The right way to ride the IT wave

HP is one of the largest IT firms in the region, employing nearly 700 staff. Joseph Hanania explains how the company’s investment in people has put it in an ideal position where it can create markets.

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By  Peter Branton Published  October 1, 2005

|~|Hanaiabody.jpg|~|Joseph Hanania, managing director of HP Middle East, says the firm wants to create an ecosystem of opportunities.|~|HP is ready to ride the wave of unprecedented demand that major IT vendors are witnessing in the Middle East. With its extensive product and solutions portfolio targeting customers of all sizes, the company is on course to hit record Middle East revenues in its current fiscal year and break the US$1 billion sales barrier in the region for the first time. Managing director for HP Middle East, Joseph Hanania, leads a team of almost 700 staff — making it one of the largest IT firms in the Middle East. He talks to IT Weekly about HP’s intentions to ride out the boom in IT spending in the region and emerge in a strong position after this period of growth. What are your views on the current IT spending climate in the Middle East? Is the growth we are experiencing sustainable? I believe that the Middle East is going through a growth phase, the likes of which it has not witnessed in the last 40 to 50 years. If you couple that with high oil prices, then all the ingredients are in place for the IT market to grow. I don’t know how sustainable this will be, but everyone is trying to ride the wave while it happens. This includes companies from many different sectors. We have seen telcos and banks in the region producing record profits and this is creating investment momentum. Some people are saying that the financial markets in the Middle East are in a bubble phase and that it will burst. I tend to believe that too, and a few people will be hurt when it bursts. It will be a little bit ugly, but I believe the rate of growth will dip down, not change direction completely. The investments that HP has made in human capital, knowledge and infrastructure, and everything that exists around these areas, are the best way to ride that wave. HP has the ability to move faster and that is being reflected in the numbers that we are producing in the region. So how strong has the growth been in the Middle East for HP? We finished the first half, ending April 2005, with historical records in terms of revenues and profits in the Middle East — top line and bottom line growth. That was very good and it was a reflection on the investments that we have made and the performance of all the HP staff. We have a team of 700 people now in the Middle East and every single person deserves credit for those results. Will you continue to expand the head count given what you said earlier about the ‘bubble’ in the Middle East? There have also been global head count reductions announced at HP by new CEO Mark Hurd. HP announced that it was reducing its worldwide head count and I think that Wall Street looked on this in an extremely positive way. Since Mark Hurd became HP CEO in April, Wall Street has seen much more value in HP and this has been reflected in the stock price. They had been waiting for HP to dust off some of its plans and actually do these things. The decision to reduce the workforce had been taken a long time ago but not actually executed. Mark Hurd is simply following what needs to be done, and in terms of reducing the workforce, HP is doing this in an incredibly respectful and fair way. HP is making sure that people are taken care of and receive the right compensation, the right recommendations and time to find new jobs. I have never seen a company approach this in such a professional way and HP has shown that it is very conscious about the welfare of its staff and also its social responsibilities. So how do these global decisions impact the Middle East operation of HP? Will there be any cutbacks in headcount here? I don’t think so, and it is because of the strategy of investment and growth that HP has in the Middle East. We will not invest in additional staff until the numbers are made. In other words, I do not invest on promises, I invest on actual data. Let’s say we have a person that is supposed to produce X amount in revenues. Now he is bringing in X plus Y but we will not bring in a new person until the person is actually bringing in X plus X. I don’t want to bring in staff and then take them out of the organisation a year later — that is not a sound business strategy. Our record in this region shows that we have not brought people in and then been forced to take them out through a workforce reduction. Some people are taken out of the organisation because of performance-related issues, but we have to do that. [And] when we do this, you can be rest assured that we have tried everything possible to help them first. We don’t invest in people unless we know the business is there, and this is all about looking at long-term as opposed to short-term. HP creates markets, it does not just respond to the market. It is all about how we can create an ecosystem of opportunities that, in turn, drive additional opportunities. What do you mean by ‘creating markets’? HP segments the market into three distinct areas: consumers, small-and-medium businesses (SMBs) and enterprises. We have workforce targets and go-to-market models targeted at each sector. At the enterprise segment there is further subdivision into specific industries. Telecoms is one vertical in this region that is critical for growth. We also work in various other sectors such as financial serv-ices, the public sector, oil and gas, travel and tourism, and also in the manufacturing industry. We offer enterprise customers a group of solutions, methodologies, architectures, implementations and designs that can be deployed over a period of time, allowing them to embark on the journey towards becoming an adaptive enterprise. As customers start off on this journey, they start seeing more efficiency, speed, security and availability in their IT systems, and most importantly, start seeing a reduction in costs that demonstrates a real return on IT investment. This level of return improves as customers travel further down the adaptive enterprise route and HP can prove it. How does HP change its approach to reflect the levels of maturity of each market in the Middle East? How do you approach a market that is only now starting to open up such as Iraq? We already do run rate business in Iraq — PCs, notebooks, low-end servers, printers and cameras for example. This continues to increase month-by-month. As far as enterprise projects in Iraq, we have heard a lot, engaged in many discussions but there have been no decisions yet. Much of this is to do with budgets and the fact that ministries are still being formed. Run rate revenues are increasing and we are giving this business all the support it requires. We are pleased with the partners we have appointed and they are delivering the services required around the products. In the enterprise space, we are making sure that we are engaging with key customers. There have been some substantial deals in the Iraqi telecoms space and HP counts all three operators as customers. This is as close to enterprise projects as you get in Iraq. There is a huge project pending for the central bank, but nothing has been awarded or decided yet. Do you expect overall IT spending in the Middle East to continue climbing? And how does HP’s growth in the region reflect this trend? The total market size for 2005 as estimated by IDC is US$5.6 billion. Last year, the market was worth about US$5.1 billion so we are talking about a growth of 10%. In the first half of our fiscal year ending April 2005 in the Middle East our sales growth was 29%. Basically, we achieved three-times the overall market growth rate and this shows the confidence level that the customers have in terms of what we are doing. So, is HP Middle East on course to crack the US$1 billion sales barrier for this year? I will give you an estimate. For the financial year ending October 2005, I think HP Middle East will end up at about the US$1.2 billion to US$1.3 billion sales mark. In a market worth US$5.6 billion, that is not a bad place to be. ||**||

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