The Second Wave of E-Business Reaches GCC Mid-Market

However, the region's business landscape, to a great extent, is dominated by small and medium-sized businesses, which employ more than half of the workforce in the states of the Gulf Cooperation Council (GCC), including Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. In this article, Husam Dajani, Vice President Oracle Middle East, explores the challenges facing medium-sized organisations in the GCC and the business drivers for adopting the technology which until recently has been the preserve of the larger enterprise.

While oil has been the traditional economic mainstay of the GCC countries, smaller and medium-sized enterprises form the fastest-growing aspect of the Gulf business community. The contribution of these companies to the regional economy is immense, with new businesses drawn to the entrepreneurial-friendly spirit and tax-free environment found in the GCC states.

However, these companies face challenging times. The continued economic downturn has put severe pressure on lowering operating costs and highlighted an increased need to improve productivity and reduce time to market.

The advent of the GCC Customs Union, which began implementation in January 2003 and covers more than 1,500 imported items, means that mid-sized companies are battling for a piece of a unified trading community, and with larger enterprises increasing their geographic market reach or widening their breadth of products to increase sales, pressure has never been greater for the mid-market.

In addition, the GCC Customs Union is likely to mean increased competition for mid-sized companies as they all home in on the same target markets. The entire sector is struggling to cut costs and increase profits, and companies continue to be lured away by lower labor costs.

These external drivers - economic downturn and increased competition - have resulted in heavy burdens being placed on a mid-sized business' administrative and information technology systems.

Most of the Gulf's larger enterprises, a number of which were early adopters of Internet-based applications, have weathered the economic storm by operating efficiently as e-businesses. To survive alongside this first wave of e-business adoption, mid-market organisations must similarly transform their processes.

Take, for example, a company's financial systems. The potential for the GCC to establish a common market by 2005 and a single currency by 2010 represents a prime opportunity for mid-market companies to anticipate change and simplify their financial structures now.

With one currency, there is no need to have a finance department in different locations around the region. Using Internet-based enterprise applications, mid-market companies can consolidate systems throughout the region in shared service centres, reducing operating costs and streamlining processes.

Mid-market businesses now view technology as a doorway to new markets, as evidenced by increases in IT investment and Internet connectivity in this sector. A recent Oracle study of 600 European mid-market companies underlines this fact. Seventy-two percent of companies interviewed cited access to new markets as the highest-ranking quality benefit for a technology implementation, while response to markets, processing of orders and lower personnel costs were ranked as other top benefits.

So what's stopping these smaller firms from adopting e-business? Factors such as fear of cost, and of disruption to daily business are uppermost. Forrester Research reports that many companies find some e-business applications difficult to use, forcing up implementation costs by as much as 15 percent .

Typically, mid-market companies do not have large in-house IT teams or sizeable IT budgets. In the past, this meant that they could not afford to buy, implement or manage the latest e-business systems - putting all of the associated benefits of these systems out of their reach.

Furthermore, AMR Research reports that the mid-market business is moving away from large-scale, protracted IT projects towards rapid implementation with a guaranteed return on investment.

AMR reported in 2002 that companies are looking to implement projects in a timeframe of 13 weeks and to achieve return on investment in approximately six months. Heavy customisation is out, in favour of pre-configured software that can deliver the functionality and benefit required without involving excessive time or expense.

The mid-market has many of the same business requirements as larger companies. With this in mind, mid-sized business need the same e-business software capabilities as those enjoyed by large enterprises, not a down-sized, non-scalable version which does not accommodate growth or offer key functionality.

IDC analyst firm predicts 30 percent of European small and medium-sized businesses will increase their IT budgets in 2003. Many of these companies realise that affordable, reliable, secure and scalable e-business software can boost overall profitability and provide a competitive edge. It can also enable them to fully modernise their back office, consolidate systems, improve processes and reduce costs.

In addition, companies should make open standards an essential criterion of their IT system selection process, so that the business does not become tied into a single technology platform, but can integrate seamlessly with various types of technology. This is especially important as a company looks to merge or partner with another business that may be relying on a different technology infrastructure.

Today, the first wave of e-business is well-established amongst the larger enterprise market in the Gulf. The current factors of economic downturn and increased competition, coupled with the advent of the Gulf Customs Union and the potential for a common market and single currency, mean that emerging companies must view new technology solutions as enablers to benefit from these market changes rather than being defeated by them.

With the right software in place, the GCC's smaller and medium-sized companies can be in the forefront of the second wave of e-business, and profit from that leadership.