Well connected: The development of niche segments should help to boost the vibrant IT scene

Ranked as the Middle East and North Africa’s (MENA) most high-tech city alongside Dubai and Doha, according to a study by Swedish telecoms equipment company Ericsson, Abu Dhabi’s sophisticated information and communications technology (ICT) infrastructure and strong fibre network reaffirm its position as a business centre and play a critical role in its diversification efforts and transition towards a knowledge-based economy.

The UAE ranked second among Arab states and 25th overall out of the 142 countries included in the World Economic Forum’s ‘Networked Readiness Index 2012-13’, demonstrating that it is well placed to exploit the opportunities offered by the digital age and is among the world’s leading nations in terms of its ability to leverage ICT to boost competitiveness and development.

The Abu Dhabi Systems and Information Centre (ADSIC) is an independent government body tasked with executing Abu Dhabi’s ICT agenda, formalising the strategy for and spearheading the implementation of e-government services. Its efforts have contributed towards the UAE as a whole ranking second only to Singapore in terms of government usage in the World Economic Forum’s “Global Information Technology Report 2013”. Businesses and residents stand to benefit from being able to interact directly with the government and obtain permits and documentation via electronic channels.

Rapid Growth

 According to a September 2013 study put out by the Kuwait Financial Centre, the UAE represents the second-largest ICT market in the GCC region after Saudi Arabia in terms of spending. ICT expenditure grew at a compound annual growth rate of nearly 19% between 2003 and 2010, and is anticipated to grow nearly threefold between 2013 and 2015 to $40bn. These figures compare very favourably with the 4.9% average global growth in IT spending forecast by the International Data Corporation (IDC), and this expansion has prompted a broad spectrum of IT vendors and service providers to establish a presence on the ground in recent years. The UAE also hosts regional headquarters for a number of global tech giants, including Microsoft, Oracle, HP, IBM, Google, Dell and Facebook, many of which have based their operations in Dubai’s dedicated technology-focused free zones.

Abu Dhabi, in comparison, is looking to secure a niche in the field of content creation, setting up a dedicated media zone, twofour54, to help attract companies producing Arabic-language content across a variety of online and traditional media.

As 60% of the Middle East’s population is under 29, twofour54 has chosen to focus on e-learning, animation, gaming and media production as components of the digital economy value chain where it believes there is unmet demand. Opportunities have been identified in Arabic online content in particular, which accounts for just 3% of all global online content despite being the world’s seventh-most-spoken language. Anchor tenants include video game publisher Ubisoft, the Cartoon Network, Sky News, CNN and Fox International (see Media & Advertising chapter).

Demand

Similar to much of the GCC, government departments and state-linked companies account for the majority of ICT spend. As the emirate transitions from a state-driven economy to one hosting a broader range of corporates, demand for a wider breadth and depth of IT services is growing. Over time, driven initially by sectors such as telecoms and financial services, private expenditure should account for an increasing share of overall spending. A 2012 study by telecoms operator du estimated that firms in the UAE spend almost Dh10bn ($2.72bn) on their ICT needs, with small and medium-sized enterprises (SMEs), which account for 98.5% of all UAE businesses, making up half of this.

Category-wise, demand for security solutions remains high across the board for most client segments, and there is a growing realisation of the role that business process outsourcing (BPO) plays in cost control and productivity. The UAE’s high-speed fibre and mobile networks and relatively stable internet protocol regime offer firms the assurance that cloud-based solutions – an area growing in popularity as companies increasingly need to manage and store large volumes of data – are secure and reliable. While private sector demand takes on a growing role, state expenditure on ICT, spearheaded by ADSIC, is maintaining its pace. In addition, investment to bring more public services online and streamline information systems and administer data across government departments is ongoing. “Whenever we sign and secure partnerships with international providers of enterprise solutions, we make sure that the vendors, as part of the agreement, provide knowledge-sharing workshops and training,” Rashed Al Mansoori, director-general at ADSIC, told OBG.

ADSIC’s programmes include Jobs Abu Dhabi, which connects jobseekers with positions in the emirate’s government and private sector, and the Abu Dhabi Government Contact Centre, which provides government-related information. Other initiatives include the e-Citizen programme, the Abu Dhabi Spatial Data Infrastructure programme, the Abu Dhabi Portal, and the e-Literacy programme. All of these initiatives are designed to develop a comprehensive e-government programme that allows agencies to exchange information easily, develop cross-agency solutions and build national IT skills development in the government and among the population. In this vein, ADSIC is working to give individual government employees the ability to update and provide online services and enhance their technical skills.

Business Infrastructure

As the emirate takes steps to enhance its reputation as an international business centre, ensuring access to high-quality supporting infrastructure will be critical. In this regard, its current IT infrastructure – in terms of providing international connectivity and the capacity to handle growing broadband requirements – is more than adequate.

The UAE is home to several submarine-cable landing stations that provide telecommunications connectivity to other continents. More recent landings include Gulf Bridge International, the Middle East’s first privately owned submarine cable, and the Bay of Bengal Gateway, which is set to begin commercial operations on a system linking Malaysia and Singapore to Oman and the UAE, with branches to India and Sri Lanka, in 2014.

Inland, the UAE’s terrestrial network relies mostly on modern fibre technology rather than legacy copper lines. In 2011 Abu Dhabi became the first city worldwide to provide every household with its own direct fibre link (as opposed to copper cables carrying calls to an exchange, where they then enter the fibre network) – an accomplishment which contributed to the UAE earning the top ranking in the world for fibre-to-the-home (FTTH) penetration in 2013 from the FTTH Council of Europe. According to the annual study by Panorama Research on the global FTTH market, the UAE reached the top of the list with a penetration rate of some 72%. (Etisalat puts this figure at 85%.) The ranking covers countries with a minimum of 200,000 households where the FTTH penetration has reached 1% of the total number of homes. In 2013, 36 countries were ranked.

Results of a 2011 business survey by the Telecoms Regulatory Authority (TRA) reveal that 92% of the UAE’s businesses had an internet connection of some sort, with 99% of organisations considering telecommunications to be an important aspect of running their business. A total of 73% of firms responding to the survey expressed satisfaction with the speed of their local connections, and 28% of business respondents indicated that they were running an internet connection with a speed in excess of 16 Mbps. The TRA expects to have a 2013 survey available in late 2014 or early 2015.

Satellite

 In addition to its extensive fibre network, Abu Dhabi is the sole player in the Gulf that has its own sovereign communications satellite system. Al Yah Satellite Communications Company (Yahsat), a subsidiary of Abu Dhabi’s government-owned investment firm Mubadala Development Company, launched two multi-purpose satellite systems in April 2011 and April 2012. While the main thrust behind the launches was to provide secure and resilient communications for the UAE government, the firm is seeking to capitalise on commercial opportunities. Yahsat provides direct-to-home television channels in the MENA region and is rolling out a broadband offering to corporate customers that either require broadband services in remote areas where fixed connectivity is lacking, or desire a back-up connection in the event the terrestrial network experiences outages or downtime – a problem that can on occasion be caused by disruptions to undersea cables.

“Today’s global economy is powered by connectivity and it is imperative for business and government entities to reduce any risk associated with internet outages. That is why there has been an increase in demand for satellite broadband services as it offers resilience with respect to terrestrial internet services which are dependent on local or international infrastructure,” Masood Mahmood, CEO of Yahsat, told OBG.

The firm has announced that it will be targeting business users across the UAE in the future, complimenting the two telcos, Etisalat and du, by providing services where they do not. However, for now the satellite broadband offering is likely to have the strongest uptake in some of the other 28 countries across Africa, the Middle East and Central and South-west Asia where it has satellite coverage, particularly in the less developed sub-Saharan countries where fixed infrastructure is poor and in some cases quite limited.

Data Centres

 As the local market matures and domestic firms become more comfortable with outsourcing some of their data-handling requirements, the prospects for managed data services show solid growth potential. Thanks to its position between Europe, Asia and Africa and its status as a business centre and a base for many multinationals’ regional headquarters, the UAE also offers solid prospects as a BPO off-shoring destination and data hub. Injazat, which was founded in 2005 and is now a joint venture between Mubadala and Hewlett Packard, operates the only tier-IV data centre in the Middle East. The centre’s facilities include an integrated building-management system that monitors various climatic, power and access systems. The venture provides a range of managed services, including enterprise storage and back-up, as well as security and network services, to a diverse spectrum of clients from across the Gulf region. Etisalat, meanwhile, operates a SmartHub data centre in Fujairah, where it is hosting network carrier operators, including PCCW Global, Level 3 and China Telecom Europe, as well as content providers such as Microsoft and Yahoo. In April 2013, it announced a partnership with Epsilon Telecommunications to provide managed co-location services to some of Epsilon’s global customers at the Fujairah premises. Khazna Data Centre has also signed an agreement with telecoms provider du to be the anchor tenant in two data centre facilities in the UAE, one at Masdar City in Abu Dhabi and the other at Meydan in Dubai.

Human Capital

 Having identified ICT as a core pillar of the Abu Dhabi Economic Vision 2030, the emirate is investing heavily in ICT training at the primary and tertiary levels. By connecting all schools to high-speed internet and introducing e-learning modules in all classrooms, students are being familiarised with IT at an early age, which should in turn also help in career development. In addition to enhancing the skills of government employees to be able to employ IT in their job functions, ADSIC is also making a contribution towards promoting e-literacy among the general population by offering free training programmes to boost digital awareness and aptitude among some segments of society, such as the elderly, who might otherwise have not be able to benefit from e-government services.

As a part of efforts to support the development of a high-tech cluster by linking academia and industry, the Advanced Technology Investment Company, a Mubadala subsidiary with a focus on investing in high-tech firms that is also seeking to established a local manufacturing base in the semiconductor and computer chip space, has launched a semiconductor research and development strategy in partnership with the Abu Dhabi Educational Council.

Outlook

 In terms of its ICT infrastructure, Abu Dhabi is one of the most advanced places in the region, providing companies in the emirate with reliable and robust communications connectivity. As the local economy expands and diversifies, attracting a greater mix of corporates, there is growing demand for a wider range of IT products and services to supplement the government sector, which remains a reliable source of business.