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01 March 2024

Investment in R&D helps firms weather storm

Experts say companies should focus on home-grown innovation. (AFP)

By Reena Amos Dyes

The importance of research and development in the field of information technology has grown as companies require more efficient IT systems in order to save money in the current economic scenario.

With cost cutting being paramount, companies have a more pressing need to optimise and automate more business processes.

Also, IT companies must provide more innovative services to secure their clients and become more competitive in the market.

Emirates Business spoke to experts to find out how R&D in the IT sector is the need of the hour.

Dr Iyad Rahwan, Lecturer, Director, Faculty of Informatics, British University in Dubai, said: "Investment in technology is a key driver of productivity growth. Firms need to look through the economic cycle and think of long-term growth potential as opposed to short-term variations in demand. When the economic cycle turns, those who have invested in technology may be best prepared to reap the rewards."

The experts said that contrary to popular belief R&D does not necessarily mean additional financial burden on companies in these trying times when companies are already facing budget cuts.

R&D is not necessarily an expensive activity, particularly in IT.

Dr Rahwan said: "IT innovation in particular does not need expensive laboratories housed in multi-million dollar high-tech facilities in order to bear fruit. Many big IT players started off in the shed of someone's backyard. It is important for players in the region to recognise this since, in my opinion, R&D is vital to the region's competitiveness in the longer term. These days, investing in R&D may seem like a bad idea, because research is often seen as a luxury affordable only to large corporations with big budgets. However, we must remember that in developed economies, high-tech small and medium enterprises (SMEs) that target niche markets play a major role in driving innovation and creating new value. These companies often spawn entirely new business models, which can even create entirely new industries," he adds.

Innovation also helps make companies more competitive internationally. Ray Kafity, regional sales manager, Mena and Pakistan, IronPort Systems, said: "The minute you stop investing in research and development it makes your product obsolete as a product is as good as the last time it was updated."

Take, for example, the business of professional and social networking sites like LinkedIn or Facebook, or search engines like Google or Yahoo. These companies started with very modest capital but with very innovative ideas. There are very few examples of this kind of innovation in this region, and we would like to see more."

According to experts, advanced technology can increase productivity. So when a company is facing a difficult time financially, introducing innovation (for example better business automation) can help them find ways to do things more efficiently: do more with less, so to speak. Dr Rahwan said: "As they say, necessity is the mother of invention. And now, it is ever more necessary for us to improve worker productivity and find ways to optimise business processes."

Electronic markets are an excellent example of how advanced IT can help reduce costs significantly.

"Take the process of procurement as an example. Traditionally, this was a paper-based, labour-intensive and highly inefficient process. Nowadays, business-to-business procurement solutions (for example Ariba) have revolutionised business. Online auction sites (for example eBay or it regional counterparts Souq.com and Tejari) have created opportunities for buyers and sellers from diverse geographical areas to do business.

Olivier Campenon, Vice-President, Europe and Middle East Africa, BT, supports the concept adding that: "The biggest challenge is always to stay ahead, anticipate demand for new services and have technology and platforms ready to deliver when customers demand it. This stays the same regardless of downturn."

Campenon said: "In many countries in Middle East, telecoms business was and still is highly regulated. To provide you with an example what deregulation can achieve, I would have to point out the achievement in terms of broadband availability in the United Kingdom. The UK has jumped from one of the laggards in terms of the internet usage to a country, where more people have access to broadband internet than to the gas network.

"This is no coincidence; UK is ahead of all its EU counterparts in terms of liberalising the telco market. And, to the benefit of the customers, this is one issue that needs tackling not only in the Middle East, but in emerging economies all over the world. And quite a few European countries as well."

Dr Rahwan said: "In the UAE, most IT products and services are imported innovations, not home grown. This limits the competitiveness of UAE companies. This can change with expanded home-grown R&D and innovation.

"Having said that, electronic markets are still not used as widely as one would hope, particularly in the business-to-business domain.

"This is partly due to the difficulty in matching buyers and sellers of complex products and commodities in business-to-business transactions. When you want to buy a DVD on eBay or Amazon, all you have to do is type the movie title in the search box, which is a simple task. But suppose you are trying to source industrial equipment with complex and specialised specifications, and involving complex dependencies (for example compatibility between parts).

"Things get complicated when your needs cannot be fulfiled by one single supplier, but collections of suppliers providing complementary parts," he said.

"Computer scientists are now developing techniques and algorithms for allowing highly complex auctions (called combinatorial auctions) to deal with these sorts of scenarios," said Dr Rahwan.