M'sian tech firms make good in Middle East

MALAYSIA--Local ICT (information and communications technology) companies have made some headway into the lucrative Middle Eastern markets, but still face challenges growing their business in the region, say industry players.

According to the Multimedia Development Corporation (MDeC), at least nine local companies have managed to make inroads into the Middle Eastern markets in the last few years.

"Companies such as Green Packet, GCI, Scan Associates, N2N and Itopia, are but just some examples that have set up operations in various countries in the Middle East," Saifol Bahri, vice president of industry development division at the MDeC, said in an e-mail interview.

He noted that a few other companies were also planning to stage major entries, and should be making announcements in due course. "We expect major announcements for joint-ventures in the next few months, past the summer holidays," Saifol told ZDNet Asia.

IT security vendor Scan Associates has had operations in the Middle East since mid-2005, and believes there are ample opportunities in the region.

"We started off providing ICT security services," Norbik Bashah Idris, executive director of Scan Associates, said in an e-mail interview. "Later, the company diversified into providing managed security services (MSS).

Norbik noted that revenues generated from its business in the Middle East have been "very encouraging". "The region contributed about 23 percent of our total 25.3 million ringgit (US$7.6 million) revenue for the financial year 2007," he said.

Frost & Sullivan's Asia-Pacific consulting director, Siew Kam Soon, said the Middle Eastern ICT market can be characterized as "buoyant" and "on an upswing" over the past three to four years.

"This has been spurred by increasing market liberalization and capacity," Siew told ZDNet Asia in an e-mail interview. "For example, Bahrain's telecommunications market is expected to transform the ICT market into a US$375 billion industry by 2010, due to high demand for IT products and services from both public and private sectors."

But, challenges abound
Despite the business potential and inroads made by some Malaysian companies, local ICT players still face some challenges growing their businesses in the Middle East, say several industry players.

Siew noted that Malaysian companies have had mixed outcomes from their endeavors in the Middle East. The analyst noted that the two most critical challenges local ICT players faced were securing strong committed local partners and adapting to the working culture.

According to MDeC's Saifol, it is critical that technology and other related solution providers stay competitive in their niche markets.

Local companies, he added, should also ensure they are globally benchmarked before going to market. "This is because the customers will be studying the very same criteria on each prospective vendor," Saifol explained.

He added that this is where MDeC aims to play a value-added role, by providing targeted global marketing of these Malaysian businesses and their solutions to specific markets.

Adrian Yong, CEO of Malaysia-based CSF Advisers, noted that to succeed in the Middle East, Malaysian companies would need to hook up with local partners that have good technology and track record with international clients. CSF Advisers designs and builds data centers.

"The [Middle Eastern] partners need to be able to source for local equipment suppliers, which also have to have good after-sales and local manpower support," Yong told ZDNet Asia in an e-mail interview.

Scan Associates' Norbik concurred, noting that companies cannot go into the region alone unless they are an established name in the market.

"Even so, stiff competition will make one rethink one's strategies there," he said. "Companies with good local partners and a sound business strategy stand a better chance of succeeding in the region in the long run."

Norbik encouraged local companies to engage resources provided by government agencies such as the MDeC, Malaysian Industrial Development Authority (MIDA) and MATRADE (Malaysia External Trade Development Corporation). He said these government bodies have continued to support Scan Associates in various ways, including providing business leads through B2B (business-to-business) matching activities.

CSF's Yong said another challenge local companies face is that Middle Eastern clients still prefer to deal with American and European companies, perceiving Westerners to be better business partners.

"[But], Malaysia has a bit of an advantage in that they see us as a friendly and progressive Islamic country," he said.

"There have been some Middle Eastern firms that have begun accepting Malaysian ICT consulting expertise that are competitive in nature, especially when they realized that Western firms have been overcharging them," Yong noted.

His advice to local entrepreneurs seeking opportunities in the Middle East: "Take the smaller jobs first, and build a reputation by providing good, speedy but quality delivery."

Edwin Yapp is a freelance IT writer based in Malaysia.