Sheikh Khaled Bin Zayed Al Nehayan is a firm supporter of the local IT Industry. Whether adding his voice to conferences or driving professionalism into the market through the companies he sponsors, such as GTFS, he has clear views on the value of IT and how that needs to be understood by local firms and organizations. In a very busy schedule, he found time to talk to CNME at length about these and other issues.

CNME: Sheikh khaled, taking a snapshot approach, how do you view the current state of the IT market in the Gulf?

Sheikh Khaled:I believe it’s better business than any other. It may be a little down at present, but it’s still a vitally important area. The IT market as a whole in the Gulf has developed tremendously over the past few years, more than any other industry. And it’s due to the adoption of new technology that other industries – such as oil, construction or tourism – have been able to change so much.

CNME: Change has certainly come…

Sheikh Khaled:There have been huge changes and adopting technology locally has certainly brought benefits to the region. This is important because we lack the human capital here and technology has proved itself better than the old-fashioned ways.

CNME: Has it gone far enough, though?

Sheikh Khaled: No, the problem lies in scale. Look at the number of large companies in the region who, in today’s market, benefit from e-commerce or ERP or the use of the Internet or other things. For them, the economies of scale from using these technologies bring large benefits. However, for the smaller companies, who work on smaller margins, the model doesn’t really work here. But we still need to create a shift in thinking into how to adapt to new systems.

CNME: You’re talking of the private sector, does this hold true also in government?

Sheikh Khaled:Of course. Government too can benefit, but again you have large Ministries such as Health with thousands of employees – they get the benefits of scale. However, there are many such smaller departments of Ministries, often smaller than the big family trading houses.

CNME: Is there an answer?

Sheikh Khaled: I believe so. If we need the numbers to make major new technology implementations – like e-commerce or ERP – work, then we need to spread the overhead cost.

CNME: Any other problem areas?

Sheikh Khaled: The real benefits of IT come from information sharing, as you know. However, there’s often a reluctance to do that, so technology is looked at reluctantly.

CNME: How should we overcome that?

Sheikh Khaled: Through education. Training is very important. Due to our labour resources shortage, we must train widely so that people use new technology and the Internet without hesitation, in order to make it effective in their daily work. I think both government and family businesses need to spend more on training. Otherwise the old guard will hesitate and we’ll lose the benefits.

CNME: In your view, what do you think is holding such people back in adopting technology?

Sheikh Khaled: Simply lack of appreciation of the return on investment. There just hasn’t been the right cost benefit analysis for technology, so a lack of understanding makes them hesitant to move forward. Also some may have been burned by previous over-exposure and so now they’re more cautious.

CNME:There’s often a control issue too, I think …

Sheikh Khaled: Yes, sometimes people fell that they are losing control by giving away authority. But that has to happen – automation forces you to set up systems and procedures that work without constant approvals. Senior management needs to let go in order to create the transparent connections that enable e-business to work.

CNME: How do you think that can be done?

Sheikh Khaled:In this market, it will depend on three elements. Firstly, a competitive environment – if you’re threatened in the market then you’ll expedite new processes. Next, knowledge and an open learning process for decision makers, whether that’s through publications like this, seminars, training or exhibitions. Lastly, the Government when it pushes e-government will force the private sector to jump to get a piece of the new opportunities.

CNME: How do you view the role of major IT companies?

Sheikh Khaled:The large, successful ones have addressed the region in a different way. They’ve invested heavily over the long term and are now reaping the benefits. In fact, some have captured a market share here that is disproportionate compared to other markets like Europe and the US. The question is: how have they done that when, perhaps, their products are much the same as their competitors? The answer lies in investment – in the region, in people and in localizing their business to meet local needs.

CNME: Is such an unbalance healthy?

Sheikh Khaled:It’s the way it works. The market is very harsh. Companies that were punished in the past for not meeting earnings targets should have planted seeds and invested here for the future. All too often, management in the US or Europe fails to see that this market in the Gulf can compete easily with other second tier markets worldwide. Our adoption rate of technology is good. Often, we’re the fastest growing region for companies – last year, I think, this was Intel’s fastest growing region after China, for example.

CNME: The lessons are clear …

Sheikh Khaled: Yes, they will have to learn from those who have won. But when the numbers are small and US executives are focused on targets then the region isn’t given the attention it deserves. They have to rethink and use the good days to push in the region.

CNME: But how can small companies make an impact here?

Sheikh Khaled: They can always demonstrate their products in other markets. People here are very open to change and I think any good decision maker dependant on the technology won’t put all his eggs in one basket. Instead, he’ll share his requirements with more than one player and anot risk it all on one.

CNME: What changes do you expect to see over the next couple of years?

Sheikh Khaled: Instead, I prefer to give you my wish list! My expectation is that there’ll be more use of technology and many more players coming into this market, especially when the stock market cools off from the need to chase quarterly earnings. At that stage more will come back and try to increase their market share. What I’d like to see is more alliances being created, by both sellers and buyers alike. As a region we need to bring down the cost of technology and that can only be done with alliances. Family firms aren’t going to merge but they can come together to drive technological initiatives and drive the cost down. As I said before, we need to reduce overhead costs and spread the benefits – that will helps us all.

CNME: How would it work in practice though?

Sheikh Khaled: Take ERP as an example. How many family groups have adopted it – a small handful. Why? Because it’s very costly, the implementation process is prohibitive and the training costs are excessive. So why not share the costs with an alliance, so more technology is pushed out? Share the experiences and we’ll drive technology use much faster.

CNME: The ASP model would help.

Sheikh Khaled: Exactly. To expedite this, the ASP model is the most suitable - a group of companies come together and an ASP then hosts the applications. We’ll see some reluctance because of security and the risk of trading secrets being compromised, but look at banks. We all put our money in the same banks and yes, of course, there are risks but they’re tolerable. The benefits so far outweigh them!

CNME: What do you think is the inhibitor to this?

Sheikh Khaled:Simply the decisions in large family businesses and government continue to be made by non-IT people who fear technology. What I’m saying is that these companies and governments should focus on what they do best and subcontract their IT out to competitive tender. Then an ASP will provide a better service and the technology will be better than it would have been in-house.

CNME: But they’re not used to doing that, are they?

Sheikh Khaled: Why not, though? They subcontract transportation and energy production, so why not technology? IT is not their core business so subcontract it.

CNME: Of course, some may feel that they’ll give away competitive advantage.

Sheikh Khaled: Possibly, but balance that against benefits. And, you know, there’s no exclusivity in ideas – once a project a product is out in the market, someone will figure it out. But sharing the cost of technology and putting it into the hands of those with the know-how makes a lot of sense.

CNME: Have you been discussing this in the market?

Shaikh Khaled:Yes, I have been calling for this from both sides. I see some resistance, because people don’t always like to sit down with their opponents. Maybe we need more time – after all, the first jumper is the bravest!

CNME: Does this resistance also come from vendors?

Sheikh Khaled:Yes and that’s strange, because we see them co-operate in some areas. It’s this new idea of co-opetition – work together in some areas, compete in others. My message to them is simple – take your current market share into a new company that you create with other vendors, develop that market and then try to increase your share.

CNME: How should a user judge a vendor?

Sheikh Khaled: At the end of the day, it’s not about the technology but how it’s delivered and the service. I think everyone who is interested in his business should keep a close eye on technology. Tidal waves of it are changing the world forever – so keep one eye on business and the other on technology trends.

CNME: What excites you about this industry?

Sheikh Khaled: The change – nobody can sit still for a minute in this business. There’s always something new – that makes me feel young.

CNME: How do you view DIC and its effects?

Sheikh Khaled: it’s certainly already changing local market. The focus now is on the physical aspects and lots of issues have come up _ I wish all sides of it had been given to people with that focus and experience and the DIC had concentrated on attracting technology businesses to the region. Of course, its’ going to bring great benefits. After all, technology is the third revolution, after industry and service.

CNME: You’re very optimistic, but do you have any concerns in all this?

Sheikh Khaled: Fear of burn-out. We’ve all through hype – Y2K, for example, burnt the hands of everybody. So my fear, I think, is vendors pushing something not useful. Of course, the good thing about technology is that it’s a transparent business.

CNME: Finally, what is the role of local IT companies in all this?

Sheikh Khaled: If you’d ask me that ten years ago, I’d have said a big role. Now everything is about global entities and with the ease of customization built into software for localization, it’s hard to see a major role for local players. I think they need to get into service.

CNME: Seems a shame…

Sheikh Khaled: It’s just the rules of survival in today’s market. Demand for these companies is still there, just on a much smaller scale.