RIYADH, 20 May — Application Service Providers are third-party entities that manage and distribute software-based services and solutions to customers across a wide area network from a central data center. Basically, ASPs are a way for companies to outsource some or almost all aspects of their information technology needs. ASPs developed due to a realization that software could be marketed as a service instead of a product. ASP clients pay a fee, generally monthly, for the desired software and hardware services instead of purchasing the licenses and equipment outright. The global market for ASPs was valued at less than $1 billion in 1998 and has been forecast to exceed $20 billion by 2003.
According to Joseph Braude, Middle East & North Africa Analyst for Pyramid Research, more than $2.1 billion in IT hardware, software and support services were sold last year in the Arab Middle East and North Africa. Pyramid Research forecasts that the annual value of the market will reach $8.9 billion in 2005. About 59 percent of last year’s demand came from three countries in the region: Egypt, Saudi Arabia and the United Arab Emirates (UAE). These countries will still account for 64 percent of the figure forecast for the region in 2005. High piracy rates mean that hardware still makes up most of those purchases but that is set to change as governmental anti-piracy efforts increase and the market comes to value software support as much as the original product.
Into this market are entering the first ASP pioneers. They face an enormous challenge to educate the market on the potentials of outsourcing and gain market trust in the concept. In his White Paper, “ASP Strategies and IT Markets in the Arab World,” released at pyramidresearch.com May 2001, Braude stated that while the overwhelming majority of Saudi Arabia’s 150,000 businesses are low-tech service and trading concerns, the 5,000 companies with more than 500 employees all use computers and hence could constitute an immediate revenue lifeline for new ASPs.
“Seasoned IT entrepreneurs in the Kingdom recognize that a viable Saudi ASP model in the short and medium term must tailor its suite of applications offerings to certain key vertical markets,” said Braude. “In some cases, the markets are open to several service providers, whereas others call for a single contractor. Winning companies will be those that fuse prowess in applications development with a solid Internet design and service provision infrastructure. Known commodities and their foreign partners will be favored over others.”
Braude suggests that in the short-term ASPs would be well advised to target the health care sector, the travel industry and certain government ministries such as the Ministry of Haj and Endowments and the Ministry of Education. Taking a longer view the retail sector, construction and manufacturing will also prove profitable.
At E-Commerce Saudi Arabia 2001 some of the most reputable names in business in the Kingdom stepped forward to make a major announcement regarding the availability of the ASP model to the Kingdom’s small and medium sized enterprises (SMEs). Integrated Visions, founded by Sheikh Bakr BinLaden, Baharoon Development Corp. and the Saudi BinLaden Group, has signed an agreement with Microsoft Corporation to become the first authorized ASP in Saudi Arabia.
“In today’s Internet business with its imperatives and increasing emphasis on customer care, organizations of all sizes are turning to application service providers for assistance,” said Sheikh Bakr BinLaden, Chairman, Integrated Visions. “This contract is coming to answer the computing challenges of reach, independence, predictability and cost for our valuable customers.”
Integrated Visions has just completed the construction of its Jeddah data center. It is one of three global data centers, each of which will function as a regional springboard for the unrolling of ASP services. The Jeddah data center will cater to the needs of the Gulf region. The data center in Kuala Lumpur will focus on businesses and governments in Asia/Pacific. The third data center, located in Cairo, will serve the African and eastern Mediterranean market. Hewlett Packard supplied the infrastructure in Saudi Arabia. IBM was contracted for Malaysia and Sun is the vendor for Egypt. The data centers are empowered by Equant. To gain access to the points of presence and backbone connectivity necessary for application service provision, I Visions will be using SaudiOnline (SOL) as its ISP. While the company has initially made an agreement with Microsoft for their applications, in the future I Visions will be signing agreements with other software vendors as well, to serve all the needs of their customers.
Immediately after the signing of the ASP agreement with Microsoft in Riyadh at the e-commerce conference, Sheikh Mohammed M. BinLaden, VP Development Affairs, Saudi BinLaden Group and a board member, I Visions, and Issam O. Abou Nasr, President, I Visions, sat down to discuss the new endeavor.
“Microsoft creates beautiful products that help companies and organizations excel by allowing them to focus on their core businesses and leaving the clerical, statistical and management means and tools to be held and done by the software provider,” said BinLaden. “This software and the licensing of it is quite an expensive tool for medium and small companies in Saudi Arabia. Companies have to set up IT departments, purchase products, train employees — there are so many costs. What we have found is that having an ASP in I Visions to approach SMEs will allow them to reengineer and re-innovate their businesses and help them to focus on their core business activities. We can help them by allowing them to bypass all the difficulties associated with software ownership. We will handle everything on the data management side. Once a company comes to see the benefit of the software they are using they can purchase it outright from the software vendor, if they so choose. For companies the ASP model is just a lease agreement that will minimize their exposure on cost and on risk.”
Perhaps the biggest problem to be overcome in getting this market to consider using an ASP is the issue of trust. The president of I Visions took up this subject without hesitation.
“Trust. Businessmen should remember that Saudi BinLaden built 70 percent of the infrastructure in the Kingdom in the past,” pointed out Abou Nasr. “Now they aim to use that same excellence and integrity in their involvement in the IT field to help the Kingdom move with speed and skill down virtual roads. Our foundation is here in this market and we have signed a joint cooperation agreement with a company called Equant, which will help with the data transfer, firewall and other security issues. All data movement will be recorded and customers will be advised in advance and in detail about any enhancements we are making to their data management. Customers will have total access to these records. In addition we will be having outside security auditing so that even our own management and employees will be supervised.”
I Visions’ partnership with Equant will allow them to become a Public Key Infrastructure (PKI) certification authority. This will enable them to help managers adopt PKI technology throughout their organizations. PKI will be used extensively to enhance all of I Visions own security. In addition if a customer would prefer, data may be hosted at the customer’s data center still using I Visions as an ASP.
While I Visions is pleased to work with SMEs they also plan to help large organizations have their own ASPs.
“At Saudi BinLaden group I know that vendors have a tough time following our software licenses with them because we have started so many industries and subsidiaries,” said BinLaden. “Each of our subsidiaries is doing a license on its own. If we can have an internal ASP controlling all the licensing agreements with each vendor it would make life much easier. We could have large blanket contracts and service agreements and our tracking of these agreements would be less costly and time consuming.”
To the concern of the infrastructure difficulties on data movement in Saudi Arabia, Abou Nasr stated that it should not worry companies because I Visions had already thoroughly investigated the issue.
“Operating in Saudi Arabia, within the country, having I Visions linked to the ATM backbone, users don’t have to go through the bottleneck at KACST,” he said. “Because we are not going outside we are not going through them. For the people coming from outside that is where we are working to find a solution. For the movement of large amounts of data we recommend that companies use a leased line. To contract a leased line monthly would cost less than half of the salary of one IT person. Using an ASP means that companies that are now using obsolete technology can immediately switch to the latest solutions available and they will not pay more than 30 percent of what they are currently paying to run their IT departments.”
BinLaden added to this sentiment.
“We believe and as our chairman Sheikh Bakr emphasized, e-commerce will not give its true value to the users if they are not e-business enabled,” he said. “In order to benefit from e-commerce you need to have your organization e-business enabled. You need to have an electronic company, business operations wise. This is the only way you will really benefit from the efficiencies introduced by e-commerce. Having said this we need to empower people to have the right e-business solutions to address the environment. So we want to bring everything at the same time. We don’t want people to get excited about e-commerce and then find out that they need to spend a lot of time and cost to be e-business enabled. We want to provide the users with economical, fast e-business enablement before they tackle e-commerce.”
