While the UAE has a rising demand for IT outsourcing, it is struggling to compete with more established nations.
Lootah to set up IT centre in India
While the UAE is emerging as a significant source of demand for IT outsourcing services, it is struggling to compete with more established nations to become an outsourcing destination. On Tuesday, the SS Lootah group, a local business conglomerate, announced its information technology division will open an offshore development centre in the Indian state of Kerala. Lootah Information Technology Services (Lits) will use the centre to develop and maintain software systems for the company's GCC clients. The company joins businesses like Emirates airline and Dubai World in working with the Indian outsourcing industry on key technology projects.
Lits had been working with IT firms in India for some time, said Abdullah Saeed Lootah, the company's chief executive. "As a natural progression, we are now looking to establish our permanent base in India, known for its IT stronghold and skilled manpower," he said. Authorities in the UAE have long spoken of their ambition to turn the country into a hi-tech hub that global companies turn to when looking for advanced IT services.
But the realities of a serious skills shortage, skyrocketing costs and increasingly competitive industries in nearby nations like Egypt and Jordan have challenged this vision. Instead, a new trend has arisen, with major Indian outsourcers opening local offices to offer closer customer support, regional customisation and increased sales efforts. In 2005, the Government of Dubai, through its Tecom Investments wing, established the Dubai Outsource Zone (DOZ). Offering 100 per cent foreign ownership, no taxes and full repatriation of profits, the DOZ aimed to attract at least 200 companies to the free zone by 2010. Less than 50 are active there today.
The largest domestic outsourcing business is Injazat Data Systems, a joint venture between the Mubadala Development Company, an investment business run by the Abu Dhabi Government, and EDS, the US-based IT services company that recently merged with Hewlett-Packard. "Of course the rising costs of inflation play a part in the cost of a service," said Eddie Cunningham, the head of marketing at Injazat. "But you can counter that by increasing the levels of automation and efficiency."
Injazat will open a new US$100 million (Dh367.3m) data centre in Khalifa bin Zayed city in the coming months. It will be considered a "Tier IV" centre according to industry standards, meaning it will essentially never need to close for maintenance, with data stored there being available 99.995 per cent of the time. "That's how you keep your costs down," said Mr Cunningham. "Better technology will keep us competitive. And companies outsource for different reasons, not all of them cost-related."