By Sarah Gain
The tech recovery is well and truly under way and the Middle East’s IT industry is booming. The emerging markets will account for more than 60% of market growth and the Middle East’s total IT market is expected to reach US$13.35 billion by 2008.
|~|ITSB---PHOTO-1---LEAD-PIC--.jpg|~|Zarouni: IT resources need to be allocated strategically. |~|Forrester Research predicts 37% of enterprises will spend more on IT this year than they did in 2004. Computer hardware spending is expected to hit its stride by the end of 2005, reaching 9%, network equipment will grow modestly at an average of 4%, software spending will grow 3%, while IT consulting and integrations spending will post a modest growth of 4%. From 2006 to 2008, emerging markets will account for more than 60% of market growth and in the Middle East, the total IT market is expected to reach US$9.25 billion in 2005.
The growth, according to global research firm IDC, will be a result of enterprises’ migration to more dynamic IT environments, which boast greater efficiency and better business-responsiveness.
Security was the underlying reason for IT investments in 2004 and this trend has continued as enterprises pay renewed attention to the protection of their IT infrastructures. Datamonitor says the total enterprise security solutions market will reach approximately US$32 billion by 2007. Enterprise security spending is still small in comparison to other areas, however, there is still strong potential growth ahead, particularly in areas such as security appliances and services, as well as in relatively immature markets such as intrusion prevention systems (IPS) and security management.
As viruses and malicious code attacks grow in number so does the cost incurred by corporations, governments and private individuals to clean up systems and restore them to working order — this includes the cost to eliminate and repair the damage done by viruses, lost revenue and the impact of downtime and on worker productivity.
For many organisations, business is based on trust and the public embarrassment of a security breach can be devastating. This realisation is driving substantial security investment. “To be seen to fall victim to a hacking or virus attack demonstrates to customers the organisation is not protecting itself well enough and does not have effective security in place. It highlights the business’ information could be easily exposed. For banks in particular, this could be devastating,” says Youssef Laban, the CIO of Banque Saudi Fransi.
Regional corporations are starting to turn away from the traditional model, which sees security treated as a series of ad hoc projects. They are acquiring platforms that provide pre-emptive, enterprise-wide protection that can assure business continuity and regulatory compliance, while still meeting critical obligations such as reducing the exploding cost of security, improving communications and co-ordination among key departments.
“Companies are beginning to realise conventional patching is only effective against known threats and is managed on an emergency ‘triage’ basis, which can be disruptive to normal operations. Enterprise security must map directly to operational processes. Integration is key in leveraging the security infrastructure to optimise corporate security posture, reduce cost and support business objectives,” explains Ahmed Etman, senior territory technical manager for the North and South Gulf at ISS Middle East. ||**|||~|ITSB---PHOTO-2---IBM---Kila.jpg|~|Kilani: Customers are seeking solutions that won’t lock them into a proprietary platform and enterprises are spending enthusiastically on business integration and management software. |~|The applications market is another area of high growth. It is clear from the number of implementations carried out in the region every month that enterprises are spending enthusiastically on business integration and management software. The enterprise resource planning (ERP) applications market, for example, is expected to reach US$36 billion by the end of 2008.
“Customers are seeking solutions that won’t lock them into a proprietary platform. Combining applications and infrastructure technology provides customers with offerings that can help them solve their business challenges,” says Bashar Kilani, manager of IBM software business for the Middle East, Egypt and Pakistan.
For many enterprises in the Middle East, the deployment of a new ERP system has resulted in improvements in customer service, integration and information flow throughout the company. The Dubai-based HVAC provider, AAF-McQuay, a subsidiary of the global major McQuay International, for instance, consolidated its business activities and saw time savings of 25% on the financials front when it bought a range of ERP modules from Epicor Scala.
McQuay was under increasing pressure to improve customer service, reduce lead-time and better the quality of reporting. ERP components such as logistics, contract, service, project and payroll management and reporting modules, proved to be a valuable investment, as they increased control and visibility of data and improved efficiency by reducing the manual entry of data at multiple locations.
According to Mohammed Nayeem, head of IT and accounts at McQuay, expenditure is perfectly justifiable when it delivers long-term benefits. “These features are going to be key components required for [the company’s] future growth. They have substantially increased efficiency, resulting in major savings for the company, providing an ongoing return-on-investment (ROI),” he says.
Other enterprises are focussing on developing their hardware infrastructures. Integral elements of robust technology architecture always command substantial investment. Gartner Consulting says organisations with under US$1 billion in revenue, are spending up to 60% of their total IT budget on infrastructure, including data centre, voice and data networks and helpdesk.
For organisations over US$1 billion in revenue, the average spend on infrastructure is still just under 50%. “For many businesses, particularly those that compete in highly competitive marketplaces, IT can be a key component of competitive strategy,” says Howard Rubin, an associate with Gartner Consulting.||**|||~|ITSB---PHOTO-3---Nayeem---M.jpg|~|Nayeem: Expenditure is perfectly justifiable when it will deliver long-term benefits. ERP has substantially increased efficiency, resulting in major savings for the company, and providing an ongoing ROI.|~|Euromedia, a provider of business services such as public relations and marketing, was in need of a complete infrastructure overhaul. Acquiring a series of Intel Xeon based servers and turning to faster network switches has provided better performance, increased stability, faster access to data, and maximum connectivity for the company.
Euromedia deployed a range of Citrix solutions and the move has improved dependability and scalability for Euromedia’s multiprocessing environments as centralising data has brought improved security, manageability and compatibility, connecting branch offices directly to the main server and enabling data to be updated immediately.
According to Alex Golzari, managing director of Euromedia, meeting customer demands, along with the cost savings and productivity benefits delivered, have made the expenditure worthwhile. “Many of our clients are extremely busy people for whom time means money. The quicker we deliver results, the more profitable it is for them. Now [our employees] are able to work remotely or simply work faster while in the office,” he says.
For enterprises, infrastructure consolidation also offers a means to achieve significant cost savings. By curbing the exploding need for space and power in the data centre and by improving the performance of both servers and storage subsystems, system administrator time can be sharply reduced as system availability is improved and user satisfaction increases.
Through consolidation, the IT infrastructure can also be modernised to support the organisation’s future plans for growth. It is for this reason, according to Oracle’s managing director for the Gulf region, Ayman Abouseif, that streamlining the infrastructure is becoming an area for major spending on the part of CIOs: “We are also seeing a number of infrastructure consolidation projects — companies have gradually acquired what seems like millions of servers, databases, storage elements, as well as too many administrators to manage everything — they are looking for consolidation to reduce complexity and cost.”
For Dubai Police, the updating and centralising of its technology infrastructure lead to just these types of improvement. In order to enable its vast resources of internal information to be shared with other government offices, deliver remote access to data for the department’s employees, and improve public access to information and services within the department, Dubai Police invested in a complete data centre set-up for intranet applications and infrastructure consolidation, adopting the Oracle technology stack, from the database and application cluster to a comprehensive collaboration suite and an application server including portal, J2EE, mobile and wireless, content management SDK, and reporting capabilities.
“We consolidated all the data and information required in a highly available, highly secure Oracle Database Grid powered by the Oracle Real Application Cluster. Although our budget allows us to invest in the best, we still need to be very careful that the technology we choose will be a good investment in the long term,’ explains Colonel Ahmad Hamdan Bin Dalmook, CIO of Dubai Police and a member of the Dubai e-Government executive team.||**|||~|ITSB---PHOTO-4---Al-Madani-.jpg|~|Ahmadi: Tight management of business processes is essential for any retailer with operations spread across different countries.|~|Furthermore, the storage boom, which started in 2004, is still in evidence in the Arab Gulf states, where the total spending on storage software in 2003 went up by 32%, and similar or higher growth is expected in the future. There is major spending on storage area networks (SAN), as corporations quickly come to realise the true value of their information.
“The storage market in the Middle East is booming. The Middle East may be an emerging market, but it is starting to mature. Businesses are getting serious about storing their data,” says Mohammed Amin, general manager for EMC Middle East.
It is only logical that, as dependence on technology grows, enterprise systems will become more memory-hungry, particularly as long as e-mail remains the preferred means of business communication. As Fred Moore, president of Horison Information Strategies, highlights in his paper on storage navigation, “E-mail is presently generating approximately 400 petabytes of digital data per year making it perhaps the most storage-intensive application.” All this extra information translates into heavy investment on the part of enterprises.
Today, IDC puts spending on storage in the Gulf States at over US$112 million and predicts that it will exceed US$400 million by 2008. “Businesses are realising the importance of their business-critical data and know that they cannot afford to cut corners when it comes to storing it,” states Heini Booysen, program manager for IDC in the Middle East and Africa, continuing: “Data protection is the main driver in spending and end user demand for additional capacity will only continue to heighten.”
The concept of storage has evolved from being non-centralised, tactical issue to becoming a primary strategic investment, one that is at the heart of a company’s survival. In the name of operational transparency, legislation across all verticals means that companies are required to store vast quantities of information for longer periods, often in high-availability environments.
“For most enterprises, storage has gone from being an issue that only concerned the IT infrastructure group to an issue that concerns senior management throughout the entire organisation,” points out Murali Nambiar, sales manager for Symantec in the Gulf States. In the Middle East, the very nature of the emerging market also means the swift business growth witnessed in many sectors is fuelling demand.
Dubai Municipality is all too aware of what an organisation’s expansion means in terms of storage investment. “All our different departments have a lot of data stored. The volume of this grows rapidly, of course, and if it is decided that one single piece of data is needed, then we must be able to produce it at once. It is a serious balancing act,” says Abdulla Ali Al Madani, head of operations and network services for the Municipality. ||**|||~|ITSB---PHOTO-5---Euromedia-.jpg|~|Golzari: Meeting customer demands, along with cost savings and productivity benefits make expenditure worthwhile.|~|Voice-over-internet protocol (VoIP) is slowly becoming commonplace across the region, with an acceleration of high volume cutover deals by corporations and the large-scale delivery of mainstream consumer offerings. The freeing up of telecommunications legislation is strengthening the future of VoIP in the Middle East, as is the boom in the call centre industry throughout this region and Africa, which is expected to continue growing at approximately 30% year-on-year.
As a result, according to Nidal Abou-Ltaif, managing director for Avaya Middle East and North Africa, “IP telephony implementations are doubling, perhaps even trebling on our predictions. There are many benefits of using telephony over an IP network, such as savings on the cost of infrastructure and maintenance by only having one network for voice and data, besides the new solutions that are possible with IP telephony, and this is why investment in these technologies — and other customer-centric technologies — is picking up.”
Several academic institutions in the Gulf States have invested in VoIP infrastructures, as well as the deployment of wireless technology, as part of their move towards the concept of a digital campus. The Dubai Men’s college, for example, discovered the value of revamping its systems with campus-wide wireless connectivity and VoIP technology.
Vendors with broad wireless strategies are hastily positioning themselves to gain market share, and Hady Abou Onk, project director for the Gulf University for Science and Technology’s (GUST) e-learning project in Kuwait believes educational institutions and enterprise businesses will be looking to wireless and VoIP, or build on their existing configurations as the technologies mature.
“Transmitting voice and data is becoming an increasingly integral part of any network design. With VoIP and wireless connectivity the opportunities are unlimited. Materials can be accessed from any location, at any time, very easily. The benefits of this type of infrastructure investment are clear and we will continue to be on the look out for any advancements in this field,” he says.
With sophisticated technology systems being deployed by businesses, education and training is another area in which there is considerable investment. Regional governments are now allocating huge budgets for educational programmes driven by their understanding of the importance of ICT in business, and many now see training as an increasingly important consideration for companies.
“Graduates of any discipline need good IT skills and this type of vocational training is not only an important part of an academic education, but also a long-term investment. This is important for an increasingly electronic era and development of IT skills needs to continue in the workplace. Enterprises are learning that because they are spending a lot on technology, they also need to devote a proportion of their budget to training. It is essential employees know how to get the best from technology solutions in order for all other IT investments to be leveraged successfully,” confirms Jawad Sebaali, Universal Knowledge Solutions' country manager for the UAE.||**|||~|ITSB---PHOTO-6---Nidal-Abu-.jpg|~|Ltaif: Investment in IP telephony and other customer-centric technologies is picking up in the region as the market becomes more competitive.|~|The need for a high level of IT expertise in most verticals is also driving investments in IT. Reshaped by the collapse of the dot-coms and the ramifications of the events of 9/11, the hardware storage industry of the past has given way to a new value system increasingly based on services. Indeed, spending on IT services rose 12.7% to US$308.5 million in the UAE last year.
CIOs are beginning to invest in solutions that will free operational resources for higher value-added activities that involve core competencies and business strategies and to keep up with these demands, IBM is moving from a technology-only approach to its marketing and concentrating instead on promoting what it calls its “value-based propositions” to differentiate itself from competitors.
According to Kilani, “Businesses in the region now have the necessary infrastructures in place and are now turning to business intelligence, integration tools and services in an attempt to get added value from their investments.”
Abu Dhabi Islamic Bank found forming a partnership with a managed service provider (MSP) to be a good solution for diverting the burden of performing certain operational chores away from the company’s IT administrators.
Costly IT staff resources spent shifts watching management consoles instead of strategically planning ways to improve the IT architecture, so transferring the costs of selected responsibilities to a third party was a viable option, according to Adel Ahmed Al Zarouni, senior vice president of IT at the bank. “Allowing an MSP to handle day-to-day monitoring and management has given the organisation an opportunity to reallocate in-house IT resources to more strategic initiatives.”
All CIOs, like Al Zarouni, find themselves under pressure to economise, while still having to strive to meet the escalating IT requirements of their businesses, but there is some good news for these increasingly budget-conscious CIOs.
A study commissioned by Juniper, which polled 560 companies with more than US$100 million in annual revenues, reveals 25% of organisations that show a significant boost in revenues as a result of IT do not necessarily spend more.
Rather, the study shows businesses that take a different strategic approach to IT use show at least a 3% higher revenue growth. "[These companies] are not necessarily looking at spending more money on IT, but on spending the money more wisely," says Brett Sharp of market researcher TNS in London, which conducted the survey for Juniper.||**|||~|ITSB---PHOTO-7---UKS---jawa.jpg|~|Jawad Sebaali: Enterprises are learning that because they are spending a lot on technology, they also need to devote a proportion of their budget to training.|~|The trends revealed in the study indicate while all the high revenue-generating businesses were making concerted efforts to achieve greater efficiency, 64% are planning to pursue both cost reduction and IT consolidation projects in the next 12 months. In addition, technical projects were managed better at these flourishing businesses.
The fast growers had 45% more IT projects going on at any given time than the more slow-growing organisations. Rather than implementing five large IT initiatives, each taking years to complete, the high-achievers instead broke their projects into more manageable stages, an approach that allowed an IT project's success or a failure to become apparent sooner so the venture could be adjusted. Perhaps most interestingly, however, was the importance of the internet in the operational practices of the companies that saw revenue growth.
According to the research, the successful organisations were 30% more likely to have mobile workers, and around 20% more likely to have employees working from home. 35% also feel their businesses are highly dependent upon real-time transactions and are therefore using the web to deliver applications to workers and to branch offices, and striving to cut costs through projects to eliminate all non-IP data movement from their networks.
The revelation holds valuable lessons for corporations throughout the Middle East. Perhaps next year, when Gartner predicts worldwide IT spending will double, CIOs in the region will have taken note of the success stories and will allocate their resources wisely.
As IBM’s Kilani says, “IT spending is not just about buying technology. For enterprises it is a matter of investing in business benefits and competitive advantage. And that means getting value out of your IT assets — it doesn’t have to cost the earth.”||**||