RIYADH/JEDDAH, 4 July 2006 — The Saudi Economic and Development Company (SEDCO) has acquired a 30 percent stake in EJADA Systems Company Limited (EJADA). SEDCO (www.sedco.com) is a global investment management company based in Jeddah. In addition to SEDCO, other institutional investors are already stakeholders in EJADA.
EJADA (www.ejada.com) was formed in early 2005 through the merger of Advanced Computer Technology (ACT), NEWTEK Solutions International (NEWTEK) and Elite Computer Solutions (Elite), creating one of the largest IT services and solutions companies in the Middle East. EJADA focuses on providing IT services and solutions to organizations in finance, oil and gas, telecom, heath care, education, military and government sectors in the region.
SEDCO’s investment in EJADA is geared toward creating the first truly regional IT services and solutions provider in the Middle East and North Africa. EJADA has already demonstrated strong growth since the 2005 merger, expanding its customer base and winning a number of key contracts from new clients including the Saudi government. The additional capital provided by SEDCO will allow EJADA to expand its operations in order to capture a larger share of the rapidly growing IT sector in Saudi Arabia and across the MENA region.
Last Tuesday, in an exclusive interview, Arab News met with members of SEDCO and EJADA’s executive team who were in Istanbul, engaged in other business.
“This investment is a very important move to get SEDCO into the IT sector,” said Abdelelah Salim Binmahfouz, shareholder and director of SEDCO. “It is a strategic investment for our company considering what we see as the future for the IT sector in the MENA region. We strongly believe that it will be one of the major industries for the region for the next 15 to 20 years.”
While there has been no history of establishing large IT services companies in the region, Binmahfouz has no doubt that for the industry to become more sophisticated there is a need to scale up operations.
“The move that this group made by coming together and forming the existing company drew our attention,” he remarked. “They are on the right track to form something substantial enough to make it noticeable and seen in the market and to be able to carry out the services that are required by the market in the future.”
These are services that Binmahfouz is certain will be essential to organizations in MENA.
“IT is not a cost center. We as investors who have just joined EJADA would not have involved ourselves in a business that did not deliver an attractive return on investment both to ourselves and the market,” he commented. “Companies who continue to have the false impression that IT creates costs rather than brings cost savings and other opportunities, are missing the point and are actually not managing their costs properly. With the correct implementation, IT can enable a business to do better financially. Look at how much an IT solution can save in inventory management or HR management. For many companies this can be in the millions. Nowadays, analysis of IT implementations can predict the cost savings and business benefits that come from using specific solutions so companies have no reason to hesitate in making an investment in IT solutions. Within SEDCO, we perceive IT as a competitive tool.”
It is a tool that EJADA would like to offer as a means of empowerment to numerous organizations across MENA in order to help them face the challenges of a global economy. EJADA operates from its head office in Riyadh and through its branches in Jeddah, Alkhobar, Amman, Cairo, Alexandria and Dubai and through its partners in Beirut, Kuwait, Yemen and Oman. With a locally based and culturally aware work force of 400-plus professionals and strong strategic alliances and partnerships with leading global technology providers, EJADA expects to grow its business in Saudi Arabia and across the region rapidly over the next five years, focusing on delivering successful IT projects to a broad range of large enterprises. Saudi Arabia is still the most important market for EJADA and for the present, the majority of its capabilities will continue to be based there.
SEDCO’s investment is a clear indication of the bright future ahead for EJADA. According to Yousuf Khayat, MD of SEDCO’s Direct Investment Group, “SEDCO prides itself as being the leading private wealth management and investment organization in Saudi Arabia and the Middle East. We are long-term investors who look for opportunities to invest in promising Middle Eastern companies and help these businesses to grow across the region. We believe that EJADA has the potential to become the leading IT services and solutions provider in the Middle East, with strong brand recognition and a diversified customer base. We are pleased to be able to help the company achieve its potential and look forward to working with the EJADA management to create the Middle East’s own IT powerhouse.”
Perhaps it will not be as large as the major IT services companies in the West but it is planned that EJADA will certainly be large relative to the market and this will bring advantages.
“There are significant opportunities that remain untapped in the region,” said Khayat. “Most of the larger IT contracts in the region still are handled by the services divisions of the international vendors. EJADA is aiming to be a trusted regional company that will be working hard to take a greater share of the pie for enterprise and government implementations. We believe that keeping those revenues in the region will be of great benefit to the local economies. Growth in the size and sophistication of the service offering from EJADA will bring the credibility needed to give large organizations the confidence to turn to EJADA for IT solutions.”
Consequently, there is an urgent mandate to grow EJADA rapidly. Khayat asserted the wisest and most efficient way of achieving the needed growth would include acquisitions.
“Most of the large international IT firms have grown rapidly through acquisitions — take Oracle for example,” he explained. “The challenge is to see where other companies can complement EJADA. It is important though to verify whether the corporate cultures can mesh before an acquisition is seriously considered. That is not to say that there will not be organic growth of EJADA. The company now has adequate capital to grow and every effort will be made to add managerial and technical talent to the team.”
Does that mean that EJADA will be attempting to acquire its competitors in the regional marketplace?
“In business this can be a positive tactic,” said Khayat. “If a competitor has complementary products, staff or other features, why not attempt to join with them rather than constantly be coming up against them in the market? EJADA will never be the only player in town though, and competition is good because it keeps everyone motivated to provide better services. EJADA is large compared to the other players in the regional market but smaller compared to major international vendors. The challenge ahead is to grow those factors that differentiate EJADA from both the local and international competition.”
Khayat made it clear that there was no plan for EJADA to actively work to crush the competition. The fact is however that economies of scale, high level offerings and market experience are already giving EJADA an edge over other local IT firms. With a strong balance sheet, EJADA can afford to take the long view allowing the company to be more competitive on price. This effectively may drive some smaller local firms to seek to align themselves with stronger partners, increasing consolidation in the market.
“I will reiterate again that this is a strategic investment for SEDCO. We have always been interested to have an investment in the IT sector but until now we had not found the right vehicle,” Khayat said. “We believe that EJADA is the right vehicle and any further investments in this sector, to the extent possible, we would want to do through the EJADA platform.”
The rewards for a successful partnership could be great. According to Business Monitor International, the IT services market in Saudi Arabia alone is expected to reach $1 billion in 2006, from $700 million in 2005. Regional growth in the IT sector is expected to remain strong over the next five years, supported by government initiatives to automate processes and enhance e-government services.
In discussing the deal, Yasin Bakhsh, chairman of EJADA, said: “SEDCO’s investment brings a valuable contribution toward achieving EJADA’s vision of being recognized as the largest, most trusted and innovative IT services and solutions company in the Middle East & North Africa. We are known in the market for our ability to successfully deliver complex, large scale IT projects. We are committed to enabling our clients’ business excellence by ensuring the highest standards of implementation, integration, consulting and support services.”
Youssef Ward, president of EJADA, continued: “Our clients want a partner who understands their business, understands their pain and will enable them to run their business efficiently. Companies don’t want to be focusing on IT. They want to focus on their core operations and they want technology to enable them — not cause disruption. Companies want IT to help them serve customers both from a technology and business point of view.”
Ward observed that in the past, some companies chose technology solutions without fully understanding their impact on the business. EJADA always considers the business processes and maps the technology to those processes.
“There is no project that we have done where we implemented just a technology solution,” he said. “We implement technology along with change management, training, enhancement of processes and procedures and of course, on going support to help companies make the most of their investment.”
When it comes to investment in IT, Ward explained that companies in the GCC aren’t interested anymore in re-inventing the wheel. They want to take the best solutions available from global vendors.
“But it’s not just about taking the solutions as they come from the international vendors, giving them to the customers and walking away,” he clarified. “Customers depend on us to intelligently customize those solutions, within limits, so that their business processes are optimized.”
So, a technology company EJADA definitely is, but Ward emphasized that they’d be nowhere without talented people. The company is making a significant investment in training both of fresh graduates and upgrading the skills of experienced staff members.
“Everyone in EJADA has a development program that helps us to continually grow their skills according to not only the market requirements but also in their areas of interest and talent,” explained Ward. “Today, with the growth happening in the market everyone is on the lookout for good people. The art of retaining and attracting people and creating corporate loyalty depends not only on financial incentives but also on professional challenges and a stimulating corporate culture.”
To decide on its future, currently EJADA is engaged in an exercise to map the situation in each major vertical in each country across the region and consider the viability of having a presence in that geography. Then appropriate investments will be made in ways that will bring a broad range of benefits.
“EJADA is different from organizations that come from outside, make their revenue and then those funds leave the region,” said Ward. “We are from the region and for the region. We are going to invest more and more in creating resources for the region — that means hiring and training locally, and bringing top technology solutions to the region. We are planning geographical growth and growth within industry verticals. We also want to be a good corporate citizen in other ways. We have already begun contributing on a social level and we plan to do more for the society in the future. We have strategy meetings in the coming weeks and then we will certainly be addressing the market again. Transparency coupled with well-considered action will always be key components of EJADA’s way forward.”
