Technology giants bank on UAE and Saudi for growth

At a time when financial markets have come to a standstill in terms of sales and falling growth, technology giants see the Middle East, especially the UAE and Saudi Arabia, as countries with growth potential and expansion.

A cross-section of companies operating in the UAE told Emirates Business despite of single-digit growth in some parts of the Middle East and customers getting cautious about purchases, investments into the region have not stopped.

The firms are banking on consumers flocking back into shops, especially with the launch of Windows 7, and provide a boost to sales.

Emirates Business spoke to Samir Al Schamma, Regional Director of Intel in the Middle East; John Hoonhout, Managing Director of HP in the Middle East; Dave Brooke, General Manager of Dell in the Middle East; and Seiji Koyanagi, Managing Director of Panasonic Marketing in the Middle East and Gulf, on the eve of the 29th Gitex Technology Week, one of the biggest ICT exhibitions and conferences in the Middle East.


Have you seen a lot of investments and resources moving to the region due to the worldwide financial slowdown?

Al Schamma: If you look at the Europe, Middle East and North Africa, you would see a contraction in the second quarter, but the market performed better than expected, at minus 9.8 per cent compared to forecast of minus 13.5 per cent.

Middle East and Africa posted better-than-expected results at plus 3.8 per cent compared to minus 1.9 per cent. The demand has held for consumer products but corporate purchases contracted worldwide. Although we have seen reshuffling of resources across different groups within the same country but I have not seen many resources being moved to the region.

Hoonhout: While I am not able to quantify these investments, I can tell you that our investment in the Middle East has focused on expanding our footprint into the region. We are opening two new offices this quarter and will continue to get closer to our customers. In addition, we have also implemented an aggressive 'graduate recruitment programme' further demonstrating our commitment to the region.

Brooke: The economic crisis has definitely impacted the region. The degree of this impact is dependent on the segment and the country, but it has become clear that government and the public have both remained relatively buoyant on a macro level.

Koyanagi: We have to adjust to the economic environment. It is important to identify ourselves in the eyes of customers. This is reason we are investing more in Gitex this year than last year. Ours is the biggest stand at Gitex, which says a lot. In terms of spending, we have to squeeze our assets, which means we do not have excessive assets. We have not held back on investments but on expenses, especially variable cost expenses. There is no cutting back on long-term investments, which will go on as planned.

We have not even cut back on staff and offices. In fact, we have been told to increase our staff by five per cent in the Jebel Ali office from October.

What are the opportunities the Middle East presents in time of financial slowdown? Which part of the region presents the most and what kind of opportunities?

Al Schamma: The second quarter of 2009 showed positive signs in the Middle East and Africa, which has prompted signs of a recovery relative to the economic slowdown. The personal computer (PC) market reported year-on-year growth of 3.8 per cent in the second quarter, which was mainly driven by the increase in notebook sales.

Saudi Arabia is the only market where we have seen double-digit growth and that country, fuelled by the rise in consumer buying and spending by government and oil and gas sector, still represents the largest PC market in the region.

Hoonhout: Today, the Middle East is one of the fastest-growing markets for HP and the opportunities for the IT industry in the region are positive despite the worldwide slowdown. During the economic downturn we have been putting a lot of focus on helping customers optimise or automate their operations in order to reduce costs and redirect these savings into innovation.

HP has been present in the Middle East since 1968 and opened its first regional office in 1994. We are the largest information technology and solutions provider in the Middle East with 1,100 employees and a physical presence in almost all countries across the region.

HP is bullish about the region as a whole and ha been focused on the opportunities the region offers. If you look at where we think the fastest growth will come in the next five to 10 years, it will be in the emerging markets.

We expect a fast recovery and a return to substantial growth in the Middle East, Levant and Africa. The UAE, Saudi Arabia, Qatar and Egypt are some of our top markets, in terms of business opportunities and growth.

Brooke: Multiple markets across the region still represent opportunities for Dell in many different areas and segments. For example, Saudi Arabia and Abu Dhabi, are still moving forward with critical infrastructure projects, while countries, such as Jordan and Egypt, are maintaining good momentum in the health-care sector. Kuwait has also seen opening up of opportunities in areas such as education and government over the past quarter and nations, such as Oman, Qatar and Bahrain, are showing growth in IT across both public and private sectors.

Koyanagi: The economic crisis has impacted the entire industry and some of the countries have seen the worst. But compared to global markets, the region did well. Saudi Arabia and Qatar were robust and this was mainly because business was evaluated in different ways. Catering to customers and after sales service are the key performance indicators for us. Revenue may be here today and gone tommorow, which is why correct evaluation is important.

From which part of the region are you witnessing most of the growth?

Al Schamma: We have seen single-digit growth in most of the countries, apart from Saudi Arabia, where we witnessed double-digit increase.

However, with businesses taking a cautions approach, corporate purchases are lagging. As for the government, we are seeing some uptake in projects in the fields of education and services albeit at a slower pace.

The Middle East and Africa market is by far a mobile market, with more than 55 per cent of the computers shipped to the region being laptops, and this figure increases to 80 per cent in countries such as Saudi Arabia and the UAE. Demand for Netbooks, largely powered by the Intel Atom processor, has also grown exponentially since it appeared in the region in mid-2008. Netbook sales account for more than 20 per cent of the notebook sales in the UAE and almost 10 per cent in Saudi Arabia in the second quarter of 2009.

Worldwide, Intel Atom revenue grew by 65 per cent in the second quarter.

The channel is witnessing growth, although it is in single-digit numbers due to the downturn. We have also started to see some of the channel leaders in the region capitalising on the lucrative SMB market by putting together turn-key solutions with after-sales services to boost their profit.

Hoonhout: In 2009, despite market challenges we have been able to grow and invest. In the first and second quarter of 2009, customers and companies took a cautious wait-and-watch approach, which reflected on our growth. However, things have picked up in the second half of the year and we are looking at continuing the upward trend into the next year. Our goal is to drive long-term profitable business for our regional customers and partners.

The government, banking and telecommunication sectors in the Middle East have been at the forefront in the adoption of new technology to improve their business processes and they are some of our key customers. By constantly updating and refining our products we have been able to hold or gain market share in the consumer and SMB segement.

Brooke: Dell has seen positive growth across both corporate and public segments and within consumer base.

What is the position of the UAE in growth plans?

Al Schamma: We have a relatively poor PC penetration, at less than 20 per cent, and broadband penetration of three to four per cent in the region. Although these numbers might be higher but there is still a huge room for growth. The UAE is one of our key markets in the Middle East, which is considered one of the fastest-growing markets for Intel. We have a solid strategy for the region that entails increasing our collaboration with governments and non-private entities in the region through the Intel World Ahead programme, which aims to connect people to uncompromised technology in the region and around the world.

Hoonhout: The UAE is the cornerstone of our business in the Middle East. A major share of our customers, partners and business comes from the UAE, in addition to a growing workforce who are based in the UAE.

At the same time we continue to increase our focus on other countries in the region by increasing our staff in those countries.

We are committed to growth of large and small business in the UAE, and as the country expands we see huge opportunities where HP's technology and expertise can further support and fuel the growth and progress of the country.

Brooke: The UAE Government continues to invest in growth initiatives. Projects such as the recently completed Metro in Dubai and Abu Dhabi's numerous construction and infrastructure projects demonstrate this, providing continued opportunities for organisations such as Dell.

Are you seeing growth coming from the retail level or large enterprise purchases?

Al Schamma: We have seen demand in the consumer sector rising due to the fact that computers are indispensable, they are something people need in their lives.

However, with businesses taking a cautions approach, corporate purchases continue to lag behind. As for the government, we are seeing some uptake with initiatives in some of the countries mainly in the field of education and services albeit at a slower pace compared to 2008.

Hoonhout: Our sequential growth has been a result of both retail and enterprise purchases, although the big growth in the past two quarters has been from the latter as enterprises have budgets that are allocated on a long-term basis. While retail spending fell in the first and second quarter, the pick up has been steady and since the middle of this year we have seen a turnaround.

Brooke: The largest proportion of Dell's revenue comes from sales of computers and related equipment and services to large corporate customers. However, over the past two years, Dell has vastly expanded its sales distribution channels globally and as such is able to foster better relationships and opportunities at the retail level.

According to market research companies, such as IDC, retail sales for Dell over the past year have seen tremendous growth.

In addition to its direct online business and business via phone, Dell has expanded its reach in retail stores globally and now has products for sale in nearly 43,000 locations. Its retail partnerships are narrow and deep and help the company to get specific products in the hands of people looking to do remarkable things with technology.

Dell's multi-channel sales strategy includes phone sales, online sales and sales at dell.com through retailers and sales at retail partners' locations.

These partnerships represent a key piece of Dell's evolving global retail strategy. Selling systems in multiple channels is a way for Dell to connect with customers it may not have necessarily reached in the past. Dell's evolving business strategy combines its direct business with distribution channels to reach people around the world. Retail is simply an expansion of the direct model, allowing Dell to customise products through the shopping experience people prefer – phone, online or stores.

What are the main drivers of growth in the Middle East and the UAE?

Al Schamma: IDC forecasts that the Middle East and Africa will grow by 12.5 per cent in 2010 to around 15 million units fuelled by consumer demand.

We still have a relatively poor PC penetration at less than 20 per cent and broadband penetration of three to four per cent. There is still room for faster growth in this region compared to mature markets. The UAE is projected by IDC to grow by almost 10 per cent to 1.8 million units and thus represent one of our largest markets in the region. In the long run, growth will come from consumer wealth and more government spending on education, health, infrastructure, public services, etc.

Hoonhout: In the corporate and enterprise segment, one of our key areas is Data Centre Transformation and Virtualisation. HP software and solutions and professional services will also be one of the main growth drivers.

Many of our customers want to implement world-class automation solutions, to improve staff utilisation and eliminate routine time-consuming operational tasks. Demand for software and services will continue to grow in the coming years because the business case is compelling. We are also heavily engaged in the government sector, where we are seeing many governments continuing to invest in major initiatives.

By constantly innovating and releasing new features in our notebooks, laptops and printer ranges we will continue to grow and gain market share in these segments.

Additionally our range of industry standard ProCurve network solutions have created a remarkable track record in the Middle East and we expect to see rapid growth in this segment in the coming years.

Brooke: Dell is ramping up its services portfolio in emerging countries, Europe, Middle East and North Africa and targeting the region with custom-made services and features, including remote infrastructure management, all of which are recognised as key growth areas. This services portfolio has been designed around the premise that IT is critical to the business operation of these companies and it takes away the day-to-day IT management worry from customers, allowing them to focus on their businesses.

Dell's system integration, resale and distribution partners in the emerging countries, Europe, Middle East and North Africa are a key driver of growth.

In fact coverage of Dell's partner community in the emerging countries, Europe, Middle East and North Africa has expanded in recent years, with the Middle East now having more than 1,500 partners on Registered Partner Programme.

Through this ecosystem of channel partners, Dell continues to focus on growth in the enterprise space, notebooks business, SMB and consumer segments.

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