Looking abroad: Export strategy set to benefit from increased cross-sector cooperation

Although the domestic market for IT products has grown in the past few years, the National Information and Communications Technology (ICT) Strategy 2013-17 recognises that supporting expansion will require a renewed focus on exports. The kingdom’s companies have been quite successful in marketing their wares abroad. Export revenues rose from just over $40m to $230.6m between 2002 and 2011, according the Ministry of ICT (MoICT). The sector was once characterised by a dependence on foreign technology, though that is now changing. The CEO of MenaITech, Bashar Hawamdeh, told OBG, “Right now in the Gulf, it is still very popular to seek international systems. However, I believe there will be a regional shift towards more customised and localised procedures.”

EXPORT REVENUE: Although domestic revenues are about twice as large in total, reaching $508m in 2011, they grew at less than half the rate of export revenues. Exports showed a strong resilience in the years following the global financial crisis as well. Between 2009 and 2011, revenues from external trade eked out an average growth rate of about 1%. After two years of contraction, in 2009 and 2010, they bounced back with a 14% growth rate in 2011. Domestic revenues, however, declined at an annual average of 11.24% over the three-year period, according to data from the Information and Communications Association of Jordan (int@j).

Several factors contributed to the declines in the domestic market, including a tighter state budget and a thriftier private sector. “Revenues that IT companies generated locally dropped in 2011 because of less government spending on the IT sector, coupled with less spending on IT services by education, banking and telecoms operators,” Abed Shamlawi, CEO of int@j, told The Jordan Times in September 2012. The kingdom’s IT stakeholders are now focused on areas where Jordanian firms have a strong position, and encouraging them to make their mark internationally.

BIG SPENDERS: By segment, computer programming generated the largest IT export revenues in 2011, at $134m, or about 56.6% of the total, according to the latest data from int@j at the time of publication. Data processing and hosting was the second-largest category with $36.3m in revenues (15.3%), closely followed by other IT and computer services, at $31.2m (13.2%).

By country, Saudi Arabia is the largest customer for Jordanian ICT exports. Export revenues to Saudi Arabia were about $94m in 2011, or 39.7% of the total. A shared border, common language and rich trade relationship explain the country’s use of Jordanian IT products. After Saudi Arabia came the US at $22m (9.5%), the UAE at $20m (8.5%), Iraq at $15m (6%) and Qatar at $10m (4%), according to int@j figures.

Although Jordan already holds a strong position in GCC markets, stakeholders still see room for more growth. Overall IT spending in Saudi Arabia reached $7bn in 2012, while the UAE spent $5.18bn, according to IDC Middle East, a global IT market research firm. Furthermore, those spending rates are expected to grow.

Total expenditure on IT and IT-related services in Saudi Arabia, for example, should grow to around $12bn by 2015, according to int@j estimates. Jordanian firms aim to continue expanding their share of these high-growth IT markets by cultivating existing business ties and finding new avenues for expansion.

BEST FOOT FORWARD: To increase their competitiveness in export markets, IT companies are working with stakeholders in other economic sectors to develop their products. Opportunities in education, namely with e-learning content, have seen some positive developments in recent years. The Jordan Education Initiative (JEI), a government-led programme started in 2003 to reform Jordan’s education system, has played a key role in this regard. JEI launched a request for e-learning content development from local firms, which partnered with multinationals like Microsoft and Cisco to take on these projects. The programme has attracted investment to the IT sector and to education products for export.

Multinational partners invested around $3.7m to help fund JEI’s e-learning content development, according to a World Bank study released in June 2012. These funds helped create products that are already taking hold in other countries in the region. In April 2011 Amman-based Integrated Technology Group (ITG) signed a contract with the Saudi Ministry of Education to implement its EduWave education management information system (EMIS) across Saudi Arabia. The Saudi iteration of the system, called “Noor”, was introduced in 37,000 schools to serve 10m users. The information management system has also been introduced in Bahrain, Syria and Oman, according to ITG.

VIRTUAL OFFICE: Similar to education, business process outsourcing (BPO) and knowledge process outsourcing (KPO) are both areas in IT that are generating large export revenues. BPO includes business operations like accounting, finance and customer interactions. In Jordan, firms have found a lucrative niche in call centres and customer service. Economic activities of call centres generated revenues of $6.97m in 2011, according to int@j. Of those revenues, $6.44m were from export services. Players in the kingdom include Aspire, Exten-sya and CrysTelCall. These firms enjoy several important advantages compared to their counterparts in other countries. Among these is a factor as simple as language. The dialect of Arabic used in Jordan is closer to the dialects of Gulf countries, some of the region’s largest customers for outsourcing services. English is also widely spoken, making it easier to access European and North American markets.

Looking ahead, costs across the sector should come down further as new technologies and processes gradually replace standard voice calls, which account for largest part of the segment’s costs. In time, affordable technologies like voice over internet protocol (VoIP) could replace them. Jordan’s policy of liberalisation regarding VoIP supports the growth of outsourcing moving forward, Ramiz Kalis, CEO of CrysTelCall, a local content centre outsourcing firm, told OBG.

Although VoIP calls are used predominantly in the North American and European markets, adoption is growing elsewhere. Other technologies, like live chat, social media and web platforms, could offer yet another alternative to standard voice calls. Given Jordan’s strong IT infrastructure, outsourcing players are looking at growth opportunities in these areas. “Whether it’s a phone conversation, an email, a chat or a Face-book wall post, it is a customer interaction that needs to be dealt with, and therefore a service we can provide,” Kalis told OBG. With internet penetration and social media usage continuing to rise in the Middle East and North Africa region, growth could be on the horizon for web-based customer service channels.

Although outsourcing segments like call centres have seen impressive growth, stakeholders are also intent on working up the value chain to more KPO, which includes research and other knowledge-based services. Since Jordan has a small population compared to outsourcing giants like Egypt and India, it will have trouble competing on costs alone, according to the draft National ICT Strategy 2013-17. The document suggests that more resources be devoted to developing KPO.

Jordan already has a proven track record when it comes to KPO: both HP and Cisco have technical assistance centres based in the country. To maintain momentum in this area, the authorities are working to ensure that education programmes are producing highly trained graduates that can fill knowledge-intensive positions in IT. In April 2009, for example, the Ministries of ICT and Labour, along with other stakeholders, created the Graduate Internship Programme (GIP). The GIP provides subsidies for new graduate’s salaries of up to 50% for the first 12 months of employment and 25% for the following six months. Between May 2009 and September 2011, there were 960 participants employed by private companies under the programme. Of them, 292 were offered full-time positions at their internship locations and 274 found employment elsewhere. In 2012 the GIP accepted about 500 participants. The programme, along with others, could help the sector reach its goal of continually raising the calibre of IT graduates and, over time, ensuring the country’s knowledge outsourcing industry remains competitive.

PIECING IT TOGETHER: With revenues that have grown nearly five-fold over the past decade and a quick return to growth in the wake of the international financial crisis and the Arab Spring, IT export indicators have been positive in recent years. Looking forward, stakeholders are working to consolidate Jordan’s position as an exporter by bringing more focus to its offerings.

“Exports have followed a path based on export promotion in the past, but we believe the trend is shifting to export development, hence exports require a targeted strategy, a major push for development. The potential was there all along, it just needed to be planned,” int@j’s Shamlawi told OBG. “The sector lacks a unified strategy, so that is what we want to work toward.” To that end, int@j is working with the government on completing the country’s new National ICT Strategy 2013-17. Bringing companies and officials together, it is hoped, will help to encourage cooperation, development and more competitive products.