Room for Improvement

The UAE remains a trailblazer in the evolution of the wider Middle East IT market but as the major IT players flood into the country they are facing many new challenges – a staff shortage, lack of space and extortionate real estate. Duncan MacRae asks how these problems are being dealt with in order to continue the IT revolution.

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By  Duncan MacRae Published  February 1, 2007

|~|200-Sudihir-Dungarpur,-vice.jpg|~|Dungarpur: The UAE is an extremely opportunistic market that serves as a launchpad for Midde East growth.|~|In recent times the UAE has worked tirelessly to earn the tag of most technically advanced nation in the Middle East region.
Despite the vast number of IT vendors based in the country, and with many more clamouring to set up camp in the likes of forward-thinking Dubai, there are certain industry commentators who warn there is still a long way to go.

The International Computer Driving Licence foundation (ICDL), a vendor-neutral digital literacy programme, feels although some progress has been made in the country over the years it is still nowhere near enough.

Jamil Ezzo, director general at ICDL GCC, says: “Dubai IT is fast-growing, however, IT in the UAE is not very advanced. We still have a long way to go in terms of creating a digitally literate society.

“We still have the unemployed women by choice, for example. We have senior citizens, we have people with special needs. We have many sectors of society that have not used computers or do not have the opportunity to be computer literate.

“For example, the internet in this part of the world is maybe 12 times more expensive than in the West. PCs are still expensive,” he says.

Ezzo believes that if we want to see computers and the internet in every home and we want a digital literacy environment then we are in dire need of involving the private sector, as well as the government, in supporting different programmes and initiatives. This, he feels, could be achieved either by providing subsidised learning programmes or setting up national training programmes that provide free training, or offer incentives to different people.

“There was a report published last week by IDC which highlights that the UAE has made tremendous progress in the e-government’s readiness and the e-government’s readiness is not only the set-up of e-government but also training programmes for citizens and the level of computer skills in the country,” he continues. “And the UAE has improved its rank amongst the world’s countries in terms of progress,” he says.

There is no doubt that IT has a direct impact on the social-economic growth of any nation and Ezzo points to Europe and the United States where IT and digital literacy have improved tremendously and helped develop the productivity, the social-economic growth and the standard of living.

“We believe this digital literacy is vital for the UAE and the individuals in it because we are living in a digital society,” says Ezzo.

“Anyone who can’t empower themselves or equip themselves will become an outcast and will become unemployable. They will have a problem being part of society.”
For IT vendors there are many plus points to having a base in the UAE and this helped to attract not just an abundance of small and mid-sized businesses but also a number of the big IT players.

Patni Computer Systems, a major Indian IT player, recently decided it was time to make a move into the Middle East market.

The company, which is the sixth biggest software and service exporter according to the National Association of Software and Service Companies, felt that the UAE was the most suitable place to set up camp.

Sudihir Dungarpur, vice president at Patni EMEA, says: “We believe that the UAE will offer us a variety of benefits. Most of the Indian IT companies are focused on the US market but the kind of work going on in the UAE and the type of services that are going to be offered is going to be absolutely cutting edge.

“The government is spending a great deal of money on IT and the kind of systems that they are building is all cutting edge. So both the quality and quantity of work that will be available is very appealing.”

While noting that Saudi Arabia is a much larger IT market, Dungarpur says that after doing some research the company realised that Dubai and the UAE were places where they would be able to blend into the culture fast and easily relocate employees to.

“That’s been our strategy because the UAE is very expat-friendly,” he explains. “It attracts people from all ethnic backgrounds. Dubai is an extremely cosmopolitan city. When I speak to people in the government and people in important offices in Dubai, especially the UAE, they say they are trying to model the city on the likes of London, New York and Singapore.”

Dungarpur has been visiting Dubai for the last six years and has witnessed the dramatic changes that have taken place. He felt it was the perfect launch pad in the region. “Slowly we will grow from the UAE into other markets. We have the clients to do that but we wanted to start in the UAE and take it from there.”

According to Patni, the IT industry is only going to get stronger in the coming years, attracting some of the world’s largest IT vendors, and also the most skilled workers.

“I think IT is a people-orientated industry,” explains Dungarpur. “We need technology but we also need to have the right people. In the UAE with the fast-paced development any company coming in can look at the UAE as an opportunistic market and can bring in people that are able to service their clients in a certain way.”

Dungarpur says the company is very particular about the type of projects that it is taking on. The right clients are very important and the quality of work are equally important as Patni strives to build a happy workforce.

“So far the work that we’ve been getting in the UAE has been very attractive and I think it’s going to keep coming in the UAE,” adds Dungarpur. “The IT industry is going to keep growing due to IT companies coming in from Eastern Europe, China and India – mainly India as it is so close.”

Yet the great lure of the UAE brings with it some major issues that need to be addressed. With more and more companies desperately scrambling to get a piece of the action, particularly in Dubai, there is simply not enough room for them all. Not only is there a lack of space in the city but the prices of what real estate is available is reaching astronomical levels.

For 3i Infotech, these are problems that seem to keep getting more difficult to manage. “We’re growing rapidly so require professionals to move from one country to another, coming here and with visa processing and everything else involved with that doing business here is effortless,” said Hari

Padmanabhan, deputy managing director at 3i-Infotech.
He adds that although he feels space restrictions are the only problem with working in Dubai, it is certainly a major one. “They just don’t have enough space to meet our growth requirements,” he explains. “Other than that I think everything else is great. We’ve already bought offices, which will be available at the end of 2008, and we’re investing in the long-term over here.||**||More challenging|~|200-Mohamed-Sharaf,-marketi.jpg|~|Sharaf: UAE provides access to regional market.|~|“I wouldn’t say that the lack of space or rent costs are impacting our plans to expand. We are looking at how we can manage these problems by investing in other offices,”

Padmanabhan continues. It is definitely becoming more of a challenge in respect to cost of living for the employees, as far as he is concerned. For them, Padmanabhan says the single most significant factor is the rent and that is increasing the company’s costs year-on-year and has led to changes in pricing for products.

“To some extent I would imagine that there would be one segment of the market that would find it so much more challenging to afford our products,” he explains. “I honestly wouldn’t say it’s holding us back in anything we’re doing but we’re having to factor it in.

“The challenges are significant and holding up margins is more difficult. We have to increase margins all the time. At this point in time we’re looking at different ways we can counter that,” he adds.

Patni now face similar problems in trying to keep prices as low as possible, while still being successful, and moving the company forward.

“The real estate market in Dubai doesn’t allow us to meet the economic scale that we would like to pass on to our customers and that’s been the biggest challenge for us in the UAE,” says Dungarpur.

“It’s very expensive. I’m shocked at the real estate appreciation that has happened and within a year of being here we are finding it extremely challenging maintaining our prices in the region.

“That is something that the government seriously needs to look at because the real estate prices will lead to a lot of dissatisfaction - not only for people new to the country but also for people who’ve been living here for years,” he says.
Despite this problem, the potential to make money in IT in the UAE will make sure companies are not put off from making the move there.

PC manufacturer Lenovo is just one company hoping to take full advantage of this in the coming years.
With a base in Dubai Internet City, Mohamed Sharaf, marketing manager, Lenovo Middle East, Egypt & Pakistan, says the main benefit for Lenovo is the fact that the UAE has the highest year on year growth in the region in terms of desktops and laptops combined.

“The PC growth year on year in the UAE is 66.9% according to IDC and if you look at Saudi Arabia, which is the biggest market in the UAE, the growth in the same period is 26% so that’s a huge difference,” says Sharaf. “If you look at the rest of the Middle East the growth is 11% so it gives a big indication of the market growth in the UAE and how important it is being located here and being able to serve the local market.”

Sharaf feels that this growth has come about because the UAE is trying to become a more IT enabled economy, with IT enabled government and schools. “It’s one of the leading countries as far as the government getting IT in schools and not just high schools and universities – before that,” he explains.

“We have just worked with the Ministry of Education in an initiative to put PCs in public schools. The first step was enabling 173 public schools in the UAE- not only Dubai. And this deal was approximately 2,500 PCs delivered to the Ministry of Education. We are also looking at other educational establishments and enabling government supported universities,” he says.||**||Technically advanced|~|200-Jamil-Ezzo,-director-ge.jpg|~|Ezzo: Private sector needs to be engaged if PC literacy rates are to reach their potential in the UAE.|~|Another reason Lenovo are enjoying working in the UAE is geographical. As far as Sharaf is concerned the UAE, and Dubai in particular, is a great hub for shipments, exporting to other markets within the Middle East and Egypt, which plays a big part in many vendors deciding to base themselves here.

The same was certainly the case for telecoms provider Avaya, which describes the UAE as a good regional base in terms of providing support to multinational companies.

“We benefit from the logistical elements like the airport and hotel infrastructure, and the associated lifestyle, says Nidal Abou-Ltaif, managing director for Avaya in the Middle East and North Africa. Avaya’s office in the Emirates Towers is centrally located and easily accessible, with good business facilities and close proximity to hotels.”

Abou-Ltaif also says the UAE is a very service-centric market and so customers have been receptive to solutions that enable them to provide an enhanced level of service.

Organisations from both the UAE’s public and private sectors have adopted Avaya solutions, including leading banks, hotels, telecoms operators, service providers, and government departments.

The PC vendor has even deployed communications solutions for some of the UAE’s most visible organisations including Emirates Bank, Dubai Police, Etisalat, and the Dubai Department of Health, and is hoping to build on this work. “We are expanding our operations in the UAE,” says Abou-Ltaif. “We are increasing the number of our regional technical support staff based here, as well as opening a branch in Abu Dhabi and establishing an Avaya training centre in the UAE.

“A defining feature of the UAE is that companies here want to be more competitive and customer-focused, so they are using technology to advance those goals.”

Undoubtedly there is an ongoing IT drive in the UAE as the government attempts to transform it into one of the most technically advanced countries in the world, if not the most.

Dubai Internet City is a prime example of what is happening right now in the country. It is now home to a dynamic international community of ICT companies, including global giants such Microsoft, Cisco, IBM, HP, Dell and Sun Microsystems. Many small and medium businesses and promising entrepreneurial companies have settled in DIC from a wide variety of sectors – including software development, business services, e-commerce, consultancy.

Wipro is another of the big names to be found working there, having built near-shore delivery capabilities in the region in the form of a near-shore managed services centre. The company has also set up a regional PMO office to manage its projects in the Middle East.

Raman Sapra head of Gulf business operations at Wipro is also happy now that the company has hired its first batch of UAE nationals during this financial year.

“Dubai Internet City has built a world class ecosystem for IT in the Middle East region and we are delighted to be based here,” says Sapra.

“The IT Industry in UAE is going through a very exciting phase and we are delighted to be a part of it.

“These UAE nationals are undergoing an intensive talent transformation programme within Wipro and once they complete their training will become an integral part of our organisation’s projects in the region,” he adds. The training of local workers is an extremely important issue – companies may be able to bring in skilled employees from abroad fairly easily but the future of IT in the UAE will surely depend on developing a vibrant local workforce.||**||Addressing skills shortage|~|200-Philip-van-Heerden,-pro.jpg|~|Van Heerden: Market must face up to HR challenge.|~|IDC, a global market intelligence firm, believes that the HR challenge is one that can not be ignored if IT is to keep advancing in the UAE.

According to Philip van Heerden, programme manager, services and verticles MEA at IDC, international players have been recruiting within the local providers.

“That’s definitely a short-term tactic to ensure that you have skills available,” says van Heerden. “But when it comes to networking or VoIP or any of those type of skills there’s just a plain shortage in the Middle East and it’s not just in the UAE.

“They have to look to Europe or another international market to gain those skills. But also when you don’t have those skills available you can contractually get someone in for three months to do the project for you and just move them back to their place of origin. The providers that don’t have that good access to the sub-continent tend to struggle over the short term.

“Companies addressing the skills and training issues in their specific areas is critical. If they can’t provide services at a certain level then it threatens their business. Staff and skills and people are their commodity so they have to get it right at all times.

“It is a major issue and I think we’re going to see more creative ways of handling this HR challenge because we’re all aware of the skills shortage, that’s for sure.

It is not just the big players that are going to need to get creative though. ICDL’s Jamil Ezzo says the learning centre is actively trying to encourage the industry to change and widen its scope of innovation by involving everybody in society.
But when the UAE decides to do something it does not just want to do it right – it wants to excel – and that is what the nation’s IT industry is aiming for not only in the region, but on a global scale.

Van Heerden adds: “The UAE is a nice benchmark because of its position and what it’s trying to do. It’s a nice benchmark for the rest of the Middle East to follow.

“There are some issues which make it difficult to compete with other countries but it’s at least something that other countries can look to as an example,” he concludes.||**||

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