Indian IT firms strengthen UAE footprint

The year 2009 saw an increase in investments and direct presence from Indian IT software service companies in the UAE as businesses slowed down in global markets such as the US and Europe.

Major IT service companies such as MindTree, PCS, HCL and Aegis (part of Essar) increased their investments in the region by setting up its direct offices. Most of them have set up base in the UAE and Saudi Arabia where they have major customers.

The GCC market has touched $3.5 billion (Dh3.512.8bn) in IT services, according to EIU (economic intelligence unit). In the region, the UAE and Saudi Arabia contribute 75 per cent to the IT software services market.

Shivkumar HS, general manager & geography head-Middle East from MindTree said: "The company was targeting key customers, who were part of global contracts, since two years. But since last year we needed to be aggressive locally. The infrastructure boom was a step forward in the IT segment. With risks in European markets, companies have started looking at the rest of the world.

"This is the main reason many IT services companies have started operations here in the past one-and-a-half years. Even with oil prices coming back to normal it gave surplus revenue to government offices. The money from the public sector is being pumped into infrastructure."

The US and European markets are still major contributors to IT service companies in terms of revenue but their share has come down in the past year. Indian IT service companies have now realised the potential and are moving away from one-man operations to full-fledged teams.

"Developed markets have slowed down as budgets are cut in organisations worldwide. Projects are postponed and curtailed, therefore, becoming important to go to markets where we are not present. This is the reason companies are setting shop now in the Gulf," said Manojeet Chowdhury, Vice-President & Head of Mena at Mahindra Satyam, which is in its 14th year of operation in the Middle East.

3i Infotech is another company which has been present in the Middle East with offices in Dubai for a few years. "Dubai is still a good place to set up a regional base. Liquidity from oil prices, surplus reserves with the government have encouraged companies to set up offices in the UAE and rest of the region. In the region, the UAE and GCC are the two places that has seen a lot of activity," said Pankaj Chawla, CEO & President at 3i Infotech Middle East, Africa, and Russia and CIS countries.

According to Chawla, UAE and Saudi Arabia at least contribute to 25 to 40 per cent towards IT services business in the Middle East.

Other companies like HCL Technologies started business in the region mainly because the Middle East is globally among the top five clients of Western countries.

"Before the global recession, the GDP of the countries in the region was another important reason to set up offices. The Middle East strategy was formed two to three years ago and inspite of the macro economic factors changing HCL still went ahead and invested," said Manish Mishra, Regional Head, at HCL Technologies Middle East.

The company has already set up offices in Saudi Arabia, the UAE, Qatar, Bahrain and Kuwait.

Another advantage even local companies see in working with Indian IT services companies is the cost factor compared to working with European IT service firms. "Indian companies definitely have an advantage over European counterparts as in some cases they are three times higher in cost due to stronger currencies. Indian companies have also grown quickly due to the immense engineering skills available."

There are local IT service companies in countries such as Egypt and Jordan who are much cost-effective than Indians. "A large number of local companies are looking for offering between European and local companies. This is where Indian firms fit in offering a delivery similar to an European at the price of an Egyptian," said Chowdhury.

The IT service firms also see business potential compared to other markets as many local companies are putting in place basic ERP (enterprise resource planning) and BI (business intelligence) solutions. Chowdhury said: "The basic IT networks is in place in the US and Europe while companies are moving to the next level in IT networks in the Middle East. Therefore for IT service companies quality of resources required in the region is also high as only maintenance resources are needed in other markets."

Business intelligence, outsourcing, virtualisation, high performance computing are areas of growth for these companies in the Middle East. Companies like 3i Infotech are expecting to hit 1,000 customers in 2010 from the region. "The contribution from GCC has increased with 40-50 per cent coming in from this area and out of this 20 per cent coming from Saudi Arabia," said Chawla.

This also holds true for HCL, which is working with 25-plus customers in the last one-and-a-half years.

It's not only the biggies targeting the Middle East but also small to medium-sized Indian software and service companies tapping the business potential in the region. ESC (Electronics & Computer Software Export Promotion Council for the Middle East) represents the small to medium sized software companies in the region.

Regional Director Kamal Vachani said: "I have seen a lot of these companies came to Dubai last year and set up office. As Indian companies specialise in packaged software and services especially in exports, they see potential in this region. There has been a shift in business from the US and Europe. These markets still exist but the businesses have been expanded towards the Middle East."

According to Vachani, most of these companies set base in Dubai and target countries like Bahrain, Saudi Arabia and Jordan.

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