An exchange of e-ideas

Tejari CEO Omar Hijazi, a key speaker at this month’s CIPS conference, claims the region could learn a lot about e-sourcing from the west — and showcase its successes in return

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By  Peter Branton Published  May 7, 2006

|~|Hijazimain.jpg|~|There are things happening in the West that we could learn from, says Omar Hijazi of the forthcoming CIPs conference.|~|While there are a number of firms now operating in the e-procurement space here in the Middle East, online marketplace Tejari is still arguably the region’s most high-profile e-player. This month also sees a high-profile e-sourcing and e-procurement conference take place in the region (organised by the UK’s Chartered Institute of Purchasing & Supply — CIPS). IT Weekly spoke to Omar Hijazi, who took the helm as CEO of Tejari last year, about the benefits this conference will bring to the region and about the future of e-procurement here in the Middle East. Let’s start by talking about the CIPs conference, where you will be one of the speakers — how beneficial to the region will this conference be? I think it’s a two-way exchange: the benefit to the e-procurement community here is there will be a presentation of best practices from all over the world — you have speakers from Europe and the US — and I think understanding what the leading-edge practices from the West are could be very interesting for the community here. The reverse exchange is we’re going to tell them what we’re doing here in the region so we’ll be showcasing the people involved in the eGovernment initiatives here and they can talk about what they have seen. We’ve also got the heads of procurement from the likes of Emirates Airlines and Jumeirah International, so the prominent firms here and what they are doing in the field of procurement. I think there are things that we are doing here that they’re not doing there and vice versa. That exchange [of ideas] is probably the biggest benefit and the fact that CIPs is here credentialises the level of penetration of e-procurement practices here in the Middle East. They are looking at coming here in a big way and begin opening a chapter in the Middle East. It just reinforces that strong e-procurement practices are in place here, so there are some leading initiatives here that the West could learn from. And there are things happening in the West that we could learn from. How strong is e-procurement here in the Middle East then? I think we should take public and private sector differently, first of all, as I believe they have very different ways of looking at e- procurement. For the public sector, I would say Dubai has been the innovator, Sheikh Mohammed made it a directive that everyone will have to develop e-procurement and develop software for e-procurement practices. So, the government of Dubai is probably one of the most advanced countries in the world when it comes to e-procurement and it probably skews everything else in the region. So from a Dubai standpoint, it is very advanced, if you look across the wider region, there are new government initiatives that are promoting e-procurement now, similar to Dubai. In Oman, they are trying to drive an e-procurement solution, in Qatar we see something similar. In Jordan, there is a new e-procurement law coming out. So you see the beginning stages across the Middle East, [of governments] saying we’re doing this; we’re decreeing it. Its good to actually engage with a very transparent procurement process because that is what you ultimately get — everybody can do faxes and papers and open sealed bids, all of that, but there is nothing like floating an auction on an internet market place and seeing suppliers bidding for it openly and awarding that business online. So transparency is probably the biggest single benefit, from a public sector perspective that you can show to the world. Obviously each procurement department will benefit from the savings because you get such a competitive bidding process because you can open up to the world. I can give you an example. We ran an auction on behalf of one of the largest banks: they were looking to buy a fairly significant amount of specialised computer paper. They floated the auction, they got about three or four responses from Lebanese suppliers. They weren’t very happy with us, so they called us up and asked if we could get some Dubai suppliers to bid for them. So we went off and got some Dubai suppliers to participate and they did. It turned out the most expensive Dubai supplier was 50% less than the least expensive Lebanese supplier. To have orchestrated that in the space of three or four days would have been impossible [without e-procurement]. So even now you are seeing this kind of cross-border trading where you will start seeing some sort of more level playing field because all of a sudden people can start competing more easily. That is all part of the free trade agreements that are being signed right now to promote this type of fair competition and open market, so from the public sector standpoint it is all about transparency, efficiency, free trade and open markets. What about the private sector? In the private sector, they’re driven completely by money, so it has to have some impact on the bottom line. Would you not say that governments should have a resp- onsibility for cost-savings, even in this region, where many governments do have large resources? Oh absolutely, and they have. The savings are great in the government departments, but you have to look at the even broader picture, because they have to look at these issues such as free trade, transparency and greater competition. So usually, when the mandate comes down, the departments will still save money because that is a natural benefit of e-procurement but there is a broader agenda in mind. For the private sector it is ‘can you save me money’ if it is the buyer and for the supplier it is ‘can you find me more sales through this channel that I couldn’t get before’. So you’ll see suppliers that are very active on our marketplace and others that are not because maybe they don’t have a particular category that is very active online yet. For a supplier they want to see more business, they want to be able to participate in more auctions and they want to be able to see that easier, lower cost of sales. This all sounds well and good, however similar things were said a few years ago in Europe, yet e-procurement has not taken off there to the extent that was predicted. Why has it not happened yet? Well, I think for our region the penetration has actually been very good. Between 2004 and 2005 the growth in auctions increased by 25% across the board. At Tejari we’ve done over US$2.7 billion in auctions over the course of our history. So we have seen growth. One of the reasons why you might not see as broad a penetration here, especially in the Middle East, is that you can’t just walk in and sell e-procurement. First you have to sell the internet, then you have to sell the advantages of e-procurement, then you can sell Tejari services. With some suppliers, we would have to get them an internet servide provider (ISP) connection, and then we can sell them the benefits. We have been working with Etisalat to promote internet penetration, but here in Dubai that penetration rate is about 50%. In Egypt, when I was there with some of its ministers a year ago, they were very happy that they had doubled internet penetration over a one-year period, but it had gone from 3% to 6%. So there are still some fundamental infrastructure issues that need to be addressed and then there are traditional barriers to how business is conducted. Tejari is now offering consultancy services. What type of services do you offer and how are you charging for them? We have a service now called Tejari Expert. It is a traditional consulting model, it’s a fixed price for a set of services. We have a consulting methodology that is fairly robust and there are four or five services within that such as spend analysis and vendor scorecarding. There’s also what we call event management, that’s where we do strategic sourcing engagements for a particular category. Let say they want media services. We’ll run a special auction for them, we’ll manage the whole auction, we’ll do a search for media services companies, help them evaluate and select vendors and then work with them to negotiate long-term deal with their vendors. How significant a revenue-earner is that for Tejari? I would say its about 5% to 10% so its not particularly significant for us as a revenue earner. I would say it is more of a value-added service. I think its important because a lot of procurement professionals are looking for additional expertise. That’s also where CIPS is important because we will be working with them to certify procurement professionals as well. We’ll work with them to take our clients and their people and provide a means to do more certification for professionals. ||**||

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