How important is it to have a tier IV data centre in the UAE? In what ways does this facilitate or enable business in the UAE?
ZEINELDIN: We need to first understand what tiering is about. There are typically tier 1, tier 2, tier 3, and tier 4 data centers and they vary in terms of availability. Typically, a tier 3 would give you 99.98% availability, while the tier 4 would give you 99.995% availability. Although that increase sounds trivial, for some applications, such as trading applications, this could be very important. For the majority of the application areas, a well-designed tier 3 where you can maintain any component in the infrastructure concurrently will serve 99% of business requirements. Even if you are in trading you can have your trading platform served by a tier 4 data center and the rest, HR, messaging, CRM, etc. served by a tier 3. Sometimes a well designed tier 3 with a fail safe mechanism to another datacenter can suit all of these needs. For the most part in the GCC, we have mixes of tiers 1,2,3, and 4. Tier one would be for basic telecom equipment for different Points of Presence or what they call POPs. Then there are the tier 2 data centers for IT equipment. Tier 3 runs most of the mission critical systems. There are not as many tier 4 data centers because they come with a very high premium. That .015% increase in availability tends to cost a lot of money. When businesses do a cost-benefit analysis, they typically opt for a tier 3 or what is called a tier 3+ that has more redundancy built into it.
How has the downturn impacted business for you? Which lines were the most vulnerable, which were the most resilient?
ZEINELDIN: The downturn for us was a double-edged sword. In a way it was a blessing in disguise but it also presented some pressure on the business as well. When there is a downturn and capital and credit are tight, what typically happens is businesses tend to minimize CAPEX spending and minimize that into operating expenses and that happens to be precisely our model. You do not have to put a lot of capital up front, you just pay for the services that you need as you go. In a way that was helpful because many of our clients opted for managed services & solutions. Those looking to invest in their own data centers were more inclined to lease them and companies looking to upgrade their security systems were more likely to outsource security infrastructure to people like us. On the negative side, there were margin pressures because of cash and liquidity. There were also less new projects and initiatives and less companies coming to the market. This is a very resilient business in terms of economic downturn.
Do you have any expansion plans domestically or internationally? Where do you anticipate the highest levels of growth will come in ICT in the UAE?
ZEINELDIN: We have expansion plans on a number of fronts. Our co-location data centres have almost reached 100% capacity so we are planning to launch another by the end of this year, so that will double the existing capacity that we have. That is on the data center front. In terms of services, we are also launching a number of new services. Cloud services and virtualization services are very hot right now, so we are introducing those. Also, disaster recovery, especially with what is happening in the region. Many countries are looking for other locations for their operating environments, so we see companies from other countries in the GCC in the financial sector for example, coming and setting up disaster recovery arrangements and seats so the staff can be relocated on a temporary basis. Geographically, we are only expanding through alliances and partnerships outside the UAE. Our primary focus is in the UAE.
The big question is what will the next growth sector be. We believe growth will come from the small and medium enterprises. They represent 90% of the businesses in the UAE. New start-ups especially will be quite hungry for IT services and not necessarily want to load the P&L and CAPEX with a lot of IT related cost because there is a level of uncertainty when you start a business. We are seeing many of these not wanting to invest in staff but still have a good reliable service on a” pay as you go” model. Also, public sector spending is supposed to grow around 14% this year with the government putting more focus on citizen related services and on healthcare and education related services. So we are seeing the e-Government drive is starting to pick up momentum again.
Experts at the Cloud Computing forum in Dubai predict fundamental changes in the UAE’s IT business models in the coming years. What will these changes be?
ZEINELDIN: It is very important to understand the dynamics of the cloud. The cloud is a way of provisioning services. The same applications can be rendered through traditional infrastructure where you would buy hardware and software and make it available to the users, or you can make it available through the cloud. Having something in the cloud does not mean that it is sitting somewhere unknown. There are private clouds. Private clouds means that you slice the computing, storage resources, and storage capacity all being provided in a way that matches the desired workload. Normally, in a public cloud, you do not know where these resources are. They could be sitting in California or London or Dubai. When you have a private cloud, you basically secure that arrangement of provisioning on demand resources to a local cloud provider. The way that provider structures the infrastructure is only for you or a predetermined number of clients that all agree to be on that cloud. So think about it for government entities. Rather than having each entity buy its own hardware and storage and having over capacity at times and under capacity at times, if they share a private cloud, they would have all the capacity needed on demand and it would save everybody money.
We see the region moving into private clouds, both shared and single tenant. We see less international clouds, especially for enterprises, and the reason for that is security concerns. Sometimes there are laws that prohibit sensitive data like financial data or government data outside of the country, so this would open up these kinds of opportunities. There are also certain considerations in terms of service. Having an account manager or a service manager that will talk to you, understand your requirements, guarantee certain levels of availability, understand your language, is available in your time zone, etc. are all key requirements that would make the flavor of local private clouds more appealing to the large enterprises. We expect that the consumer cloud space will pick up across the board. There will be very few players, the likes of Google, Microsoft and Amazon, that will consolidate these. On the small and medium, there will be some requirements for a local presence, but for the most part they will be satisfied to have cloud services provided from anywhere in the world. There are considerations like latency and the sheer physics of serving markets that are close by.
The highly competitive nature of the region is really driving ICT adoption. In terms of projected ICT spend in the region, Saudi Arabia leads with a projected ICT spend of about $6.5bn and the UAE follows that with around $5bn, while the population is only one fifth of Saudi Arabia. So in the UAE we have a very high level of ICT penetration in the community.
Research has indicated that the worldwide cloud services revenue has already touched the USD 68.3 billion mark in 2010. Where is there business opportunity or investment opportunity in cloud services in the UAE today?
ZEINELDIN: I think the opportunities present are three-fold. From a segment standpoint, small and medium enterprises would be the ones that would find cloud services most appealing. From an application standpoint, it would be predominantly horizontal applications; things like messaging, email, information suites, CRM applications, these would be the first areas of interest. From an industry perspective, the hospitality, construction and manufacturing are typically the ones that consume cloud-based services. For example, if you are in construction management, you need to exchange a lot of files and drawings across multiple domains and typically a cloud service is more efficient than trying to establish your own network.
What needs to be done to encourage organic ICT growth in the region? What kinds of support are available for tech based SME’s in the UAE today?
ZEINELDIN: In the growth of the ICT industry in the region, everybody has a role to play. From an infrastructure standpoint, the UAE has done a good job in terms of its ICT infrastructure. The mobile penetration is the highest in the world today, where per 100 people there are about 250 mobiles. In terms of the bandwidth availability and international traffic availability, there has been a lot of work that has happened. There are so many international and multinational companies present here in the UAE. The other part is the ISVs or the local independent software vendors. There is a bit of a challenge there as there are a number of them here, but they predominantly sell bespoke applications as opposed to looking at customers needs and being able to tailor a solution for them. The cloud model would eliminate that dependency. The third dimension to this is the people and their skill sets. This is still a challenge in the UAE. The depth from a vendor’s side in terms of skill sets is still very limited. Most of the multinationals have a sales and marketing presence in the region as opposed to a R&D and development presence. The highly competitive nature of the region is really driving ICT adoption. In terms of projected ICT spend in the region, Saudi Arabia leads with a projected ICT spend of about $6.5bn and the UAE follows that with around $5bn, while the population is only one fifth of Saudi Arabia. So in the UAE we have a very high level of ICT penetration in the community.