Egypt’s new frontier

We’re down the road from those other pyramids — the famous ones — which represent Egypt’s tradition. This new triangle — in a sprawling, glass-walled area they call Smart Village, home to internet companies and the Ministry of Communications and Information — represents its latest effort to modernise.

For a country which boasts seven millenniums’ worth of history, its experience as a global technology player is small — just twelve years, since then-communications minister (and current prime minister) Ahmed Nazif looked at the success India and China were having as outsourcing centres and thought, hey, we can do that.

Down the road from the holy site where his ancestors laid the building blocks for centuries of frenzied tourism, he laid the foundation for a technology infrastructure which could not only rival but surpass other emerging markets in one key area — innovation.

Egypt has painstakingly laid the groundwork by luring foreign companies like Intel and Microsoft as an outsourcing centre. It’s up to $1.1bn in outsource revenue, with plans to hit $3bn by 2015.

In terms of sheer size, India and China and even Brazil will probably always beat Egypt in the race to be an outsourcing hub — sales, marketing, and, yes, call centres. They’ve got the manpower and physical space Egypt never will.

But where the country can surge ahead is as a hub for the almost untapped North African and Middle East markets. There are ten million internet users in North Africa, excluding Egypt’s 21 million.

Its push begins now.

Which is why Fakharany and I are here, in this pyramid cafe that looks like a revolving airport restaurant.

“We came as an investment — there was very little in revenue but we followed the user,” he says.

Fewer than eight million people were online in Egypt when he arrived. That was in 2007.

Building blocks

Google, which set up its North Africa headquarters in Cairo in 2007, is arguably the biggest coup wrought by ITIDA, the Information Technology Industry Development Agency. It’s the government office which serves as Egypt’s technology rep to the world and its point-of-contact for foreign investment.

Other companies who have set up shop in Cairo since 2000 include Intel, Microsoft and Cisco. Before the presence had been limited to IBM, ICL and Fujitsu, which had its ancient operation in place since the 1960s.

“We are doing the outreach — focusing on positioning and rebranding Egypt as a destination for tech giants,” says ITIDA’s CEO, Yasser El Kady.

The fact that the tech sector is the brainchild and pet project of the current PM means ITIDA and the government are committed to helping private companies succeed more than they might be in other countries, with an emphasis on public-private collaboration.

“Government encouragement is key in driving our strategy here,” Fakharany tells me. “They’re faster than the private sector. They’re very open and tech-pro, for sure.”

Google and the government partnered together starting in June 2009 to use the internet as an advertising platform to promote tourism, foreign investment and technology. When Nazif was appointed technology minister in 1999, he focused on the intial building blocks needed to create a global tech giant in a land where the IT infrastructure could barely support the local population.

Mohammed to the mountain — if Egypt was eventually going to become an innovation hub, it would first have to lure foreign investment with a stable tech infrastructure. That meant starting with outsourcing, bringing in companies like Intel to establish their marketing and sales teams in the capital.

“He focused on building a master plan for Egypt,” El Kady says. “It was, ‘how can the government be seen as a service provider?’ and then positioning Egypt as a big destination with a big population.”

Nazif and his team made trips West, explaining Egypt’s capacity as a hub for the Middle East and North Africa.

“We didn’t have any option but to follow the rest of the world into the technology boom,” El Kady explains. “We needed country transformation — this is a cornerstone of our modernisation.”

Right now, the plan is for ITIDA to recruit more foreign investment and help expand the outsourcing capacities of the brands already in the country. It will also continue its outreach to the Gulf, as it did in early 2010 with the ‘Go to GCC’ campaign, urging GCC countries to outsource to Egypt.

“We are prepping a strategic master plan for 2020 — including export value — to create more jobs and continue building the technology economy,” he says. “We are looking to become the outsourcing hub for the rest of Africa.”

And this year, with a solid groundwork in place, a plan for innovation expansion will take its first steps.

It will draw largely on local talent, with companies hosting entrepreneurship competitions and scouting the newly tech-trained graduates of Egypt’s top graduate schools and universities.

“We’re in very close contact with the government and encouraged to see a lot of the steps they’re taking and really pleased with what they’ve been doing. They’re very active compared to other governments in the region,” says Ahmad Hamzawi, Google’s head of engineering for MENA.

“The opportunity for innovation exists across MENA, but if you laser in on countries, Egypt is at the forefront in terms of its ability to innovate — companies are coming online now, and the support of the government prepping students for the industry.”

Information superhighway

The economic impact of the internet on the technology sector — and on the country as a whole — will be huge.

“The internet infrastructure has been on a roll since ’99 — [lowered] DSL prices, internet clubs — those are all government initiatives,” Fakharany said.

In addition to the 21 million users (of a population of about 88 million), there are now 70 million Egyptians with mobile phones, many of them smartphones with 3G capacity.

With government encouragement, prices for DSL lines and mobile web have come down. It’s possible to get five gigabytes of 3G on a phone for just $0.9 per day.

In MENA as a whole, ten percent of Google’s users now come from mobile devices, and that number is expected to grow with the continual introduction of new devices like iPad.

The company’s Cairo office has trouble keeping track of growth — that’s how fast it’s happening. “Our metrics change every other week,” he says. “If you predict what’s going to happen now, you always fall short.”

Students play a big role — there are nineteen million Egyptians in primary schools and another two million at university, and they’re arguably the biggest target group for advertisers and tech executives.

“They’d rather share a USB instead of a pizza, because they want to be connected all the time,” he says.

In MENA, only Saudi Arabia tops it in Google search traffic.

The internet infrastructure in Egypt is rapidly expanding, with a key factor being Mobinil, Vodafone and Etisalat’s takeover of the country’s four-biggest web companies. The mobile companies are the private sector’s biggest ally, besides the government.

“They’re improving their service in 3G and mobile solutions,” Fakharany says. “We’re trying to grow the whole ecosystem. As the market grows, we grow as well. The web isn’t a zero-sum game.”

Even traditional connections are reaching more and more Egyptians.

“Even if you have one DSL connection, it goes to the whole building, so there’s ten to fifteen families behind that one cable,” he says.

He cited a need for advertisers to start thinking digitally and realise a search engine’s capabilities.

“We have to expand the user base — but we want to do more,” he says. “We need to tell them there are nice tools they can use. We were a best-kept secret and now we want to get this ecosystem going.”

Search giant Google relies mainly on ads for its revenue.

“If you look at Egypt’s economy, there’s a large number of smaller advertisers that represent a big part of [the Egyptian marketing sector] — I’d like these small advertisers to expand.”

Fakharany says digital advertising could transform branding and advertising in the country.

“This concept of media that measures — this is a way to send the right person to the right product and then see what he does after he sees the ad. Advertising then becomes a distribution channel. And that’s the holy grail.”

The advertising base in MENA has been growing. Egypt is a microcosm of how internet companies like Google can provide the tools to get local businesses up to global speed and help foreign entities adapt to a new market.

“We work very closely with huge multinationals and local companies — we have a captive, huge audience.”

“On the monetary side, what we’re interested in is the online advertising business and for that reason we spend a lot of our time focusing on Egypt,” Hamzawi says.

Google has been coming up with pay plans configured to the local market, making cheque cashing easier — something he said he hoped would grow ad market share in the country.

Per company policy, he wouldn’t reveal exact revenue or number of users per day — but “the number is quite significant” and is number one in terms of how much traffic it pushes in the region.

Tech-ucation and jobs

The Egyptian government’s push for technological expansion will create jobs for the newly graduate and revamp the education system to include a tech curriculum.

“We’re looking at creating more jobs for the newly graduated,” El Kady says. “We’re focusing on talent development, even in the colleges. We’re not just focusing on the engineering and the technology [itself].”

He said there were about 65,000 Egyptians working in the information technology sector in Egypt, with 30-35,000 providing local services and the rest working on outsourced services.

“Seventy percent of the people who trained in [computer science] at university are now going to work in our sector,” he said. “These are people who wouldn’t have this kind of job otherwise.”

“Education is key,” added Fakharany.

Egypt’s overall unemployment rate was 9.4 percent in 2009. A number of those left in the cold were younger, recently graduated candidates who could not find suitable work at home.

At Intel’s Egypt office, for the time being, “most of the focus is going to be on recruiting local talent,” says country head Taha Khalifa. “And as the situation grows, we’ll be able to recruit from neighboring countries, and then experts from Europe and the US as well.”

He says Intel and fellow country offices had worked on a tech curriculum that could be modified for Egyptian classrooms.

“We worked on new classes — we were able to help train students at Egyptian universities. They learned to programme sequentially, but now they need to know [more advanced] parallel programming concepts.”

He said the current recruit pool needs work if Egypt hopes to keep the jobs from going to foreigners.

“On the basic technological aspects we find good people, but things need polishing — we’re working in teams,” he said. “Both the academic community and the minister are receptive to us telling them about the requirements so that we can meet our needs.”

Intel is just one company actively seeking out top local talent through entrepreneurship initiatives. In 2011, it will host the Intel Sites and Engineering Fair throughout Egypt’s 22 governorates, asking pre-college students to use technology to come up with solutions for the biggest problems in their communities, urban and rural.

It’s a recruiting tool — Intel will keep track of these kids, and by the time they graduate university, the company and others like it will have need for workers who can not only perform scientific tech functions, but innovate.

“We want to see how they can combat problems by using technology,” Khalifa says.

From his office overlooking the Nile and a swath of downtown Cairo, he’s entered a partnership with the University of California at Berkeley, looking at their technology and entrepreneurship classes and working on adapting the curriculum to schools in Egypt.

“We’ve worked on new classes — we’re able to train students better at Egyptian universities,” he says. Computer science students had already learned to programme sequentially, but in order to work on advanced IT schemes “they need to know parallel programming concepts. We worked with the ministry on training and that should get us where we need to be.”

Google has hired an engineer to head university relations for MENA, working on the ground to prep students for jobs in tech companies or related arms of the government.

A sprawling symbol

The biggest symbol of the new Egypt — and IT’s role in bringing it up to speed – is Smart Village Cairo Business Park, the three million sq m campus that houses the MCIT. Once you’re in it you could be in any other city in the world. Everywhere you look men are hammering away at half-finished glass-walled buildings.

Then there’s that fake pyramid, with its fake moat — an attempt to let you know that despite the changes, Egypt is holding onto its roots. It’s a symbol of progress for foreign investors.

“Before we had this, the only thing they could put on advertising brochures were the pyramids,” someone says earlier in the day.

To get to the Village, driving out towards the western suburbs near Giza, you’ll pass them on your left.

Opened in 2003 as the country’s first business centre catering to government offices, educational centres and private companies, by the end of 2009 it housed more than 120 companies and 28,000 workers.

The aim is to expand to 500 companies and 100,000 employees by 2014.

Raw talent

Imagine a heart monitor that would allow a patient to check his medical stats from a mobile phone.

It’s already been created, at ITIDA’s talent incubator, and it’s just one example of the technological innovation already taking place in Egypt — much of it from young talent that has seen the fruits of the government’s education initiatives.

(That idea was from a pair of PhD students.)

“The raw talent is there, it’s something we recognize very easily,” says Ahmad Hamzawi, Google’s Zurich-based head of engineering for MENA, who saw the heart monitor on a recent trip to ITIDA. “It shows the level of innovation that we see in the country — people are looking at very hard problems to solve. One thing I notice in Egypt is that the people have a thirst for information.”

He says what the government, educational system and private sector need to do is “provide them the overall assistance from the ecosystem perspective — in past there’s been issues around hosting, power, how to get funding. Attending events from us and from the government, people are starting to see there’s resources available to them and they realise they’re not alone.”

ITIDA’s incubator is one such step.

Hamzawi, who sees about a dozen new projects every time he visits the lab, said the support took some of the risk out of founding a tech startup.

“We’re encouraging them to take risks. There had been a stigma across MENA where people are concerned to fail, and that culture’s slowly changing. It’s a very active country — opportunity for innovation is very high.”

Less-flashy new ideas could have a greater impact on daily life for everyday Egyptians — the same ideas Intel has put forth about solving typical community issues with technology.

Take the capital’s notorious traffic jams.

Right now, “you have to turn on the radio and listen to some stale info about a bridge in Cairo that’s empty and now it’s not empty,” Hamzawi says. So companies have been coming up with mobile traffic alerts and other solutions.

Out of urban sprawl have emerged companies similar to 4Square, which allows users to “check-in” to restaurants and other locations and see where their friends are.

And even gamers feel the momentum — “mobile gaming is a big field where we’ve been seeing companies spring up,” notably in Alexandria.

Hamzawi says Jordan and Egypt are the region’s two big innovation powerhouses — but, evidence of Cairo’s pulling ahead, it doesn’t yet have a permanent office in Amman. (Its MENA operation works out of Cairo and Dubai.)

Google’s biggest recent offering, the high-capacity Chrome, has also seen traffic surge throughout MENA, particularly in Egypt.

“Now you can get the driving directions from the Giza pyramids to Alexandria,” Hamzawi says.

Arabic content

YouTube’s Arabic-language launch several months ago was proof that companies are thinking of ways to build their user base by putting an emphasis on products which use both the language and local content.

“We noticed a lack of high-quality Arabic content. So we thought, ‘what creative things can Google do to improve that?’” Hamzawi said.

They embarked on a project to translate entries on high English-traffic sites like Wikipedia into Arabic.

The MENA engineers also created language technology unique to Arabic which allows users to type phonetically in Arabic — what if you’re in a computer lab and don’t have an Arabic keyboard? — and have their text automatically converted into Arabic script.

“Search is never perfect, and we’re always making advancements. At any week there could be over 100 different search experiments running,” he says.

And that applies to Arabic.

“We have people in these search teams who are focusing on Arabic searches. We have been launching search advancements in Arabic… targeting the Egpytian market in particular.”

Branding the future

IT services consultancy Atos Origin is already working with 100 companies in Egypt, bringing home-grown entities up to a global standard.

 “We’re looking at company structure, how they can build a business plan and focus on HR development,” El Kady says. “We want to take [their standard] outside of Egypt and put them on a level with Europe.”

The cost of the branding push is $15m — so far.

It will have far-flung dividends.

“We want to help out IT companies grow and develop into bigger markets,” he says. “The Egyptian market has limitations, so I have to take them outside — to the GCC and [now] to Africa. We are enabling the companies, trying to have them work together. If you go in together, you have a higher chance of success, and less risk.”

Intel’s Khalifa says just one employee — and one assistant — arrived in Cairo in 2001.With government support, he says Intel had swelled to nearly 70 employees, all Egyptian.

“The feeling is that we’re all working towards this goal. They put us together and said, ‘work together first on outsourcing’ — and we succeeded at that.

“And now comes the innovation.”