Major IT players, who are experiencing slower growth in the US, have found a refuge in emerging markets in the East and elsewhere.
The classic Bric group – Brazil, Russia, India and China – along with the UAE, Saudi Arabia, Mexico, Poland, Turkey, Argentina, Columbia, Thailand and Vietnam are slated to enjoy growth of 16 per cent collectively in 2008, says the International Data Corporation.
Recent research by the company shows larger manufacturers are deriving more than 60 per cent of their profits from outside the US, which for decades has been the dominant IT consumer.
Such is the case with Autodesk, a California-based software and services company that supports the manufacturing, infrastructure, building, media and entertainment and wireless data sectors.
"For the first time we are seeing Europe, Middle East and Africa overtaking America as the largest in terms of revenues," Ahmad Al Jasim, regional manager of Autodesk Middle East, told Emirates Business.
"The strong euro and the US slowdown have helped shift the momentum."
The company, best known for its AutoCAD design software, plans to double its investment in the GCC in the next four years.
—Autodesk offers IT solutions for manufacturing, architecture, engineering, construction, media and entertainment as well as geospatial and plant products. But for most people Autodesk simply means AutoCAD. Could you tell us more about your company?
—If I meet a layman who doesn't understand what Autodesk is, I tell him we are the Microsoft of the design industry. Most projects in the world have been designed using our software. Our most famous product, AutoCAD, is like Microsoft Office. Here in the Middle East our market share in engineering design is about 90 per cent.
—In which countries in the region do you operate, and do you have a presence in Iraq?
—Technically we cover 18 countries but since we are an American company, headquartered in San Rafael, California, we don't do business with Iran, Syria and Sudan. Our regional operations are based in Dubai. We don't have an office in Iraq because people are still concerned about security and stability. But if the authorities there continue what they are doing today then in about five years' time you will see people coming to do business in Iraq.
—Do you have any partnerships in Iran, Syria or Sudan? And what do you think the outlook is for these countries?
—No, we don't do any business at all in these countries, they are totally embargoed for us. But these three markets have high potential for growth. It just depends in their political alignment with the US. If, let's say, this year Syria strikes a peace deal then we'll be there in 24 hours and our business pattern will definitely change.
—A number of IT vendors Emirates Business spoke to recently talked of a paradigm shift whereby the weight of their activities was shifting from the West to the East. Is this the case with Autodesk?
—Very much so. Last year we achieved global revenues of $2.2 billion, of which the Americas accounted for 40 per cent with the other two regions – Europe, the Middle East and Africa including India and Pakistan (Emea), and Asia-Pacific – accounting for 30 per cent each. But this year, for the first time, we are seeing Emea overtake America as the largest region in terms of revenues, for two reasons. Firstly, because Europe is strong so whatever we sell in euros will add value to our revenues. The second factor is the weak economic condition of America. We also see gradual growth in Brazil, India, China and Russia.
—What are your top three markets in the Middle East and do you expect the current line-up to change?
—The UAE is our biggest market followed by Saudi Arabia then Egypt. Egypt is going through massive reforms and is attracting more investment. However, in the next two years we feel Qatar will overtake Egypt and enter the top three because much of the growth will come from energy and infrastructure-intensive countries. And the UAE, Saudi Arabia and Qatar are all project-driven.
—The Middle East has been investing massively in the IT sector. What are the major factors that will further drive IT growth?
—Firstly the government's vision and also the safety and security. Another major factor is the internal cash flow because of high oil prices. The economic instability in the West is positively affecting businesses here.
—Do you have any expansion plans?
—We will have offices in Saudi Arabia by October and in Egypt by December this year. We will also open offices in Qatar and Kuwait next year. Currently we cover these countries from Dubai. Initial investment in setting up one office is around $1 million, primarily for space and furniture. But an office will not bring you business. So we will double our investment to increase our head count as well.
—Have you considered slowing down your expansion plans due to the possible effects of the West's financial crisis on the region in the mid to long term?
—We don't see any gloomy pictures. We have massive and solid plans ready for the next four years – up to 2012 we will invest in products, people, planning and marketing. Two years ago we thought we were going to reach saturation point but demand for new licences keeps on coming. And when you continuously have new customers you should not need to worry about saturation.
—Despite the rosy outlook for the region's IT industry, do you foresee any threats?
—I don't see any local threat, in fact the past two years and the next two years could turn out to be the best time to do business here. But externally – I hope nothing happens but the biggest threat to the region's business stability is Iran. Also, if the euro rises further it will have a big impact.
—Do you have production centres in the region?
—We don't have production bases here, though we do in Europe and China. The Middle East is a consumer market. Production of software requires a pool of highly skilled and affordable labour, which the region doesn't have an abundance of. The workforce here is not cheap as staff are imported and of prime value. And the attrition of people here is very high because of high market demand. In software production you need stability. So if you start production here your products wouldn't be affordable.
—The Middle East has always been an IT follower but has not yet taken a step further to becoming an IT leader. Will that continue to be the case over the next few years?
—It will take the region a generation to become an IT leader. Yes we have been an IT follower – but also a good user. Today you may say that technology is developed in the US. But the use of IT for creativity and productivity can be seen in this region – just look at the buildings. People here have cracked the software and use it to the maximum. But we will remain a follower for a generation, it takes time. We need to develop the society first. We are also not like India and China where they have a massive workforce.
If you look at the US, it has become a leader in technology after 250 years of building infrastructure and developing human beings. You cannot compare their 250 years with our 40 years. This is still a young society, a young economy.
Ahmad Al Jasim, Regional Manager of Autodesk
UAE national Ahmad Al Jassim has 27 years of professional experience and has been with Autodesk Middle East for 13 years. He was born on May 21, 1957, and obtained a degree in engineering from the University of Portland in the US.