The Hindu Business Line : IT cos now turn to Gulf

Mumbai, April 14 As Indian infotech companies expand their wings, a new geography is emerging as a growth driver: the GCC region or Gulf Co-operation Council countries.

Fuelling this opportunity is the imminent recession looming over the US, and rising oil prices that leave the GCC countries flush with funds to invest in technology.

The GCC countries are among the fastest growing IT markets in the world, says an IDC report, estimating that the collective IT spend of Gulf states is expected to touch $ 10.53 billion by 2010, growing at 13 per cent annually.

“Gulf state governments have increased their IT budgets considerably, thanks to high oil prices…they are using the opportunity to upgrade infrastructure…,” the research report said.

Oil and gas companies look to implementing IT to manage operations and streamline production processes, the report added. The GCC is constituted by Saudi Arabia, the UAE, Oman, Kuwait, Bahrain and Qatar. The highest demand comes from government and sectors like oil and gas, banking and Islamic finance, says Mr Mustafa Moonim, i-flex Solutions’ Vice-President (Europe and Middle East Sales). IT experts say that Saudi Arabia and the UAE account for more than 70 per cent of the total IT spend in the region.

There is interest in regions such as Bahrain, Qatar and Abu Dhabi to have automated Islamic financial institutions, said Mr Moonim. Many leading banks in the region are also keen on outsourcing IT services to Indian vendors, says Mr Sridhar Kulasekharan, Senior Vice-President, Cybernet-SlashSupport.

In majority cases, contrary to traditional trans-border engagements, Indian companies follow an onshore-centric model. “Roughly 90 per cent of any IT engagement (in this region) is serviced onsite; only the remaining tends to be off shored,” says Mr Virender Aggarwal, Director and Senior Vice-President, Satyam Computer Services.

Going into GCC helps Indian IT companies diversify their revenue base, given the economic volatility in developed economies, says said Mr Milan Sheth, Partner, Business Advisory Services, Ernst and Young.

Further, Mr Aggarwal adds, sky-rocketing costs are forcing firms in the UAE and some other regions to off shoring, there by cutting costs by about 15 per cent.

Since, Gulf States are relatively new to the concept of IT off shoring, deal sizes are small, between a couple of million dollars to over $ 5 million, said an industry analyst.

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