For techies, the GITEX, the annual information technology exhibition in Dubai, is one of the top three exhibitions in the world. It has steadily grown from 939 companies being represented in 2004 to 1,353 in 2006, with 133,139 visitors from 119 countries. The growth of GITEX reflects that of the MENA region overall as the third fastest growing IT market in the world after India and China. This year has already been sold out and will be the biggest exhibition ever in its history. At least 25 Lebanese firms have signed up along with a new conglomerate of companies known as Lebanon SoftShore.
GITEX is the place where developers unveil their latest designs such as Software Design Consulting Group’s (SDCG) Visual Dolphin Retail, that will allow retailers to manage their total business from the register, tax collection, inventory status and customer/supplier data. According to Raymonde El-Hayek Warde, general manager of SDCG, her company has participated in GITEX for 10 years and experienced constant growth that is “due in large part to the opportunities that GITEX offered in terms of exposure and importance in the Middle East.”
For others who are in the early stages of expansion to the Gulf and Arab counties, such as New Information Technology (NIT), GITEX provides the platform they need, said its managing director Selim Jamaty. NIT developed SoftPharm, a software package for pharmacies, and has achieved a market penetration rate of 97% in Lebanon. Now it is time to go to the Gulf.
Big things are happening on the Lebanese front in software development, an industry that has been able to withstand the many economic pressures facing the country. According to a 2001 Professional Computer Association’s assessment, the IT sector was estimated at $245 million with the software industry making up 14% or $34 million. Hardware and infrastructure made up the lion’s share of 58% and service another 28%. At the time, exports made up only 9%.
Focus on exports
Today, things have changed with exports accounting for the majority of business with few firms concentrating solely on the Lebanese market. Statistics on the ICT sector are hard to come by as there have been no recent studies to provide an accurate size of the industry. According to Joe Abi-Aad, president of the Association of the Lebanese Software Industry (ALSI), the sector is sorely in need of one but in the meantime independent estimates range from $250 million (Oxford Business Group 2005) with aggregate growth of the software development sector estimated at around 10% annually, to $320 million (ITG Group).
According to Abi-Aad, between 2001 and 2004 the market experienced a slight decline that coincided with the burst of the global technology bubble. Since then, members of ALSI have reported growth ranging from 5% at the lower end and up to 80% for the most successful firms who are outsourcing to the US, the EU and the Gulf. It is a burgeoning trend as developers can no longer rely on a cash-strapped Lebanese market where smaller clients are beginning to default on payment schedules. Both Fady Geagea, manager of Profiles Software Company and Nader Abdallah, general manager of Anzima, which has been serving the GCC since 2003, said doing business in the Gulf was critical for their survival in this current climate.
Another firm which had to deal with the economic fall-out from last summer’s war has opened up shop in China. Carole al-Sharabati, managing partner of software developers CME, said that they needed a back-up office for their clients overseas because of the instability in and risk perception of Lebanon. Also, the lower wages in China have helped her firm to increase international competitiveness.
One major development in the sector is the Euro-Lebanese Center for Industrial Modernization’s (ELCIM) initiative to create Lebanon SoftShore — The Software Cluster (LSS), a conglomerate of Lebanese software developers. LSS was formed this year as a means to strengthen Lebanon’s competitiveness abroad and provide Lebanese firms with a platform for greater exposure and organization to bring big outsourcing projects to the industry. So far 17 firms have joined the cluster, focusing on markets in the GCC, EU (mainly France, Switzerland and UK) and the US. LSS is headed by ELCIM and will pool the resources of the cluster members. ELCIM will promote the cluster members abroad and direct large projects.
For members like al-Sharabati of CME, “it is an opportunity to join hands and collaborate in a number of areas.” She views the cluster as a forum to exchange information and work together where she can assist other firms in expanding to the US while she hopes to gain exposure to the European market.
According to Talal Hijazi, coordinator of the software manufacturing sector for ELCIM, one of the advantages Lebanon has over many competing countries is its ability to develop software in many languages.
There are drawbacks to operating in Lebanon. Al-Sharabati’s firm pays $3,500 per month for a connection that in the US would not cost more than $100. Furthermore, the lines are unreliable and neither fast nor wide enough. Electricity prices have also increased along with those for generator services. Both — internet and electricity — are fundamental for the industry and their low quality a severe problem.
The greatest danger facing the industry is emigration. Most firms report difficulties to retain qualified engineers and developers. Al-Sharabati said that most young professionals are concerned only about the short term as a result of the recent instability and are therefore short-sighted when it comes to building a solid career, preferring instead to hop from one job to the next with their ultimate sight on going abroad.
As companies continue to grow, the demand for more engineers grows concomitantly leaving the market constrained by the lack of seasoned professionals. Few engineers with three to five years of experience can be found.
Software giants Microsoft and Cisco are working to address this problem through their Partnership for Lebanon that also includes GHAFARI Inc., Intel Corporation and Occidental Petroleum Corporation. The Partnership for Lebanon is focused on a number of issues to assist the Lebanese market ranging from educational initiatives to funding the private firms’ expansion efforts.
The partnership members recently announced that they will offer training programs for the IT sector — in cooperation with the Council for Development and Reconstruction — for students to help them acquire the skills and experience they need in the expanding market.
According to Hussam Kayyal, program director of corporate citizenship at Cisco, they were shocked when talking to high school students to find out that none of them were planning to stay and work in Lebanon. Since then, they have stressed to students the potential of the local sector through training and education.
Perhaps the most interesting trend is the issue of gender in IT. Female engineers are taking on the industry and shifting it from what was traditionally a male-dominated sphere to a more mixed one. According to al-Sharabati, the industry allows for much needed flexibility especially for females from more conservative backgrounds. CME is facing the issue that some young women have curfews imposed on them by their families and must be home by 5 p.m. Through telecommuting via the internet, these women can finish their work at home. Women are also less likely to move abroad for work and thus are becoming ever more attractive on the local market.