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Sizing up managed IT services opportunity in the Middle East

Sizing up managed IT services opportunity in the Middle East
September 03, 2018

When I began my career in IT consultancy three decades ago, most IT consultancies faced a major hurdle: convincing companies that business process outsourcing to an unseen third party, four or more time zones away, could save them money and make them stronger.

Since then, we’ve proved the skeptics wrong. Managed IT services is now a $150+ billion global industry — and still growing rapidly. I have watched my own IT consultancy firm, HCL Technologies, grow from an Indian company of 4,500 employees with $200 million in revenue back in 2000 to a global company with 120,000 employees that earned $7.4 billion in 2017, and become a trusted managed service partner of over half of the Fortune 500 companies.

Managed IT services is now a $150+ billion global industry — and still growing rapidly

I like to think that my experience at the heart of this transformation has given me a good eye for a major business opportunity – which is why I jumped at the chance to take on HCL’s Middle East portfolio.

Sizing up the Middle Eastern opportunity for managed IT services

As you know, there’s a lot to like about the Middle Eastern IT consultancy market. The World Bank sees a steady 3% growth for the Middle East and North Africa by the end of this decade. Analysts have identified important structural changes in the region with the, governments improvinge their fiscal positions, the introduction of a wide variety of policy reforms, and investments in infrastructure as the primary reasons accounting for this growth.

[http://pubdocs.worldbank.org/en/124691512062603210/Global-Economic-Prospects-Jan-2018-Middle-East-and-North-Africa-analysis.pdf]

The business culture in the Middle East is also getting more sophisticated, allowing local businesses to rank with the best in the world. For instance, Careem, a Dubai ride-sharing app, is beating Uber in the Middle East, thanks to a proprietary mapping system. Also, Emirates, the world’s largest airline, was recognized as the “Airline of the Year” at Air Transport Awards 2018. The selection was made by a jury of experts from different sectors within the aviation industry. Other Middle East & North Africa companies have been given the ultimate vote of confidence. Souq, for example, an e-commerce site founded with five employees in Dubai 2005, was purchased by Amazon in 2017 for around $800 million.

Beyond all that, I’m optimistic because even though many leading Middle Eastern companies are already doing many things right, most have yet to take full advantage of what managed IT consultancy services can do for them.

Why not? I think this could be because some business leaders here still subscribe to certain myths about managed IT services:

Managed services are all about labor cost arbitrage. The traditional thinking about managed IT solutions was that the advantages were mostly a matter of labor cost savings. However, efficient business operations and innovations have turned out to be more significant gains. In India, for example, where I have served as the SVP & Business head of country for five years, most of the companies that have chosen HCL as their managed service partner have experienced above-average revenue growth.

Managed services companies are only good for optimizing routine operations. Our Indian clients tell us that they have actually gained a number of important strategic advantages, such as being able to perform on par with international standards, without having to spend the time and resources needed to develop their own world-class IT program. Here too, the early signs are promising. Our Middle Eastern clients have reported a minimum of 30% revenue growth after transitioning aggressively to managed services, and 15% growth in profitability.

Managed services are only for mature companies. As much as managed services have to offer to major companies, they may actually be even more valuable for young, fast-growing firms. For a start-up on the fast track, the ability to scale seamlessly with growth is a huge advantage, making it easier for the company to focus on the areas where it hopes to make its mark.

At least half of the Fortune 500 are already convinced. What about you?

Next: What managed IT services can do for you.