In light of the economic crisis affecting Lebanon, and with the country’s talented workforce leaving the country, resulting in a brain drain, Executive sat down with Wissam Youssef, chief executive officer at CME, a multinational technology consulting firm based in Beirut, to discuss the Information and Communication Technology (ICT) sector, the possible new business model for the technology sector, and the role-models that Lebanon could develop. This Q&A follows the Technology and Knowledge Economy roundtable held on March 31, 2021, and the preparation of Executive Magazine’s action plan for reinforcing this and other sectors.
During our roundtable, you mentioned that due to the brain drain and the lack of economies of scale it is necessary to focus on premium outsourcing services. Could you expand on what types of services are needed?
Let’s start with a little brief on the outsourcing landscape in general. Usually you have two different levels of outsourcing needs. The first level is outsourcing for low-cost resources, which is typical for South America, Asia, and Eastern Europe. It’s more about focusing on obtaining low-cost mass scale resources, and they are available in countries like India, China, Vietnam, the Philippines, and others. This is a good market. However, in Lebanon we don’t have the scale to serve a similar market, we don’t have a massive workforce, the whole ICT (Information and Communications Technology) sector is currently employing around 10,000, even less, skilled resources. So to serve this market it’s going to be really tough on the Lebanese ecosystem. That’s why I don’t think it’s necessarily our main advantage, although today we are competitive on the cost side, but not necessarily on the availability of resources. That’s why I prefer to stay away from similar markets, unless there is a special opportunity of course. So this is where it comes to the low-cost layer of the outsourcing market. Then you have the more advanced layer, more focused on the added value, the technology added value, this is when outsourcing occurs not just for low cost but also for availability of skilled resources, and this is when companies look for skilled resources. This is happening all over the world because of the lack of skilled resources. It’s not just about low cost but also about skills and efficiency in terms of cost, the balance between quality and cost. This is where Lebanon has a real opportunity because we have skilled resources. This is not about mass, this is not about serving a need of 10,000 or maybe 1,000 resources, this is not the main target for premium services, it is more about filling a gap for a specific innovation product, innovative product or a niche company. This is where I think Lebanon has a real opportunity.
During our roundtable, CME was hailed as a success story. Can you tell us what CME is about? And also do you think that others could replicate this business model in Lebanon?
Let me give a little briefing of what we do and how we started. I think it is relevant and could be a case study for any new business. We are a technology company; we provide services, including outsourcing, but also products we develop, solutions, in different industries. We serve more than ten different industries, from Telecom, retail, healthcare, digital wallets, market research, insurance etc. It is really diversified, and we have a pretty diversified portfolio of technologies because of our scale. We have been serving customers throughout the past 17 years. We deliver for the whole supply chain system for Subway, everything that starts from the point of sale all the way to inventory management, procurement, operations, sales, compliance etc. Our solutions are deployed in more than 35,000 locations for Subway specifically, and other branches of course, all designed and engineered from Beirut. We also have a support team, 24/7, serving customers all over the world. We also worked with PayPal in the past; we developed for them the next generation mobile payment system that they currently use to compete with Apple Pay and Google for digital wallets. Thomson Reuters was also one of our customers, we supported them in deploying large billing systems for law firms, and we also served Allen & Overy (one of the biggest law firms in the world), White and Case and other big names in the law industry. This is the type of products and services for customers that we served in the past years.
One of the main capabilities that we have now is all-around diversification in terms of industries and technologies. We are also what we call the end-to-end solution provider, because we are not only software vendors, we are also hardware vendors, we design and manufacture hardware. It is not just about the software itself, and this is really unique because when I talk about hardware, it is not about large-scale hardware manufacturing, it is more about the Internet Of Things (IOT), smart devices. This is all engineered here in Lebanon. We are talking about product design, mechanical design, electronic design, and certification [such as the] Federal Communications Commission (FCC), all we can imagine. It is all engineered in Lebanon, prototyped and manufactured in China, and sold mainly to the US market. So this is the model that we have now. I think the main standpoints of CME today are first diversification, and second the track record that we have because it helps us acquire additional customers. The third one is what I call the end-to-end engineering services which is hardware and software, which is pretty unique and is similar to the model that Apple has actually. And the fourth one is about the resources, because all IT knowledge is about the resources. This is what is really unique about Lebanese talent; it’s multidisciplinary aspects and mindsets. This is a true differentiator, and this is why we are able to succeed in the premium services as well. And the real case study is around this point, because [we have] a tangible example of this. If we go to India or to the Philippines or China, usually we find someone who is really good; you can definitely find smart people and good developers, but they are more focused on a specific technology or industry. They do not really know how to make the link between the domain expertise and the technology, so it’s not just about technology or about writing code. Let’s say you are developing an insurance software, it’s pretty complicated, the insurance industry is not a straightforward industry, so if you deal with a developer focused on coding, then you need someone else who is going to do the analysis for him, to make the business case. Another resource, a third one, is going to test his work, so you end up hiring three instead of one. Whereas in Lebanon thanks to the academic background we have, [which is] one of the advantages we have, we are multitasking, multidisciplinary, so when faced with a challenge we really have the package, the background, to deal with this and to really play three roles in one: analysis, development and quality assurance. This is exactly what I call premium services: when you deal with someone who is really professional. If you go today and ask a developer to send you a username and password of a production system, one of the options is that he sends everything in one mail, and this is not professional. You will get the information but it is not really professional. A professional developer would have everything stored in a secure location and would send you a link that requires your authentication. This is exactly what I think Lebanon is capable of.
Do you believe the Lebanese ICT sector’s credibility has been reviewed downwards? If yes, do you think it can come back again?
There are different problems for the sector’s credibility. The Lebanese brand in particular. The first part is related to the government itself, and the way the country is run. When a high-level ranking officer in the government, minister or general director, goes on public media and claims that we [will not be able to provide] Internet by end of January, and this video reaches our customers in the US or the Arab countries, what do you think they will think about this? They will think their business is at big risk. They have huge operations that rely on the Lebanese talents in Lebanon. [That same day] one of the customers received a video on WhatsApp saying that Lebanon will “go dark” at the end of January. Imagine a company is going bankrupt in the next three months […] do you think the CEO will go on the news and say the company is going bankrupt in three months? Or [will he do] his best to make sure that everything will be managed properly to avoid the chaotic environment? This is really hurting us, and the same happened with electricity as well. I had to cover for our risks, to find solutions to provide our customers with plans B, C and D. Murex are offering to relocate their team to Cyprus, I read an article about it in the Commerce du Levant a few weeks ago. They are doing this because of the noise; financially it makes zero sense because we can operate here.
The second part, and it is also not contributing to build a real plan for Lebanon, is coming from the private sector, because whenever we are successful we go outside of Lebanon, and we claim success from a country outside of Lebanon. And this is not helping. I think we really need to convince the private sector that companies can go wherever they want, have offices anywhere. We are present in all continents, but we always take pride in our presence in Lebanon, we are not trying to hide it at all, this is our identity and we want to create a brand for the Lebanese ICT [industry], and I’m not blaming them, but we need to fight a little bit and create this brand.
How do you see the ICT sector in Lebanon building synergies with other industries?
I think there is a huge opportunity here. It’s a great question. I’m going to specify a set of industries that are really on the edge, and the mix between these industries and technology will create a huge advantage [money-wise].
The first one is healthcare. We have the best doctors, until now. The ICT [industry] might help them to stay in Lebanon, because most of the ICT companies pay in fresh dollars, because they sell outside Lebanon. One of the solutions we are developing now is a healthcare or wellbeing practice application. Soon we will be hiring doctors, just to give you the scope of this. […] If we really want to compete in innovative products, healthcare is a great resource for the ICT sector in Lebanon to create this edge.
Then you have the education sector. We also have really strong academic institutions in Lebanon, {like] the American University of Beirut (AUB), Université Saint Joseph (USJ), the Lebanese University, with hundreds of years of experience. We partnered with USJ to build an education system, an information management system for the students, and it’s going to be a partnership between CME and USJ. The ownership of the property is for CME but USJ has royalties in this. This is also going to add value to our offering. When we develop software for an institution like USJ, you really know it is going to be a Class A product, because it is one of the top universities not just in Lebanon. Theirs are actually the same needs as universities in France and Canada.
I just gave you two examples but there are many others like supply-chain, insurance, banking.
You mentioned bench lining during the roundtable? Can you elaborate on it from a policy view? Are you still hiring? How?
I talked about the bench lineup, that is similar to that of sport teams, the bench support for the football team. One of the main challenges in our industry, the outsourcing industry, [is the] speed of mobilization. Whenever you have a customer, the first question is the cost, and then how much time you need to staff the team. Is it a week? Immediate? Three months? If it’s three months I am not interested because other vendors can furnish the same service in a shorter time. So it’s not just about quality and cost but also availability and mobilization. This is something we struggled with in the past. Again, because of the lack of economies of scale in Lebanon, we don’t have a massive workforce. To mitigate this risk, we decided to develop the bench lineup: resources that are hired but are not necessarily assigned to production or an existing customer. There are what I call “overstaffed resources” without them being really aware of course, so they don’t really feel the difference between someone who is on the bench and someone who is really on production. So when you do that, you have an availability of resources to engage immediately with your customers. So it’s adding up to our real edge now on top of what we have now in terms of cost advantages and quality advantage. Thus is the main advantage of having a bench lineup, and the reason we couldn’t do it before is the cost. Due to the currency devaluation and all that is happening in Lebanon, we are much better on cost so we are able to have an overstaffed team to a certain extent of course.
Globally speaking, do you see a role model for the sector in Lebanon for the moment? You said the Silicon Valley model would not work. Do you only see premium outsourcing as a role model for now?
You mentioned a key word here, “for the moment.” You know, if you really want to be successful in this field, you have to have a step-by-step approach, and not an aggressive one. I really like Circular 331 [announced by the Lebanese central bank in August 2014] as an initiative of course; I have a lot of comments on the way it was executed. But 331 was more into building a “Silicon Valley,” and right now we don’t have funds, and people are not interested in bringing funds into the country. So if you really want the Silicon Valley model you need funds, because it’s all about investing in startups. And all of the startups are living on funding, so this is not possible in Lebanon today, it is impossible I would say […] The only chance today is to focus on services, the real added value, the premium services, even if we need to go into the low cost let’s do it. If there is an opportunity we will do it. We need to create jobs. People want work. This is the real economy we need to build now. If we start now promoting the professional services business for the ICT sector, then with time the same model that happened with CME will happen with others. Whenever we gain domain expertise, whether from insurance industries, banking or others, we are going to develop our own solutions, and not just be limited by what we provide to customers. When you do that you have a chance to become a Silicon Valley. Maybe in five or ten years.
Thank you for having been part of our roundtable discussions. How do you evaluate the idea of Executive’s action plan? What would you like to see in it?
I think, the more we talk about this, it’s better. As an ecosystem. One of the main challenges in our ecosystem is we don’t really have an umbrella where all the ICT companies, the key players of this industry, are collaborating or communicating. Because we always look at each other as competitors, which is fine, this is the nature of the business. But for the benefit of the country it is necessary to have similar gatherings to brainstorm, throw ideas, even if there is no tangible outcome but it is good to keep the discussions open. Most of the points were discussed three years ago with Adel Afiouni (former minister of technology), with the Investment Development Authority of Lebanon (IDAL), exactly the same model. We did not do anything but I don’t blame anyone. At least if we maintain this communication, if we don’t give up, we will give hope for others to start. I know that many will give up, but these roundtables, especially if we capitalize on them, regardless of the agenda, regardless of the outlook, if we capitalize on them and send positive stories to the Lebanese people, to the Lebanese youth, the upcoming engineers, to give them a little bit of hope, that’s it. I don’t blame anyone for leaving Lebanon, immigrating, but today it’s being promoted as the only solution, which is not true, at least for the software engineers and the technology sector. We need the other side of the equation, that’s it.
