Company: A merger of seven major local companies, Saudi Internet Company (SOL) is one of the larger ISPs. Services include internet dial-up access, leased line internet access, web hosting services, web design, intranet services, corporate training and e-mail/internet applications. SaudiNet: Operated by STC, SaudiNet serves corporate customers and small and medium businesses. Zajil: Zajil claimed to be among the top five ISPs, with more than 50,000 subscribers, in mid-2002.||**||Saudi e-learning market grows by 33%|~||~||~|Saudi Arabia’s US$30 million e-learning market is set to expand by 33% annually over the next five years and hit US$125 million by 2008. This growth will come, primarily, from the Kingdom’s ongoing investment in education and vocational training, according to Madar Research. Other key drivers include government-led initiatives and education projects, some of which are already in various stages of implementation. Some universities and colleges in Saudi Arabia have already reached impressive levels of e-learning adoption. For example, King Saud University in Riyadh has introduced e-learning into its curriculum, while King Abdulaziz University has deployed an e-learning solution to benefit its distance education students as well as those attending classes. The university is also home to the largest electronic library in the Kingdom with 16,000 e-books. King Khalid University’s e-learning pilot project is expected to go on stream in the 2005-2006 academic year, while the Arab Open University offers 12 e-learning based courses using the FirstPlace e-learning solution of the UK Open University. ||**||

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