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ED NOTE_sep09 22/10/2009 14:12 Page 9
FROM THE EDITOR 9
Grand designs Why Abu Dhabi’s urban blueprint will transform global perceptions of the UAE.
T
he opportunity to design the world’s most cutting edge and luxurious developments with an unlimited budget to transform those concepts into reality is every architect’s dream. But in Abu Dhabi it is a reality. The emirate’s 2030 urban blueprint envisages a city that will bear little resemblance to the Abu Dhabi of today. Few cities in the world have the space or budget to re-invent themselves, but Abu Dhabi is in the unique position of having oil wealth and plenty of land, both inland and on the coast, that remains untouched by urban development. There are striking differences between Abu Dhabi’s 2030 plans and those in Dubai. The latter’s dramatic redevelopment has been both faster and louder. Projects have focused on breaking records and have featured primarily luxury residential developments and hotels that in many
cases are largely inaccessible to all but a privileged few. Indeed it would be easy for an outsider to assume, from the international press coverage Dubai has attracted, that it, not Abu Dhabi, is the UAE capital. This perception is one Abu Dhabi’s leadership is keen to correct. Once its plans are complete, it will no longer be the quieter, low-key neighbour to Dubai, but a global centre of culture, business and tourism in its own right. A major part of this strategy will be to establish a base for the UAE federal government in the Capital District, an area equivalent to the UK’s Westminster or Washington DC in the US, the likes of which does not currently exist in the UAE. Another important part of the 2030 plan and one that differentiates Abu Dhabi from its neighbours is the Cultural District. The Abu Dhabi government has worked hard to establish links with the world’s top museums and art galleries to bring their collections to the Middle East for the first
“Piracy is present in every market but it is truly developed here because it takes advantage of two weaknesses. One is the technology we are using, the other is the lack of law enforcement” Marc-Antoine d’Halluin, President and CEO of Orbit Showtime (Page 32)
“QFC is a really unique animal because I haven’t come across a situation where the government has set up a financial services sector from scratch before” Stuart Pearce, CEO of Qatar Financial Centre (Page 36)
time. It has also worked with top architects, including Frank Gehry, to create sustainable and visually striking structures that may not break records, but will set new standards in world design. Such work will do much to dispel the perception that the UAE is all about sun, sand and shopping. The leaders behind Abu Dhabi’s ambitious 2030 vision have proven that speed, when it comes to urban planning, is not always of the essence. With the benefit of having witnessed the mistakes of its hastier neighbours and guidance from the world’s greatest architects and cultural establishments, the future of the UAE capital is bright.
Diana Milne Editor
“If you don’t innovate and evolve with your customers you will simply fade into oblivion,” Micky Jagtiani, Chairman of Landmark Group (Page 42)
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CONTENTS 11
32
Lights, camera, action
42 Talking shop Billionaire shopkeeper Micky Jagtiani serves up advice on driving business through innovation, surviving the downturn and the secrets of his success
Orbit-Showtime President and CEO Marc-Antoine d’Halluin lifts the lid on the real reasons behind the merger and his frustration at losing English Premier League football television rights
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36 In the money Find out why Qatar’s Financial Centre is transforming the country’s economy with CEO Stuart Pearce
City of the future We travel forward in time and report on what the future holds for the UAE capital, Abu Dhabi, in 2030
CONTENTS_oct09 22/10/2009 13:30 Page 12
CONTENTS 12
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Flying high-tech
New horizons
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62
Bigger, better, greener
ASK THE EXPERT 102 David Stokes, Business & Decision 108 Grzegorz B. Gruchman, IDS Scheer 128 Hitesh Jain, WITS Interactive 134 Peter Elliott, PA Consulting Group
56 “The millionaire-maker” The business of making dreams come true with National Bonds Corp. CEO Mohammed Qasim Al-Ali
62 New horizons Dr Samir Pradhan of the Gulf Research Center on the trends shaping the global Islamic finance market
70 Taking IT to the next level Business Management talks to Basil AbdelNabi, Head of Information Technology for Arab Bank, about the challenges facing today’s CIOs
PROJECT FOCUS 126 Ajai Kumar Dayal, OFIS
78 IT security untapped
EXECUTIVE INTERVIEW 60 N. Ganapathy Subramaniam, TCS 65 Haitham Abdou, International Turnkey Systems (ITS) 74 Kevin Burton, Burton Asset Management 76 Tony Lteif, Security Matterz 82 Iliyas Campbell, Diligence Management Consultants 119 Jay Bauer, STI Systems 123 Satish Babu, Swift Interiors Design and Build
With Madhulika Biswas of Frost & Sullivan
86 Flying high-tech With Royal Jordanian CIO Ahmed Abu Ragheb
94 Tomorrow’s communications landscape Dissecting unified communications with Frost and Sullivan’s Lavanya Palani Batcha
98 A refreshing change Masafi CEO Ashraf Abushady outlines his company’s plans to take on the giants in the UAE snack industry
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CONTENTS 14 104 Doing business the intelligent way Helena Schwenk of Ovum outlines the latest trends in Business Intelligence (BI) technology
110 A hot commodity The ups and downs of life on the Dubai Gold & Commodities Exchange (DGCX)
116 Fly buy Colm McLoughin, Managing Director of Dubai Duty Free, looks back on 26 years of doing business in the UAE
INDUSTRY INSIGHT 68 Chris Alvord, COOP Systems 84 David Allinson, Opennet 90 Luca Lazzaron, BMC Software 92 Philippe Babin, Media5 Corporation 114 Thomas S. Senger, Kofax 133 Saji PK, Sify Technologies
130 Educating the Kingdom 120 The luxury collection How Emaar hopes to build a five star hotel chain from scratch in just five years
IN THE BACK
Hot wheels
How Saudi Arabia aims to become a centre for educational excellence in the GCC
18 The brief 20 Middle East business round-up 22 News 140 City guide 142 Hot wheels 144 Final word
136 Joining forces 124 Bigger, better, greener We put energy-efficient construction under the spotlight P L AT I N U M S P O N S O R
Two legal experts from Eversheds give advice to companies hoping to set up joint ventures in the Middle East
The luxury collection
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A hot commodity
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UPFRONT THE BRIEF
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BUILDING TRUST
Dubai’s economy is on the road to recovery. But there is a long way to go before trust is restored in the country’s beleaguered property sector. The announcement by the IMF’s Chief Economist Olivier Blanchard in October that the worst of the economic downturn is over was the news the world’s leaders had been waiting to hear for the past 12 months. And none more so than in Dubai which has been dealt a devastating blow by the economic downturn. Hardest hit was the real sector on which many of the emirate’s hopes for future prosperity were pinned. Dubai, until the recession hit in 2008, had invested billions of dollars in record-breaking real estate projects, fuelled by oil wealth in neighbouring Abu Dhabi and easy access to finance, combined with a growing appetite for risk by capital providers and investors. By late 2008 however, the party was clearly over. Around 566 projects in the UAE, the The number of majority in Dubai, had projects cancelled been cancelled or or delayed in shelved. Market confithe UAE dence plunged and almost 40 percent of people surveyed by Arabian Business.com at the time said they believed the property sector would never return to the heights it had once reached. Many experts believe the nature of the Dubai property sector’s meteoric rise and the weak foundations supporting it, meant a crash was inevitable. Indeed Mohanad Alwadiya, Director of Dubai-based Harbor Real Estate said some industry observers predicted a crash as early as 2007: “Real estate values were always headed for a correction. The price increases witnessed in the first half of 2008 were unsustainable and the bubble had to burst at some stage.” Dr Samir Pradhan, Senior Economist at the Dubai-headquartered Gulf
566
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UPFRONT THE BRIEF Research Center agrees: “Demand growth, higher asset prices, easy liquidity, higher expectations, speculation and artificial leverage created the real estate bubble in Dubai. The fact that it burst was inevitable.” Even though the overall Middle East construction market is now predicted to stage a recovery in 2010, most agree that the industry focus has shifted away from Dubai towards other, more stable, economies. In a recent survey published by legal expert Norton Rose, 55 percent of respondents with interests in the region’s construction industry expected the effects of the economic slump to fade within 12 months. However, 71 percent said their primary markets are now based in Saudi Arabia, Abu Dhabi and Qatar, with only five percent choosing Dubai. Even those with a significant stake in the emirate are looking at other markets. Dubaibased contractor Arabtec, for instance – the largest in the UAE by market value – has won contracts in Saudi Arabia and Abu Dhabi so far this year as it ventures further afield away from the property downturn in its home market. “People talk about [the Dubai market] turning around, maybe by the middle of next year, but I don’t think it will ever achieve the scale and the heights that it was at before,” said CEO Thomas Barry in a recent interview with Reuters. It is a market perception that those within Dubai are only too aware of. “There has been a disproportionate amount of negative press regarding Dubai since the economic crisis began, and this will have damaged investor confidence in the emirate,” concedes Alwadiya. “It is now up to the authorities and developers alike to restore confidence in Brand Dubai and in doing so to ensure the mistakes made leading up to 2008 are not repeated.
19
NEWS IN PICTURES
Iranian President Mahmoud Ahmadinejad with International Atomic Energy Agency (IAEA) chief Mohamed ElBaradei in Tehran where they met to discuss the newly-revealed second uranian enrichment plant
A metro train drives through Sheikh Zayed Road in Dubai on the day of the official opening of the emirate’s metro network
Riyadh-based motorcyclists taking part in the Hogs of Lebanon Harley-Davidson tour ride throughout Beirut celebrate with a Saudi flag at the end of their three-day event. They were among 200 riders taking part, including bikers from Lebanon, Syria, Jordan, Saudi Arabia, the UAE, Kuwait, Greece, Italy and France
Hollywood actress Demi Moore arrives at the opening of the Middle East International Film Festival in Abu Dhabi. In its third year, the festival has introduced awards for ‘best feature film’ from the Middle East and ‘best new director’
An Emirati visitor inspects the FIFA Club World Cup trophy on show at the information technology exhibition, Gitex in Dubai. Abu Dhabi will be hosting the Club’s World Cup between December 9 and 19.
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UPFRONT MIDDLE EAST BUSINESS ROUND-UP
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SAUDI ARABIA New car sales have shown strong growth in Saudi Arabia despite the global economic downturn. The latest report by Business Monitor International predicts the Kingdom’s car sales market will grow by two percent this year and by 2013 sales will have experienced a 50 percent increase. This is in contrast to the car sales markets of the UAE, Bahrain and Kuwait, all of which are due to decline this year. The report states that the worst is now over for the Saudi auto industry and says the market has been revived by increased lending with car loans set to account for over 70 percent of purchases this year. Meanwhile the value of sales is expected to reach US$18.53 billion in 2010. Saudi Authorities have given the goahead for the licensing of privatelyowned gun shops in the Kingdom, in a bid to crackdown on illegal gun ownership. According to Arab News, the Ministry of Interior has said anyone over 25 with a clean criminal record and a bank guarantee could apply to open a gun store. The country has also recently granted permission to Saudis to start gun clubs – on the condition that these are away from civil establishments, residential districts, schools, hospitals, markets, petrol stations and gas warehouses.
UAE Abu Dhabi has secured US$2.15 billion in a 22-year financing deal to fund its Shuweihat 2 water and power project. The deal between the Abu Dhabi Water and Electricity Authority (ADWEA) and a consortium of 15 regional and international banks will fund the development of the project which will produce 1507 megawatts of power a day. ADWEA owns 60 percent of the project, while France’s GDF Suez and Japan’s Marubeni both own 20 percent. The financing deal is the biggest secured in the region this year and only one regional bank, the National Bank of Abu Dhabi, is part of the consortium. Half of the financing is to be provided by the Japan Bank for International Cooperation.
KUWAIT Sheikh Ahmad al-Fahad al-Sabah, Kuwait’s deputy minister for economic affairs, has revealed the country’s intention to relaunch plans for a fourth refinery in the country. He told the state news agency KUNA that plans that were previously scrapped for the US$15 billion refinery, were back on the drawing board. The original plans were scrapped after politicians claimed there had been violations in some of the contracts that had been awarded. According to Reuters, several members of the Kuwaiti parliament had alleged violations, including handing a package to the US company Fluor Corp. without a tender.
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UPFRONT MIDDLE EAST BUSINESS ROUND-UP
OMAN Oman Air has been forced to delay the launch of its four weekly flights to the Maldives and Sri Lanka. It has attributed this set back to delays in winning approval for the flights from the Sri Lankan aviation authorities. It had planned to launch the flights as part of its international expansion programme using a new fleet of Airbus A330s. Barry Brown, Oman Air’s Chief Commercial Officer, said in a statement: “We are extremely disappointed to announce this delay caused by the inability to secure approval from the Sri Lankan authorities.” Around 300 passengers were affected. Meanwhile the airline has launched what it claims is the plushest toilet in the industry. The toilet in the first class cabin of its A330 aircraft features luxury flooring designed to imitate a sandy beach.
BAHRAIN Deaths have doubled on construction sites in Bahrain in the last four years and will continue to rise unless companies take action. That’s the warning from the country’s Labour Ministry, which has released alarming figures showing the number of fatalities on sites across Bahrain. So far this year, 35 workers have died in work-related incidents, compared to 18 in 2005. In 2008 36 were killed and 29 died in 2007. The majority of those that perished fell from buildings under construction, were hit by falling debris or became trapped in workplace machines. Most of the deceased were from India, Bangladesh, Nepal and Pakistan. The Ministry has urged companies to stop flouting safety regulations. These include the rule that companies with 100 employees must employ a safety officer and those with 50 or less should train a foreman or supervisor to monitor safety issues.
21
QATAR Supply of housing in Qatar is rapidly outstripping demand with one in 10 residential units likely to be empty by 2010. A report by Engel and Volkers claims that because of the saturation in the property market, commercial rents will bottom out by next year. The study claimed that there has already been a substantial decrease in commercial rent this year compared to during 2006 to 2008. This has been due in part to the completion of various large projects in locations such as West Bay. Meanwhile, the market for commercial villas remains stagnant, it claims. A company has been set up to drive development of a railway system in Qatar. Qatar Railway has been launched with an initial capital investment of US$100 million. The country hopes to set up a fully-fledged rail network by 2026. Work on the mega railway project covering the whole country is due to start in 2012. Meanwhile, work on a metro rail project is also due to start and an international consultancy has been appointed to carry out the work.
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UPFRONT NEWS
DUBAI: NO RECOVERY UNTIL 2010
22
H1N1: PANDEMIC, PANDEMONIUM OR PARANOIA? Investment bank EFG-Hermes estimate that real estate prices in Dubai will not recover until the last two quarters of next year. In a quarterly report on the UAE’s property sector, EFG said: “With relatively low buyers’ confidence in Dubai, together with our view that demand will continue to focus on the rental market as supply is absorbed, we do not anticipate any strong recovery in Dubai selling prices before the second half of 2010 at the earliest.” The report also reveals that, on average, prices in Dubai declined 50 percent from the highs of last year, and that current transactions were focused on completed projects and prime locations.
FAST FACT
5% Amount construction growth in Qatar will slow by 2009
As winter in the Northern Hemisphere approaches, and the world faces the H1N1 (swine flu) virus, businesses around the globe are preparing for a disaster that might never materialise. So will this impact your business? The answer is a definite ‘maybe’, but it’s also a very big maybe. The last big flu, Spanish Influenza, left 50-100 million dead 80 years ago. So in the absence of being sure, we do what we do best in disaster planning: prepare for ‘what if’. The question to ask is whether this is truly a pandemic, or are we victims of the media pandemonium, or is this all just human paranoia?The answer, of course, is that it’s all three. To reduce paranoia, deal with the situation. Have an afternoon or evening when a doctor will administer the vaccination for H1N1. This will go a long way toward gaining employees’ trust, their loyalty and their desire to go the extra mile for the company. We have found the best way to avoid falling into the media circus is to educate your people on how H1N1 is
transferred, so they can make educated decisions based on fact, not fiction. The World Health Organisation is an excellent resource. Policies need to be clearly outlined for what to do with people who become sick or are showing signs of being sick. These policies need to be outlined by your HR or legal department. The biggest impact your business will face is what policies your local governments might impose that will indirectly limit how you do business. These might include closing schools, limits on travel, limits crossing borders, to name a few. These will impact your bottom line, none are the fault of your business and you can’t really plan for the recovery until we know what to plan for. www.disasterrecovery.com
KUWAIT OUT OF POCKET? The UN has accused the Kuwait Investment Authority (KIA), the Gulf state’s sovereign wealth fund, of losing US$94 billion in assets as a result of the financial crisis. However, Kuwaiti officials have denied such claims and Othman Ibrahim al-Issa, KIA’s acting Managing Director, has asked that the UN rectify its mistake by announcing that is not the case. Last month, in its World Investment Report 2009, the UN Conference on Trade and Development announced that the huge losses were as a result of Kuwait not coping well with the global economic downturn, adding that it was one of four Gulf sovereign wealth funds to be hit particularly badly, losing a total of US$350 billion.
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UPFRONT NEWS
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MIDDLE EAST TOURISM TO DOUBLE BY 2020 After the global economic crisis growth of over 18 percent, which is ravaged the region’s tourist indus- expected to continue from next try and construction projects for year. Similar trends of growth can new hotels and leisure complexes be found across the globe as the were delayed or even cancelled, the world's tourism industry emerges Middle East has finally received from the recession. Speaking at a seminar in Abu some good news. According to a report by the UN World Tourism Dhabi, the UNWTO regional repOrganisation (UNWTO), the num- resentative for the Middle East, Abdel-Ghaffar, said, ber of tourists visiting the Middle Amr East will more than double by 2020. “Generally speaking, the GCC countries appear to be showThe region’s growth rate ing a fair degree of rewill be almost double silience to the that of the world avglobal economic erage, taking the downturn.” number of You only have Number of tourists tourists arriving expected to visit to take a look at in the region to the Middle East Abu Dhabi to 136 million by by 2020 get an idea of the 2020, up from 54 region’s renewed opmillion last year. This timism with regards to will be welcome news as the UNWTO report also highlighted tourism, as it aims to more than the fact that the number of tourists double the number of hotel guests coming to the Middle East in the to 2.3 million a year by 2012, first seven months of this year fell by down from a forecast of 2.7 mil13 percent, compared with the same lion earlier this year. At present period last year as the global reces- the Middle East has 477 hotel sion hit. Yet, the UAE somewhat projects, or 145,786 rooms, bucked the trend with a three per- planned with more than half alcent growth in tourism in the first ready under construction, acquarter of this year. And in 2008 the cording to a report by Lodging region overall experienced tourism Econometrics, a US research firm.
136 million
GLOBAL PERSPECTIVE Since 1932 Lego has entertained generations of children. But when the company came close to collapse it took an outsider, JORGEN VIG KNUDSTORP, to save it from financial ruin, as the European edition of Business Management discovers in the latest issue. CEO Knudstorp says: “My job was to stop the bleeding, stabilise sales and cut costs dramatically to deal with the new reality of selling 40 percent less than we did two years ago.” To read more go to www.bme.eu.com
DUBAI LOSES ITS CROWN Dubai no longer tops the list of the fastest rising financial centres in the world. The latest independent Global Financial Centres Index (GFCI) shows that Dubai is likely to be surpassed by Shanghai, Beijing and Shenzhen as the most significant centres for financial activity on the world stage. In more bad news for the emirate, it also fell to fifth in the list of financial centres where international companies saw future offices being opened, behind four Asian-based centres. London
and New York dominated overall, with recent surges from Hong Kong and Singapore meaning they joined the two western economic super powers in the top four. Dubai was named in the top five centres perceived to have been most affected by the global economic crisis. New York and London were reported to have been hit the hardest, however their mature financial institutions and traditional systems have enabled them to remain strong, according to the GFCI report.
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UPFRONT NEWS
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PEOPLE POWER AND TRAINING SOLUTIONS After cutting a long fruitful shot help people learn new developing in the field of HR and leadership concepts but also to ensure that development since 1998, LTC they cross the bridge from learntoday owns a wide portfolio of more ing to doing. This allows your peothan 120 globally practiced and fully ple to achieve their full potential certified training programmes to and better align individual goals enable organisations to develop a and competencies with organigreater performance. sational objectives. The Aiming to provide results are measurits clients with a able and lead to top quality sersustained imThe number of vice, LTC is affilprovements for globally adopted training iating with seven your organisaprogrammes of the world’s tion. Using a colowned by LTC leading training orlaborative ganisations which are; diagnostic process, Ken Blanchard Companies, Ken Blanchard Companies Franklin Covey (just Egypt), helped some of the world's leading Eagle’s Flight, Vital Smarts, organisations solve complex isAcumen Learning, Maximum sues, achieve measurable results, Potential and DOOR training and and develop leadership capacity to consultancy. improve productivity and perforKen Blanchard, through mance. Effective Leadership soluwhich LTC come to get noticed in tions provided include the Gulf, is a global leader in lead- Organisational Excellence, Team ership, workplace learning, em- Effectiveness, One-to-One Talent ployee productivity, and team Management, Executive effectiveness. Using Blanchard so- Development, Personal Self lutions, people increase their im- Development, Coaching, and more. pact as leaders, enabling them to The Ken Blanchard companies proachieve strategic objectives and vide comprehensive leadership dedrive organisational results. All velopment, management training, Ken Blanchard training pro- and coaching solutions that address grammes are designed not only to your business needs at every level.
DOCUMENTATION AUTOMATION
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To find out more go to www.ltc-intl.com or www.kenblanchard.com
Middle East businesses and governments are gearing towards full scale automation of their documentation and business processes despite tightening budgets and stormy economic climates. Two reasonably priced enterprise solutions are making headway in that change throughout the region, and surprisingly enough they are home-made. Not tailored for a specific industry, but they are mainly active in banking, telecommunications and governmental sectors. ArcMate Capture, the flagship product of UAE-based NVSSoft, is an extensive large-scale solution for today’s challenging data and document capture requirements. It employs advanced neural network technologies for form recognition, to yield outstanding, language-independent recognition accuracy. Use of this technology ensures higher performance and better results than traditional OCR-based form recognition techniques. ArcMate Capture was designed from the ground up with the Arabic language in mind and therefore it integrates seamlessly and transparently with many Arabic OCR engines to provide full text extraction and zonal OCR capabilities for Arabic documents. The latest release of ArcMate Capture was launched at the Fujitsu Imaging Channel Conference in Morocco last February, and has ever since achieved notable successes in the UAE, Saudi Arabia and Kuwait. Also, EZIFlow, a recent product of NVSSoft, is a user-friendly solution to automate business processes for enterprises of all sizes. It enables businesses to achieve full integration with existing systems, harnessing the power of all existing resources. This robust solution increases enterprise efficiency by reducing paper flow and the associated costs and risks, and enabling full scale collaborative work with set permissions and real-time monitoring, exception handling, auditing and reporting. EZIFlow was designed according to the international WfMC workflow reference model and has a full user-friendly graphical interface for business process design and instance management.
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UPFRONT NEWS
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CRISIS FORCES EXPATS TO FLEE KUWAIT Around 17,000 expatriate workers have cancelled their residence permits and left Kuwait in the first half of 2009 due to the impact of the global economic crisis, according to Middle-East-Online.com. Quoting sources in the Ministry of Social Affairs and Labour, it claimed that more than 70 percent of the affected workers were Asians, who make up the majority of the foreign workforce in the oil-rich emirate. However, the figure does not include foreign workers who may have resigned or been dismissed from government jobs or domestic service, since the Ministry of Social Affairs and Labour is re-
AIRPORT RENOVATION
sponsible only for employees in the private sector.The sources said the real number of foreign workers affected by the crisis was likely to be much higher since many of those dismissed decided to stay on to look for other opportunities, in some cases illegally. Under Kuwaiti law, no foreigner can live in the country without a valid residence permit, which is dependent on employment. The number of foreign workers in Kuwait dropped by 20,000 to 1.75 million at the end of last year, according to official figures, in the first drop since the Iraqi invasion of 1990.
EXPATRIATES LIVING IN KUWAIT
The Jordanian government is planning to invest US$750 million in the redevelopment of Queen Alia International Airport (QAIA) in its capital, Amman. The project, which when finished, will increase the airport's capacity to 21 million passengers, was announced yesterday by Curtis Grad, CEO of Airport International Group, on the last day of the aviation conference, Low Cost Airlines World MENA 2009. “We expect Phase I of this terminal to be ready by early 2012. It will have a capacity to handle nine million passengers. The Phase II will be able to handle an additional 12 million passengers. We are looking at inbound traffic from Abu Dhabi, Al Ain, Dubai and Sharjah and other GCC markets to link up with QAIA and benefit from it,” Grad said in a statement.
1.33 MILLION
ASIANS
971,000
ARABS EUROPEANS AND AMERICANS
35,000
AUSTRALIANS
35,000
DRIVING SUCCESS THROUGH INTEGRATED MANAGEMENT SYSTEMS (IMS) Businesses traditionally evolve over a period of time and introduce different back-end, or transaction processing systems at different stages of their evolution, depending on their needs. So they may have a suite of ERP or CRM or core banking as well as other applications critical to running their day-to-day transactions. On top of these applications, organisations usually evolve into the use of BI or corporate performance applications. Inevitably this has led to the duplication of effort in maintaining the same information in multiple systems, unnecessary cost, a lack of information transparency and inability to timely provide managers with quality information to base their decisions on. Ensuring success in achieving goals on a
sustainable basis requires firm control over managing strategy and operations. It is critical to create a single integrated system, to report from these multiple applications and provide the management with unified information on which to base critical decisions. These decisions will need input from one or more of the following management frameworks running within the organisation: • Strategy management system describes the midto long-term plan of action of the organisation • Business process management describes and documents how the organisation does things • Business performance management monitors how well the organisation is doing things
• Quality management ensures the organisation delivers value to its customers • Risk and compliance management ensures that the organisation has identified possible risks and is prepared for them Deploying an IMS allows organisations to migrate towards a management system that treats strategy, performance, risk, compliance, process and quality as interdependent enablers of achieving goals, allowing them to be managed in a unified, systematic way in order to optimise results. The key benefit from an IMS is the ability to align all management practices with your strategy. www.iycon.com
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IRAN LOGS ON
DUBAI WORLD SLASHES GLOBAL WORKFORCE
A new study by Euromonitor has revealed that Iran is top of the league for internet use in the MENA region, with 57 users per 100 inhabitants making up over five percent of the world’s internet users, totalling 85.5 million in 2008, compared to 16 million in 2003. During the same period, the region’s share of the world internet users rose from two percent to 5.2 percent, with Iran leading the way with 41.1 million logging on, as of 2008. Egypt came second with 12.6 million. Even when the figures are examined relative to population size, the widest access to the internet was still found in Iran, followed by the UAE with 56.4 users per 100 inhabitants. Despite the internet being slow to arrive in the region during the 1990s, the development has been extremely fast recently. As states across the MENA region look to open themselves up to the wider world in an effort to increase revenue through greater foreign investment, the spread of the internet is part of a wider trend of growing access to media and communications.
Dubai World, the state-owned investment group, has announced it will cut its global workforce by 15 percent, taking it below 70,000, as a result of the global financial crisis. The majority of cuts will be made in the UAE itself – 25 percent – after the real estate market was hit particularly hard by the crash. The restructuring operation will result in a saving of more than U$800 million over the next three years, the company said in a statement. Dubai World operates a number of major ports across the globe, and its subsidiaries include property division Nakheel, investment business Istithmar World and newly-created retail management arm Retailcorp World. In a statement the company said: “Each Dubai World division is now more appropriately sized for the current market while at the same time well placed to take advantage of the eventual economic recovery.” Despite falling business after the crisis hit, DP World managed a 48 percent growth in profits through 2008, the company announced in March. However it also announced in January this year that it would be reviewing expansion plans and putting a freeze on recruitment after a drastic downturn in the container terminal industry.
Q2 2010 Date when major work is set to start on Dubai’s ‘The World’ development
DATA BACKUP AND RECOVERY SOLUTION LAUNCHED Software vendor Acronis has launched a new portfolio of disaster recovery products that combine data deduplication, enhanced support for virtual environments, and centralised management. Acronis Backup & Recovery 10 is the next generation of the vendor’s Acronis True Image solution. It offers data ‘deduplication’, a technology which can cut storage requirements by up to 90 percent through eliminating copies of redundant data. Until now, this technology has been reserved for larger organisations due to the high implementation cost but with this release Acronis offers the industry’s most cost-effective software deduplication solution, without the need to purchase additional hardware. Data deduplication technology is increasingly a must-have when it comes to increasing storage capacity and reducing storage costs. SMEs
can now take advantage of enterprise-class services, at a very affordable price, in an easy-to-use package for backing up and recovering critical data to or from disk, ftp, optical and tape devices at industry-leading speeds. With Acronis Backup & Recovery 10, restoring a complete system, PC, workstation, or server, can be done in minutes, not hours or days. “IT buyers today are demanding that backup and recovery solutions deliver the value that comes from greater efficiency, manageability, and scalability,” said Dave Russell, research VP at Gartner. "The common denominator is that organisations, regardless of size, are striving to maximise the impact of their technology initiatives. They will require such important features as using one product for both virtual and physical backup, data deduplication for faster and more efficient backups, and the ability to manage all backup processes from a single console.” Jason Donahue, Acronis President and CEO, said: “Acronis has expanded its market focus to better address the needs of large organisations while continuing to deliver unprecedented features and functions for small and medium-size companies.” For more information or for a free trial of Acronis Backup & Recovery 10 go to www.acronis.eu/promo/busmagme/
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HOW MUCH THE RECESSION HAS HIT THE GULF
ENRICHED ACCESS
Sovereign wealth funds (SWF) of four oil-export- economies. The United Nations Conference on ing Gulf states lost around US$350 billion last Trade and Development (UNCTAD) said that year due to the global financial crisis, acassets held by the four Gulf funds cording to a UN report. However, dropped to US$1.115 trillion last the four states – Kuwait, Saudi year from US$1.165 trillion dolArabia, Qatar and Abu Dhabi – lars at the end of 2007 but that who were heavily impacted by government injections of Amount lost by four the crisis due to the collapse of US$300 billion helped narrow oil-exporting Gulf states due to the real estate and equity markets, altheir losses. The four Gulf states financial crisis most maintained their total asset pump more than 13 million barvalue at the end of 2008. This is largerels of oil per day (bpd), just under ly down to the governments injecting huge half of total OPEC production of around amounts of capital earned from oil, into their 29 million barrels per day.
Scheduled for release in October 2009, Cardax FT version 6 will enable proactive and pre-emptive workforce management by preventing incidents from happening on a site. Organisations today (particularly in industrial environments) need the ability to ensure that whoever is coming on site is:
LOSSES RACKED UP BY SWFS IN 2008
Businesses need to be able to do this 24/7, whether or not their IT infrastructure is online, in order to maintain operational continuity. For example, if an untrained staff member gains access to a restricted area and causes an incident, the resulting health and safety closure of a site can cause significant productivity and profit loss.Identity analytics is an advanced concept in security management, delivering an enriched access control decision by taking the ‘who, where, and when’ of the traditional access control decision and enriching it with ‘what’ competencies a person possesses. The ability to verify this information and factor it into every access decision can greatly affect operational continuity and productivity levels. Identity analytics delivers pre-emptive and proactive workforce management. If access is denied, the reason for denial is instantly communicated in a meaningful way via distributed reader hardware at the door, so that the person affected can take corrective action. The solution is able to scale from SME level – direct management of competencies – to enterprise level – drawing competencybased information from multiple integrated systems such as HR, ERP and payroll. Once configured, all of this is enforced independently of the server via the new Cardax FT Controller 6000, delivering an unparalleled and resilient solution.
US$350 BILLION
ABU DHABI INVESTMENT AUTHORITY (ADIA) US$183 billion KUWAIT INVESTMENT AUTHORITY (KIA) US$94 billion SAUDI ARABIAN MONETARY AGENCY (SAMA) US$46 billion QATAR INVESTMENT AUTHORITY (QIA) US$27 billion
DUBAI DEBT REPAYMENTS TO HIT US$50 BILLION BY 2012 Dubai-based government related entities (GREs) are likely to stump up accumulative debt repayments totalling US$50 billion over the next three years, according to Standard & Poor’s. Its estimate of the current total amount of debt owed by the Dubai government and its various GREs is between US$80 billion to US$90 billion, but it also added that the margin for error was significant “given the lack of official statistics”. S&P has issued a number of credit rating downgrades to Dubai GREs over the past few months. The agency points out that more significant than the quantity of debt outstanding was the relatively shortterm structure of the debt. “According to approximate data contained in the report, cumulative repayments for Dubai-based GREs over the
coming three years are significant and amount to nearly US$50 billion, which is equivalent to around 70 percent of Dubai’s current estimated GDP,” Standard & Poor’s said in a new report published on Thursday. “The majority of this debt will come due in 2011 and 2012,” the agency added.
• • • • •
inducted in safety policies and procedures trained to perform their role holds appropriate and unexpired licences insured compliant, safe and accountable
For more information visit: www.cardax.com
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SAFETY IN NUMBERS
SIZE MATTERS: SAUDI ARABIA’S TALLEST BUILDING Burj Dubai (UAE)
Leveraging a global satellite network and simple, inexpensive wireless sensors, Cartasite has made it possible to: ensure worker safety by monitoring their location in realtime; enhance the utilisation and security of critical assets; and improve performance and productive capacity. It used to be good enough to use paper to dispatch vehicles and deploy personnel, but no longer. Cartasite has developed an enterprise grade, personal safety system that is smaller than a deck of cards. This intrinsically-safe, satellite GPS beacon enables workers to get help, anywhere on the planet. Their global search and rescue insurance package will pull you out of harm’s way – anywhere, anytime. Cartasite’s Global RFID solution is a small, discrete tag that talks directly to a satellite network, reporting location and movement information continuously for four years from a couple of AA-batteries. It is so fast and simple to de-
The second tallest building in the world
Abraj Al Bait
Willis Tower (USA)
Taipei 101 (Taiwan)
Petronas Towers (Malaysia)
Empire State Building (USA)
costing
$3bn to build It will have the largest floor area of any structure in the world with
equal to
Each side of the Abraj Al Bait tower will have a
clock face which will be 5 times bigger than that featured on London’s BIG BEN
271 AMERICAN FOOTBALL FIELDS
5
Royal Floors
2
The hotel 24-hour will feature: butler service
Golden Floors
PLUS
76 1,005 elevators
guest rooms & suites
with 1 suite being or equal to about 3600 sq metres 9 basketball courts
Segregated Beauty parlours grooming salons gyms
Chocolate room where chefs will
Source: www.guardian.co.uk/www.arabianbusiness.com/ wikipedia.org
ploy that no assets should be placed into remote locations without it. Too often workers are dispatched to the field without the right tools, or training. Cartasite built an open sensor platform that monitors the status of just about everything from compressors, pumps, tanks and flow lines. Their customers don’t have to set up or maintain complex, wireless networks. Direct-tosatellite, battery-powered transmitters are
built into each of these sensors. Finally, inexpensive remote instrumentation can be deployed in a matter of minutes. Naturally, all of this technology is only as effective as the application interface that supports it. Cartasite has built a simple, geospatial dashboard for all of this real-time telemetry. Because this is a web application, there is no software to install, no servers to maintain, and no upfront cost. Such a simple, practical solution is surely the way all field operations will be run in the future.
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WILL SAUDI’S ‘CLEAN’ YOUTUBE WORK? Saudi Arabia has unveiled its own ‘clean’ version of YouTube, which aims to prevent youths from watching profane or sexually explicit video clips online. The watered down version adheres to the Kingdom’s standards of cultural, religious, and moral sensibilities, a report has said. According to Arab News daily, a group of Saudis have developed NaqaTube (Naqa meaning ‘pure’ in Arabic), to be a collection of clean and edited clips found on YouTube. The group censor videos that they deem negative towards the Kingdom’s government, scholars, and citizens in general. NaqaTube’s slogan is ‘Participate with us in a clean website’. As well as those areas being monitored, in keeping with religious guidelines, images of women and music
DON’T MISS...
are also banned. NaqaTube visitors are also able to edit their own clips through the site before they upload them online. According to Abu Ibraheem, one of the moderators of NaqaTube, the site has received nearly 5000 to 6000 visitors since it launched two months ago. “Our dream is to decline the number of visitors to YouTube," Abu Ibraheem said. “Our plan in the future is to include other languages,” he added. It’s the latest measure Saudi has adopted to protect its youth and preserve its cultural and religious identity in cyberspace, Arab News said. For months now, members of the ‘Saudi Flagger’ campaign have been searching YouTube for inappropriate content, which it then requests the site’s administrators to remove.
32 LIGHTS, CAMERA, ACTION The truth behind the merger of Orbit and Showtime Arabia
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COMPANY INDEX Q4 2009 Companies in this issue are indexed to the first page of the article in which each is mentioned. Abu Dhabi Investment Authority 27 Abu Dhabi Media Company 32 Abu Dhabi Motorsports Management 54 Acronis 26,81 Adeptic 105 Alan Dick 89 Aldar Proprties 48 Arab Bank 70 Arabian Business 28 Babyshop 42 BMC 90,91 Burton Asset Management IFC, 74 Business and Decision 102,103 Cardax 27,66 Cartasite 28,107 China Railway Construction Corp. 130 Cisco 100 Coop Systems 68,69 Credit Suisse 36 Debenhams 42 DGCX 110 Diligence 82,83, IBC Dubai Duty Free 116 Dubai International Financial Centre 36 Dubai World 26 EFG-Hermes 22 Emirates 117 E-Serve 131 Euromonitor 26 Forbes 42 Frost & Sullivan 78,94
GEMS Education 130 Goldman Sachs 36 Guardian 28 Gulf Research Center 62 HSBC 36 IDS Scheer 108,109 International Turnkey Solutions 4,15,65 Intertek Systems 87 Iycon 17,25 Juniper Networks 41 KAUST 130 Kingsbridge Disaster Recovery 22,73 Kofax 114,115 Kronos 139 Kuwait Investment Authority 21 Landmark Group 42 Landrover OBC Lego 23 LIFE 42 Lotus 142 LTC 24,137 Media 5 Corp. 92,93 Meet The Boss 75 Mercedes 30 Mimecast 79,144 National Bonds Corp. 56 Net Dimensions 10 New Look 42 New Vision Software 24,59 OFIS 126, 127 Oman Air 21
OPEC 27 OpenNet 84 Oracle 143 Orbit-Showtime 32 Ovum 104 PA Consulting 134 Qatar Financial Centre 36 Qatar Investment Authority 27 Qatar Railway 21 Quest Software 45 Reem Investments 48 Royal Jordanian Airlines 86 Sage 47 Samsung Electronics 95 Saudi Arabia Monetary Agency 27 Schneider Electric 89 Security Matterz 76,77 Sifty Technologies 13, 133 Sorough Real Estate 48 Standard & Poor's 27 STI Systems 6,119 Swift Interiors Design and Build 8,123 Tamouth 48 TCS 60,61 UN World Tourism Organisation 23 Vision Solutions UK 39 Wikipedia 28 Wipro 2 WITS Interactive 128,129
IN THE MONEY QFC CEO Stuart Pearce on Qatar’s ambitious entry on the global financial stage
42 TALKING SHOP Self-made retail billionaire Micky Jagtiani of Landmark Group tells his rags-to-riches life story
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LEAD FEATURE
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When rival pay-TV operators Showtime Arabia and Orbit merged earlier this year a new chapter in Middle East media history was written. Orbit-Showtime President and CEO Marc-Antoine d’Halluin, reveals to Diana Milne what really went on behind the scenes when the screen giants joined forces.
F
or Marc-Antoine d’Halluin, the Frenchman at the centre of the biggest merger in Middle East media history, 2009 has been a year of highs and lows. In July the broadcaster faced potential ruin after bidding unsuccessfully to extend a lucrative three-year deal for the rights to show live English Premier League (EPL) football matches. Just one month later the channel announced the successful completion of a merger with its biggest rival in the MENA pay-TV sector, Orbit. Now officially re-branded Orbit-Showtime, the channel offers 75 channels, including 15 movie channels and has “hundreds of thousands” of subscribers across the region, leaving little room for competition in the market. The alternative to the monopoly created by this merger, says d’Halluin, was a situation in which both channels lost out in a bidding war, which only succeeded in benefiting the programming suppliers: “Th is was a merger between two companies that had been competing fiercely for the last 15 years in trying to attract pay TV subscribers in the MENA region. Usually when such competition lasts longer, the only winners are the programming suppliers who have actively benefited through a succession of price bidding wars in terms of content,” he says. “The merger makes sense from a purely business point of view, as it puts to an end the crazy content price wars that take place otherwise.” While such a merger may be new to the Middle East region, it emulates a pattern demonstrated in the West, starting with the merger of British Satellite Broadcasting and Sky Television in 1990. “It’s an established fact in Europe that each of the markets that have had direct two to-home (DTH) satellite platforms have experienced a consolidation. We are the sixth or seventh DTH merger to have taken place.”
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A captive audience Because Showtime is a private company it will not disclose figures for the number of subscribers it has or where they are located. However, d’Halluin will reveal that its main markets are in the GCC, with the bulk of its customers located in Saudi Arabia, Kuwait and the UAE. He says the company is now directing its efforts on growing its subscriber base in smaller but fast growing areas of the Middle East: “We focus our main efforts on our biggest markets but we are now also looking at some smaller markets such as Bahrain, Qatar, Egypt and the Levant, all of which are developing very well.” He says the channel’s subscription numbers have not been negatively affected by the economic downturn but have in fact benefited from increased demand for home entertainment as an alternative to more expensive pastimes. “At the end of the day, when people are cautious about spending their money on entertainment the last thing they are going to cut out is their TV entertainment. It provides a broader form of entertainment at a cheaper cost, especially now we offer 75 channels in one package. We’ve certainly not suffered as much impact as other industries such as banking and fi nance or real estate.” There is particular demand, he says, for video-on-demand packages: “There is a growing demand for watching what you want when you want. We have developed a subscription for video-on-demand and we now bring a variety of movies and series into DVR [Digital Video Recorder] boxes. We have now deployed tens of thousands of these and we know viewers are very happy being able to watch exactly what they have paid for.”
Regional challenges While Orbit-Showtime may have aped the behaviour of its European counterparts, it operates in a far less mature media market and faces unique challenges as a result. One of the greatest of these is piracy – a problem exacerbated in the Middle East, according to d’Halluin, by under developed technology and a lack of legal deterrents. The problem is so bad, says d’Halluin, that it costs his company losses equivalent to several times Orbit-Showtime’s total annual revenue. “It is between one and two times our total revenue and this is extremely significant.” He goes on to say that piracy also leads to culturally inappropriate material being broadcast into Middle East viewers’ homes: “It hurts as a business but it also enables the households in the region to receive content that is culturally inadequate such as pornographic channels.” D’Halluin says that rampant piracy was one of the reasons behind the merger with Orbit and that the two companies will now join forces to fight against it using the best technology available: “Piracy is present in every market but it is truly developed here because it takes advantage of two weaknesses. One is the technology we are using and the other is the lack of law enforcement and regulations helping us to fight piracy. One of the benefits of us coming together is being able to fight a much more effective war against this piracy using the latest technology. We intend, in particular, to deploy new decoder boxes that will be more secure and so will defeat piracy. They will also help consumers to receive higher defi nition channels.”
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Winning content In terms of the content it broadcasts, Showtime has brought top The showtime story international shows to the Middle East, including Eastenders, Saturday Orbit-Showtime is the leading Pay TV network in the Night Live and The Simpsons. Balancing the need to meet demand for Middle East and North Africa, broadcasting blockbuster Western entertainment whilst also respecting the region’s cultural senmovies through its exclusive deals with Hollywood sitivities has never been a challenge, claims d’Halluin, adding that to studios including Paramount, Dreamworks, Sony achieve this it is important to ensure the Arab audience is represented. Columbia, NBC Universal, Disney and local producers; “We broadcast everything you would fi nd in the West and mix it with exclusive premium sports; and international series content that has been produced in the region. We have exclusive deals including Desperate Housewives, Lost, Prison Break, with around 10 Arabic content channels. We fi nd that as a result there CSI and Ugly Betty. Showtime Arabia is based in Dubai is the right balance between Arabic and Western content. It’s about and produces its own premium channels branded respecting our viewers because in no way do we ever want to produce SHOWCINEMA, SHOWMOVIES, SHOWSPORTS, content that could be perceived as being offensive. That would be counSHOWSERIES, SHOWCOMEDY, SHOWKIDS, SHOWTODAY terproductive and idiotic.” and SHOWSHASHA. The However, Showtime is not always able network’s own channels are to provide viewers with the content they complemented with a premium demand: losing out to Abu Dhabi Media Comselection of International pany for the rights to show EPL games was a partner channels including major blow for the company and a subsequent global brands like Disney, poll by Arabianbusiness.com indicated that Discovery, Nat Geo Wild, Nat 50 percent of subscribers would cancel their Geo Adventure, MBC+ Drama, subscription if the broadcasts continued to The Style Network, CNBC, BBC fail to provide access to the games. D’Halluin’s and BBC Prime. frustration at the situation is obvious, though for d’hullun The loss of the EPL was a body blow he claims he is confident a deal will be struck to
“It’s about respecting our viewers because in no way do we ever want to produce content that could be perceived as being offensive. That would be counterproductive and idiotic”
allow Orbit-Showtime continued access to the games. “The government has to some degree brought some disruption, particularly when it takes exclusive rights to broadcast sports programmes when there is no commercial ROI perspective for a state-owned broadcaster to do this. There’s no commercial ROI in some cases, other than just marketing and branding and associating your brand or city with a certain leading league. We understand, however, the need to brand certain countries that are being developed and we believe there is a way for us to work with that. We think we’ll fi nd a way to work with them so that the subscriber base will keep accessing the Premier League.” He goes on to say that while it may be disruptive, the UAE government’s interest in developing the region’s broadcasting industry, is one step on the way to a more mature market for free-to-air and pay TV operators alike. “We have seen lots of rapid evolution in the television market in the region. The free-to-air market is developing rapidly, with government and private money being invested in it. We are seeing an increase in the amount of entertainment that is being made available for free. Th is is educating the overall market to appreciate a significant amount of the Western content that is broadcast which indirectly helps the pay TV players who offer more exclusive content to the viewers. We [the free-to-air and pay-TV operators] play to each other and that’s a very positive trend.” It’s another example of the business philosophy behind Showtime and Orbit’s merger – if you can’t beat them, join them. And with the two former rivals now a formidable force in the Middle East television market, it seems they can overcome just about any challenge that is thrown at them.
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BANKING
In the money It mayy have been slower to take itss place on the world ďŹ nancial al stage but Qatar is rapidly dly catching up with C neighbours. Indeed, its GCC Stuart Pea Pearce, CEO off the believe Qatar Financial Centre, believes it could d soon soo overtake ke them. Diana Milne meets him to ďŹ nd out the stor Q story behind the QFC.
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I
n 2005, shortly after retiring from an illustrious career as CEO of HSBC Corporate Banking, Stuart Pearce received a phone call offering him what he describes as the opportunity of a lifetime the chance to help set-up Qatar’s financial sector from scratch. It was the type of opportunity few bankers receive in their lifetime so Pearce decided to turn his back on retirement and grasp it with both hands. Three weeks later, in September 2005, he started the job as CEO of the Qatar Financial Centre with, he admits, plenty of trepidation about the task ahead of him: “There are not many times in your working life that you get asked to participate in the building of a nation state’s financial services industry,” he says. “QFC is a really unique animal because I haven’t come across a situation where the government has set up a financial services sector from scratch before. My job was to translate its vision into reality. It’s relatively easy to have a vision but converting that into action, building a strategy and persuading other people to buy into it is the challenging part.”
Reputation building QFC was set up with the aim of attracting international financial services and multinational corporations to Qatar to develop the market for financial services in the region. Consisting of a commercial arm, the QFC Authority and an independent financial regularity, the QFC Regulatory Authority, it is providing firms with US$140 billion worth of investment opportunities in Qatar over the next five years. Companies located in the QFC have 100 percent ownership rights and businesses can operate within Qatar and internationally. Those licensed by the QFC can be located anywhere in Doha and still pay local market rents. Despite the lucrative investment opportunities and favourable business conditions offered to foreign fi rms licensed by the DFC, the fact that Qatar was a relatively unknown entity to multinational companies and a very late starter in the international fi nancial services industry, meant that persuading them to come on board wasn’t easy at fi rst, says Pearce: “A big challenge was persuading the international fi nancial services fi rms that have opened up here that Qatar actually meant what it was saying in terms of its plans and that the QFC had the government support to achieve its targets. We had to persuade those fi rms to buy into the QFC vision and to put their human and fi nancial resources into opening up offices here.” Today, that is no longer a challenge, with QFC having taken its place on the world financial stage by licensing over 111 firms, including the likes of Morgan Stanley, UBS, Credit Agricole Suisse and Deutsche Bank. The success of QFC is tied in closely with that of Qatar itself, which, unlike some of its GCC neighbours, is currently enjoying an economic boom, fuelled by demand for its abundant gas supplies. The country’s
per capita income is now over US$70,000 a head, making it one of the world’s richest countries and the IMF predicts economic growth for the country of 15 to 18 percent this year. Th is is in sharp contrast to nearby Dubai, which set up the Dubai International Financial Centre (DIFC) in September 2004. The emirate’s economic growth is set to fall to minus 1.4 percent this year and in the property sector prices have plummeted by 40 percent in contrast. The development of the Qatar economy means it has come a long way from how it was once perceived as Dubai’s poorer neighbour. “I think we’ve been all pleasantly surprised at the speed with which Qatar has morphed into a place which people perceive as standing on its own two feet and not being just a look alike. The biggest challenge now is to maintain that development and start to really embed it into the Qatari economy.”
Different stories Pearce says there are clear distinctions between the economic models adopted by Dubai and Qatar, which are now being borne out in the very different fates of their fi nancial sectors. Qatar’s greatest strength, he explains, is that unlike Dubai it is an asset-backed economy: “The Qatar model is completely different. Qatar is an asset-backed economy and the authorities have spent a lot of time building and developing the country’s gas business, which underpins everything. So that strategy, to develop an economy around the gas industry, requires a completely different set of drivers in terms of this not just being a tourist destination or a property-driven model. So the differences between the QFC and the DIFC are really quite marked. They are an offshore centre, we are not. We are part of the state strategy for the diversification of the Qatari economy. Our model is, as some people have described it, transformational. DIFC’s is very commercial.” When QFC was fi rst set up however, Dubai was in the midst of an economic boom, and DIFC was the GCC’s only fi nancial services centre. Th is meant that establishing a competing operation, at a time when Qatar’s international profi le paled in comparison to that of its famous neighbour was, says Pearce, a risky step: “It was a bold move by the government to do this because the DIFC was the only game in town and what we did represented a challenge to the established belief that that there was only one place to go to in the Middle East – Dubai. But in hindsight the timing turned out to be very auspicious because Dubai now has significant challenges and people are questioning the model and whether they should be there or not.” QFC’s timing, in terms of setting up its operation at a time when the world was close to the brink of a fi nancial collapse was not, however, so auspicious. Pearce admits that the plans of some companies to open operations in Qatar have been delayed as a result: “Their plans
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may have slowed down a bit because of the current problems,” he says, adding: “But they haven’t been shelved. We’ve certainly found that there’s a keen level of interest from international fi rms to have operations on the ground here.” Th is keen level of interest, despite the global economic downturn, stems, he believes, from the fact that Qatar, with its robust economy, and attractive business environment, is increasingly viewed as a safe haven for international banks and fi nancial services fi rms. Indeed, it has been dubbed the ‘Switzerland of the Middle East’. So in some senses, he says, the credit crunch has proven fortuitous for QFC: “I think that even before the issues that the global economy faced, the Middle East was becoming more strategically important for many fi rms. For some of them the turmoil they’ve faced has reinforced the positive nature of the Middle East market and given the Middle East even more credibility and importance. The Middle East has not been completely immune from the world’s major fi nancial problems but the level of problems faced by most countries here is far less than those faced by other countries and other fi nancial services sectors elsewhere.”
People power The key to the success of the QFC and to ensuring it does not fall victim to the risky financial practices responsible for the downfall of many banks is the recruitment of highly qualified banking professionals such as Pearce. He describes the process of attracting international banking professionals to what was at the time, an unknown entity. “At the beginning we had to talk to a whole pile of people, who in the first instance became friends then later colleagues, to persuade them that this was in fact a very interesting opportunity and something that was truly unique. We had to persuade all sorts of people to come and join us and for many people, including myself, this was a big leap of faith. We’re not a big staff, we’ve got 130 people but we’ve been extraordinarily fortunate to be able to attract the quality of people we have.” Pearce and his team are keen to ensure the long–term sustainability of Qatar’s financial industry by creating a pool of highly qualified financial professionals that the QFC can draw on in the future. With this in mind, it has set up the Qatar Finance and Business Academy (QFBA) in partnership with the Qatar Foundation and Qatar University, which will provide recognised training and qualifications for financial services professionals. One of the main aims of the projects is to educate the local population so that the QFC does not rely entirely upon the expatriate workforce. “If you’re going to build a financial services sector you are going to need human capital,” says Pearce. “One of the biggest challenges in an emerging market is to create a mechanism that will attract quality people from the local population into that market and provide them with the ability to learn and to develop their careers. We can’t continue to rely forever upon imported labour.” Another project Pearce has been very involved in has been the setting up of Qatar Insurance Services, which trades as Qatarlyst. The platform is designed to support trading between insurers, reinsurers, brokers and other insurance professionals. As such it is the only system of its kind in the world to cover the entire insurance transaction process. Similarly unique is www.QFinance.com – a banking and finance information resource which QFC has set up in partnership with the UK’s Bloomsbury Publishing. “These projects are absolutely critical to the future of Qatar’s
financial sector and all the projects we’ve embarked upon are absolutely unique. For instance, there isn’t another platform like Qatarlyst anywhere in the world. And although there are other business academies in the Middle East the QFBA is unique because it focuses on the provision of training and accreditation specifically for Qatar.
A day in the life Because he is so involved in building the future of the QFC, Pearce says his typical day revolves mainly around meeting those who he hopes will be key players in its development: “We meet an awful lot of people. There’s a substantial amount of interest in Qatar and that means meeting people from banks, investment management companies and insurance companies. We’ve already had 300 meetings in the first half of this year. Another large part of my day is spent making sure that the planning and the strategic approach that we are adopting is still on track.” It’s a hectic schedule, for a man, who, when he took on the job, had effectively retired. But he says the rapid pace of change he is witnessing in Qatar and the QFC’s role in this, have provided his career with a vibrant new lease of life “QFC has very much exceeded my expectations because the project is like a blank piece of paper. People ask me what it will look like in five years time. I have no idea because I didn’t know what it was going to look like when I started. All I can say is that in five years this place will be really quite something. I’ve been here four-and-a-half years now and the changes I’ve seen have been quite dramatic. But I believe the second set of changes will make the first set look pedestrian.”
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“The QFC’s vision is to establish itself as the financial centre of choice in the Gulf and Middle East region”
In the Hot Seat: Business management quizzes Stuart Pearce on the hot topics in the qatar financial services industry. How favourable a business environment is Qatar for international companies hoping to set up business there? Stuart Pearce: The QFC has attracted a wide range of local, regional and international financial institutions, largely due to the country’s strong energy-based economy, but also because of its appeal as a platform for the region as a whole. The QFC’s vision is to establish itself as the financial centre of choice in the Gulf and Middle East region, with a commitment to investing in education, as well as a strong attachment to corporate social responsibility. Firms coming to the QFC are able to introduce new products, a greater range of services and to contribute new employment opportunities for the Qatari workforce. The Emir of Qatar has submitted a vision plan for 2030, where all the government and business arms are working together to implement the core objective of the vision which is mainly on human, social, economic and environmental development. QFC is an integral part of the Qatar’s strategy to create a sustainable and industrialised economy which will benefit generations to come. How strong is business confidence currently in Qatar, against the backdrop of the global financial downturn? SP: We have partnered with Dun & Bradstreet in introducing the Composite Business Optimism Index for Qatar. The purpose of the composite business optimism Index is to capture the aggregate behaviour of all the six individual indices. Qatar is projected to register one of the highest growth rates in the world in the current year, a real GDP growth rate of 18 percent primarily backed by the natural gas segment of the hydrocarbon sector. In 2008, GDP from the gas sector (QAR 120 billion) overtook GDP from oil (QAR 100
billion) and grew 94 percent year on year over the 2007 figure. To curtail the impact of the global economic downturn, Qatar’s government responded swiftly to improve the tight credit market conditions through liquidity support, capital injections and equity purchase. On the fiscal front, Qatar’s 2009-10 expansionary budget of QAR 94.5 billlion has made large allocations for strategic infrastructure development projects to help the economy maintain its growth momentum. This year QFC has launched several Arabic language communication channels in order to promote financial knowledge among the Arabic speaking population in the country. Why has QFC adopted this strategy and what are the main aims behind it? SP: QFC is witnessing continuous development. When we started in 2006, our objective was to improve the image of Qatar and QFC in the global market and this is why all reports and publications were in English, as they targeted an English-speaking audience. We have to remember why this centre was established. One of the main reasons was to enhance the image of Qatar and the capacity of the financial services sector, as well as encouraging companies to offer financial and non-financial services to set up their businesses in the country – all those reasons made it essential to issue publications in English, in order to communicate to the international finance industry and to firms that support that industry. Of course, the Arabic language is very important to expand our local audience their understanding of the QFC’s objectives and achievements. Using more Arabic also reflects the growing contingent of local and regional firms which are now licensed by the QFC (some 40 percent of the overall total).
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TALKING SHOP
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Self-made billionaire, entrepreneur and philanthropist Mukesh ‘Micky’ Jagtiani is one of the Gulf’s richest and most influential businessmen. But despite his and Landmark Group’s meteoric rise in retail he never lets success go to his head, as Business Management’s Julian Rogers discovers.
M
icky Jagtiani certainly falls into the category of your archetypal rags-to-riches tycoon, having started with next to nothing and built a global empire through sheer guts, determination and a substantial helping of business acumen. Having dropped out of accounting school in London in the early 1970s, he wound up driving a taxi and cleaning hotel rooms to survive, and fund his penchant for whisky and cigarettes. Forced to return back to the Gulf, where he grew up, tragedy then struck with the death of his brother, father and mother all in the space of less than two years. His whole world was crashing down around his ears but Jagtiani called upon his business instincts and set about making a name for himself, albeit as a shopkeeper initially. By 1973 this fresh-faced 21-year-old ploughed a few thousand dollars of inheritance into opening a store that his brother had leased in Bahrain before his death from leukaemia. With a burgeoning expatriate population in the Gulf state Jagtiani unveiled Babyshop – a store stocking toys, prams and baby clothes. “It was a tough start and I had to work very hard to make ends meet,” Jagtiani reveals from the
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Landmark’s headquarters in Dubai’s Jebel Ali. “I spent a lot of time clearing goods in the ports and stacking them in the warehouse before going to the shop. On a good day we would make about AED2000, which often called for a celebration in a Chinese restaurant.” He recalls a tremendous camaraderie between himself and his workforce in the early days at Babyshop. Some of these staff have stayed loyal to Jagtiani through thick and thin. “I was able to overcome the initial challenges because I had good people working with me. The team spirit was great and we were committed to what we were doing. Most of these employees are still with the group and have attained key positions within the organisation, heading various businesses.” With such a modest start to his working life, it is unsurprising that he could never have imagined himself becoming an international retail magnate with a personal fortune estimated at US$3 billion. Indeed, in 2008 Forbes ranked the Landmark chairman 462nd in the league table of global billionaires and India’s 16th wealthiest. “Though I didn’t know how big Landmark Group would become, I was very ambitious and keen to expand; so each time I surpass my growth goals I set the bar higher.” He adds: “One of the biggest lessons I
customers very seriously and constantly adapt to their needs and preferences. Other factors include financial discipline and our wide span of control over sourcing, logistics and distribution.” Moreover, this 57-yearold and father of three believes his natural business instincts and his uncomplicated lifestyle have proved a recipe for success. “I have always lived a life of simplicity and this is definitely one of my mantras of success. A simple formula I have followed all my life is to carefully listen, constantly adapt and always deliver. This, along with speed in everything I do, has earned me rich dividends. As an entrepreneur, I invest substantially in understanding market conditions and knowing where the opportunities are located. As a result I am able to take calculated risks. Research is, and has always been, one of my strengths. I always like to emphasise the need for research, research and more research.” His research and gut instincts were behind his decision last year to take a nine percent stake in UK high street favourite Debenhams, a move which was based on being able to eventually make a profit on his investment and not the first step in a full-blown takeover. Other potential investment opportunities in the UK, US and closer to home are still on his radar but he remains tight-lipped on retail assets he is planning to acquire and investment plans up his sleeve.
“I believe innovation is the fuel that keeps the business going…If you don’t innovate and evolve with your customers you will simply fade into oblivion”
Spending habits But while Jagtiani’s detailed research and ability to sniff out a good deal has been instrumental in Landmark’s proliferation, the unexpected recession has been another challenge very few could have forecast. The Mukesh ‘Micky’ Jagtiani
have learnt in business is to never allow success to lead you to complacency because success is never final. I have built my vision around this philosophy and never stopped looking for ways to provide exceptional value to my customers. Obviously it is working.” From the sweat and toil in the early years of running the single baby shop, Landmark Group has spread its tentacles into furniture, cosmetics and footwear, and even hotels, food and electronics for the mid-market consumer. In 1992 Jagtiani relocated his family to Dubai – during the dawn of an economic boom as the emirate began to transform itself into a global business and tourism hub. Taking full advantage of the petrodollars sloshing about in the Gulf, as well as an influx of foreigners and huge construction projects being given the green light, Jagtiani was able to quickly morph his business into a diversified entity with more than 31,000 employees across the Middle East, Egypt, Pakistan, Spain, China and India. Indeed, in his native India Jagtiani says business is “doing very well” thanks to over 120 stores and a turnover in excess of US$300 million. Landmark’s portfolio of 900 stores in 15 countries includes Home Centre, Babyshop, Splash, Shoe Mart Centrepoint and more, while franchises are also held for the likes of New Look, Reiss, Lee Cooper and Aftershock. So what’s the secret to ruling in retail? “Our value offering, coupled with the growth into new locations, uniquely positioned us to cater to the larger mid-market consumer base and helped grow market share in a fiercely competitive environment”, says Jagtiani. Being aware of changing spending habits and trends is key too for Landmark. “First, we take our
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retail sector as a whole has certainly been feeling the pinch because when to our customers.” And it’s not just in the stores where this philosophy is times are tough consumers tend to tighten their purse strings and only visible. For instance, Landmark Group is one of the only retailers in the make essential purchases. The GCC retail markets have witnessed a sigMiddle East to manage its own logistics and re-distribution centre, which nificant fall in the luxury goods segment as consumers look for cheaper is a sprawling, state-of-the-art facility spread across 360,000 square feet. alternatives, says Jagtiani. “Clearly, there has been a drop in consumer The group also boasts the largest customer loyalty database in the region – spending as a result of the economic downturn; consumers have become the Centrepoint Privilege Club, which has over one million active custommore discerning as they demand more value for their money’s worth. In ers. Not resting of his laurels and capitalising on brand loyalty has stood general, customers have been cautious with their money since the recesthe group in good stead to beat this difficult economic period. sion surfaced in the region. People have spent more on essentials and controlled their expenditure on items they considered as frills. However, A helping hand the market condition is slowly improving with the belief that the worst is Although Jagtiani is one of the most affluent and influential businessbehind us and it’s time to look forward.” And looking forward he is. Th is men in the Middle East and West Asia, he isn’t your stereotypical billionincludes an aggressive expansion drive into Cairo, Egypt and the rest aire surrounded by the lavish trappings of wealth such as his own yacht, of the Middle East. “We are looking to continue our ambitious expanhelicopter or fleet of supercars. He’s more interested in living a simple life sion drive in Egypt and across the region – in fact, we recently opened a – flying economy class and adding to his already impressive collection of 200,000 square foot Centrepoint, Homecentre and Max in Alexandria, Buddhas. Egypt, in addition to opening a Max store in Yemen.” Jagtiani has also Another of his passions is LIFE (Landmark International Foundation launched four new brands, Gourmet Station, Spaces, Beauty Bay and of Empowerment), which he established in 2000 to support underpriviShoexpress, in Dubai this year and the bigger picture is to take these leged children in India. Its initiatives include school and healthcare debrands across the region. velopment programmes such as setting up a home for destitute children, The bedrock of the expansion plans is built on the ability to keep invocational and non-formal schools, community clinics and medical camps novating and coming up with fresh ideas. “I believe innovation is the fuel for slum-dwellers. that keeps the business going,” Jagtiani remarks. “If you don’t innovate LIFE also operates a Centre for Learning Disability and reaches out and evolve with your customers you will simply fade into oblivion.” He to over 50,000 beneficiaries annually across Mumbai, goes on to say: “Companies that do not innovate often collapse Chennai and Bangalore, Jagtiani explains. He within a short time because their customers get ahead of them is also lo looking to spread the support pron is gramm to the Middle East in the near and their offering becomes perceived as stale. Innovation grammes LANDMARK GROUP d futu “There is no bigger gratification at the core of everything we do at Landmark Group and future. IN NUMBERS fo me than the feeling I get from that is why we keep adapting to changing market needs for e and looking for new ways to deliver exceptional value empowering people to build better Turnover in excess of l lives for themselves and their fami-
US$3.2 billion Over 900 stores in 15 countries More than 13.4 million square feet of retail space
lies.” Jagtiani puts in around US$2 million of his own money into the f fund every year and his ambition i to provide satellite televisions for is In Indians. When in India he is conscio about being seen to flaunt his scious wealth so makes every effort to fly economy clas class and sometimes takes third class trains. “W “What gives me the greatest satisfaction is the ability to touch lives and positively impact the society through my business,” he enthuses. “Today Landmark Group employs over 31,000 people who are financially empowered to support their families. We keep our customers happy through the exceptional value they get from our products and we keep our suppliers in business and help them support their families and pay their employees. We also contribute to building a better society through our numerous corporate social responsibility initiatives so these are the things that drive me in business and these are
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SPECIAL REPORT
COVER STORY
City of the
Future
Across Abu Dhabi work has started on the mega projects that are set to transform it into one of the most exciting cities in the world by the year 2030. Business Management looks at what the future holds for the UAE capital and proďŹ les ďŹ ve of the biggest developments that are underway.
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Saadiyat Island Developer: TDIC Date for completion: 2018
A
ny fi rst time visitor to Abu Dhabi today would fi nd it difficult to imagine that the emirate will one day be one of the world’s most exciting cities. Unlike Dubai, swathes of the emirate remain untouched by urban sprawl and its relatively low-key skyline contains none of the iconic landmarks associated with its brasher neighbour. But this is a city that can best be described as a work in progress. Evidence of what the future holds for the emirate can be seen in the construction work underway around the clock to build the foundations for the projects that will transform it. The driver behind these changes is the Abu Dhabi 2030 Urban Structure Framework Plan a 25year programme of urban evolution aimed at building an economically sustainable city that is able to support a population of up to five million residents. Plan 2030 aims to cement Abu Dhabi’s identity as the capital of the UAE but also to make it a global fi nancial, trade and tourism hub. With this in mind, several business, residential and tourist zones have been created, including Central Business District, Khalifa Port and Industrial Zone, the Cultural District, Masdar City and Reem Island and the Capital District – and the base for the UAE’s federal government. The government has also committed to investing around US$100 billion to developing Abu Dhabi’s Western Region, which accounts for 83 percent of the emirate’s land mass but currentlyl houses just eight percent of its residents. A long road lies ahead before Abu Dhabi’s vision is realised, with many potential obstacles blocking the way, not least the global economic downturn and its effect on the region’s property market. But with over US$100 billion-worth of projects underway across the UAE capital, failure is not an option for the developers who are relying on predictions that the emirate’s population will grow to at least three million by 2030 and that tourist numbers will have rocketed to 7.9 million a year. In this article we profile five of the projects that Abu Dhabi is pinning its ambitious hopes on: Masdar City, Yas Island, Saadiyat Island, Al Raha Beach and Al Reem Island.
Located just 500 metres off the mainland, Saadiyat Island is set to transform Abu Dhabi into one of the cultural capitals of the world. It will feature two of the world’s most prestigious cultural landmarks, the Guggenheim Abu Dhabi and the Louvre Abu Dhabi. The latter has been designed by the Pritzker prize-winning architect Jean Nouvel and will be located at the heart of Saadiyat Island’s Cultural district. Even more spectacular in design, and the centrepiece of the District, will be the Guggenheim Abu Dhabi, which has been designed by Frank Gehry. It is made up of several conical-shaped buildings and incorporates a twist on the UAE’s traditional cooling wind towers. The Guggenheim will feature 13,000 square metres of permanent and temporary exhibition space and will be the largest museum in the cultural district. Extensive work has gone into creating a sustainable infrastructure for Saadiyat Island, which includes a storm water drainage system, sewerage systems, electrical grid stations and a water supply and reservoir systems. Th is will support not only the millions of visitors that are expected to visit the island every year, but also the 160,000 residents that will live there permanently. The island will be split into six districts; Al Marina, featuring berthing for 1000 boats; the Cultural District with museums and galleries; Saadiyat Park, a mainly residential area with waterfront villas and apartments; Saadiyat Beach, a tourist area with nine kilometres of natural beaches and a golf course designed by Gary Player; South Beach, a family beach resort; and The Wetlands, which will feature a championship golf course and parkland. In total, the project will cost a massive US$27 billion to build and it is expected to attract 1.5 million visitors a year by the time it is completed in 2018.
Saadiyat Island
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Masdar City Developers: Abu Dhabi Future Energy Company Date for completion: 2016 Masdar City, which is to be build over seven years at a cost of US$20 billion, will be the world’s fi rst zero carbon, zero waste city which will be powered entirely by renewable energy. It will be car free, with its own public transport system and, as the headquarters for internationally renowned green innovators, researchers and developers, will provide a global hub for biotechnology companies. The development will be home to around 50,000 people and 12,500 businesses. The city will be powered by solar energy and transport will be provided in the form of travel pods, running on magnet tracks. All buildings will use minimal energy and natural air conditioning will be provided by traditional Arabic wind towers. Water will be delivered via a solar powered desalination plant. The city will need a quarter of the power required by an average community of the same size and its water needs will be 60 percent lower. At the heart of the project will be Masdar’s headquarters which will be the world’s fi rst mixed use positive energy building and will showcase the development’s ecological credentials in a building which will be used as a centre for the development of clean technologies. The city will also feature the Masdar Institute which is expected to attract leading environmental researchers and scientists from around the world to develop new clean technologies. Graduate programmes in environmental science will be taught there and campus accommodation will be provided to students. Residents of Masdar City will also be well catered for with open public squares connecting to homes, schools, theatres, restaurants and shops and leafy pedestrian walkways criss-crossing the city. Companies hoping to develop environmental technologies will be located in a separate industrial zone.
The personal rapid transit system, consisting of 3000 electric cars operating on a recyclable lithiumcadmium battery, will transport people around the carfree city. Most of the roadways will be housed in underground tunnels.
The layer of glass that will cover the building’s exterior will reflect the heat of the sun whilst allowing for natural light. The northsouth orientation of the structure has been designed to help protect inhabitants from the glare of the sun.
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The building will use its own wastewater to irrigate several lush gardens situated throughout the complex. In turn, the plants and trees will help provide shade, keep the building cool and absorb carbon dioxide.
Wind towers – one of the building’s references to traditional Islamic architecture – will be included to exhaust warm air, help naturally ventilate the building, and bring cool air up through the subterranean levels of the city below.
At 75,000 square feet, the onepiece roof – made up of a steel trellis covered with photovoltaic cells – represents one of the largest solar arrays in the world and will provide enough power to build the rest of the building.
Narrow, canopied streets will provide shade and funnel cooling breezes, reducing the temperature to a manageable 20˚C. Meanwhile, the network of subterranean tunnels will serve as passenger walkways to the underground transit system.
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Yas Island Developer: Aldar Properties Date for completion: 2014 While Saadiyat Island has been designed to be the cultural heart of the emirate, Yas Island will be its entertainment hub. The 25 square kilometre development off the coast of Abu Dhabi will be a key part of the government’s strategy to build its tourism industry. Its main attraction will be Yas Marina Circuit racing track which will play host to the inaugural F1 Etihad Airways Abu Dhabi Grand Prix on November 1. The track will wind its way around Yas Island’s landscape and has been designed by Hermann Tike who create Shanghai’s main racing circuit. In keeping with the racing theme, Ferrari World Abu Dhabi will be the world’s largest indoor theme park and is housed in a building covering 200,000 square metres with a roof designed to look like the body shell of a Ferrari GT car. The island will also host the Warner Bros. Theme Park, which will feature attractions based on Looney Tunes, Hanna-Barbera and DC Comic characters. Meanwhile Yas Island Water Park, for which no completion date has yet been set, will boast aqua themed rides.
No development in the UAE is complete without a mall, and Yas Mall, featuring three department stores and 500 luxury units, will break the mould in terms of its cutting edge design and the international brands it aims to attract. It will cover an area of 296,000 square metres and will feature a car park with 16,000 spaces and several triplelevel stores. In terms of accommodation, both residents and tourists will be well catered for. Residential villas and apartments will be built alongside the island’s various waterways and canals, including at the top-end, duplex waterfront apartments on the banks of the Yas Lagoon. Yas Hotel will be the island’s flagship hotel and will be joined by several branded hotels along the Northern Crescent and Beachfront Esplanade. In all, there will be over 2500 guest rooms. In terms of its transport infrastructure, the developers are planning to include a public transport system and a 10 lane highway connecting Yas Island to both Abu Dhabi and Dubai which will reduce the drive time to the capital city to just 10 minutes. The environmental impact of such a road network, will, the developers hope, be off set by the green initiatives taking place on the island, including the monitoring of the effects of the development on local waterways and the planting of 80,000 mangroves on the western shores of the island, adjacent to the island’s links golf course.
All eyes will be on Yas Island when motor racing comes to town
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Al Raha Beach
Al Raha Beach Developer: Aldar Properties Date for completion: 2019 Al Raha Beach has been dubbed the new gateway to Abu Dhabi. It will be a waterfront city and home to the emirate’s new World Trade Centre building, residential areas and a central business district. The island will accommodate 120,000 residents and, in a bid to encourage foreign investment, will be one of the first designated areas where non nationals can invest in leasehold property in Abu Dhabi. Al Raha will be split into four distinct districts: Al Zeina, Khor Al Raha, Al Seef and Al Dana. Al Zeina is described by the developers as the ‘garden city’ and will be located at the island’s quieter eastern end. Villas and apartments will front a beach and the community will feature a retail arcade, shops and cafe’s. Khor Al Raha, at the eastern mouth of Al Raha Beach’s Grand Canal, will have restricted public access and cars there will be kept to a minimum. Buildings will be tiered from three to 14 floors and will have sea views. Al Bandar will be an island set around a marina with moorings for resident’s boats. For those wanting to live in a livelier area, Al Seef will feature a vibrant residential, commercial and hotel district. Three islands offshore will provide facilities for watersports. Meanwhile Al Dana, formed around a circular marina, will be built as a series of semi-circular zones which will increase in height. Al Dana’s marina will also be the main transit stop for water transport. There will be several other districts within the development, including the cultural district, Al Shaleela, which will feature galleries and art studios as well a media museum. Al Razeen, the “Arabian Water District” will be made up of secluded villas on an island parallel to Al Shaleel and will be connected to the mainland by a series of waterways and bridges. A sophisticated public transport network will be developed to ferry people around Al Raha Beach, including a light rail system with 14 stops, a bus service, catamarans, ferries and water taxis. Road traffic will be minimised with the central boulevard roads, leading straight into underground parking areas for each precinct. Although it is a short distance from Yas and Saadiyat Islands, there will be plenty of entertainment on Al Raha itself, including a 300,000-square metre shopping and exhibition centre, two marinas and several parkland golf courses.
Al Reem Island
Al Reem Island Developer: Sorouh Real Estate, Reem Investments, Tamouh Date for completion: TBC Al Reem is a natural island 600 metres off the coast of Abu Dhabi. Once developers have completed their US$30 billion project, however, it will be a very different place. The island is currently being jointly developed by Sorouh Real Eastate, Reem Investments and Tamouh, each of whom have staked their claim to one of the emirate’s most ambitious real estate projects. Over 22,000 residential units are to be built on the island, which will be connected to the mainland by two or three bridges. The island has been designed to cater to a permanent population of residents rather than as a tourist attraction and will feature schools, medical clinics, shopping malls, restaurants, as well as hotels and a 27-hole golf course. The centrepiece of the island will be Shams Abu Dhabi, which is being developed by Sorouh Real Estate, owner of 20 percent of the development. Shams will be a self-contained city in its own right, home to 45,000 residents and designed around canals and parks. At the heart of Shams will be Central Park, which, as its name suggests, will be modelled on the New York version and will feature a theatre district, waterside restaurants and shops. At the entrance to Shams will be the Gate District which will be made up of eight skyscrapers for both residents and businesses and a luxury shopping mall. The Shams project is expected to cost US$6.9 billion in total and will occupy 25 percent of the island. The residential areas will account for 90 percent of the project while the remaining 10 percent will be used for commercial and recreational areas. It will contain 100 skyscrapers, 22,000 residential units and a one million square-metre park. Other developments will include the 83 storey Sky Tower and the five million square-metre Abu Dhabi Towers. The fi rst phase of Shams is expected to be completed this year.
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SPECIAL REPORT
ABU DHABI REVS ITS
BRAND ENGINE
Although the tussle for the Formula One Drivers’ Championship was settled at the penultimate race in Brazil, Abu Dhabi will bring the curtain down on another full-throttle season in November. We get the inside track on the sparkling new Yas Marina Circuit from Richard Cregan, CEO of Abu Dhabi Motorsports Management. With the race less than two weeks away how are things progressing at Marina Circuit and you can see it happening according to the 2030 vision this late stage? here, which is stunning. Richard Cregan. Things are progressing very well. As you can imagine there is a lot of work involved with a This will be the first twilight race on the Formula One project of this magnitude and there is a lot of work calendar. How will this create a unique experience for going on behind the scenes to get everything finished. the drivers and showcase the circuit and Abu Dhabi Everybody knows that the Grand Prix is just around the to the watching millions around the world? The track is 5.5km in corner so we are trying to make sure that everything is RC. Everything we have done so far has been unique in length up to a standard that is acceptable for our guests, the way the track has been put together, in the way the 25,000 workers whether they are international or local. facilities have been designed, so we are in keeping with clocked up 25 million that uniqueness with the day/night race. The second man-hours What will this Grand Prix and other racing events at reason is to be different. There has been a night race the Yas Marina Circuit mean in terms of tourism, [Singapore] and attempts at changing the race time 140,000 cubic metres business and putting Abu Dhabi in the shop winduring the day. We think that starting a race during of concrete used dow of the world? daylight and finishing it at night is unique – it has Designed to hold RC. The great thing about Abu Dhabi is the long-term never been done before and allows us to show off the 50,000 spectators planning that is part of its strategy. Yas Marina Circuit facilities we have here like the hotel and the marina is part of that strategy in attracting people to Abu Dhabi with the lighting. as a business and leisure destination of choice. We play a part in this strategy and a part in Yas Island’s development so it is a privilege There is a concern among racing fans that flashy new circuits are graduto get this circuit. When you look at what Abu Dhabi is doing on an internaally replacing the older tracks which are full of racing history and peditional scale, it is quite remarkable. Some great planning has gone into the Yas gree. What would you say to the fans who are worried that Formula One
FAST FACTS
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SPECIAL REPORT
is losing its identity with the scrapping of more established venues? RC. I think that like any great sport it has to go through a change and evolution. I don’t believe that any time soon we are going to lose the great circuits. For instance, you will still have Spa-Francorchamps [Belgium] and Suzuka [Japan] and Monaco, which are some fantastic circuits. They will stay in the calendar because they are very unique and characteristic of what we know as Formula One. They have a place and it is not going to change. We have tried to achieve a combination from those great circuits here but, at the same time, incorporate some unique features of our own. What are these unique features? RC. The covered grandstands are quite unique, while the pit lane exit is a tunnel, which is both safe and spectacular. There is also a great elevation change that people will see when they come – approximately 18 metres between start/finish straight and turn three. Then you have the track running underneath the hotel and around the marina and this is something unique that we are very proud of.
US$1 billion
Richard Cregan surveys progress at the circuit
RC. As well as the support races that weekend, we have a very extensive programme which includes six to eight major motor sport events. Then we have more events that will be more ‘club-sport’ level and we have other non-motor sport events like marathons and exhibitions. So there is a lot of things happening and we believe the only restriction we have here is our own imagination in being able to put on good events throughout the year and making sure that this facility is for the people of Abu Dhabi, as it was originally intended.
has been spent on the circuit
Bahrain has played host to an Formula One race since 2004. What you have learned from this GCC neighbour’s ability to stage the event? RC. They have done an amazing job and went against all the odds to build a great circuit in the Middle East. They have won a lot of awards for their race but we are looking to achieve our own success here at Yas Marina Circuit and I believe that in the future you will have two great races in this region. It will be testimony to the whole of the Middle East in moving forward and putting this region on a world stage. The Grand Prix happens just one weekend a year. What else will you be staging at the circuit?
What are you looking forward to most about the race on November 1 and when will you be able to relax? RC. I will relax when we get to Sunday night and everybody is leaving the venue having had a remarkable experience and wanting to return the following year. I think that’s probably the most significant thing. As I have experienced many times myself, there is nothing like the sound of an F1 engine so I am looking forward to that again. The first time you experience the noise you will never forget it.
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FINANCE
“The millionaire-maker” Instead of a fixed return on investments, Dubai-based National Bonds offers a chance to win life-changing cash prizes. But despite the economic crisis forcing people to redeem their bonds, the corporation’s CEO, Mohammed Qasim Al-Ali, says now is the time to put cash aside and save for the future.
I
f you awoke on your birthday with a splitting headache you would probably curse your luck and reach for the medicine cabinet. When this happened to Muhammad Fayyaz Yakub he rang work to report in sick but a phone call he received shortly afterwards proved to be the tonic to make his discomfort vanish: he had become a millionaire overnight and scooped AED1 million in the National Bonds weekly draw. The person on the other end of the phone was National Bonds CEO Mohammed Qasim Al-Ali, who always rings the winner of the top prize to personally deliver the good news. “People call me the millionaire-maker when they see me out and about because I have become something of a public figure,” Al-Ali reveals with a smile when Business Management catches up with him in his Dubai office.
Al-Ali has been making the life-changing call to the lucky top prize winners since he was made CEO in early 2008, following a 20-year career in the aviation industry. However he reveals that he still gets a buzz out of telling people they have just become millionaires. “You cannot imagine the experience I have from getting first hand reactions from the winners. They are normally in a mixture of shock and disbelief but it is still very satisfying to make one more person a millionaire every week.” One of Al-Ali’s first questions to unsuspecting winners is whether or not they are driving. “If they are I ask them to park up because I worry they might end up in an accident when I reveal the news.” The result of the draw, which is generated randomly by a computer, is broadcast on the first Saturday night of the month on the Dubai One television show, Bonds for Life. “One person told me that their TV wasn’t work-
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fi nancially savvy by saving for a rainy day and not overstretching themselves with lavish purchases. “National Bonds communicates with people about the importance of saving with a Shariah-compliant savings scheme and people see it as a safe option for their money,” he says. “However, I am not saying don’t spend because this is good for the economy.” Returns for bondholders in 2007 were 6.03 percent and this rose to 7.07 percent in 2008, which was higher than savings rates offered by both conventional and Islamic banks. As well as the cash prizes, at the end of the financial year shareholders receive 20 percent of the profits made by National Bonds, which is based on the Islamic principle of Mudaraba. But despite the favourable returns on offer, the past few months have been difficult for National Bonds. Indeed, at one point as much as 25 percent of investors were redeeming their investments as property prices fell and job losses mounted in Dubai. “People had to dip into their pockets as lending shrunk because the banks have been short of liquidity,” Al-Ali notes philosophically. Nevertheless, he is confident that the turbulent economic period will encourage more people to save for the future. And the chance of scooping serious money is a great enticement because of bondholders “we continue to reward our bondholders on a weekly are female basis via exciting prizes,” he reiterates.
34%
ing so they didn’t know the result so I told them to make sure they have a spare one next time,” Al-Ali recalls jokingly. A total of 101 prizes worth 1.15 AED million are given away every Saturday, although the minimum bondholding in order to be eligible for the weekly ‘millionaire draw’ is AED10,000. Up until May the draw took place monthly, but this was increased to weekly in a bid to attract more investors. This year National Bonds, dubbed ‘Everyone’s Favourite Place to Save’, will award AED60 million prizes and create 39 millionaires. Total bond sales last year were AED4 million.
Financial backing National Bonds, which first began in March 2006 and makes bonds available from 500 outlets nationwide alongside its website and the banks, is 50 percent owned by the Government of Dubai. Local shareholders Dubai Bank, Dubai Holding and Emaar Properties hold a 16.6 percent share each. National Bonds is licensed by the Central Bank of the UAE and subject to the same regulatory procedures as any other fi nancial institution. With the backing of the government, investors see it as a pretty solid place to put their hard earned dirhams. If you change your mind or need the funds suddenly you can withdraw your money within 30 days without any fees. Al-Ali says National Bonds is about teaching people to be more
Mixed bag
For National Bonds itself the major correction in the housing market has affected its portfolio investments. However, National Properties, a subsidiary of National Bonds, has built the AED1.5 billion Skycourts development – a residential project in the heart of Dubailand – and Flamingo Creek in the Lagoons. Last year National Bonds founded an education fund (Taleem) to invest in and manage school projects, while a similar fund is earmarked for the healthcare industry for the end of 2009 – a sector left relatively unscathed by the downturn. National Bonds Corporation has also invested in BCS (property management), Souk Extra (a retail community shopping chain) and in M’sharie, (the private equity arm of Dubai Investments). A three-person Shariah board at National Bonds’ Corporation oversees the company’s investments to assess their soundness. Around PRIZES UP FOR GRABS EVERY WEEK half of National Bonds portfolio is Prize Amount (in AED) No. of Prizes ploughed into Islamic funds such as Sukuks. “We have a very mixed 1,000,000 1 portfolio [of investments],” says Al10,000 5 Ali. “However, we are a low risk taker 5000 10 – and we need to be because we have people’s savings so we have to be pru1000 25 dent about where we put it. We also 500 60 have to adhere to strict Shariah rules Total: 1,155,000 101 when making investments.” He goes
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on to add that the period when most investors were withdrawing funds had flattened out and bond sales were picking up, particularly among corporate investors. In fact, the number of institutes snapping up bonds soared by 150 percent last year compared to 2007. And with no ceiling on how much can be invested, National Bonds is increasingly targeting high net worth individuals looking to shun riskier investments for more of a safe haven. Indeed, one bondholder has invested AED40 million. “We have created a management unit and we have relationship managers to look after high net worth National people and invite more to invest.” Today, it’s more about building on National Bonds early Bonds boasts success by attracting investors and persuad500,000 ing existing clients to top up their bonds. bondholders “When we started three years ago we were from 91 doing the hunting [for investors] – now after nationalities three years it is time for the farming – we are looking for a mixture of investors.” He adds: “For instance, about 50 percent of bondholders are Arabic speakers, 18 percent are minors because people are increasingly looking after their children (the youngest winner so far was three years of age) and 34 percent are female.” In fact, women are fast becoming a key market for National Bonds with female bondholders increasing by 40 percent in 2008 compared the previous year. Al-Ali is reluctant to speculate on whether
“We are becoming the most popular place to save and in three years we have attracted 500,000 investors” women are more inclined to save than men, choosing instead to attribute this increase to recent publicity of the scheme and a revamp of the website. On top of this, word of National Bonds benefits is spreading to other communities. Indeed, the number of foreign bondholders rocketed by 35 percent last year. “We are becoming the most popular place to save and in three years we have attracted 500,000 investors,” says Al-Ali with a broad smile. “And more and more people are investing because of the attraction of the draws.” With bond sales looking buoyant again as people tighten their belts and squirrel away their cash in safer investments, the future is looking rosy for National Bonds Corporation. And in case you were wondering what Pakistani national Muhammad Fayyaz Yakub plans to do with his newfound wealth, he says he will donate a part of it to charity and start building his dream home back in Karachi.
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EXECUTIVE INTERVIEW
Taking Islamic banking to the next level With the Shariah compliant banking sector showing no sign of slowing down, Business Management speaks with a leading voice in the industry – N. Ganapathy Subramaniam.
Islamic banking has exploded into a US$300 million industry. What has fuelled this huge growth, including among non-Muslims? N. GANAPATHY SUBRAMANIAM. Islamic banking has been growing at a rate of 15-20 percent every year, spanning most of Asia and the Middle East, and is now beginning to make inroads into the western fi nancial markets. The growth in Islamic banking can be attributed to high revenues from the petrodollar and the trickle effect on affluence in the Middle East and Asia, as well as socio-demographic trends such as the population growth and rising affluence of Muslims worldwide. Most of the products that were traditionally only available in the conventional banking system have an equivalent Shariah compliant product on offer
“There is a need for different countries to put in place the appropriate local regulatory framework to address Islamic banking” from Islamic banking. Th is transformation has enabled Islamic fi nancial institutions to broaden their value chain and offer innovative products and services, extending the usual standard products such as savings and home fi nance to more sophisticated Shariah-compliant products ranging from cards to corporate and project fi nancing, wealth management, Sukuks, stock indices and insurance. What are the challenges Middle East banks face when wishing to offer Shariah-compliant products for their customers, whilst ensuring that they meet international standards and regulations?
NGS. International banks face many challenges in setting up Islamic banking operations. A significant customer segment, a wellestablished independent Shariah board and a favourable regulatory climate are foremost among the many challenges faced by banks in setting up Islamic banking operations. There is a need for different countries to put in place the appropriate local regulatory framework to address Islamic banking, especially in areas such as tax treatments. The recent concerns raised with Sukuks and, lately, Tawarruq, reflect the need for a global governance body to oversee and mandate issues relating to product compliance and convergence of the various interpretations and standards. Another major challenge is the area of risk management and transparency, both fi nancial and procedural.
Could you explain how your Islamic banking services and products are benefiting financial institutions today in the Middle East? NGS. TCS BαNCS enables business transformation in Islamic banking in the form of increased market share for our customers, superior service quality, consistent and welldesigned product integration, alongside a lower cost infrastructure for transaction processing. Th is comprehensive solution maintains distinct identities of Islamic fi nancial products and coexists with conventional banking solutions, complying with Islamic principles and Shariah laws. The TCS BαNCS platform encompasses an array of pre-configured, customisable banking product lines, including deposits, investments, retirement accounts, consumer and commercial loans, mortgage loans, equity fi nancing, cards, payments, What impact does it have on their core treasury management and trade fi nance. In banking systems? addition, transaction banking services and NGS. Islamic banking may clearing and settlement funcdiffer from western-style tions across the banking value conventional banking chain can be enabled through in many respects but the the solution’s business process same business, regulatory configurability and service inteand technology requiregrator component. ments prevail. Most banks We also offer Shariah-comtoday deploy core banking pliant insurance solutions based systems to support their on Takaful to meet the varied business processes and needs of insurance enterprises increase operational efacross multiple lines of business, N. Ganapathy Subramaniam is the President of TCS ficiencies. Th is requires distribution channels and cusFinancial Solutions, a enterprise-wide planning, tomer segments. TCS BαNCS, strategic business unit of Tata Consultancy Services commitment and resources. with solutions in core banking, Limited. A part of TCS and the Indian IT Industry for The major areas of concern universal banking, payments, the past 25 years, he has had that banks need to address regulatory compliance with numerous opportunities to perform a variety of are product compliance, wealth management, meets the roles in delivering solutions to customers globally, profit sharing/distribution needs of a diverse range of organespecially in the banking and and the requirement to isations, including microfinance, financial services sector. As a part of his current role, he is maintain separate entity eurozone powerhouses, and the responsible for steering the financial products business books for customers and for operators of one of the largest (TCS BaNCS) of TCS globally. reporting purposes. branch networks in the world.
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ISLAMIC FINANCE
New horizons
Dr Samir Pradhan of the Gulf Research Center gives an in-depth insight into the current trends shaping the global Islamic ďŹ nance industry.
O
ver the last decade, Islamic finance (IF) has recorded spectacular growth and is currently poised to be a crucial ingredient of the global financial market. IF existed for more than three decades, providing tailor-made financial services to devout Muslims, yet its scope and coverage were largely restricted to commercial banking in the Middle East and Malaysia. However, in the last few years, innovative Islamic financial products and services, regulatory frameworks and increased linkages with the mainstream financial market have made IF as a rapidly growing segment with market presence in more than 75 countries and estimated total assets to the tune of US$800 billion. With integration of Islamic financial services, Islamic banking and Islamic insurance into the global economy, IF has undergone huge expansion, partly driven by the oil�driven financial liquidity in the Gulf, and the fast growing number of Muslims seeking more religiously sanctioned products.
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Simultaneously, the spectacular growth of IF has also raised considerable concern in the world owing to its peculiar market characteristics, debate over the interpretation of (Islamic) Shariah law and the apprehension of non�Islamic western countries. However, in the current global economic environment, IF is increasingly being projected as a reliable source of global financing. Moreover, the competitive landscape is being redrawn, with more Islamic financial services institutions in the marketplace than ever before. Incumbent banks and new market entrants are facing vastly different market conditions and need to develop new sources of differentiation beyond compliance with Shariah law to compete or remain successful in the future.
Current trends Buoyant economic growth coupled with a demographic surplus particularly, in predominantly Islamic countries, is the primary factor behind the
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phenomenal growth of Islamic finance over the years. As a result, Islamic assets have grown between 15 and 20 percent annually for the past five years, culminating in the current global Islamic assets of nearly US$500 billion, making Islamic banking one of the fastest‐growing sectors in the global financial services industry. As per other estimates, the total assets, are around US$800 billion (Gulf One Investment Bank, December, 2008) and are expected to increase to US$4 trillion by 2015 (Moody’s forecast). From a global financial industry perspective, IF still accounts for a small proportion of world financial market assets accounting for less than one percent, although it increased from 0.2 percent in 2000 to 0.6 percent in 2007. Though Islamic banking activities account for the bulk of worldwide Shariah‐compliant assets, the scope of IF is expanding rapidly beyond retail and trade financing operations of Islamic banking to more sophisticated Shariah‐compliant financial products. By 2009, the number of Islamic mutual funds have increased to 925 – an increase of 28 percent within a decade. Simultaneously, the Islamic capital market also saw growth with large-scale innovation of Shariah-compliant products. The most notable instrument (by volume) that has emerged is the Sukuk, an Islamic financial vehicle similar to a bond. From 2004 to 2008, nearly US$110 billion was raised through Sukuk. More than half the global Sukuk transactions in 2008 were based on the Ijara mode of financing, followed by Musharaka with 17.2 percent. It is important to note that the global Sukuk industry in 2008 witnessed a sharp downturn with a total value of Sukuk issues of around US$16 billion, compared to nearly US$47 billion issues in 2007 due to the ongoing financial crisis. Also, Islamic funds such as Islamic private equity funds, hedge funds and real estate funds have experienced unprecedented growth in the last few years. Currently there are more than 700 Islamic funds globally. The first Shariah‐compliant fund was launched in 2007 by the international brokerage New Edge with seed investment by Saudi Arabia’s NCB Capital. Since then many international financial players such as Deutsche Bank, HSBC and Barclays Capital have come up with a variety of funds in collaboration with their Islamic counterparts. Another important market segment is Islamic insurance or Takaful, largely dominated by GCC investors. The global Takaful industry is growing by 20 percent per annum and slowly expanding beyond the home markets to countries such as the Indian sub‐continent and Africa.
Islamic Finance in the GCC The growth of IF in the GCC region goes back to the 1970s when oil shocks resulted in a huge influx of oil revenues and a massive surge of liquidity in the region. The earliest private Islamic banks of the region were the Dubai Islamic Bank and Al Baraka groups of the KSA and Kuwait Finance House. In its early stages, most governments in the GCC region were either hostile to, or at best ambivalent about, IF. As a result, it did not grow robustly in the region. However, demand for financial products allowed a number of local and western financial practitioners to create a small industry, using investment funds from the Gulf region. Saudi Arabia, Bahrain and UAE also pursued IF as a niche segment in their overall economic diversification programme and now the region is home to the largest concentration of IF assets. Islamic banking assets in the GCC in 2008 stood at US$110 billion with Saudi Arabia accounting for the bulk (55 percent), followed by UAE (19 percent Kuwait (16 percent), Bahrain (seven percent) and Qatar (four percent). The GCC Islamic banking sector is dominated by top three banks, Al‐Rajhi Bank
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of Saudi Arabia, Kuwait Finance House and Dubai Islamic Bank with combined assets of nearly US$90 billion. In terms of market capitalisation of the GCC IF sector, Saudi Arabia is the dominant player followed by Kuwait, UAE, Qatar and Bahrain. However, despite the tremendous progress, IF accounts for a small share (15 percent) in the region’s total market capitalisation. Moreover, another important fact is that the growth of IF in the GCC is largely confined to a few economic sectors such as real estate followed by financial services largely in the form of con-
“The emergence of rival centres in the Gulf has fragmented the Islamic finance industry and resulted in very many small institutions being licensed which cannot benefit from economies of scale or scope”
criteria for Shariah supervision. A higher proportion of bank deposits are Shariah-compliant in Qatar than in any other GCC state. The Dubai Financial Centre has the highest international profile in the region, but Islamic finance is somewhat marginal to its interests. Competition can of course be helpful to financial development, but the emergence of rival centres in the Gulf has fragmented the Islamic finance industry and resulted in very many small institutions being licensed which cannot benefit from economies of scale or scope. None of the Islamic banks in the Gulf are in the top 100 world banks in terms of assets, and as a consequence it is the major international banks such as HSBC, Deutsche Bank and Citibank that have moved into Islamic finance to fill the void, especially in investment banking, where capacity and capability are of critical importance. Although HSBC has based much of its Islamic banking operations in Dubai, the other investment banks conduct their Islamic finance business from London, where it is easier to recruit skilled professionals, rather than the GCC.
Future sumer loans. This implies that the sector is slowly emerging from a low‐base with huge potentials in the future. With the liquidity crunch due to the financial crisis, Islamic syndicated lending acted as a cushion against the drop in Sukuk issuance for project financing in the GCC. As the Sukuk market contracted with increasing LIBOR rates, investors switched to syndications as a better alternative. In project finance, IF accounted for nearly 10 percent of the region’s total project financing.
Legislation, regulatory issues and Shariah compliance Despite the growth and potential for IF in the GCC, there are critical issues that need to be addressed for making the sector more competitive. Unlike Iran, there are no mandatory legislations or law for making all internal financial dealings to be Shariah-compliant in the GCC countries. Kuwait adopted legislation in 1976 to allow the establishment of Kuwait Finance House, for many years its only Islamic bank, but this legislation was superseded in 2004 by an amendment to the Central Bank Law 32 of 1968 allowing Islamic financial institutions to function alongside conventional banks, but with no special privileges for the former. The law does however provide a framework for Islamic financial governance, especially articles 86, 87, 93 and 96, including a stipulation that each institution should have a Shariah board with at least three members. Besides, there is no similar legislative provision in any other GCC state, where Islamic finance is dealt with at the regulatory level only, with Bahrain having the most detailed rulebook. Importantly, standards for Shariah compliance are not harmonised in the GCC where each institution has its own Shariah board but apart from in Bahrain, there are no national boards. Consequently, there are conflicting fatwa reflecting different interpretations of Shariah. Furthermore all those appointed to the Shariah boards of the banks have to apply to the Central Bank and obtain accreditation. Bahrain has functioned as a regional financial centre since 1976, keeping its market open to foreign banks, while Saudi Arabia and Kuwait only licensed majority locally owned institutions. Bahrain has more than 30 Islamic financial institutions, including banks and Takaful insurance companies, most of which serve the regional rather than the local market. It is very dependent on Saudi business however, and as the latter opens up its financial sector, there are competitive challenges to Bahrain, including in Islamic banking. Qatar has also a financial centre, with a detailed rulebook covering Islamic finance, including
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The Islamic financial industry has continued to flourish and is set to play an increasing role in the global financial system with the GCC region playing a pivotal role. Despite a belated start, IF in the GCC is on the upswing with tremendous future potential. The GCC countries are pursuing a strategy of integrated development of financial and real estate sectors on the premise that the two can reinforce each other. However, with increasing competition and market growth, a pragmatic strategy focusing on enabling policy regime is required to make the sector a niche economic segment. With regional financial integration in the GCC, this becomes imperative. Moreover, for GCC private players handicapped by the small market size, other emerging investment locations such as parts of Africa and the Indian subcontinent look promising. But before venturing out, these regional players need to demonstrate domestic entrepreneurial success as role models, which aptly call for governments to play an enabling role in this regard. n
EXECUTIVE INTERVIEW
Keeping your banking options open In these risk-averse times following the worst economic crisis for a generation, could Islamic banking go global? We hear from expert Haitham Abdou.
Why are leading financial institutions increasingly looking to open an Islamic ‘window’? Haitham Babdou. The global economic crisis that started in mid 2007 has taken many shifts in 2009. Among the global uncertainty, the outlook for Islamic banking in the Middle East and emerging markets remains relatively bright. Most of the emerging markets in Asia, Africa, Europe, Latin America and the Islamic countries sustained relatively high GDP. During last year most of the fi nancial institutions adopted cost cutting, capital investment reduction and headcount strategies to survive the worst economic shock in years. However the Islamic banks were expanding into the African, Asian and European emerging markets. The leading fi nancial institutions realised the investment potential in Islamic banking and specifically within the emerging and Islamic countries as one possible option to get over the current economic situation and to retain levels of growth rate and expansion. With banks sometimes interpreting Shariah compliance rules differently, what challenges does this mean for ITS when creating a robust IT platform? HA. The Islamic banking philosophy is based on Shariah compliance, which guarantees purity of transactions and it builds reliance
concepts of short time to market and low cost of ownership were some of the main ideas that went into the design of IBS. Organisations who decide to use IBS will have the edge of swift adaptation in this dynamic industry. ITS Islamic Banking Solution has been developed to comply with various Shariah rules and Ijtihad, taking into consideration country specifics and central bank rules. How are your services catering to the banks in the Middle East and where in the world do you see as having potential for your business? HA. ITS adopted a global expansion strategy several years ago. Presently, ITS offers services in more than 35 countries worldwide. ITS offers a high level of technology, that can run on various platforms, support most major server operating systems, and use multiple and modern relational databases. Furthermore, the ITS solution is built on serviceoriented architecture (SOA), which is a set of loosely coupled modular services to support both business and IT requirements. ITS is differentiated through its client services, which include training and support services, as well as improved offerings and diversified consulting services, facility management, remote infrastructure management, and project management.
on the Islamic banking. Shariah scholars put a lot of effort into standardising the Islamic banking practices that are followed by several fi nancial institutions worldwide. AAOFI and IFSB are adding great efforts towards the standardisation of the Islamic banking products and accounting. ITS has realised the model of defi ning Islamic banking products and work flow and the importance of harnessing the technology Do you see the growth of Isto provide the Islamic fi nanlamic banking slowing down cial institutions with a tool in the future, both in the that enables the banker to Middle East and globally? If defi ne and innovate Islamic not, why? Haitham Abdou is Group products in timely manner to HA. The Islamic banking Director of Marketing at ITS. meet the Shariah board and market has grown over He has over 15 years of IT experience in the banking and the market needs. the average growth rate finance industry and expertise in IT strategies for financial ITS innovated the fi rst of the countries that have institutions based on the latest Islamic Product Engine – implemented it over the last service orientated architectures. His areas of expertise backed up by its long and decade and will continue include: bank automation projects; branch delivery; core extensive experience in the to increase. The emerging replacements; Islamic financing; Islamic banking sector. The countries in Asia, Europe, AML; electronic banking; payment systems. ITS Islamic Banking SoluAfrica and Latin America tion (IBS) is a revolutionary and the Muslim countries are application that is fully flexible, easy to use, the main markets. However, the untapped adaptable and user configurable to allow ormarkets like North America and also in ganisations who use it to innovate and focus non-Muslim countries are potential markets, on creating new products and services and where this new way of banking appears safer market them in record breaking time. The than the conventional system.
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INDUSTRY INSIGHT
In a recession business continuity planning is more important than ever, says Chris Alvord, CEO of COOP Systems.
STAYING AFLOAT IN TURBULENT TIMES
I
magine a cruise line removing lifeboats from their ships because they felt the need to make budget cuts and decided this was how they would stay afloat in the murky economic waters today. Would you and your family set sail on their boats, knowing that they had no backup plan in case of an accident at sea? Most people wouldn’t take the unnecessary risk. Why should businesses operate without a safety net and risk losing everything on a natural disaster or supplier problem? A wide variety of interruptions threaten businesses worldwide on a daily basis. The question is not if an incident will occur; it is when. Establishing a proper business continuity management (BCM) programme will help mitigate these future losses and ensure your business will pull through strongly after any kind of interruption.
past. Even worse, new threats have arisen recently that need to be assessed and mitigated with fewer resources available.
Now, more than ever
A current threat to business operations across the globe is the H1N1 virus. For example, it has had a direct impact on the transportation industry, most notably with Delta Airlines claiming US$250 million of revenue losses in the second quarter of 2009. In a July 2009 report, Oxford Economics concluded that the overall impact of the outbreak within the UK could total five percent of the country’s GDP, with over 120,000 small businesses closing as a result –one of the worst economic crises to hit in decades. A BCM programme is more important than ever, BCM evolution considering the broadening spectrum of immediate Although the practice of continuity planning is threats like H1N1. The good news is that there are many several decades old, it has undergone many changes ways organisations can work smarter and do more with in type and scope. Originally, plans focused solely on less. Dropping a BCM programme altogether or allowmainframe recovery and were referred to as “disaster ing plans to age beyond their ‘expiration date’ is simply recovery” plans. As planning grew to encompass the not a good business practice. Automating the BCM business side of corporate operations and address new programme is one way to maintain plans and ensure vulnerabilities, disaster recovery evolved into “business preparedness. Many excellent soft ware packages are continuity”. New positions were created to focus solely available that support the process across an organisaon planning and testing efforts. Regulatory bodies tion in many ways, including scheduling reminders for worldwide enforced this new set of responsibilities by updates. The burden is eased on C-level management, Chris Alvord is CEO of COOP mandating the creation of planning programmes in allowing departmental employees to efficiently share Systems, a worldwide BCM software supplier. He has a CBCP organisations of certain size and industries. in ownership and accountability. certification from DRII, and has taught hundreds of students as an Today, budgets are shrinking and cuts are being Further, much of the BCM process can then be adjunct professor at NYU, USDA made across all lines of business. Regulations enforcfully automated. Examples are live feeds that update Graduate School and for DRII. His education includes a BA and MBA ing the build up of BCM programmes fall short on details on contact lists, assets, facilities and so on. from Harvard and doctoral work at Virginia Tech. audit standards and requirements for regular updates, Another way to maximise efforts is to partner leaving plans to turn stale ‘on the shelves’ of corporawith local organisations contributing to emergency tions. Even well-documented incidents like the New preparedness. Running exercises with local or state York City transit strike of 2005 and the London Underground bombings government agencies or inviting the local Salvation Army or Red Cross of the same year aren’t strong enough reminders of the importance of upchapter to participate in an exercise with your organisation usually costs to-date, well-exercised plans. Some organisations are cutting back their nothing more than a lunch. The return on investment is immense for BCM programmes in an effort to meet budget cuts, leaving themselves both training and relationship building with community organisations open to vulnerabilities just as threatening today as they were in years and could very well save your organisation in a time of need.
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BANKING
TAKING IT TO THE NEXT LEVEL Business Management talks to Basil AbdelNabi, Head of Information Technology for Arab Bank, about the challenges facing today’s CIOs.
The job of CIO/Head of IT is increasingly seen as moving from a purely technical to a more managerial focus. Do you agree with that assessment? Basil AbdelNabi. Of course. The mix of skills that CIOs must possess has increasingly taken a management focus in the past two decades, which is not really a recent development. Managing an IT function requires a complete grasp of all aspects of running any business, far and beyond the technical dimension. Th is involves the management of budgets, staff, quality, delivery times and cost effectiveness, and most importantly, the understanding of business needs and alignment with corporate strategic goals. IT is an organisational enabler, impacting practically all processes and employees. The mix of systems requirements and business needs exceeds most other industries in technical and regulatory complexity. Effective IT management requires a thorough knowledge of managerial skills, business, regulatory and technology trends to allow optimal alignment to corporate strategy. To effectively meet the demanding regulatory and business requirements, all bank processes must be integrated seamlessly into a cohesive whole. Th is enables the bank to successfully and competitively address local market demands, mounting regulatory standards, internal process controls and the delivery of quality services to various customer segments, each having different priorities and needs, around the clock and around the globe.
How do you think the role of CIO has changed over recent years in general? BAN. The role of the CIO has taken a broader business dimension. CIOs are more involved in participating in the prioritisation of bank strategy and the subsequent translation of the strategy into a portfolio of programmes and projects covering systems implementation, automation of processes, process re-engineering and delivery of 24/7 services. IT staff are responsible for providing cost-effective solutions that are aligned to the bank’s strategy, and thus need to master a variety of skills. These include knowledge of business processes, in order to facilitate the prioritisation of functional and technical needs; creativity in providing low-cost short-term tactical solutions and workarounds until the strategic projects are in place; and leveraging outsourcing options through strategic vendor alliances. The CIO’s title itself places emphasis on information as opposed to technology. Thus CIOs today need to focus on business value creation, to understand core business processes, ensure service continuity and quality and to have access to all the required metrics to measure and track progress on these fronts. CIOs need to know how to manage risks, whether this involves the delivery of new systems, dealing with process risks or maintaining high availability of current services. Finally, CIO roles include the ability to solve business issues and communicate the impact of their initiatives to business stakeholders, in addition to having a sound knowledge of technology best practices and rapidly evolving standards. IT is no longer seen as a commodity, but as a vital factor in supporting business and driving competitive advantage. Is this the case at Arab Bank, and how is technology being utilised to improve performance? BAN. IT has been compared in industry circles and from an operational aspect, to utility businesses such as telecoms; however, IT is also a primary business enabler as well as a direct factor in achieving higher business efficiencies and customer satisfaction. Banks achieve competitive advantage today directly through technical innovation and time-to-market of technology solutions. Bank management is very aware of this, and has supported IT-related strategic initiatives by establishing some years ago bank-wide functions, such as the enterprise project management office, to ensure that global strategic projects are governed in an effective and systematic manner to achieve timely completion. The Chairman and CEO of Arab Bank follows up on the progress of all strategic projects and provides his full support to these initiatives. Other initiatives have been carried out to implement sound IT governance processes, to ensure that strategic projects are business-aligned, and to ensure that they are governed under one set of policies and stan-
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dards, through the implementation of projects such as enterprise project management systems and enhanced organisational structures across all business and support units. Such a setup ensures a high rate of success across strategic projects, by enabling better accountability and holistic project management across all concerned divisions. Would you say that the top management at Arab Bank are alive to the transformative power of technology? How difficult is it to convince the board of the necessity of investment in IT? BAN. Top management is indeed aware of the transformative power of technology, and the process of obtaining the required endorsement from management is a systematic and orderly one. It involves the development of business cases and ROIs for every initiative, prioritisation of projects within each division, and later, reprioritisation of strategic and tactical projects across the bank. Th is approach provides a healthy business/IT alignment and ensures quick buy-in from all business units and from the board. The Chairman and CEO, Abdel Hamid Shoman, has always been a supporter of obtaining the necessary technological advancements in terms of systems and soft ware, and has set the tone for the bank in terms of how important IT is, not only for the business, but for customer service and efficiency. Most of the world is suffering from the effects of the global recession. How has Arab Bank been affected and what impact, if any, has the recession had on IT and your budgets? Have you been asked to do more with less? BAN. Despite the fi nancial crisis, Arab Bank achieved record profits in 2008 and has maintained healthy ratings from rating agencies. Despite the fi nancial crisis, IT investments this year have exceeded the previous year’s budgets by a considerable margin. However, IT is always accountable to do more with less, and we have managed to cut unnecessary costs by identify cost-effective solutions, eliminating custom systems that require costly maintenance, merging multiple solutions and eliminating redundancies. As systems and processes are consolidated, so are vendors and their maintenance and support contracts. By the same token, virtualisation of hardware is an ongoing process to optimise processing power and minimise power consumption, training and system administration needs.
niche technologies where skills and vendor support are sparse in the region, which we are managing to address through selective strategic partnerships and outsourcing through local and multinational vendors. The supply and demand situation for skilled IT resources has not changed much during the global crisis in the many regions where Arab Bank operates, and this has prompted us to broaden recruitment strategies and to enhance skills through increased online and classroom-based training programmes. What is your approach to technology: do you build inhouse or buy in from external developers? What factors inform these decisions? BAN. Our strategic direction is to acquire packaged bestof-breed solutions. Th is constitutes the bulk of our applications today and was one of the drivers to eliminate countless custom applications, thus considerably lowering maintenance efforts and mitigating operational risk. Some development is maintained across country-specific and niche applications requiring localisations or custom-tailored functionalities. The additional factor that drives this decision in addition to risk mitigation is the faster time to market for product and service delivery through system configuration and parameterisation as opposed to soft ware development and customisation.
“The supply and demand situation for skilled IT resources has not changed much during the global crisis in the many regions where Arab Bank operates, and this has prompted us to broaden recruitment strategies”
What are some of the main IT challenges you face at the bank, and are any of these challenges unique to the Middle East? BAN. Some of the main challenges relate to fi nding competencies on
What do you see as being your main priorities over the coming months and years? BAN. IT organisations in multinational banks are required to deliver quality services and lo-
calised products, achieve quick time-to-market and implement cost-effective solutions. Working in such a global and complex environment requires the ability to achieve economies of scale through standardisation, centralisation, automation and optimisation of service and support processes. Our main priorities are to deliver on our three-year strategic plan, while continuously enhancing our services and new technology by delivering faster, more cost-effective and higher quality value-added services.
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EXECUTIVE INTERVIEW
Can you afford to ignore the threats? Business Management sits down with Kevin Burton to discuss how organisations need to cover all bases with their all-important business continuity planning. What is driving the need for sound business continuity/disaster recovery policies and strategies within organisations today? Kevin Burton. More than simple business continuity and disaster recovery planning and strategies, the global organisations we serve at Burton Asset Management, Inc. are telling us that they are seeing a need to integrate across the risk management spectrum so that they can lower cost and increase their level of preparedness. Th is means that companies are seeking out ways to integrate emergency management, security and disaster recovery/business continuity. The process is referred to as ‘fusion’ and seems to be getting lots of traction in both western HQs and regional offices. What are the challenges faced and common mistakes made in your experience? KB. Even as companies we serve ‘fuse’ these functions and realise a higher return on their risk management investment, they also recognise the unique challenges posed by new cultures and new terrains in which they are expanding. To the extent that planning is very different in Britain or the US than it is in say, Bahrain, we are recommending in-close operations and studies prior to planning that help with clarifying risk issues, understanding response capabilities and assuring that cultural challenges are met head on. Specifically, we are finding that companies that have far-off operations become aware that resources you would find as helpful allies in their home country simply do not exist or could become competitive for resources with them during a disaster. Having clarity around what to expect from first responders in Britain or the US is very different from having clarity around the same challenges in areas where scarcity dynamics or even hostility toward the organisation is found. Being penny-wise and cash-foolish is a sure way to increase the risk of your investment in new markets. A complete understanding of the
local, geopolitical and natural hazards as well as the hosting country’s willingness and ability to respond are key factors in building contingency plans. We are deploying more former intelligence agents into these areas on our clients’ behalves to gain a clear picture of the cultural, ethical and response expectations that locals have around disasters and being more aware of those things increases the chances of the organisation not only surviving a disaster but thriving after one.
complete view of the risks of any area and are clear on how to militate against those risks. They rely heavily on employee honesty and the availability of key decision makers during a crisis. We have added kidnap and hostage components to plans. We have also added bombing and heavy security elements to plans. We have recommended lowering the profi le of organisations that might be viewed as targets in these locales and encouraged deeper employee screening and monitoring to assure that
An excellent example we just experienced in this area came about when a transnational organisation asked us to look at a sub-48 hour recovery time for their operations in Japan. It became clear very quickly that in Japan an organisation is expected to help the community during the fi rst 48 hours of any disaster, and then to help themselves. The original plan of focusing on near-term recovery had to be balanced against the cultural realities of the new market in order to assure that not only would the organisation recover, but do so without losing the market share that they were so invested in building.
the disaster we are trying to prepare for does not originate from within. What you need to be looking for when you’re building a business continuity or disaster recovery capability into a Middle East operation is the ability to have mitigation in front of the problem, not after the fact. Simply put, any organisation should plan on risk management in these areas being a normal part of their overall operating expense.
Are there any unique business continuity issues in the Middle East? KB. Absolutely. Business continuity and disaster recovery plans that are well crafted have a
Kevin D. Burton is CEO of Burton Asset Management, Inc. Burton has a broad range of experience and has helped clients address many issues to increase their IT process efficiencies or to address business process needs, staff and governance.
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EXECUTIVE INTERVIEW
Putting faith in your defences Tony Lteif, CEO of Security Matterz, talks to Business Management about the ever-changing face of IT security.
What makes Security Matterz different to other IT solution providers in the Middle East? Tony Lteif. Our approach is very different. We are not the traditional ‘box movers’ but instead we aim to develop a clear understanding of each customer’s business needs and overall technical infrastructure through the eyes of a consultant, then address them with the implementation of a compliance framework and robust technical solutions which meet strategic and operational objectives. The cornerstone of our success is customer satisfaction. With this, we build strategic alliances with world class leaders in this field by offering the right balance between the ‘best of breed’ and the ‘best of need’ for our customers. All our solutions and offerings must provide a proven return on investment. Quality drives everything and is a shared responsibility and the diversity and knowledge of our people is our strength.
“More than 95 percent of companies’ data is stored in a digital format and we have seen data loss prevention booming recently”
How did it all begin for your company? TL. Security Matterz was not our first successful IT business venture. It all started with HBO Middle East back in 1992, providing world-class healthcare information systems to the GCC market. We then went on to establish Integrated Solutions for Business (ISB) in 1998 to become a leading system integrator and e-learning provider in the Middle East. We decided to launch Security Matterz in 2007 after I spent seven years in the UK and European Security markets. From its inception, we had a clear vi-
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sion and a specific objective of where we wanted it to be. IT security has traditionally been defined as ‘confidentiality, integrity and availability’ (CIA) and we believe that this definition has evolved and should now include the management of risk, the maintenance of compliance standards, and the active management of policies and procedures. Concerns about general security have widened to include the need to maintain 'unified corporate governance’. With this view, we decided to address many enterprise challenges especially in the areas of security, networking and infrastructure. If you could secure three items within your IT infrastructure, what would those be? TL. Data, data and data. It is the heart and backbone of any business. More than 95 percent of companies’ data is stored in a digital format and we have seen data loss prevention booming recently along with compliance frameworks such as ISO 27001, PCI, COBIT all revolving around securing your data.
ing IT investments, reduce cost and resources and yet best of all increase security. ROI on many of those solutions is short term, two to six months. There’s also a huge interest in ‘best practice’ which is more than a national or cultural demand Where do you see the future of IT Security in the Middle East? TL. New legislations in many GCC countries are forcing organisations to change the traditional way of doing business. For instance, by enforcing PCI standards on financial institutions, organisations must adopt best practices to achieve compliance such as ISO 27001, Basel II and so on. Such organisations are now re-engineering their IT strategies and formulating their security positions in order to address such changes. This is not easy, especially when executives are trying to focus on their core business entities, making sure that their overall operation is profitable and efficient! This is an exciting time for Security Matterz to step in and help CEOs, CIOs and IT Directors across all sectors planning and implementing such changes and we are in a great position to do so.
And how is this economic Tony Lteif has 12 years’ experience crisis affecting your cusas an IT Security expert and has founded a number of successful tomers and your business? companies. Previously, he served TL. Many organisations were as Operations Director and Board Member at Nexus Technology affected one way or another as London. He also co-founded Integrated Solutions for Business many countries were. But durin 1998, a thriving IT company in ing these times of e-crime rises, the Middle East. our customers must be very competitive in order to win business so they can maintain leadership. With this contrast we have seen a big demand for our services and solutions especially on compliance (ISO 27001, 9001 and 2000 ITIL) and infrastructure monitoring, convergence and optimisation as this could maximise the benefits of most organisations’ exist-
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IT SECURITY
IT SECURITY
UNTAPPED A unique insight into the state of IT security in the Middle East with Madhulika Biswas of Frost & Sullivan
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oday, enterprises are not limited to just employees and stakeholders but represent suppliers, channel partners, and collaborators who need access to data related to products, contracts, movement in supply chain, and much more. In this extended enterprise, we fi nd an increasing need for electronic information to support and manage inter-firm relationships. Moreover, with the increasing availability of broadband connections and decreasing subscription rates, the Middle East market will further witness the drive towards internet adoption. Hence, as a result of vanishing perimeters, increased need for collaboration and information sharing and growing business internet penetration, information technology now forms the backbone of enterprises’ day-to-day activities. The increasing dependency on the internet, has amplified exposure towards IT-related threats.
The changing threat landscape Enterprises have become more prone towards security risks both from an inbound and outbound perspective. Th is changing threat land-
scape has been caused by the rise in the number of security incidents, such as phishing attacks, generated from this region. In addition, with the increasing complexity of threats, many online users are becoming victims of cyber crime attacks and the incidences of successful attacks are escalating. In the region, Saudi Arabia, Egypt, the UAE and Qatar are the leading countries that are the target and source of malicious online activities. The growing frequency of fraudulent activity has led to an exponential rise in IT security investments, especially in areas such as data, web and network security, like anti hacking and anti spam. However, the region has been slightly relaxed in implementing sophisticated information storage and security solutions, as security is still seen as a technological issue by several companies. The region has registered a double-digit growth and sectors like banking are ahead in terms of having a better understanding of information, storage and security. The integrated security market has witnessed good traction in 2009, and as a result brought many innovations into the integrated security segment. Customer preferences are slowly shift ing to integrated security appliances, and hence secure routers and switches are likely to see higher adoption levels. Adoption of data loss prevention (DLP) systems has also gradually improved in the past two years, due to awareness of data leakage. DLP protects data via a combination of processes and technology with the ultimate goal being the prevention of a data leak. With this, the adoption of DLP solutions has also increased.
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Compliance Companies are adopting DLP for a variety of reasons, with compliance being the strongest incentive. Compliance management is slowly becoming the centre of security decisions and spending. A worldwide trend for adoption of next generations integrated security appliances known as Unified Threat Management (UTM) devices is also developing as a means to increase the market participation of small and medium companies. SMB companies are interested in network security solutions, but have limited adoption of security solutions due to prices and investment capabilities. Unified threat management (UTM) has many features far more advanced and sophisticated than its predecessors, enabling better network management, security in centralised devices, services like realtime signature update and many more tools for administrators, making it easier to upgrade networks. UTM technology has particularly good traction in the Middle East countries where a large number of small and mid size organisations that use the internet-based business model, are adopting UTM to safeguard their IT infrastructure. Verticals such as banking and telecom are the major adopters of the latest security technologies. Due to the growth of international banking and money laundering, there has been an alarming increase in the rate of fraud and organised crimes, while in the telecommunications sector, the ongoing capital expenditure is driving security spending. Governments in the region are taking many initiatives such as liberalisation and privatisation of the telecom industry, establishing technology parks, which further infuse growth into the ICT industry. In addition, with the healthcare sector realising the consequences of data loss, data security is gaining importance, with initiatives, such as creating a common ID for their clients. The region lacks government regulatory guidelines and compliance mandates, but is witnessing increasing initiatives in the security arena. One problem is that initially ISPs in the region rapidly deployed broadband internet connections without implementing security solutions. However, with the cautious measures taken by governments, many ISPs were blocked and marked as a source of spam generation. Standards like BSI
(British Standards Institution), ISO 27001 and PCI DSS (Payment Card Industry’s Data Security Standard) developed by credit card companies to provide guidance in order to prevent credit fraud and other security mishaps, are gaining popularity amongst enterprises. Adoption levels of standards are increasing in the Middle East as numerous enterprises are working to get themselves certified with various international standards due to growing business needs while working with clients and partners spread across the globe. However, many enterprises in the region feel that certification programmes are tedious and need lots of paper work, so the preference is to follow standards internally without certifications being opted for. Hence, enterprises are looking for partners who can provide proper guidance and make the certification process simpler.
Preparing for the future Companies in the Middle East are looking for compliance technology, which simplifies the choice and implementation of standards with a little effort and background information. However, this requires expertise in internal staff or resources. The existing need for IT security experts that can be readily absorbed by the enterprises without any extra efforts to train them, is also stimulating growth of the education sector. As an attempt to reduce this gap, educational institutions are taking various initiatives to create a trained work force for IT security. As a result of the economic meltdown, the region witnessed investments being made for enhancement of IT infrastructure not only from governments but also from private organisations. The steep decline in oil prices due to the economic slowdown is one of the major factors behind initiatives being taken to reduce the dependency of economies on oil. With this, the future holds massive growth in the field of mobile operations, internet/broadband services, and fi xed line, which will further fuel investments in IT infrastructure, enabling IT security to penetrate the market faster. „ Madhulika Biswas is Senior Research Analyst- Information and Communication Technology Practice- South Asia and Middle East at Frost & Sullivan. For feedback and enquiries contact tanu.chopra@frost.com
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EXECUTIVE INTERVIEW
A risky situation Apathy and a lack of understanding has sidelined risk management in the past. Iliyas Campbell says now is the time for a renewed focus.
What are the main drivers behind the rise to prominence of risk management strategies? Iliyas Campbell. The main driver has been the need for compliance from the financial services industry. With the implementation of stronger regulation across the region, a higher level of risk management was required. Prior to this, with the exception of some of the financial industry, the risk management function within many organisations was at a much-reduced level. All industries have taken stock of recent events, including the main conflicts in the region and the economic crisis. Businesses are now beginning to realise that the risks of doing business with external organisations and the financial, physical and reputation risks that they can attract can be as critical as the direct risks that the business has identified as part of their own specific assessments. What effect has the global economic crisis had on risk management strategies – for both companies based in the region and overseas businesses looking to invest? IC. Over the past decade we’ve seen the risk management function in many organisations being sidelined and in some cases ignored altogether. This was quite bluntly confirmed during recent workshops and seminars in the region where managers of these functions expressed their frustration at their organisation’s inability to accept and understand the risks to their busi-
ness. We know from working with other clients that this is a global phenomena, not simply restricted to the region. What we are seeing now is a renewed focus on risk management as the compliance process forces businesses to provide a specific and auditable risk management process and the effects of the economic crisis fuel deeper analysis of the business risks. This is true for business in the region and foreign investment where the increased demand for due diligence is evident. What are the main challenges that organisations face today when assessing risk? IC. Part of the problem stems from a lack of understanding of this business function. There are also biases and perceptions of risk that affects not only the process of assessment, but also the decision making process that follows that can be ingrained within an organisation’s culture. This is one of the reasons that a consultant, from the outside looking in, can often identify risks that have become part of the business culture and may not be readily identifiable by those within the organisation. Possibly the greatest challenge is for those in charge of the risk management function to provide a clearer understanding of their function and value to their management and not to see the unit solely as a cost centre. This is essential if they are to be taken seriously and included as an integral part of the business process in the future rather than being side-
lined and potentially exposing the organisation to increased risks. Do you have a recent example of how your services benefited a client operating in the region? IC. We have noted a rapid increase in the amount of due diligence and risk analysis being conducted within the region. Whilst one may comment that this increase is necessary given the current crisis, it could equally be said that it should have been at this level prior to the crisis. The past year has seen numerous clients renewing their risk assessments in the region and conducting increased due diligence on vendors, partners and other third parties involved in their business process. One client in particular was able to negotiate a reduction on their insurance premiums based on the latest risk assessment compiled for them that will amount to a significant figure over the coming years. The insurance company accepted the reduced premium after the client had shown that they had clearly identified the risks to the business noting a reduction in some areas, and having made allocations and plans to mitigate the risks. Iliyas Campbell is the founder of Diligence Management Consultants in Abu Dhabi. He has lived and worked in the Middle East for 14 years engaging with a number of global consultancies prior to establishing Diligence. Campbell has an MSc in Risk, Crisis and Disaster Management from the University of Leicester.
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INDUSTRY INSIGHT
See the light on open source David Allinson, General Manager of Opennet MEA, lifts the lid on new opportunities for Middle East CIOs.
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here’s a love affair brewing between enterprises and open source in the Middle East. After flying below the radar for several years, open source solutions are slowly but surely gaining altitude as the community discovers that open source solutions present incomparable benefits over proprietary soft ware and hardware, including better customisation and integration services. Open source makes sense. More so today, thanks in part to the economic downturn the global market is currently facing. There are opportunities for CIOs to not only carve out costs from their IT infrastructure but also deliver performance and results. In addition, Linux, the premier flavour of open source, has a whole lot going for it that proprietary solutions don’t. It’s a stable environment. If that’s not enough, it turns out the Linux market worldwide is growing rapidly as more and more Linux servers are deployed in an increasing variety of enterprise-wide projects.
storage can then be dynamically allocated in a few seconds. Red Hat is a major contributor to open source virtualisation projects (including Xen and KVM). While virtualisation helps customers reduce cost, management tools increasingly play a central role in unlocking a customer’s IT budget. Not all customers want to spend money in order to save money, but ultimately if the added value is there, then the project goes ahead. The combination of virtualisation and management tools into an open source stack alongside middleware, databases and applications is delivering value to customers even in a budget constrained environment.
Building blocks
With open source, enterprises can now build business applications using open source solutions. Solution providers could use Oracle on RHEL, SAP on RHEL, develop core banking applications on RHEL and JBoss, develop Microsoft Exchange alternatives using Zimbra and RHEL, and so on. These open source offerings provide key features such as hot back-up, active-passive high availability, online table and index reorganisation, security auditing, database partitioning, and parallel query execution, among several other business-critical features. Virtual reality In a region where a large percentage of enterprises David Allinson joined Opennet MEA as its General With enterprises increasingly looking at data centre fall into the small to medium enterprise level (from 25 to Manager in April 2007 and is consolidation as one path to achieving cost reduction, 200 users), Opennet MEA, as Red Hat’s main distributor responsible for re-organising the company’s Middle virtualisation is one technology that is coming into its and authorised certified training centre, recently extendEast operations. He brings with him over 25 years’ own. With the added benefit of being able to reduce the ed the availability of new open source support packages experience in growing and cost of desktop consumption and refresh costs through targeted specifically at this sector. These packages, availdeveloping businesses, as well as creating winning virtualisation, CIOs are looking to open source experts able at different levels, include support for as few as four strategies to strengthen their position in individual market like Red Hat for a clear virtualisation strategy. Virtualisaservers, phone and email support, a dedicated technical segments. tion technology delivers a quantum leap in IT operational account manager, scheduled visits including workshops, flexibility, speed of deployment and reduced capital exknowledge transfer and technical presentations, incident penditure. It delivers more to its users while CIOs gain increased control visits, and training on the essentials at the system administration level over their costs. Virtualisation enables enterprises to run multiple operwith the option to earn RHCT (Red Hat Certified Technician) certificaating system ‘instances’ or ‘guests’ on a single physical system. It isolates tion. These offerings will enable such companies to adopt open source the complete operating system and application stack from the hardware, solutions with back up support from a specialist support organisation, increasing operational flexibility and improving resource utilisation. allowing them to reap the benefits of open source with confidence. With virtualisation, processing and data resources servers and storTo learn more about the open source alternative for your enterprise in the first instance please email david@opennet.ae. age are logically grouped into a single resource pool. Virtual servers and
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AVIATION
FLYING HIGH-TECH
Since taking on the role of CIO at Royal Jordanian, Ahmad Abu Ragheb has transformed the airline into a high tech 21st century carrier. Diana Milne asks him how he did it. Royal Jordanian has won many awards for the introduction of innovative technology to improve its services. Can you describe some of these achievements? Ahmed Abu Ragheb: 2007 was the year that we introduced many new airline systems to assist Royal Jordanian in areas such as passenger services, cargo and back office processes. The airline joined the oneworld Alliance in April 2007 and for that reason it needed to upgrade its systems. So we introduced a new departure system with e-ticketing facilities, a new accounting system and a new revenue system. We were also the first airline in the region to introduce self service kiosks at Queen Alia International Airport and Aqaba Airports. We also launched a new internet booking engine so customers can make their own reservations and process their own tickets and we set up a call centre that is the entry point to Royal Jordanian for passengers or clients. What challenges did you encounter when introducing these changes? AAR. The biggest challenges we faced were the target dates. We needed to apply all these systems in a very short period of time and in order to do that we needed to mobilise our resources and apply scientific project management. We were very much assisted by the senior management of the company who provided us with a great deal of support. Th is is usually a very important factor when it comes to introducing any new technology for the airline.We succeeded in reaching our project targets and because of this we won an airline strategy award.
Why do you think you were so successful in meeting your targets AAR. The motivation of the staff and the fact that they are so well skilled was a big factor. Also, the support from the senior management played a big part in our success. As a result of our work, the airline has defi nitely become more efficient. In addition to joining the oneworld Alliance, Royal Jordanian has now become a profitable airline where the quality of service is immaculate. It’s an excellent airline in all its products. The changes have also helped us to attract many more customers. Our passenger numbers have now increased by over 70 percent in the past three years. How developed is Royal Jordanian’s deployment of technology compared to that of other airlines in the GCC region? AAR. I wouldn’t’ say that Royal Jordanian is more sophisticated. Each airline looks at their IT strategy from a different viewpoint. From our viewpoint, IT is aligned very closely to the strategy of the airline and what we want the business to achieve. Like us, other airlines are also providing online services to their customers. We believe that no matter how small an airline is it should provide more or less the same services as the larger airlines. That means that the quality of services has to be priority number one. How closely is the airline’s IT strategy aligned with its business strategy?
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One means “Danger” The other one means
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GOING GLOBAL AAR.Traditionally IT was driven by technology and now it is driven by business. In other words, we now look at the business, its strategies and objectives and then look at how technology can help them to meet those objectives. We are always evolving the business and so we are always bringing in new technologies. How successful has the introduction of e-ticketing been amongst customers? AAR. Because of e-ticketing we now have zero manual tickets. Now all the tickets are generated electronically whether that’s in Jordan or wherever you are in a sales office. It is an excellent tool for customers and has proven to be very popular.
Royal Jordanian officially joined the oneworld Alliance in April 2007, after it completed all technical and technological requirements to become part of the grouping. It was the first Arab and regional air carrier selected to join any of the three global airline alliances (oneworld, SkyTeam and Star Alliance), and the first airline to join oneworld in the last five years The airline currently has marketing alliances, through code-sharing, with several international airlines: American Airlines, British Airways, US Airways, Iberia, Malev Hungarian Airlines, Tarom, Gulf Air, Syrian Arab Airlines, and Yemen Airways. Other oneworld alliance members include American Airlines, British Airways, Iberia, Cathay Pacific and Japan Airlines.
line operation. Our target is for the migration to the new platform to have taken place in October or November 2010.
“Royal Jordanian’s
You recently introduced a group revsenior management enue management system to enable believes that IT the faster and more efficient facilitais at the heart of tion of group bookings. Can you dethe airline and scribe how this works? that nowadays AAR. The system performs an evaluation of group booking requests and offers the everything revolves best possible price for them as well as around IT” information on what space is available onboard the fl ight. Th is also helps us to better forecast what space is available to be fi lled by individuals. It offers more options from the reservation system and helps the analyst to select the combination of fl ights with the highest achievable revenue.
How challenging will it be to achieve this goal? AAR. It’s very challenging because the project involves introducing five new IT systems. Airlines usually only do this sort of project once. It’s like getting married. You do it once in a lifetime. Once it is complete there will be many improvements for passengers of Royal Jordanian. For instance, they will be able to buy their ticket for other airlines’ for connecting fl ights with the web check-in. They will also be able to make changes to the names of passengers online. How are you improving the efficiency of Royal Jordanian’s back office operations? AAR.We have just launched a new Oracle ERP solution for the back office. Th is is aimed at improving staff efficiency for certifications, human resource management, and the data that staff have access to.
What is the biggest IT project you are currently working on? AAR.We’ve recently signed an agreement to change our IT platform over to the Amadeus platform and this is a very big project. Most airlines within the oneworld Alliance use the Amadeus platform and Amadeus solutions provide many beneficial features to passengers and to the air-
Do the senior management of Royal Jordanian understand how important IT is to helping them to meet their business objectives? AAR. Yes. Royal Jordanian’s senior management believes that IT is at the heart of the airline and that nowadays everything revolves around IT. Th is includes solutions for improving revenue and solutions for cutting costs. The challenge we have been given now is to reduce the cost of ABOUT ROYAL JORDANIAN the operation and IT is one way that we will be In 1963, King Hussein of Jordan issued a Royal Decree for the setting up of a national able to achieve that. air carrier. His words at the time were: “I want our national carrier to be the ambassador of goodwill and the bridge across which we exchange culture, civilization, Before joining Royal Jordanian, you were trade, technology, friendship and better understanding with the rest of the world.” Chairman for IT at the Arab Air Carriers Inspired by this vision, Alia (later renamed Royal Jordanian) launched its Organisation. At that time, what did you operations as role as Jordan's national carrier. Royal Jordanian’s headquarters are identify as the biggest technical challenge located in the heart of the capital, Amman, and its flights are operated from Queen that airlines in the region face? Alia International Airport (QAIA). Its fleet covers a network of 55 destinations on AAR. As Chairman of IT for the AACO, I four continents. The airline owns Royal Wings, a Royal Jordanian subsidiary company always looked at how we can assist as a group, dedicated to charter business, operating from Amman Civil Airport in Marka. It also the passenger services area, and what the best owns 20 percent of Jordan Airline Training and Simulation Limited (JATS), 20 percent solutions are to go around it. That will always of Jordan Aircraft Maintenance Limited (JorAMCo), 20 percent of Alpha (the flight be the biggest challenge that airlines in the catering services company) and 6 percent of the Royal Jordanian Air Academy. region face.
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INDUSTRY INSIGHT
Automatic for the people Luca Lazzaron of BMC Software on streamlining the business brain with IT service automation
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s you read this article approximately 100 billion neurons within your body are processing the information you’re absorbing and sending it to your cerebral cortex. The nervous system controls the body’s conscious and subconscious activities – from the blink of an eye to the act of typing on the keyboard. And it does all this while operating in the background automatically. Like the nervous system, an organisation’s IT infrastructure operates predominantly in the background. Whilst far less complex than the human brain, advanced technologies such as server virtualisation and distributed and mainframe computing mean an IT network is by no means a simple architecture. IT professionals work in an environment in which any error can impact quality of service, revenues, or even the company’s reputation. Additionally, new regulations demand tighter controls and accountability. IT is under increasing pressure to reduce costs, despite its complexity. One way to meet
“The benefits are compelling. Companies investing in innovative technologies like automation are better positioned to weather the economic downturn” these challenges is by deploying service automation as part of a Business Service Management (BSM) strategy – a management approach that ensures IT provides the business operation with the services it needs for growth. Service automation solutions automate many of the routine IT tasks in the same way your nervous system ensures you keep breathing. Automating these tasks improves operational efficiency offers greater control over service quality, security, compliance and business agility. The benefits are compelling. Companies investing in innovative technologies like automation are better positioned to weather the economic downturn, according to a recent survey by BMC Software of more than 300 EMEA CXOs. Many of our customers are enjoying huge annual cost savings thanks to innovation. Companies that thrive, both in this environment and in future ones, appreciate the transformative potential of IT and so maintain a strong, consistent investment. Among the companies reaping the benefits of service automation is Virgin Media. Using BMC Software’s BladeLogic automation technology, Virgin Media is shortening its release cycles, aligning the configuration of its applications and automating software updates across the company. According to Matt Wills, Virgin Media’s Build and Environment
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Manager for Mobile Delivery, BladeLogic has helped the company achieve a faster time to market for its web services. Virgin Media released 11 web services last year and deploying each of the configuration items for each service took only six minutes compared with 30 minutes that was originally estimated. By automating 201 software deployments, Virgin Media calculated it saved nearly eight days’ of IT management time. BMC BladeLogic is also helping decrease application downtime, increase IT productivity, and reduce operating costs for Virgin Media’s data centre. This is most apparent in the company’s nine test and development environments, each containing approximately 20 servers. Collectively, the environments support nearly 53 bespoke applications, each with up to 30 sections that can be configured. Some components change only once per year while others change once a week or more, making manual change and configuration management highly inefficient. Before BMC BladeLogic Wills’ team relied on a paper-based change management system that was time consuming, lacked accountability and was vulnerable to errors. Adopting BMC BladeLogic has simplified this complexity, automating these processes and minimising the time, resources and costs involved. “There’s no doubt that the BMC BladeLogic data centre automation solutions have made a fundamental difference to the way Virgin Media manages, controls, and enforces configuration changes,” Wills said. “We do expect a lot from the solution, and here we use the phrase, ‘It’s not Blade magic, it’s BladeLogic’.” It also lets Wills sleep easier at night – along with his nervous system. n Luca Lazzaron is VP and General Manager for EMEA at BMC Software. To find out how BMC BladeLogic automation technology can help your IT department visit www.bmc.com/solutions
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INDUSTRY INSIGHT
A decade of VoIP Philippe Babin, General Manager of Media5 Corporation, takes a closer look at the impact that VoIP has had on organisations in the last 10 years.
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t seems like almost yesterday that we were all bringing in the new millennium, and worrying that the world would come to an end as the clock struck midnight. With the first decade of the 21st century nearly over a lot has transpired in the telecommunications industry, but nothing has made such a controversial impact as that of VoIP. It is being called the decade of VoIP, but the reality is that there were many times when critics and industry insiders called for the death of VoIP. Early in the decade, VoIP was in its infancy, with challenges surrounding voice quality, reliability, interoperability and security. The industry also faced the challenges created by the dot.com ‘meltdown’, which had significant impacts on both investment in technology as well as communications infrastructure. There was also reluctance amongst the major service providers to promote VoIP. Early on it was an argument about voice quality, but over time it became more about protection of their revenue base, even as developers brought new solutions to the market, offering better and better voice quality and reliability. Finally, a major hurdle for VoIP has been the public’s understanding of what exactly VoIP is and its benefits and value to enterprises, service providers and consumers. A key challenge has been getting out the message that
VoIP provides wonderful opportunities, and is certainly not just a technology to use on a computer. But I am glad to say that VoIP is now a fundamental component of our modern telecommunication systems. Moving forward VoIP will continue to be a significant catalyst for change in the way that service providers, enterprises and consumers use communications. VoIP takes on different names and forms: be it IMS for service providers looking to base voice, video, wireless and IP systems around SIP or unified communications (UC) in the enterprise world. The current economic slowdown has had little effect on the VoIP market. A recent report showed that in the enterprise segment, VoIP users had continued to rise to over 28 percent in 2008 and this figure is expected to be over 50 percent by 2012. Challenged by the new generation of ‘over internet’ services providers, traditional telcos around the world are considering the use of IMS or UC system to differentiate themselves, be it over wireless, WiMax, copper lines or fibre optics, to protect their market segment or expand into new regions. Beyond this, we believe that as VoIP and SIP evolve, users will expect broader capabilities. We feel that security and survivability will become ever-more important capabilities in enhanced VoIP solutions. Our plan is to ensure
that our solutions are leaders in these areas. With our Media5Boss solutions on one side but also our easy to customise soft ware and hardware platforms, we enable the service providers to thoroughly differentiate themselves by offering well proven technologies. Th is year at Media5 we released the Media5Boss-Branch, an advanced, all-in-one suite of cost-effective solutions designed to offer security and survivability in multi-site, branch office environments. We are convinced that these offerings will meet the needs of organisations looking to deploy security and survivability into their overall telecommunications infrastructure. We are also seeing some exciting developments in the area of mobility. Offices today are anywhere and everywhere. We have recently introduced several interesting mobility solutions to provide enhanced and integrated communications for an enterprise’s mobile worker. Media5Boss-Mobility is a powerful all-in-one solution for secure fi xed-mobile convergence. Media5-Fone is a SIP Client (soft phone) that runs on the Apple iPhone. We have also developed the Mobility SDK, a soft ware development kit, allowing service providers to easily create their customised, secure SIP-based applications that can run directly on the iPhone. While there are challenges ahead, we are excited by the opportunities that the next decade will provide, and we are already at work on the next wave of solutions.
Philippe Babin, General Manager Media5 Corporation, joined in 2001, first as Director R&D and later on as Head of Product Line Management. In these positions, Babin had the opportunity to implement successful product development processes, and to define the company's strategic orientations. Babin graduated in Electrical Engineering at Université de Sherbrooke, Québec, and completed an MBA in Business Administration in 2004 at the same university. To learn more about Media5 Corporation and its line of leading VoIP solutions and services, please visit www. media5corp.com or info@media5corp.com.
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UNIFIED COMMUNICATIONS
TOMORROW’S COMMUNICATIONS LANDSCAPE
Lavanya Palani Batcha of Frost & Sullivan paints a picture of the future of uniďŹ ed communications technology.
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he unified communications landscape is dynamic and continuously developing. Market participants such as vendors endeavour to grow their product and service offerings, depending on the current or anticipated state of the market. Pure hardware vendors are now looking to diversify into adding soft ware-based products into their portfolio, thereby bringing forth a more comprehensive unified communications solution. It is imperative that the enterprise end user understands, identifies and makes decisions pertaining to trends that could shape the enterprise communications scenario in the future. Elaborated below are three significant developing trends to look out for in the coming years. Service-Oriented Architecture: Today unified communications is widely understood to encapsulate voice, video, and data applications via a range of devices such as desktop PC, desk phone, mobile device and the like. However, there is an increasing momentum towards enhanced ser-
vice offerings such as Service-Oriented Architecture (SOA), which can bring additional benefits to an enterprise that has already implemented unified communications. Solutions based on SOA, facilitated applications such as real-time identification/tracking embedded within the unified communications platform have promising potential in industry verticals such as hospitality, aviation, and healthcare amongst others. It is anticipated that as this avenue develops further in the future, there would be myriad enterprise-centric business processes that can be integrated via SOA and unified communications. Interoperability: The world of unified communications involves a plethora of devices, applications, solutions and services, with the majority being built on closed, proprietary architectures that deny any interoperability between OEMs. Th is presents a challenge, especially in the case of an enterprise with multiple locations possessing proprietary communications products from a host of OEMs at each of these sites. The networking and unification of these divergent products in order to streamline communications within the enterprise can be a daunting and cumbersome task, not to mention the existing hindrance of proprietary products and solutions. Adding to the complexity, if the said enterprise were to look at adopting unified communications, they would be left with no further option other than to undertake a com-
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plete forklift operation. Th is would essentially involve discarding all legacy proprietary products thereby sinking significant initial capital investment on the equipment. Therefore, as greater numbers of enterprises display interest in the unified communications solution, the need for fundamental interoperability between products from different vendors is of the essence. Given the current prominence of collaborative environments in the unified communications arena, interoperability becomes especially relevant. Such a scenario has prompted several
business processes to be handled by skilled third-party service providers. Services-based models also serve to reduce the capital expenditure required on hardware and equipment. Unified communications is no exception. Vendors and system integrators are looking at various business models that would enable them to deploy hosted or managed UC services such as IP telephony, conferencing and collaboration and so on. The Soft ware-as-a-Service (SaaS) model for unified communications has been quietly emerging into the forefront. Although the services-based model is suitable for all manner of enterprises, the most significant market could potentially be Small and Medium Enterprises (SMEs). Besides the cost savings involved, the SME customer can look forward alliances and partnerships amongst unified communications market to experiencing at least a partial implementation of unified communicaparticipants, even amongst traditional rivals. Vendors such as Microtions within the enterprise. The infrastructure required for soft and IBM have been major unified communications on-premise unified communications would entail having a competitors: However, there have been announcements sizeable number of skilled support and maintenance staff, regarding these vendors working towards interoperwhich may not be feasible, especially for an SME. In the ability of their unified communications solutions. One case of a service-based model, the service provider saves significant and positive development towards achieving the enterprise from the hassle of support and maintenance. interoperability is the growing importance of Session An example of the SaaS-based model is that of the Cisco Initiation Protocol (SIP) as a widely accepted standard WebEx Connect platform that provides the capabilities for for multimedia communications. Th is can help towards audio and video conferencing, presence integration and a semblance of interoperability, if devices and solutions messaging. With additional support for document and are built based on the SIP standard. However, the indusLavanya Palani Batcha is Senior Research Analyst task management, this platform serves as a collaborative try is witnessing differences in terms of SIP implemenfor the Information unified communications tool. tation by vendors. Th is could pose even more problems and Communication
“Although the services-based model is suitable for all manner of enterprises, the most significant market could potentially be SMEs”
with several third party solutions being available. To counter such a problem, vendors would need to develop highly specific interoperability solutions.
Technology Practice in South Asia and Middle East at Frost & Sullivan. For feedback or enquiries email: tanu.chopra@frost.com
Hosted and managed unified communications services: The hosted and managed services model has been slowly gaining traction. Enterprises have started to lay more emphasis vis-à-vis focusing on their core competencies and leaving the routine
In conclusion: Despite setbacks about the adoption of unified communications due to recent economic trends, the future looks promising with significant potential for this market to grow steadily. These key technological trends have the power to shape the market landscape and further augment it, by simplifying existing solutions and ensuring that the needs of enterprise end users are served.
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MANUFACTURING
A REFRESHING CHANGE Masafi has transformed itself from a small regional mineral water producer into a multi million dirham food and beverage company with its sights set on becoming an international player. Diana Milne meets its CEO Ashraf Abushady to find out more.
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ust five years ago Masafi was known as the brand behind one product – bottled mineral water. Today it produces a range of fruit juices and has recently branched out into the lucrative snack market, with its own range of gourmet potato chips. I meet its CEO Ashraf Abushady at the end of the company’s busiest period, Ramadan. “For us Ramadan is a very important month,” he tells me. “The consumption of a lot of our products is much higher then. Juice products, for exam-
ple, we sell more of.” Seasonal variations aside, however, Masafi is a company that has taken its place among the most successful brands in the region, a status recognised recently at the annual Superbrands awards, where it was named the GCC’s leading FMCG brand. The company’s foray into the snacks market is a major milestone in its history, having traditionally focussed on water, juices and tissues since its formation in 1976. Abushady, describes the significance of the move:
“We are no longer just a mineral water company. We have been working hard and investing heavily for the past five years to reposition ourselves and move away from that. Two years ago we introduced Masafi juice and we are now one of the top six players in the region with a six percent market share. Now we see big potential in the snacks area.” So much potential in fact that Masafi has earmarked AED10 million to be spent on the development, manufacturing and promotion of the potato chips and has launched an integrated marketing and advertising campaign to win over the hearts and minds of the GCC’s snack lovers. Describing the potential he sees for this product, Abushady, says: “Snack is a huge business in the UAE. Current trends are showing high double digit growth year-on-year. There are currently a lot of different snacks coming to the UAE. We call them new age snacks. Potato chips are number one in terms of the popularity of these snacks.” He goes on to say that given Masafi’s existing well-established position in the UAE market, he is confident that it will have the edge over other snack brands entering the market: “We have our own edge when it comes to quality and innovation. We are always seen as a company that produces natural and pure products. When it comes to innovation, in terms of our communication and the way we engage with our customers, we are a very forward-thinking company. These are our selling points, which make us unique when it comes to any new product developments.” One of the reasons why Masafi is to keen to make its mark in the snack business is that the other non water segments in which its products fall, are, says Abushady, very fragmented markets in the GCC regions. Th is makes it difficult for the company to gain dominance in the market in the same way as it has in the mineral water business. Th is, he says, is particularly the case with the juice market: “The Juice market in the UAE is particularly fragmented, with both long life and short life products. The top two players in this space are both contributing close to 12 to 15 percent market share. Then from number three to number 10 we’re talking about seven or eight percent market share.” He goes on to say that Masafi is happy with the revenue it has succeeded in achieving within this market space. “We now have six percent market share, which was a great achievement
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for us. We are currently meeting our volume expectations in terms of supply and revenue,” says Abushady, adding that Masafi has not been significantly affected by the economic downturn in the region: “For now, looking at our figures for the fi rst eight months of this year, as usual we are meeting our business objectives in terms of volume and business. In fact we have even improved our business figures in recent months.” In terms of its geographical spread, the Masafi brand covers the GCC, east Africa and even Japan. Its strongest sales are in the GCC, with the UAE its biggest market, followed by Oman then Kuwait, Qatar and Bahrain. The Saudi market is however “very tough” according to Abushady. He says the company is particularly proud of the inroads it has made in a market so far from its home turf; Japan: “We have very good distribution systems in Japan and a good partnership with a Japanese company. When we export to a new market we don’t handle distribution, we give our product to a distributor and they handle the rest of the business. We are doing extremely well in Japan and we hope to cover a lot of other potential markets in the Far East from there.” While the company is keen to grow its presence in the Far East, before doing so Abushady says it must first establish itself in the new sectors it is targeting within its home markets: “We believe in both horizontal growth and vertical growth. We want to grow our business domestically before we start to consider new markets.
We have to feel comfortable about each and every business we enter before we talk about export. And we have to make sure we have enough capacity to cover any new market before we do that. It’s a very tough equation when we have high demand from the export market that is more than we can afford. We don’t have enough capacity to cover the high demand. As well as focussing on its boosting its sales figures and exports to foreign markets, the company is keen to build a reputation as an eco-friendly green fi rm with a commitment to reducing its carbon footprint. With this in mind, last year it launched its Carbon Action Plan which includes several initiatives, such
and the public to hold this against us and say, ‘Th is is great, but what are you going to do about the empty containers?’. We have now established recycling centres in areas that are selling a high amount of gallons and we can now collect over 60 percent of what we are selling for recycling.” Because Masafi also produces plastic containers such as the four gallon one use water
“We are meeting our business objectives in terms of volume and business” as the introduction of biodegradable shrink wrapping in its packaging and the opening of recycling centres throughout the GCC. These initiatives, says Abushady, are particularly important given the introduction of one use only four-gallon water containers which replaced reusable ones for hygiene reasons. Abushady says: “It’s important for us to be seen as environmentally friendly. We didn’t want the press
containers, it is, says Abushady, affected by fluctuations in the prices of the raw materials to make these products. He describes this as one of the biggest challenges the company faces in the year ahead: “Our biggest challenge is the fluctuation in the cost of raw materials. Around 50 percent of our revenues come from raw materials, so the main challenge in the future is this cost. Our PET plastic bottles are affected if the price of oil goes up. The price of paper and cartons is also affected, which can tip our bottom line. We cannot continue to increase our prices for customers. We are a profitable company,. We don’t work on low margins or decline.” However, these are the sorts of challenges that Abushady is accustomed to dealing with, having come from a position at the multinational drinks company Coca-Cola. He describes Masafi as a “healthy environment to work in” with high transparency. It’s the sort of working culture you would hope for from a food and beverages manufacturer and one that has so far stood Masafi in very good stead: “Everybody here is free to talk and when you have such a healthy environment internally it shows externally in your products and your profits.” Says Abushady.
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ASK THE EXPERT
Peak performance David Stokes, Global Head of Life Sciences at Business & Decision, lifts the lid on agile business process management (BPM) and ‘Lean Compliance’.
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egulatory compliance is a necessity for most organisations, none more so than in the life sciences industry. Even as the green shoots of economic recovery appear, it is increasingly important that small-to-medium manufacturing, sales and distribution organisations learn to balance the need for compliance with an on-going ability to sustain cost effective operations. As companies come to terms with increasing fi nancial, environmental and employment regulations, there are valuable lessons to learn on how to balance the apparently confl icting objectives of operational flexibility and regulatory compliance. The days of life sciences companies making unrivalled and unquestioned profits are long gone. Even before current discussions on healthcare reform and the cost of drugs and devices, life sciences companies were under significant competitive pressure to reduce research/development, manufacturing and sales/distribution costs. Just like companies in other innovative sectors (high-tech, consumer electronics and transportation/ logistics) there is a need to achieve a balance between on-going regulatory compliance and business process efficiency. Where in the past this was tackled by one-off business process re-engineering (often as part of implementing a new ERP system) there is now a need to constantly optimise business processes to respond to a variety of internal or external factors including: • Internal re-organisation, possibly as a result of merger, divestiture or acquisition • Internal innovation, either in terms of new products, new production technologies or new business processes
• External change factors, including new products or different business process models introduced by competitors • Changes in regulations, including the reinterpretation of existing regulations in the face of new technologies or enforcement initiatives
In the case of the latter, life sciences companies constantly introduce new products, processes or technologies and the most successful organisations are adept at interpreting regulations to suit changing circumstances. It is this that places the ‘c’ in cGMP (current Good Manufacturing Practice) and which allows best-inclass life sciences organisations to stay ahead of the game, ensuring that their business processes are agile, efficient and compliant – what Business & Decision have termed ‘Lean Compliance’. For SMBs in other sectors to leverage similar business process management (BPM) approaches, it is necessary to employ techniques that allow the use of agile business
processes and technology that supports the use of ‘Lean Compliance’. In terms of agile business process management, it is possible to develop BPM models that allow the performance of business processes to be monitored in near real-time. Analytical techniques are used to determine the underlying cause of changes in business performance and flexible systems allow changes to be quickly made in order to align business processes with internal or external changes. When it comes to Business & Decision’s Adaptive Business Process Management Model, such models need to be supported by the use of systems and technologies that provide the business intelligence needed to allow changes to be quickly detected and for business processes to be quickly changed to meet new challenges, including changes in regulation. While large organisations have traditionally met these challenges by the use of multiple integrated systems and technologies, it is now possible to use integrated, standards-based systems and technologies to provide not only the transaction-based business processes traditionally employed by ERP or CRM systems, but also the built in KPIs, business intelligence and workflow needed to support agile business process management and lean compliance (e.g. Microsoft Dynamics AX and Oracle Fusion applications/middleware). The best time to build in compliance supporting adaptive business processes into an organisation is during the deployment of new enterprise systems. As global markets position themselves for a rebound, now is the time to be evaluating your adaptive abilities and to ensure your firm is flexible enough to meet the needs of the changing economy.
David Stokes is Global Head of Life Sciences and Principal Consultant for Business & Decision, where he provides strategic consulting to a variety of pharmaceutical, medical device and biotechnology companies. Stokes is internationally recognised as an industry thought leader in the field of meeting complex business requirements through the use of cost effective and compliant information systems and technology.
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BUSINESS INTELLIGENCE
Doing business the intelligent way Ovum analyst Helena Schwenk explains why BI remains a top priority for CIOs and how they can employ the technology as a recession-busting tool.
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T budgets will come under increased scrutiny and pressure in 2009, especially if the economic downturn continues. But, while a recession might well force companies to pull back on some IT investments, Ovum believes that any new initiatives will address specific business pain-points and offer quick and visible payback. BI fits into this category – focusing on key issues like securing and increasing revenue from profitable customers, rationalising and reducing operational costs, providing greater visibility into cross-selling opportunities and improving customer satisfaction. Hence, Ovum believes that BI will continue to rank among the top three priorities for CIOs in 2009.
as they realise the need to analyse their businesses and the market in order to boost revenue performance and to segment (profitable) customers more clearly. However, BI customers are also becoming increasingly cost-conscious. Companies are insisting they do more and more sophisticated types of BI with less money and IT staff. Ovum believes that’s a good thing – it will make BI more focused and efficient, which in turn has a better chance of returning tangible benefits. It will also continue to force BI vendors away from their traditional premium pricing models, resulting in broader adoption of BI beyond an elite group of executives and analysts to front-line business users.
Recession busting technology While many companies will instinctively use BI as a cost-cutting tool, smart companies will continue to invest in BI solutions to intelligently scale back operations and maximise efficiencies from business processes they already have in place. In a recession, BI allows companies to take a more calculated and informed approach to tightening their belts, making sure that any cost cutting measures don’t cut across their top business priorities or cut out the valuable Brazilian rosewood with the deadwood. Moreover, they will increasingly focus on using BI to maximise revenues, optimise operations and grasp new and lucrative business opportunities before their competitors do. While a recession might well force companies to pull back on some IT investments, there’s rarely any question of a BI project being pulled or cancelled due to a cut in costs. If anything, an economic downturn could in fact speed up its deployment from a piecemeal departmental deployment to deployment across the wider enterprise. Ovum expects the risk-averse fi nancial services sector to lead the charge in new BI projects over the coming year
New models As a result of the economic downturn customers are becoming more risk averse and are looking for more cost-effective ways of implementing BI. Th is will challenge traditional BI and data warehousing implementation approaches and put new development, deployment and packaging models like open source, soft ware-as-a-service (SaaS) and pre-packaged appliances on the radar screens of more BI customers in 2009, particularly SMBs. Additionally Microsoft's market entry and BI strategy aim to make BI a commodity technology that customers will expect to implement easier and for a lot less than the complex, premium-priced solutions of the past. These are some of the key BI technology trends that are developing: Open source: Open source BI is still a fledgling market and its evolution is still a far cry from its evolution to free solutions that are advanced by the developer community around the globe. However, it is no coincidence that Linux is now the fastest growing platform for new
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BI projects. The continued interest in open source BI in 2009 is a clear counter-reaction against the market dominance of a few vendors due to consolidation. Open source BI pioneers like JasperSoft and Pentaho, which were once considered temporary illegal aliens in the BI market, are establishing themselves as permanent residents, getting funding, issuing new code releases and starting to win over larger non-traditional enterprise customers. Economic forces are also playing directly to open source, particularly for first-time BI buyers. These companies are looking for a cost-effective way to deploy BI without having to fork out a heft y upfront fee for a packaged commercial offering. First-time open source implementations will always be prototypes. But if successful they will evolve into fully productive BI systems that are backed by commercially licensed support services from open source BI vendors. SaaS BI: providing BI as a hosted online service – is gaining increased market acceptance, especially among smaller, costconscious businesses. 2009 will be a decisive make-or-break year for SaaS BI adoption, especially as seemingly similar cloud infrastructure models start to take root. Most of the early adoption thus far has been among SMBs or departments of large organisations. The real test for SaaS BI will be to break into the enterprise market. When SaaS starts to uproot complex enterprise applications, including BI, it will truly have broken into the mainstream. The year, 2009, is probably too early for that to happen. But vendors will start to demonstrate how a small and simple SaaS solution can quickly kickstart an actionable enterprise-wide BI strategy without having to undergo a big and complex customised enterprise data warehouse (EDW) project fi rst. In large enterprises, Ovum expects these SaaS deployments to proliferate by fi rst complementing existing BI tools, applications and infrastructure. Ultimately any spike of SaaS BI adoption in 2009 rests on the success of SaaS’s poster-child application, namely Salesforce and whether it can withstand the economic pressures being put on its slim margins model. However, Ovum expects at least one major breakthrough in 2009 – the on-demand model will also (finally) enable BI vendors and partner channels to offer functionally focused or vertically oriented analytic solutions, without the pain of conventional BI deployment approaches. Ovum believes there is an untapped oppor-
Helena Schwenk is a Senior Analyst within Ovum’s software application team and is based in the UK. She has over 15 years' experience working within the IT industry as both an analyst and IT practitioner. Her areas of focus include business Intelligence, performance management and data warehousing. Schwenk holds a BA (Hons) in Computing and Information Systems.
tunity for vendors to offer vertically focused SaaS that can quickly plug skill-gaps in organisations that are restricting them from doing specialised and advanced analytics like pipeline analysis, predictive analysis and fraud loss prevention. BI in the cloud will also ride on the coattails of steady SaaS BI adoption. Even though the defi nition of cloud computing continues to shift like the clouds in the skies, the notion of hosting BI infrastructure and using BI services will start to gain the attention of CIOs and IT directors. Much of that is due to the noise that major cloud platform players – Google, Microsoft, Amazon, Salesforce.com and others – have made in 2008. Application form factors: The emergence of new competition from influential vendors like IBM, Oracle, HP, Microsoft and Teradata is helping to reinforce the value of data warehouse appliances and is bringing it into the BI mainstream as an alternative model. The appliance form factor – which gives companies the operational ability to plug and play BI technology without wasting time and money on assembling the hardware and soft ware infrastructure – is catching on fast and threatens to break the traditionally high price-entry barriers for BI. Significantly, it offers mid-sized firms a chance to engage in complex and high-end BI, which can be deployed at a fraction of the cost and time compared to traditional enterprise data warehousing. In 2009, Ovum expects more BI tools and applications will be increasingly bundled with data warehouse appliances. More data warehouse vendors will also pre-integrate BI tools and applications – either their own and/or those of their partners – into their appliance bundles. These data warehouse/BI appliances will also be increasingly tailored, packaged and priced for specific vertical market segments and even specific functional application.
“In a recession, BI allows companies to take a more calculated and informed approach to tightening their belts”
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ASK THE EXPERT
How to keep the BPM wheel rolling Grzegorz B. Gruchman, Managing Director of IDS Scheer Saudi Arabia LLC, offers his views on the power of business process management (BPM)
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rovided the strategy is good, BPM is the primary tool to execute that strategy in an effective way. Its benefits are many. There are no executives who would not like to increase the quality of their companies’ and agencies’ products and services, deliver them faster and increase satisfaction of customers or citizens. These are the impacts of process transparency and standardisation, improved task co-ordination and a better match between business needs and IT support. This, in turn, is achieved if BPM is applied. The BPM wheel has to begin to roll and must do so continuously. However, it must roll on a solid foundation, comprised of an enterprise architecture and process governance structures. A perfect enterprise architecture inventories all business components of a company or agency, such as objectives, performance measures, units and departments, processes and tasks, jobs, documents and the like. It also inventories all technical components, such as applications, databases, computer hardware and networks. More importantly, it also describes interrelationships between those components – who does what and how. To track those relationships and to keep them updated, a software tool such as ARIS IT Architect has to be used. From a BPM perspective, enterprise architecture allows the ability to define exact process boundaries – where it begins and ends, as well as which departments, tasks, jobs and applications are involved in process execution. Once an end-to-end process is properly delineated and defined, somebody has to be put in charge of its management. In traditional companies, the focus of management is on resources, particularly people and money. Therefore, management system has to be augmented by processrelated duties and procedures. A high-ranking executive or a managerial team has to assume responsibility for process result planning and monitoring of its execution. A methodology such as ARIS Value Engineering for Process Governance is very handy for that purpose.
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“The BPM wheel has to begin to roll and must do so continuously. However, it must roll on a solid foundation, comprised of an enterprise architecture and process governance structures” Once we know where the process begins and ends and who is in charge, the BPM wheel begins to roll. A process modelling and analysis tool, such as ARIS Business Architect, can be used to map existing process in a more detailed way. The process maps are used to find improvement opportunities or to define how best practices will be applied in a company or agency. The maps of future processes are formatted and published using ARIS Business Publisher, to distribute new procedures among employees in an electronic way. In the next step, process maps are adopted using technical tools, available within a business process management system (BPMS) such as webMethods, to develop blueprints for execution of the automated process segments. The BPMS
engine executes the blueprints for each process instance, handling data flows between application systems and co-ordinating humans/system tasks. Data on execution of process instances is extracted from application systems and stored within a tool, such as ARIS Process Performance Manager. The data is subsequently used to compute performance indicators and presented to a person or team in charge of the process performance. If the performance indicators indicate something is wrong, the same data is used to analyse the process and to find reasons behind unsatisfactory results. If necessary, a change in process organisation is suggested and designed using ARIS Business Architect. Later, one of its add-on modules, namely ARIS Business Simulator, can be used to test if implementation of intended changes will lead to expected results. The new process maps are formatted and published using ARIS Business Publisher – but you already know what comes next. This is how the BPM wheel keeps turning. Would you like to try? n Grzegorz Gruchman, Managing Director of IDS Scheer Saudi Arabia LLC, has spent more than 10 years in the Middle East. He joined IDS Scheer in 2001 as a VP at IDS Scheer Poland. He has also been a consultant for global companies such as Ernst and Young and Hewlett-Packard.
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TRADING
The financial crisis has left hordes of investors with badly burnt fingers. The effect on the Dubai Gold & Commodities Exchange (DGCX) was a nosedive in trading volumes as investors fled the market, but since then a concerted effort has been made to entice clients back, as the departing CEO Malcolm Wall Morris explains. By Julian Rogers
A hot commodity
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t has been another sweltering Friday on Dubai’s Sheikh Zayed Road and Malcolm Wall Morris is about to head home. Unlike the majority of businesses in the Arab world, the DGCX is akin to the other major financial hubs around the world in that it’s open for business from Monday to Friday. And much like the global markets too, this past year has been a white-knuckle ride for Morris as his exchange’s trading volumes recuperate from the battering the financial world took 12 months ago. “I wouldn’t be so bold as to say investor confidence has returned to the markets,” he suggests when quizzed as to whether it’s now safe to venture back in the trading waters. “However, people are looking at alternative investments because of falling real estate prices and equity markets.” Up until the final third of 2008, DGCX – a fully automated online commodities exchange established in 2005 – was riding the crest of the wave with business up by a whopping 75 percent in July compared to the same period the previous year. Introduction of the West Texas Intermediate and Brent oil contracts and Indian rupee futures contracts
helped to fuel growth in the exchange, which is joint owned by Dubai Multi Commodities Centre (DMCCA), Financial Technologies India and Multi Commodities Exchange of India. Futures contracts in everything from gold to oil and currencies to steel were hot property. Then all of a sudden the financial tsunami wreaking havoc on the world’s major exchanges struck Dubai and the DGCX. Morris, who has 15 years’ professional commodity experience to his name, admits the impact took him by surprise. “The world came back to Dubai after the summer and Ramadan expecting it to be business as usual but it was literally as if someone had turned off the lights,” he recalls. “So we went from July into two quiet months but then business seemed to suddenly dry up – it was a shock how suddenly it all happened.” For instance, with construction projects shelved commodities like steel fell through the floor from record levels of US$1500 a ton. In this situation investors and speculators needed to tread very carefully. Analysing the results of 2008 reveals a 26 percent rise in volumes compared to 2007 but this doesn’t tell the full story; DGCX volumes were up treble this amount at one point. This annual increase to a total of 1.1 million contacts traded, although still impressive, was a bitter disappointment for a somewhat crestfallen Morris. “Given the state of the financial markets in 2008, to have ended the year 26 percent higher than 2007 was a great result for us, and we were delighted with that. However, I was frustrated that we had man-
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kets, as there was in crude oil and precious metals and in the currencies, aged to book 75 percent volume growth for the first seven months of the year we were saying that there is a way that you can protect yourself against and effectively gave back 50 percent in the last quarter.” Amid the slide in volprice swings. You can use the derivatives to do that.” umes, regular top-ten brokers suddenly disappeared from Morris’ radar. The focus was on educating customers with workshops on the benefits Some have yet to return to the top of the tree. “The effect was quite dramatof using derivatives as risk management tools ic,” he says. “Broker members were being and it started to kick-start an upturn in voltaken out of the market because of the credit umes as confidence and liquidity started crisis and what was happening in the properBreakdown of trading flowing back into the exchange in the second ty and equity markets.” half of the year. In fact, investors have been activity on the DGCX Not Dubai, surely? more than merely dripping their toes in the Gold and other There had been an underlying belief that water – volumes rose 44 percent this metals 40% Dubai was insulated from the financial crisis August compared to the same month in sweeping the world. It was perhaps the gap Energy 2008 with 151,699 contracts worth US$8.84 20% between the meltdown hitting the West and billion traded. And August trades were up the emirate that coaxed people into a sense an impressive 33 percent over July. The of complacency. As it subsequently tranmonth also recorded the highest daily volspired however, Dubai certainly wasn’t imume, worth US$583 million. “We have mune, Morris concedes. With trading tried to encourage as much liquidity as posfigures on his charts plummeting like a ensible and it seems to have worked,” says gineless plane in freefall, Morris needed to Morris. “It’s been a ‘back to basics’ apdust himself down and re-inject vital liqproach about incentivising people to put voluidity in the markets. He realised DGCX ume on the exchange.” Currencies had to shelve expansion plans and concen40% trate on providing the best markets possiAll that glitters… ble for clients in a concerted efforts to get As the name Dubai Gold and investors and traders back. “We put aside Commodities Exchange suggests, a certain our potentially aggressive growth marketing plans and we went very much yellow precious metal plays heavily in trading volumes. Dubai didn’t get down the road of ensuring that we were operating the best markets that its moniker ‘City of Gold’ for nothing, especially with it being the main we could and that we were working in conjunction with our customer base route for physical gold into India – the highest consumers of the metal to ensure that they understood the benefits of transacting within our marper capita in the world. Despite being perceived as a safe haven during a ket.” He elaborates: “If you’ve got this huge volatility going on in the marbear market, gold suffered amid the crisis as investors decided to snap up
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physical gold instead of taking a position with an option or futures contract. The downswing in gold is a stark contrast to when the DGCX was established and riding high as the principal commodity in terms of volume. “Gold used to account for as much as 70 percent of our business but this has dropped to around 40 percent [including other metals] as trading volumes for other commodities increase,” Morris reveals. “That’s not because gold has lost its attraction,” he is quick to stress. “And it’s not because gold is less important to us. I would say it’s because of the ongoing education process of understanding derivatives as risk management tools and how investment products work in the region.” The upshot of this shift in the status quo is that currencies now make up 40 percent of volumes, with crude oil holding a 20 percent share. “The West Texas Intermediate [oil contract] was the most successful contract launch in the exchange’s short history and very quickly became a key component of our product portfolio, and remains so today. And we now have a much better balanced portfolio in terms of where our business is coming from, rather than being dependent on the gold market.” As gold dips in terms of business, currencies on the exchange have seen a surge in business recently, with volumes up 50 percent in the first eight months of 2009 compared to the same period last year. With volatility in currencies during the economic situation people look to exchanges like DGCX as a way of protecting themselves against swings in currency values. The exchange lists four currencies – euro-dollar, yen-dollar, sterling-dollar and rupee-dollar. In fact, the DGCX is the only exchange outside of Mumbai to offer rupee futures contracts, which is not surprising considering how many Indians reside and work in Dubai. On top of this, India has also become the UAE’s premier trade partner.
Caution But while things have been looking up for certain commodities, Morris has taken a cautious approach with the launch of the plastics futures contract.
The contract was signed and due to go live in February until the plug was pulled. This was after some careful consideration of the situation, Morris explains. “We took the view that it was not the right time. We had designed, in conjunction with the petrochemicals industry, plastics contracts for both this region and Southeast Asia. All industry contract specifications were written, the delivery points organised and the warehouse procedures drafted. Everything was ready to go.” He adds: “This was going to be a brand new tool in your arsenal in order to hedge and manage price rates, as well as a transparent pricing mechanism. But look at what is going on in the world – we are all fighting to ensure that our businesses survives so now potentially isn’t the right time to introduce a new way of doing business to the market.” Morris believes this willingness to listen to clients is what separates it from other exchanges. “By listening to our customers, we’ve managed to grow the business as we have. We listened to them [with the plastics contract] and said, ‘If you don’t think it’s right, then we will postpone the launch until the market’s settled down sufficiently where you can devote enough time to actually making these contracts a success.”
Pastures new With the exchange now heading in the right direction after a turbulent period Morris has taken the decision to move to DMCCA as its new CEO. DGCX Chairman Ahmed Bin Sulayem said Morris had led the exchange into the next stage in its strategic growth. Indeed, in early October yearon-year volume traded on the exchange passed one million contracts. A departing Morris says the advantages of DGCX are abundantly clear: “People are looking for somewhere else to put their money as an alternative investment, especially with the growing understanding that a wellregulated exchange is a place that you can trade with confidence. Dubai is a gateway between East and West. It’s a place with great attractions and great potential so this exchange is well suited here because it’s also a stepping stone between East and West.”
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INDUSTRY INSIGHT
Market drivers Thomas S. Senger examines how organisations are looking to get back inbranch to improve customer relationships
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inancial products are quickly becoming commoditised due to new market entrants and consolidation. The primary tactic banks are using to establish a level of differentiation is outstanding customer relationship. To overcome this challenge, banks are re-focusing on the branch and are investing to turn them into centres for financial advice and sales. Hence, banks will create the customer proximity and trust to build a long-term business relationship.
Customer pain points A quick look at how to overcome those niggling ECM issues Issue: Poor customer service due to slow, manual processes Solution: Speed up document-driven banking processes by capturing documents at the front office or ‘point of contact’ at branch locations. Issue: Inefficient, labour-intensive processes that delay the opening of an account or the closing of a loan Solution: Automate manual tasks like identifying documents or data entry with intelligent capture technology. Issue: High cost of handling paper related to loan/deposit workflows
“The primary tactic banks are using to establish a level of differentiation is outstanding customer relationship” Cost control However, branch-oriented banking processes, such as new account opening and loan origination, are document-intensive and can push operating cost up substantially. Because of this, any financial institution will have to consider the automation of business processes to improve efficiency and reduce costs. With this in mind, Kofax offers a collection of information capture, processing and notification solutions that enable banks to efficiently deal with information and support documents related to the account opening or loan origination process inside the branch. In an effort to reduce processing times, these solutions facilitate the capture of documents early on in the deposit or loan workflow. They include technologies that detect missing documents and data and can proactively notify personnel to instantly correct errors with optimised information. Furthermore, these products are built around a flexible architecture that is easy to deploy within the Thomas S. Senger is Kofax’s Senior branch and include intelligent softVice President of Applications ware that removes the complexity usuSoftware & Services EMEA. Senger oversees all customer-facing sales ally associated with document capture. and services functions in alignment
Case study The origin of small business loans can often be a complex process, re-
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with the company’s newlyintroduced hybrid go-to-market model, which supports both direct customer engagements and indirect sales through channel and with alliances partners.
Solution: Replace couriers with the electronic delivery. Archive scanned images of documents electronically instead of boxes of paper files. Issue: Limited access to information that is retained in paper format. Solution: Move document capture in-branch so that documents can be made immediately accessible throughout the organisation in an electronic format. Issue: The need to capture and track information for regulatory compliance purposes. Solution: Establish a chain of custody for documents that are used in banking processes by tracking what documents were captured, when and where they went.
quiring loan officers to collect supporting documentation like tax returns and financial statements. They usually receive this information in various ways – through the branch or via fax or email. In an effort to streamline branch operations, one institution deployed multifunction peripherals (MFPs) throughout their branches, allowing them to consolidate printing, copying, faxing and scanning in one device. The bank wanted to use the MFP’s scanning functionality to reduce the number of paper documents that loan officers had to deal with. Subsequently, they deployed a Kofax solution that allowed them to scan and capture documents through their existing servers using a single interface. The Kofax solution also provided a web-based application to enable loan officers to route these documents to a document management system for additional processing. The process then allowed the bank to capture all documents, regardless of format, through one single source, which significantly streamlined the process for originating small business loans. All of these elements combine to offer financial institutions more efficient processes that improve customer service and offer a fast return on investment. n
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RETAIL
As the sponsor behind some of the world’s most high profile sporting events, Dubai Duty Free (DFF) is not your average airport retailer. But then, as Diana Milne discovers, neither is its Managing Director Colm McLoughlin.
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hen Colm McLoughlin arrived in Dubai from Ireland in 1983 to set up the country’s first Duty Free outlet, he planned to stay for six months. But, like for so many expatriates, things didn’t quite go to plan and 26 years on he still hasn’t returned home. “I still haven’t finished what I started, because I’m quite slow,” he jokes. “It was only ever supposed to be a sixmonth project but I’m still here.” He fondly remembers the early days of setting up shop in a Dubai that bears little resemblance to the glittering metropolis of today: “At the time there were only three million passengers passing through the airport each year . We were travelling around in taxis with no air conditioning and in those days there was no Emirates Airline, no Emaar or Nakheel, and the tallest building in the emirate was the Dubai World Trade Centre. We hadn’t a clue what we were going to do. I remember conducting the first training session for staff in an open tunnel under the airport and using a plank of wood stretched across two tar barrels as a table.” Today DDF is the world’s biggest Duty Free operation in terms of annual sales. In its first year of business in 1984 it achieved sales of US$20 million. In 2008, its 25th year, sales reached US$1.1 billion. McLoughlin says his proudest achievement however, is the fact that over half of his original 100 staff are still amongst the now 3,500 strong workforce: “We still have 56 of the original people working for us and we’re very proud of that,” says McLoughlin. “In fact a lot of the people that originally came here on one or two year contracts are still here and many are now preparing for retirement. We call them our pioneers.”
Success story He believes there are several factors that have contributed to the success of DDF – and that led it to rocket to number one position among the world’s Duty Free outlets last year, despite having lagged at number three for two years previously: “We had been trailing at number three for a couple of years but last year we had a very good year and were found to be top in the world. The main reason we are the best is because of what we call penetration. In a lot of airports the retailers sell to about 16 or 17 percent of departing passengers. In Dubai we sell to 42 percent. International traffic through Dubai Airport is ranked at about 11th or 12th in the world so it followed that our Duty Free would be ranked in that position. But because we sell to more people and we sell a little bit more to all of them we’re actually punching above our weight and we have come out as number one.” He goes on to say that he believes the success of DDF can also be attributed to the fact that it is well positioned in the airport, it offers good value for money and it has “the best trained group of staff in the Duty Free industry”. Of the products it offers, he claims the best sellers are those in the perfumes and cosmetics category, which account for 17 percent of its business. Gold makes up 13 to 14 percent of sales while cigarettes and alcohol account for 10 to 11 percent. Meanwhile, electronic goods make up around seven percent. “It then drifts down to products that make up one percent of our total sales but of course one percent is still US$10 million,” McLoughlin goes on to say, adding that one of the product categories where he sees the greatest potential is confectionary.
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DUBAI DUTY FREE: THE VITAL STATISTICS
Although already a highly successful retail operation, the DDF’s sales were boosted last year by the opening of Dubai International Airport’s Terminal 3 building, which features 4800 square metres of retail space and has capacity for 43 million passengers. “We have found the Terminal 3 building to be highly beneficial because it eased some of the congestion we had in the existing terminal building. Th is has meant we can handle passengers quicker and it has played an important part in our success this year. There are many airports around the world where the Duty Free sales are down 15 or 20 percent this year but in our case we’re holding level with last year and we are told that in this business that is very good,” says McLoughlin He admits, however, that despite the advantages of a swish new terminal complex, DDF has not been entirely immune from the effects of the economic downturn. He says sales were down seven percent on last year’s figures in the fi rst four months of this year and that there has been an increase in budget airline passengers who tend to spend less in Duty Free. However, he claims that due to a series of promotions and discounts, sales are now level with last year’s figures: “We think by the end of this year we’ll have surpassed last year’s sales and we are forecasting that by the end of this year we’ll be up four or five percent on 2008. And we’re very happy with that.”
- Dubai Duty Free, which celebrated its 25th anniversary on 20th December 2008, has seen its business grow from AED70 million (US$20 million) in 1984 to AED3.9 billion (US$1.1 billion) in 2008. On its anniversary day the operation achieved over AED70 million (US$20 million) in sales during the 24-hour period, which equals the annual sales of its first full year of business. -The year 2008 represented a 23 percent increase on the previous year. December itself was a record month with sales reaching a new monthly high of AED403 million (US$111 million), while on 17th December, the milestone figure of AED3.6 billion (US$1 billion) was crossed. -Last year saw the operation doubling its retail space from 7000 square metres to 15000 square metres with the inauguration of the new Emirates Terminal 3 in October 2008. The opening of Dubai Duty Free’s head office and distribution centre and the increase in the operation’s staffing levels to 3700 were also major milestones for Dubai Duty Free in 2008.
Brand visibility DDF’s success story is down also to its marketing strategy, which sees it sponsor high-profi le sporting events, both at home and abroad. In Dubai it sponsors the Rugby Sevens, Dubai Airshow, Dubai Duty Free Golf World Cup, International Film Festival, Dubai Tennis Championships, Dubai Desert Classic and The Dubai World Cup horse racing event. Overseas it has sponsored the Irish Derby and the Shergar Cup at Ascot. Th is strategy Dubai Duty Free sponsors several major international sporting events gives it a global visibility that money spent on conventional forms of advertising cannot buy, according to McLoughlin: “I think this gives us exposure in lots of parts of the world. It is the sort of promotional activity AWARD WINNING that is difficult to buy anywhere. For instance, we have run the Dubai Tennis Championships for 16 or 17 years. Our marketing gurus tell us To date, Dubai Duty Free has received more than 150 awards the amount of publicity that generates was valued last year at US$1.35 from industry, media and government bodies. It is a five-time million. That would be how much we’d have to spend to buy that sort winner of the Frontier Award for ‘Airport Retailer of the Year’, of advertising. So it achieves two things. It keeps our name going and and has recently won Global Traveller Award for ‘Best Duty Free Shops’ in 2008 and 2009, the Business Traveller UK and it keeps promoting our name. And of course the more it does that, the the Business Traveller Middle East award for ‘Best Duty Free more it keeps promoting the airport.” Shopping’, along with the Raven Fox Award for ‘Middle East Th is close relationship between the fortunes of Dubai Duty Free Travel Retailer of the Year’. and that of Dubai Airport and the state owned Emirates Airline is due to the fact that all three are controlled by the Dubai Government and
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under the leadership of HH Sheikh Ahmed Bin Saeed Al Maktoum. Th is says McLoughlin, means all three organisations are mutually supportive and work together to ensure each benefits from the other’s success. It also means DDF has a far more active role in the life of the emirate, and in the lives of its residents, outside the context of the airport than other duty free operator would have: “One big advantage is that our Duty Free at the airport is home-owned,” says McLoughlin. “I’m the boss of it and Sheikh Ahmed is my Chairman so we’re all kicking with the same foot. In most airports around the world, the commercial space is rented out to commercial Duty Free operators and they do not have the same drive to do the things that we do. They would not, for instance, sponsor the Irish Derby or the Dubai World Cup or build the tennis stadium. A
those activities include, not only corporate sponsorship, but also charitable funding through the setting up of the Dubai Duty Free Foundation to which a percentage of its profits is transferred every year to support local and international charities. According to McLoughlin, the nature of DDF’s ownership means he also has a close working relationship with Sheikh Ahmed: “We have a one-to-one relationship. I report to him and he helps me out when I need his support.” McLoughlin and his team may have achieved great things since the early days of operating with a skeleton staff in a relatively small provincial airport. But there is much more to come for DDF with the opening of the new Dubai World Central airport due in mid-2010. The scale of the airport, which is under construction in the Jebel Ali area and will have capacity
42%
Number of departing passengers who shop at DDF
Dubai Duty Free
“We think by the end of this year we’ll have surpassed last year’s sales and we are forecasting that by the end of this year we’ll be up four or five percent on 2008. And we’re very happy with that” rented operation wouldn’t be in a position to do any of that stuff so it’s very beneficial to us. They would not step outside their marked zone and get involved in local activities like we do.” He goes on to say that
for 70 million passengers, is immense and DDF has already earmarked 4000 square metres of retail space within the Duty Free shopping complex. Describing the scale of the project, McLoughlin says: “It will be the biggest airport in the world. There will be five parallel runways, which will be spaced far enough apart for four or five aircraft to be taking off or landing at the same time. Although we have arrangements for 4000 square metres of retail space to open there, eventually the blueprint is for 54,000 square metres of retail space. Our retail space within the existing airport is 15,000 square metres, so it’s big.” It’s the next chapter in what has been one of Dubai’s greatest retail success stories. And it looks as though McLoughlin won’t be going home any time soon.
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EXECUTIVE INTERVIEW
Customer satisfaction is key In these lean times the ability to attract and retain customers can prove a real advantage over the competition. To discover more we hear from STI Systems’ Jay Bauer. How can a CRM strategy help companies attract and retain customers in today’s economic climate? Jay Bauer. Integrated CRM systems provide quality service and build relationships by insuring the right people get the right information at the right time. Delays due to credit holds or incomplete approvals are avoided with integration into back-office systems, eliminating conflicting information. Sales solutions are based on an improved familiarity with the customer’s information. Support staff contribute to these solutions and advocate them. However, if your CRM system only does those things, it is underachieving. In difficult economic times, people mostly buy things of strategic value and postpone items of tactical importance. Our proprietary positioning methodology is used to identify tactically positioned products, reposition them to demonstrate strategic value to the target buyer, and formulate the best process to employ within the CRM system to energise sales during a sluggish economy. What benefits does CRM technology offer to SMEs in particular? JB. CRM technology empowers SMEs with the ability to deliver quality customer experiences without the overhead of capital-intensive IT solutions that large corporations have. Today’s CRM solutions link all of the customer-facing parts of the organisation so that all team members have the information they need, to deliver exceptional service and strengthen relationships with customers, while maintaining efficient business processes. CRM automates business processes, including lead routing, quote and proposal management, opportunity and pipeline management. All levels benefit from the automation of workflow processes, which are otherwise time-consuming and prone to error. CRM enforces proper qualification of prospects, allowing the team to focus on the highest value opportunities.
“CRM systems must have the ability to integrate seamlessly with customer’s applications, such as back office systems, proposal generation, the web and customer-facing tools” Which factors should companies take into account when selecting the right CRM technology for their organisation? JB. A CRM system must conform to the current sales and account management methodology to minimise disruption to the sales force and other support organisations. The system must also have the ability to adapt and grow as processes are refined and product offerings change. CRM systems must have the ability to integrate seamlessly with customer’s applications, such as back office systems, proposal generation, the web and customer-facing tools. Finally, it is critical that the system is able to integrate with handheld devices such as BlackBerrys. These tools provide sales and support with instant access to customer information to insure quality.
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How does your company ensure that the solutions it offers are tailored to companies’ needs? JB. STI begins with a thorough analysis of the customer’s internal sales and marketing processes. Success is insured by obtaining concurrence at all levels of management and staff on the goals, objectives and requirements of the solution. We frequently find disparities in the expectations of these groups. Because many implementers utilise a top-down design methodology, these disconnects are rarely discovered or taken into account. STI obtains concurrence on the process at all levels to ensure a broad-based commitment to the system. STI also creates tools that help sales reps execute the sales process in a manner designed to answer the concerns of buyers and influencers within the buying hierarchy. These step-by-step tools are in a sales playbook, which is used to improve selling effectiveness. With this methodology, we have achieved a success rate for CRM implementations well in excess of the industry average. In the future how do you see the CRM market evolving? JB. As CRM systems move to web-based implementations, we will see more integration with other web-based services especially social networking systems which are currently under development. Functionality of CRM modules will expand. CRM systems today are fairly mature and I do not expect major changes over the next few years. The emphasis will be on back office integration, improved conversion tools allowing more efficient and cost-effective upgrades, and reducing the total cost of CRM system ownership. n Prior to founding STI Systems, President and Consultant Jay Bauer had 25 years’ experience in sales and marketing management with such companies as Computer Sciences Corporation, Boeing Computer Services, and Motorola. From 1991 Bauer has been the Senior Process Consultant on more than 300 projects. Clients include Wells Fargo Bank, CCH Tax Compliance, Blue Cross of California, Pacific Care, Pacific Bell and others.
HOSPITALITY
The luxury collection With plans afoot to establish a ďŹ ve star hotel chain in under 10 years, Emaar Hospitality Group has set itself an ambitious target. But as Marc Dardenne, CEO tells Business Management, it has every intention of reaching it.
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Emaar Hospitality has pledged to build a world-class five star hotel chain, The Address, in under a decade. How close is it to achieving this aim? Marc Dardenne. Emaar Hospitality Group launched The Address Hotels and Resorts a little over a year ago. This was shortly followed by the opening of its first and flagship hotel, The Address Downtown Burj Dubai to global acclaim. Response to the hotel has been strong and it continues to record robust occupancy levels. It has also become a social hotspot in Dubai with a range of restaurants including Neos, an impressive sky lounge on the 63rd floor. Its close proximity to The Dubai Mall, the world’s largest shopping and entertainment destination and direct views of The Dubai Fountain – the tallest performing fountain in the world, have added to its popularity. Some of the other key achievements for The Address Hotels and Resorts include assuming the management of The Palace – The Old Town hotel in Downtown Burj Dubai – and signing international management contracts in Morocco and France to manage luxury resorts. The Address Hotels and Resorts will operate Domaine de Lavagnac, a luxury resort developed by Residence De Lavagnac SARL in LanguedocRoussillon, South of France. Scheduled to open in 2011, Domaine de
Lavagnac is the first five star tourism development in Languedoc and comprises a 17th century chateau that is being transformed into a 70-suite hotel located in close proximity to the Mediterranean coast. The Jnan Amar Polo Retreat in Morocco is a luxury retreat developed by SIAMA, a subsidiary of Azmi Abdelhadi (AAH) Group in Marrakech. The Address will manage the luxury five star retreat hotel includes dining facilities, meeting venues, leisure facilities and business lounge as well as several luxury villas. Other milestones include the opening of our third property, The Address Dubai Mall in September and another property will open soon, The Address Dubai Marina. What plans does The Address Hotels and Resorts have to expand its hotel portfolio globally and which parts of the world does it plan to target? MD. The Address Hotels and Resorts is part of Emaar Hospitality Group, the hospitality and leisure subsidiary of Emaar Properties. As one of the world’s largest property developers, Emaar is creating integrated lifestyle communities across key emerging markets as well as developed economies. Emaar Hospitality Group and The Address Hotels and Resorts will
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support the hospitality and leisure aspects of these communities across the world as well as explore independent hotel development, management and operation contracts. Our development pipeline for The Address Hotels and Resorts includes Egypt, Lombok in Indonesia, Jordan, Saudi Arabia, Syria, Turkey, Budapest, Shanghai, London, Los Angeles and New York. We will continue to focus our development efforts in the Middle East and North Africa region, the Indian Subcontinent and South Asia. The Address has won many prestigious international awards this year including: Hotel Business Lounge of the Year – Commercial Interior Design Awards 2008; Best Leisure and Entertainment venue – Commercial Interior Design Awards 2008; Best New Hotel – Arabian Hotel Investment Conference Awards 2009; Dubai’s Leading Lifestyle Hotel and Middle East’s Leading New Hotel – World Travel Awards 2009; Condé Nast Traveler Hot List 2009; The Palace – The Old Town ‘Dubai’s Leading City Resort’ – World Travel Awards 2009. What will be the unique brand values of The Address and how will it differ from other luxury hotels in the UAE? MD. The three key differentiating factors for The Address Hotels and Resorts are: location, service and benefits. The brand defines itself by its ‘one size fits one’ approach whereby benefits to guests and service excellence are priorities. For the convenience of guests, all check-ins are processed in the guestrooms upon arrival. In addition, complimentary wireless internet is available throughout the properties apart from a 24-hour fitness centre and a 24-hour business lounge. Guests opting to stay in suites or club rooms can enjoy the innovative and convenient privilege of a complete 24-hour stay. How high has demand been for Nuran, Emaar Hospitality Group’s serviced residences, and what plans are there to expand the chain? MD. Currently, we operate two properties under the Nuran brand, namely, Nuran Marina Serviced Residences and Nuran Greens Serviced Residences. A third and flagship Nuran serviced residence is planned in Downtown Burj Dubai. We are targeting the leisure sector in the GCC, which has earned us good results in the summer months. How has demand for and development of luxury hotel developments been affected by the global economic downturn? MD. We opened The Address Downtown Burj Dubai in the thick of the global financial downturn. During this time we also won two international management contracts to operate luxury properties in addition to opening another hotel this year. Demand for luxury hotels continues to be strong in Dubai, led by its robust visitor arrivals. Does Emaar have any plans to enter the mid market hotel sector or will it remain exclusively in the luxury boutique hotel sector?
About Emaar Hotels and Resorts: Emaar Hotels and Resorts LLC is a subsidiary of Emaar Properties and was initially created as part of a joint venture project with the fashion designer Giorgio Armani. Its aim is to develop and operate hotel branded products at five star level that are internationally recognised as “lifestyle” oriented hotels. The first Armani/Emaar hotel will be in the Burj Dubai where the company is also looking to develop and operate a collection of branded, mixed-use properties. Through the collaboration with Giorgio Armani SPA, Emaar Hotels and Resorts LLC is responsible for expanding Emaar’s profile on a global basis by the creation of Armani Hotels, Resorts and Residences internationally.
MD. We are currently concentrating on ensuring the continued success of our five star premium hotel brand The Address Hotels and Resorts as well as the successful launch of the fi rst Armani Hotel. What are the biggest challenges you face as CEO of Emaar Hotels and Resorts in the year ahead? MD. One of the biggest challenges faced by the hospitality industry is sourcing and retaining key staff as well as rationalising and maintaining a high degree of resource use efficiency. This year will see the opening of the world’s first Armani Hotel within the Burj Dubai. How close is the hotel to completion and how unique an experience will it offer to guests? MD. The Armani Hotel Dubai and Armani Residences in Burj Dubai will open this year. Personally designed by Giorgio Armani, the openings will mark his debut into the world of hospitality and realise his dream to offer his customers a comprehensive Armani lifestyle. The Armani Hotel Dubai will open doors to a world of sophisticated beauty that is marked by Giorgio Armani’s defi nition of timeless style, understated elegance and made-to-measure design. Characterised by immaculate design and incomparable luxury, the hotel will be a place that offers the same kind of welcome to guests as Giorgio Armani would privately extend to his family and friends. Is Emaar Hotels and Resorts planning to form partnerships with any more international design brands? MD. Currently, Emaar is focused on the roll out of the Armani Hotels and Resorts.
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EXECUTIVE INTERVIEW
our relationships with our clients and the trust they have reposed in us that has ensured our growth during these difficult times.
A KEEN EYE FOR DETAIL We get the lowdown on creating the perfect working environment with Swift Interiors Design and Build’s Satish Babu. How do organisations’ needs differ across industry sectors and different countries when it comes to interior design and construction? Satish Babu. Commercial organisations are mirrors of the society in which they operate. Obviously, the needs of different industry sectors vary depending on their function, products, markets and so on, but the common thread is society and the concept of ‘global village’ that is very much prevalent here. The big names across all industry sectors strive to portray themselves as leaders, and rightly so, in all that they do, and where better to start than from their office interiors, which immediately convey their status and commitment to all their stakeholders. In the Middle East, the design and build (D&B) industry is extremely competitive by virtue of the number of players here. The clients here need something very fast and creative. The D&B sector needs to be prepared to come up with designs to outclass, outpace and outdo the existing architectures. Hence, we need to constantly look out for what is not available rather than what is available. Above all, as in every other industry your relationship with your client is of paramount importance. A rela-
tionship that is built on trust and dependability ensures the sustainability of any business. With companies struggling in the global downturn, what impact has this had on your business? SB. I suppose that the impact has been positive, in that we have been able to kick start
“In the Middle East, the design and build (D&B) industry is extremely competitive by virtue of the number of players here” organisation-wide restructuring as well as undertake new initiatives. We are strengthening our processes to make them more customercentric. For this we have chosen the Quality Management System model of ISO. We have also invested in CRM-based sales, marketing and deliverable models. I think that we are getting ready for the big push once again. We have also started developing more vendors and are in the process of building a very strong internal planning and control department. For us, without a shred of doubt, it has been
What has been the most daunting/complex refurbishment you have undertaken to date? SB. It is difficult to point out any one project. We have been involved in the complete refurbishment of functioning offices of banks, complete turnkey fit outs of four floors of a commercial tower from a ‘shell and core’ stage, concept restaurants, educational institutions, broadcasting studios and more. I am sure that all our projects have been very challenging in their unique way and satisfying to us. The challenges have mostly always been the timeframes in which these jobs need to be executed and we have been fortunate in that we have a workforce that, if I may say so myself, is extremely dedicated. We as a company look at every project as an important milestone. We are thankfully involved in a lot of exciting work and believe that our work should be the strongest brand for us. We look at all the aspects very carefully and also ensure that customers benefit from our competency, skills as well as ethics and honesty. How much potential do you see in the Middle East for Swift Interiors and what challenges do you envisage in the region? SB. The potential is huge and cannot be quantified. We are mid-range players and even in this segment, the opportunities are immense. The design and construction industries need to be more innovative – from mindset and design to material sourcing. More time and attention has to be focused on long-term achievements, quality and practicality. We have a social responsibility to focus on sustainability and promote ‘green certified products’. Fortunately the government here is leading the way by laying benchmarks for future works and it is all very exciting and promising. Satish Babu is an industry veteran in the area of design and build (D&B). Having worked for one of the more aggressive D&B companies in Dubai, Babu has honed his skills in the entire gamut. Swift Interiors, is now known for its commitment to customer and professional workmanship.
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ENVIRONMENT FOCUS
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he demand for ‘greener’ buildings – and the materials needed to construct them – is increasing around the world, fuelled by a rise in environmental consciousness and the knowledge that our existing non-renewable resources are not going to last forever. The Middle East is not immune to this trend; in 2008, for example, the Dubai ruler and UAE Prime Minister, His Highness Sheikh Mohammed Bin Rashid Al Maktoum, passed a decree to implement green building in line with the emirate’s strategic plan. However, with the UAE earning the dubious accolade of having the highest carbon footprint of any nation, according to the World Wildlife Fund, there is clearly still a lot of work to be done. The advantage being, of course, that when the ruler talks, people listen – even Dubai’s upscale developers. One example of this is the increasing investment by developers in district cooling systems, which distribute chilled water through underground pipes to groups of buildings. District cooling can provide twice as much energy efficiency as individual air-conditioning systems. Another example is the recent high-profile launch of the Blue Communities project by developer Nakheel, backed by Dubai’s ruler. The project will invest AED 200 million over three years to bring together a wide
Bigger, better, greener The Middle East has not traditionally been known for its focus on energy efficiency or sustainable buildings, preferring instead to follow the adage that bigger is better. But that attitude is changing.
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range of people – from government ministers to philosophers, poets and photographers – to define standards and guidelines for sustainable coastal development. In addition, the 400 metre-high Lighthouse at the Dubai International Financial Centre is aiming to be the first skyscraper to achieve a platinum rating under the Leadership in Energy and Environmental Design (LEED) system. If it succeeds, it will be only the 18th building in the world to achieve this standard. The Lighthouse will use 58 percent less electrical energy and 48 percent less water than the standard design for buildings in Dubai.
Sustainable design For a building to be truly green, sustainability must be integrated into the design from the outset, as Sudhir Jambhekar, Senior Partner in architectural firm FXFOWLE, explains, “Our advancement of sustainable design spans a wide variety of project typologies, and in each case, an integrated design approach promotes solutions relevant to the programme, building size and location. Right now we are designing more than 1.4 million square metres of LEED space around the world, including three LEED Platinum projects and seven LEED Gold projects. “We recently partnered with the United States Environmental Protection Agency’s ENERGY STAR and EPA Climate Leadership programmes, and are currently developing a comprehensive climate change strategy to reduce our office operations’ greenhouse gas emissions.” FXFOWLE has been involved in the planning of 200 hectares of land called the Canal District within the Waterfront, Nakheel’s new sustainable mixed-use development in Dubai. The Canal District is designed to the standards of the United States Green Building Council’s LEED for Neighbourhood Development (LEED ND), and is the world’s largest district designed to LEED Gold standards. The master plan divides the site into eight smaller districts that are connected by a light rail system and a series of parks, canals and pedestrian boulevards. Sustainable guidelines will ensure that all future buildings on the site will be LEED Gold. Another of FXFOWLE ‘s energy efficient projects is the Maritime Tower, also in Dubai, a 39-storey projected LEED Gold office building comprised of a seven-storey podium with four stories of offices on three sides, and a total floor area that is approximately 102,000 square metres. The tower will be located in Maritime City – a new city with maritime facilities, education, commercial, residential and retail complexes. The tower takes the form of three layers of sails curving up from the ground, built to look as if they are billowing in the wind, and is oriented in an east-west direction to minimise direct sunlight exposure and maximise views to the adjoining waterfront and main avenue vistas.
Making progress Jambhekar says that in the countries in which the firm works, sustainability is now either at the forefront of the building industry (for example, in Dubai and Abu Dhabi), or it’s just beginning to surface, such as in Saudi Arabia. Dubai now requires that every project not only be sustainable, but also be LEED-certified. When asked what is behind this new-found environmental consciousness, Jambhekar replies, “His Royal Highness General Sheikh Mohammed Bin Rashid Al Maktoum once said: ‘We have to make history and approach the future with steady steps, not wait for the future to come to us.’ I think this
is the perfect example of a driver to ‘go green’. We must act now and not wait. Having said that, I think the specific drivers for this desire in the Middle East region are a combination of the following. energy is expensive, water is not plentiful, there is greater awareness of the LEED system, and there is a new consciousness surrounding the issue on the part of world leaders.” One problem that will continue to trouble the Middle East’s construction sector is the continuing need for many building materials to be imported. Companies like FXFOWLE use local materials sourced from within a 500mile radius of each project site whenever possible, as well as recycled materials and finishes. However, many of the ingredients needed to provide the glittering edge to the region’s luxurious buildings – Italian marble, for example, and even materials as relatively mundane as glass – must still be transported across long distances, raising the area’s carbon footprint substantially.
“We have to make history and approach the future with steady steps, not wait for the future to come to us” Jambhekar also believes that in order to be considered a global leader in sustainable design and development, the Middle East needs to explore and implement a greater design strategy for public transport. “Dubai is doing this quite successfully,” he points out, “but Abu Dhabi and Saudi Arabia need to make it a priority. I also believe that there needs to be more emphasis on energy-generating ideas, such as geothermal and other renewable energy technologies; and more focus given to conserving and reusing water. Lastly, and probably most importantly, there must be carefully planned growth. The region must embrace the idea of urbanism, and recognise density over urban sprawl.” The Middle East will obviously face great challenges in its drive to become an environmental leader. But with the financial resources available in the region and the commitment from those in power, this vision could well become reality. n
DIFC Lighthouse The first skyscraper to get a LEED platinum rating is a 400metre tower, with 64 storeys of offices and, above them, three horizontal-axis wind turbines integrated into the facade. The building also has an entire wall made of photovoltaic panels to generate solar energy, and together architects firm Atkins hopes the renewables will generate 10 percent of the building’s energy needs. The building is designed to let in light but not heat, minimising lighting and cooling requirements. It is attached to a district cooling system, and has ‘hundreds’ of energy and water-saving measures, including chilled beams, low-energy lighting, advanced lighting controls, low-energy car park ventilation and lighting and an intelligent building management system. Atkins expects the Lighthouse to use 48 percent less water and 58 percent less energy than Dubai’s standard designs.
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PROJECT FOCUS
• Uninterrupted business operations: Care had to be taken that business activities do not get disrupted due to the refurbishing at the current facility therefore the lead-time had to be minimised significantly. • Limited available space: A total of 125 extra workstations and six cubicles had to be accommodated in an additional space of just 800 square metres. One had to ensure that the additional workstations and cubicles did not clutter the office.
Solution offered by OFIS
The complete solution Lifting the lid on a recent office makeover by OFIS to meet an insurance company’s needs . Project brief
AJAI KUMAR DAYAL
O
FIS (Office Furnishing Interior Solutions), a division of the Easa Saleh Al Gurg Group, established in the early 1980s, is one of the fi nest integrated office interior solutions provides in the UAE today. Over the decades, it has executed several projects for large corporations such as HSBC, Citi Bank, Royal & Sun Alliance, Johnson & Johnson, Shell, Unilever, DHL, Schlumberger, Landmark Group and many more. Home to the world’s best brands in furniture, flooring and interiors for offices, OFIS brings you innovative furnishing solutions for work environments. Comprehensive, through-the-line offerings are also available for classrooms, training rooms, lecture halls, auditoriums and airport lounges. With a complete in-house design studio and a team of competent and motivated professionals it aims to maximise customer satisfaction through offering avant-garde solutions.
The UK-based international insurance giant, Royal & Sun Alliance (RSA), forged its way in the UAE market six decades ago. However, growing opportunities and subsequent expansion plans rendered the existing facility inadequate. It was clear that the company would either have to undertake a major facility revamp or move to another facility altogether.
RSA Requirements • Feasibility study: Carry out a feasibility study on the expansion possibilities of the current facility and explore other options. • Integrated office interior solutions: RSA required a comprehensive plan which included space planning, designing and installation of furniture. • Extensive storage: storage of about 2000 box fi les required for documentation and archiving purpose.
Challenges for OFIS After subsequent analysis, the decision to revamp the current facility and accommodate extra workstations instead of moving to another location threw up the following challenges:
• Phase-wise execution: The project was meticulously completed in four phases in order to circumvent any disturbances in the working environment. • Innovative design solution: A dense floor plan with open office concept was implemented for better space optimisation. • Customised storage facility: Mobile storage units running on railings usually called ‘compacters’ were used in order to provide maximum storage space and utilise minimum space. • Acoustics: Tactable panels in workstations and InterfaceFlor carpet tiles ensured good acoustics were maintained, keeping the noise level low. • Corporate identity: Laminate shades matching the corporate colours of RSA complimented the office décor.
“It was clear that the company would either have to undertake a major facility revamp or move to another facility altogether” The benefits of the project meant the timely execution of all phases avoided hindrances to normal business activities, RSA averted an additional investment in acquiring a new facility and the hassle of shift ing offices and OFIS proved to be a one-stop solution for RSA for designing and furnishing their office. Ajai Kumar Dayal is GM Retail and Marketing at Easa Saleh Al Gurg Group.
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ASK THE EXPERT
Going digital with e-learning WITS Interactive’s Hitesh Jain shares his views on revolutionary digital technology and the significance of employee training in business.
D
igital technology is now considered to be the dominant element in delivering e-learning solutions to industry. In the next few years, the future of business is going to be digitalised and interactive. Digital technology is the future of business and the emerging trend in the industry. Industry leaders have started considering digital technology as the new mantra for success, profitable inputs and encouraging return on investments. While delivering branding solutions to our clients, we have realised that large numbers of companies want to project their brand in a dynamic manner. Digital technology is being implemented for e-learning and employee training in an informative manner equipped with interactivity, stunning visuals and sounds. When we undertake any project our primary focus lies in understanding clients’ needs so that we can bring their vision to reality. Numerous companies from diverse industrial sectors such as medical, man-
“Digital technology is the future of business and the emerging trend in the industry” ufacturing, aviation, BFSI, and so on, are keen on utilising e-learning and digital technology. Simulation is the path-breaking part of digital technology, which has become the latest buzz in the industry. Whether they are used for preparing a business strategy, training pilots or medical practitioners, forecasting weather or designing robots, simulations are used everywhere. The future of learning is going to be digitalised so that even an amateur medical student can learn to conduct an operation in a virtual environment. The utilisation of digital technology and e-learning suites is enabling corporate sectors to obtain maximum productivity. 3D modelling simulation is the enhanced methodology for learning new skills, improving work performance and reducing risks. Through utilisation of 3D technology and simulations, a great amount of time can be saved, along with reduced costs. Digital technology is the amalgamation of a three step process: • Acquiring knowledge • Assessing skills • Continually practising to make one perfect Backed by the dynamism of digital technology, the process of learning has accelerated at a faster rate, allowing the learner to conceive knowledge in a convincing manner. So whether it is a student, professional executive or a management professional from business school, digital technology caters to everyone’s needs.
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Employee training We see employee training as a new ray of hope for upcoming talented and intellectual professionals who possess the instinct to become the next generation of industry leaders. The necessity of coping with the upcoming business trends such as sophisticated technology has compelled corporate sectors to adapt employee training. Software firms, business enterprises and several other sectors are implementing employee training to improve their work performance and productivity and achieve profitable returns. The perspective of employee training is going to motivate, enrich and upgrade the workforce operating in business sectors. Implementing the employee training process will not only boost the leadership of the workforce, but it will also bring out lucrative benefits in business. Backed with interactive features of digital technology, employee training will generate a curiosity Hitesh Jain, Director at WITS Interactive, has over 13 years of among learners to acquire knowledge with experience in the e-learning spontaneity. Be it for any field – medical, and interactive media space. His areas of expertise includes aviation, chemical, manufacturing, softideation, innovation, relationship management and ware or human resources, employee trainIPR management. For more ing is becoming a great prerequisite to information, please visit: www.witsindia.com achieving business success. n
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EDUCATION
Kingdom Educating the
Saudi Arabia has allocated 25 percent of its 2009 budget to developing its education sector and recently opened the doors to its showpiece learning facility, the King Abdullah University of Science and Technology (KAUST). Business Management reports on the country’s hopes of becoming a kingdom of knowledge.
W
hen students sat down for lectures for the first time at Saudi Arabia’s King Abdullah University of Science and Technology (KAUST) this term, they became part of a new and exciting chapter in the country’s history. The multi-billion dollar university is the centrepiece of the country’s plan to become a knowledge-based economy with world-class educational institutions. It is to be followed by four other new universities in Damman City and the provinces of Kharj, Shaqrah and Majmah, the building of 1700 new schools and the setting up of education zones in the Economic City projects being built across the Kingdom. There are also plans to build the country’s largest women’s-only university to be completed in Riyadh in 2010, which would have 13 colleges, including facilities for medicine, dentistry, naturopathy and pharmacology and would accommodate up to 40,000 students
A modern vision The plans are key to the Saudi leader King Abdullah’s goal to modernise his country and reduce its dependence on dwindling oil reserves and Western manpower. Currently, across the Kingdom, expatriates make up 63 percent of the white and blue-collar workforce. In October, the former Director General of the World Trade Organisation described the Gulf’s migrant workforce as the biggest issue facing the region today. And with unemployment in Saudi Arabia currently standing at 12 percent, according to the World Bank, the leader is keen to correct the imbalance in the workforce through the education of Saudi youth to international
standards. Demand for education facilities is clearly buoyant in the Kingdom, reflecting the desire on the part of Saudi youth to gain qualifications. Oversubscription at the country’s existing two universities, King Saud University in Riyadh and King Faisal University in Damman, has forced the government to speed up the building of new establishments. Meanwhile, this year, there was a 40 percent surge in applications from Saudi students applying for places at British universities reflecting the lack of facilities of equal calibre on their home soil. KAUST, which equals its Western counterparts in terms of its facilities and the kudos of its researchers, aims to fi ll this gap and encourage more Saudi students to gain their qualifications at home then use them to help develop their country’s economy beyond oil. The university’s focus on science reflects the leader of the Kingdom’s desire to build on the country’s existing expertise in the petrochemical industry and expand into other areas of scientific research, which could be key to building its knowledge-based economy. It boasts the world’s fastest supercomputer and a team of the world’s top research scientists. Already the university has established research operations in five areas in which Saudi Arabia hopes to became a leading global centre of expertise: nanotechnology, applied mathematics, solar energy, membrane research and bioengineering. To enhance its international status, the university has also formed partnerships with top academic institutions across the world, including the National University of Singapore, the UK’s Cambridge University, Stanford in the United States, France’s Institut Francais du Petrole and London’s Imperial College. The latter is one of KAUST’s five ‘academic-excellence partnerships’ and is worth US$25 million over five years. Under the terms of the partnership Imperial’s Materials Depart-
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ment will provide a master syllabus for KAUST students in materials science and chemical engineering and will undertake collaborative research with KAUST academics. It will also provide KAUST researchers with guidance on what scientific equipment they require and will help them in the selection of staff for the department. In an interview with the Times newspaper’s Higher Education Supplement, Neil Alford, Chair of the Materials Department at Imperial, described the partnership as “an opportunity to “We’re the first foreign develop ties with the region and be at company to be awarded an the inception of something that has education services consultancy the potential to make a huge differlicence and we believe we could ence in terms of scientific and cultural be a tremendous partner for change.” Clearly KAUST’s strategy to Saudi. We have big plans” become a world-renowned educational institution is working. It has already attracted 70 professors and 800 students from abroad. What it must do Within the private sector, there is a strong interest from private sector now is increase the participation of Saudi students, which currently make education providers, keen to tap into the country’s burgeoning education up just 15 percent of the university’s students. The ratio is expected to sector. Most recently the Dubai-based company GEMS Education anincrease however, with the university mixed campus, featuring 70 green nounced plans to build a raft of new schools across the Kingdom. Despaces close to the Red Sea, presenting an inviting prospect. scribing the potential he sees in Saudi Arabia’s education sector GEMS School work Senior Director Dino Varkey, told Arabianbusiness.com: “From a GCC It is not only in the higher education space where the Saudi governperspective, Saudi is absolutely the market you want to be in, regardless ment is focussing its efforts. It is hoping to rapidly expand the primary and of the constraints. Saudi today, as a proportion of its GDP, is going to be secondary school sector where plans are underway to build approximately spending more on education than anywhere else in the world,” he went on 1500 new schools in addition to the 3240 currently being constructed and to say, adding: “We’re the first foreign company to be awarded an educaanother 200 that are under reservation. In total, Saudi Arabia plans to tion services consultancy licence and we believe we could be a tremendous spend US$3.2 billion on building new schools for 1.7 million pupils. To partner for Saudi. We have big plans.” put these figures into context, the country’s 2009 budget includes US$32.6 Many of the new primary and secondary schools in the country will billion that has been earmarked for the education sector – a massive 25 be built within ‘education zones’ within the Kingdom’s various Economic percent of the country’s entire budget. King Abdullah also announced City Projects. These are free zones designed to encourage the developplans to create 204,056 new jobs in the education sector. In a statement ment of a knowledge-based economy by providing world-class residential, published in the Arab News earlier this year, the country’s Ministry of educational, business and industrial facilities. The first school to be built Civil Affairs stated: “The royal approval came after the Ministry of Civil within such a zone will be the Freyssinet Saudi Arabia school to be built Affairs presented a proposal to the king to improve the situation of teachin King Abdullah Economic City at a cost of US$32 million. The state-ofers holding lower job levels in comparison to their qualifications”, adding the-art school will span 16,928 square metres and will accommodate up that it hoped the reforms would “boost the morale” of teachers. To speed to 1000 students of different grades. Meanwhile GEMS has also signed an up the development of the primary and secondary education sector the agreement with Saudi Arabia’s General Investment Authority (SAGIA) to Kingdom is entering into partnerships with private companies. A US$533 manage a school within the city. million contract with the China Railway Construction Corporation The message behind the investment in such facilities is best summed up will see the building of 200 schools across the country to accommodate by the statement made by King Abdullah in the launch brochure for KAUST, 150,000 pupils. The process is expected to take just 14 months. An article which, as quoted by the Times Higher Education Supplement, reads: “I wish about the project in the Saudi Gazette reported the Deputy Education to rekindle and spread the great and noble virtue of learning that marked Minister Faisal Bin Abdul Rahman, as saying: “The specifications of the the Arab and Muslim worlds in earlier times.” Saudi’s past as a centre of buildings are in line with international standards and the aim is to prolearning is set to be revived and, if successful, its future, beyond oil, will vide a better educational environment for our kids.” be as a knowledge-based economy with an educated local population.
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INDUSTRY INSIGHT
Server virtualisation enables virtualisation in a network attached server (NAS) – that is, a self-contained computer or server connected to a network of end users. Storage virtualisation for NAS systems is typically available as virtual fi lers, or independent fi le systems on the NAS device. NAS virtualisation can refer to creating multiple virtual fi le servers within a physical fi le server, or even the virtualising of multiple NAS heads into a single fi le system. Users in such an environment could access a fi le/application/OS that could be located anywhere in a global network and used as though it were in a single server. In a storage area network (SAN) model, virtualisation brings up unlimited potential. It differs from NAS scenarios in that it has several storage blocks accessible to the server, which is connected to the network. Here, techniques like fibre channel zoning at the SAN layer and masking of the logical unit address, either at the host side or the storage side, are used for creating virtualised storage groups. It enables huge savings through optimisation of the ‘array’ or in different servers. Only a small portion of disk spaces. The central virtualisation controlthe server’s capacity may be used to handle the ler can handle much of the critical tasks like critical aspect of running an operating system housing the soft ware, OS and so on – freeing up or an application. Virtualisation enables space on the array. It can also enable cross funcmoving of these aspects together logically, tion sourcing of MIS, that is, data from various so as to be handled out of minimised server virtual servers can be culled for business intelspace with operating systems, applications, ligence, using a hyper engine. and data coexisting in the same storage area. But the really big story with virtualisation Virtualisation is a technology which is applied is the savings delivered. Virtualisation enables at many level/layers from desktop and laptops any enterprise to lower per gigabyte storage to servers, networks, fi les, applications etc, rates that significantly impact IT spending, now even on entire data centres. On a network, especially with the emergence of power manvirtualisation can allow the creation of single agement technology – that enables moving the virtual network, in a corporate group that has computing load together and actually powering off servers that are not in use. Virtualisation in data centres is slated Saji PK, SVP of Technology to grow exponentially – from a few at Sify Technologies Ltd, has over 18 years of experience hundred virtual machines to several in the telecommunications and networking arena. He thousand leading us into truly virtual is responsible for overall data centres as 2009-10 progresses. So network and data centre management and has been what’s next in terms of technology? An at the helm of the company’s core and access network emerging winner is cloud computing – infrastructure to support where the resources physically located next generation, managed IP services and applications for over vast areas can be jointly used as their global customers. in a public domain for reliable and safe computing. It involves the creation of many external networks, using VLAN and scalable, publicly available computing enviswitching technology, or virtual routers or ronments and leaders like Google and Microvirtual fi rewalls. soft are redefi ning the economics here.
Virtual reality
Extending the possibilities of virtualisation according to Sify Technologies’ Saji PK.
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n the wake of recent recession, companies are going back to the drawing board for solutions that optimise costs. Among the huge IT spenders, this has been driving adoption of a phenomenon that has actually been around for decades – data centre virtualisation. Traditionally, running a data centre means having standalone computers/servers perform dedicated functions for individual applications. But virtualisation technology allows applications and servers to work in a non-dedicated manner, interacting to get the task done. Virtualisation is the creation of logical storage, out of physical storage. It involves multi-tenanting of hardware resources, using soft ware technologies. Th is masks the physical characteristics of resources from the way in which other systems, applications or end users interact with them. In the mainframe era, time-shared, multi-computing environments were the fi rst incarnation of virtualisation. It has been prevalent in some form in servers and storage and of-late, has matured to networks and I/O, as data centre or DC virtualisation. So what is virtualisation? Let’s take a typical scenario where an end user needs to access an application, on a particular operating system, to recover accounting data, all stored
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ASK THE EXPERT
Building for the future PA Consulting Group’s Peter Elliott discusses why ‘smart cities’ can promote happiness, diversity and sustainable growth in the fertile Gulf region.
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ibrant and creative cities drive economic, social and cultural development. Governments have an opportunity to ensure ICT infrastructure is integrated into the city fabric, enhancing the lives of citizens, encouraging businesses to invest, and creating a sustainable urban environment. Th inking ‘smart’ now will ensure that a city retains its competitive edge. Governments need to consider three activities to ensure they can exploit the potential of smart city infrastructure: • Understand how smart city infrastructure can improve public services, enhance liveability, expand and diversify the economy, and promote sustainable development • Integrate plans for the implementation of ICT infrastructure with other plans for development or renovation • Decide the role the municipality will play in developing the ICT infrastructure Governments need to enhance communications between people and government, creating a safe, friendly and efficient environment. Governments and partners can operate services and infrastructure using a single, integrated network with shared service platforms. Citizens will benefit from smart services including: transport management, security and surveillance, e-learning, e-health and identity management. The availability of high speed, low latency networks with excellent global connectivity enables businesses to benefit from services that exceed anything available elsewhere. Enhancing city connectivity to markets elsewhere gives people the opportunity to learn, and using knowledge and experience developed elsewhere, gives them access to larger markets. Th is drives the diversity of the urban economy and assures the long-term viability of a city.
A sustainable future Sustainability and a low carbon economy are key challenges for cities. ICT infrastructure enables better resource usage and more efficient operations. A recent Climate Group and GeSI study (www.smart2020. org) reported that more efficient road transportation could reduce travel time and congestion while saving 240-440 mmt of CO2 emissions and US$65 to US$115 billion. Other smart technologies including smart grid
and smart metering can also deliver significant benefits. There are strong economic incentives for implementing smart infrastructure. ICT investment boosts economic productivity and contributed between 0.3-0.7 percent of GDP per capita growth in OECD countries between 1995 and 2005. Commercial service providers are unlikely to deliver the ubiquitous high speed network and shared platforms that will enable governments, business and citizens to realise the benefits of smart cities. Some governments have actively participated in promoting ICT infrastructure including Amsterdam and Singapore.
A smart city defined The smart city requires a ubiquitous ultra-high speed network infrastructure, fi xed and wireless, that allows people, businesses and governments to connect with each other enhancing the lives of people living and working in the city by improving the social environment, managing built environments more efficiently, enabling innovative services to be offered to consumers and providing world-leading ICT services to businesses that make the city a compelling place to do business. Clients globally have thrived from PA Consulting Group (PA) working with them on all aspects of smart cities, including complete business case, urban planning, procurement process, ICT network and systems, innovative services and implementations. PA has the skilled people, project experience and sophisticated tools to support governments and municipalities with their smart city ambitions. PA’s work worldwide on master planning incorporates the smart cities concept, designing new urban environments that are best suited to promote economic and social well being.
Peter Elliott has over 20 years’ experience in ICT. He has extensive experience gained through CTO and CIO roles in leading ICT companies with particular expertise in strategy, technology business cases, complex programme management, ICT network infrastructure, applications and systems. Elliott, who joined PA in 2006, leads the company’s smart cities initiative.
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JOINING FORCES Eversheds’ Middle East Managing Partner Christopher Jobson and Kuljit Ghata-Aura, partner in the Abu Dhabi office, outline the challenges international companies face when entering into joint ventures in the Middle East.
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s the overall economic climate in the western world continues to be challenging, corporations are increasingly looking to emerging markets as potential areas of growth. The Middle East is currently a popular investment destination for international corporations and joint ventures are becoming increasingly common there as a result. In this article, we highlight some of the challenges that international companies face when entering into joint ventures in the Middle East.
Selecting the right partner One of the key challenges for an international company is the selection of the right partner. The identity of the potential local partner and the connections that he/she can bring are paramount. As such, it is important to know who you are dealing with. This sounds obvious but there have been cases of mistaken identity, which have proved to be embarrassing and costly. What makes the position more difficult is the lack of freely available public information on companies in the Middle East. It is often simply not possible to obtain even the most basic information on the ownership of companies or a guarantee of its accuracy. Given this it is recommended that international
companies engage specialist business intelligence firms to conduct the appropriate level of due diligence. The scope can be as basic as confirming the identity of local partners, to a more detailed analysis such as financial net worth, reputation and connections. It is also recommended that international companies conduct standard best-practice checks so as not to fall foul of the relevant anti-corruption legislation (such as the US Foreign Corrupt Practices Act). Often, international companies will have internal policies governing compliance in this area and these should be followed in a stringent manner to ensure that any potential reputational risk is minimised.
Entering into an MoU Care needs to be taken when entering into a Memorandum of Understanding (MoU). In many jurisdictions in the Middle East there will be an overriding duty to negotiate in good faith and the MoU will have a ‘moral’ force evidencing serious intent to conclude a transaction, which may be problematic if there is a subsequent breakdown in negotiations. It is good practice to consult a lawyer in the jurisdiction prior to entering into an MoU and to ensure that there are clear provisions regarding key areas such as termination.
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Application of agency laws Where the joint venture in question involves a local party acting as an international company’s sales agent in a particular Middle Eastern jurisdiction, then it is likely that the relevant agency law will apply to the arrangements. In some jurisdictions, the agency law will also apply to distribution and franchise arrangements. The agency law cannot be contracted out of and affords significant protection to the local agent. In particular, in a number of jurisdictions the agent’s consent will be required for the early termination of an agency or even the non-renewal of a fixed term agency, and for absent consent a court order is required. The court will have a wide discretion to award compensation to a local agent whose agency is terminated.
Dispute resolution
The MoU should also clearly record the detailed commercial objectives of the joint venture to avoid any misunderstandings. In our experience, non-alignment of the commercial objectives is a key reason for the failure of joint ventures in the Middle East.
Inevitably, in some joint ventures, the partners will fall out. It is therefore important that the dispute resolution procedures agreed in the relevant contractual documentation provide for as impartial and speedy a resolution of the dispute as possible. It is usual for any disputes under the joint venture agreements to be resolved by arbitration under ICC or LCIA in a neutral venue. The reason for this is that proceedings in the local courts and arbitration centres can be slow and cumbersome, as well as being conducted in Arabic. Many countries in the Middle East are party to the New York Convention, the effect of which is that arbitral awards made in countries that are signatories to the New York Convention should generally be readily enforceable in those countries, although this has yet to be seen in practice. Another potential avenue for recourse depends on whether there is a bilateral investment treaty (BIT) in place between the relevant Middle Eastern country and the country from which the investment is being made. BITs provide very significant protection to foreign investors whose investments are negatively affected by the activities (or inactivity) of states. The treaties allow an investor to channel its investment through a country with a favourable BIT in place, as these can differ. Accordingly, it is becoming more common for international companies to structure joint ventures to avail themselves of a favourable BIT (as well as for tax efficiency).
Foreign ownership restrictions A number of countries in the Middle East require that nationals of that country must hold a minimum percentage of shares in a company. For example, the minimum for the UAE and Qatar is set at 51 percent (although this does not necessarily need to reflect the economic interests of the parties). There are ways in which the international shareholder’s interests can be protected (if it cannot legally be a majority shareholder) such as the entry into a carefully drafted shareholders’ agreement and rights in the constitutional documents, but care needs to be taken that these arrangements are enforceable and do not contravene the relevant local law. Additionally ‘side agreements’ that seek to alter the legal position are unlikely to be enforceable. Most of the jurisdictions in the Middle East require a company to hold a specific licence or licences to conduct business in the relevant jurisdiction. Whilst it will usually be the responsibility of the local partner to obtain the relevant licences, we would recommend that the international company also engages counsel to ensure that the correct licences are obtained and the correct procedures followed. Doing business without the correct licence can have serious consequences for the international and local shareholder.
Cultural issues It is simply wrong to assume that, time differences aside, things work generally the same in the Middle East as in the rest of the world. This simply isn’t the case. For a start, Shariah law applies throughout the Middle East and needs to be borne in mind when doing business in the region. The usual working week in the Middle East is Sunday to Thursday, although in Saudi Arabia it is Saturday to Wednesday. Accordingly, when doing a deal between the Europe/US and Saudi there are only three days of the week in common. When doing deals in the Middle East it is always worthwhile having a detailed project timetable that marks Islamic religious holidays. It is not always possible to fix these as they are dependent on moon sightings, but the general time can be targeted. The holy month of Ramadan is a particular time to be aware of. It serves to be patient in the Middle East: often the counterparty will not be communicating in their first language and it may take longer to complete a deal. This should not be taken as obstruction or a lack of engagement. It certainly appears to be worth the effort, given the numerous international companies who have entered into Middle Eastern joint ventures or are in the process of doing so. n
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CITY GUIDE
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Rio de Janeiro Time -3hrs GMT | Currency: Real | Language: Portuguese | Population: 6 million And on the eighth day God created Rio, or so the saying goes. This magical place iss packed with contrasts: sandy beaches and a bustling city centre, jungle-covered peaks and nd a ur. vibrant nightlife, rich and poor… Business Management takes you on a guided tour.
About Rio de Janeiro, which translates as River of the January, is known simply by Brazilians as Cidade Marvelosa (Marvellous City). It is also the second largest in Brazil and the whole of South America. Famed its laid back lifestyle, Rio is a unique city with so much to discover and explore. With Rio being situated in the southern hemisphere, summer runs from November through to February, culminating in the atmosphere-soaked carnival when the locals (Cariacas) don extravagant feathers and party the night away aboard spectacular floats. Rio has recenty secured a sporting coup – it will be the host city for the 2016 Olympic Games
Getting around If arriving by air you will usually land at the international airport 20 kilome kilometres north of the city. An A hourly shuttle bus ferries passengers ngers to the major hotels and stops att the beaches. Alternatively, take a regular ullar bus or hop in a taxi, both of which ch h provide a cheap way of seeing the city t during ty your stay. With a taxi, i,, make sure the meter is switched on and reset from the previous fare.
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Copacabana beach
The city also has two subway lines comprising of 42 kilometres of track and 32 stations. However, it only goes as far as Copacabana, which is not particularly convenient if you are staying in the touristy parts of Ipanema and Leblon.
have a head for heights then for around €100 you can soar like a bird over the city with in a tandem hang-gliding fl ight. A video camera attached to the hang-glider captures your bird-like descent to a quiet beach west of the city. Something you do don’t always associate Rio Did you kno w? Relax w with is a picturesque lake but The city has 1000 Coracias like to get down Lagoa L Rodrigo de Freitas favelas, hous ing s behind Ipanema beach to the beach to play volleyball sits around a fift h of or just pose in skimpy swim– perfect for chilling out on Rio’s six mill ion wear at everyy availa available oppora hot day. For those who like population tunity. Copacabanaa is home to o a flutter, Rio also has its own the wor w world famous ous racecourse raceco in Leblon. Check on four-kilometre fou ure stretch which days day race meetings take place of sand but Ipanema when you arrive. b beach, just around the co See corner, is just as popular. It’ a great place to order Perhaps Rio’s most iconic attraction is the It’s c giant statue of Christ, known as Christ the Rea coconut drink or Brazil’s faam deemer atop Corcovada mountain. The ascent famous cocktail, caipirinhaa, aand people watch. If you to the summit is by train, although views of the ha,
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IN THE BACK CITY GUIDE Carnival celebrations
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Eat
Copacabana Palace
Casa da Feijoada The meal feijoada, a meat stew, is the national dish of Brazil and this small and cosy restaurant is the best place in the city to experience it. Traditionally served on a Sunday, this place serves up feijoada seven days a week.
Tourist tips • This is a place where the wealthy rub shoulders with the impoverished so crime is a problem. Never venture into a favela (shanty town) unless it’s with an organised tour and stay off Copacabana beach after dark. Take precautions with your valuables at all times. • Try to learn some key Portuguese phrases. Not many people speak English but a little bit of effort to learn the basics will go a long way when conversing with the locals. • Rio has the world’s largest urban forests, Tijuca, in the world so make sure you get out and explore the city’s greenery.
Madame Butterfly This Asian/Pacific eatery is a must for Japanese food lovers, and was elected best in its category by gourmet specialists. A highlight in the menu are the fish with shimeji mushrooms in ginger and sake sauce, as well as the variety sushi and rolls with unusual shapes.
Sleep Copacabana Palace With its classic white façade, this is perhaps the most famous hotel in the whole of Brazil. Sitting proudly slap bang on Copacabana beach, this stunning 1920s hotel has had its fair share of notable guests, including the Rolling Stones in 2006 just prior to their performance on the beach in front of 1.3 million fans. Apart from the usual facilities, this hotel features a large outdoor pool, tennis court,
health club, fitness facility, and spa and sauna. Rates: From €280 a night. La Suite Located in Joatinga, this cliff-side retreat is a boutique hotel which boasts just seven stylish rooms. Its secluded and intimate nature, together with a stunning setting, makes this a real gem in Rio. As well as an infinity pool and fully loaded iPods, there is a helipad and private beach within walking distance. For €190 an ‘insiders’ tour’ of Rio will show you the sights and sounds you won’t necessarily unearth in your guidebook. Be warned though, credit cards are not accepted but pets are welcome. Rates: From €300
Christ the Redeemer Statue
sprawling city can be spoilt by cloud cover and bad weather so plan ahead. Another spectacular view can be had from the cable cars that whisk you to the top of Pão de Açúcar or Sugarloaf Mountain as it more commonly known. Brazilian’s love their football and the historic and colossal Maracana stadium is a great experience, especially on match days. Tickets are fairly easy to acquire – ask at your hotel for details. In February every year the razzamatazz of the world famous carnival comes to town. Be warned though, accommodation often needs to be booked months in advance. It’s a similar predicament for New Year’s Eve.
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Mean machine Lotus sets pulses racing and heads turning with a beefed-up version of its high-octane Exige model.
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he name Lotus Exige Scura doesn’t exactly roll off the tongue, but who cares about a name when a two-seater sports car looks this good – and menacing. Low in weight and delivering a top speed of 240km/h (0100km/h whizzes by in 4.1 seconds thanks to ‘launch control’), Lotus say the Scura “needs to be driven by a serious driver”. The carbon fibre bodywork is coated in matt black because scura translates as ‘dark’ in Italian. Indeed, the Scura is meant “to evoke the desire to indulge your dark side”, according to the car’s designers. Continuing the colour theme into the interior, carbon fibre is used extensively to compliment the exterior and reduce weight. The seats and centre console are crafted from carbon fibre and the handbrake and gear knob have a special anodised treatment which leaves the metal with an anthracite colour finish. Overall, this is a car devoid of creature comforts but blessed with great performance and handling. The downside is that just 35 examples of the Scura will be produced worldwide. If you do manage to get your lucky hands on one, expect to pay around US$80,000.
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CLOUD NINE
Peter Bauer offers a practical guide to selecting the right partner for cloud computing.
O
ver the past year, cloud computing has dominated IT discussions around the country, and rightly so. It offers significant advantages to businesses, especially as resources become more constrained and IT departments struggle to add business value while maintaining their existing infrastructures. However, care must be taken as not all cloud-based services are created equally. Service delivery models vary greatly from hosted providers that replicate fragmented on-site technologies to sophisticated architectures; and benefits vary greatly too. So if the devil is in the detail, as always seems to be the case, some practical tips for selecting the right partner may prove useful. Is the basic design right? Tight integration of services at the provider level is critical. In the case of email this means security, archiving, continuity and policy management. The ability to provide a unified service eliminates the need for multiple interfaces, reporting and policy management. They reduce management workload and are ‘aware’ of each other in a way that allows users visibility and access to their email as well as evidential quality to be maintained.
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be set in stone, well-documented and protect against all possible risks of downtime. Demand references of existing customers to compare your situation and ask questions if none are made immediately available. On-demand email must also be completely transparent and fully interoperable with existing in-house email systems and processes. For users, the experience with an application, such as Microsoft Outlook, shouldn’t just be seamless but more sophisticated and intuitive than fragmented in-house systems. It should provide more rapid access to archived emails, flawless security, and keep employees working even during outages. Can they reduce the cost of email compliance? Business leaders need to be realistic about the regulatory risks of poor email management. Currently, organisations are struggling to manage the mountain of email, let alone comply with evolving regulations. Deutsche Bank, Goldman Sachs and Solomon Smith Barney were each fined US$1.65 million for failing to produce emails requested in the course of an investigation. Furthermore, our 2008 survey found that 69 percent of UK companies were unable to produce a comprehensive email audit trail of email records, as required by law. Partnering with the right cloud provider can substantially reduce the headache of managing and ensuring compliance, by providing an audit trail of all email activity across all user accounts. It must be made available at all times and involve minimal input from company resources. In summary, there’s no one-sizefits-all cloud model and organisations need to evaluate a vendor for its understanding of the issues faced by staff and management alike. Selecting the right partner can deliver on the promises offered by cloud computing: low cost access to expert guidance and highly-tailored, powerful business applications.
Can they lower IT costs long term? Partnering with a cloud provider must, at all times, be a low commitment relationship. Able to control licence fees by paying for access to applications on a per user basis with a transparent pricing model, IT should at all times maintain complete control of user accounts. They should be able to centrally enforce company-wide policies with real-time implementation without having to rely on the service provider’s help desk. With cloud services IT staff are abstracted from administering patches and general infrastructure maintenance and can have more time to work on strategic parts of the business. In fact, Butterfield Bank, with offices around the globe, has saved US$1.2 million per year by opting for unified email management – a reduction of 75 percent compared with in-house email Peter Bauer, CEO of Mimecast Services management. Ltd., is a technology marketer and business leader with a successful Can they offer business contitrack record and solid experience nuity? A cloud provider must in starting, growing and leading flourishing businesses in the information be architected to offer constant technology sector. His passion for IT and his considerable expertise developed availability and have rigid serchampioning business technology vice level agreements that back make him a persuasive and visionary commentator. up their assertions. They must
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