The government's endeavour to bridge the digital divide is powering the growth of IT companies. Mayank Singh reports

“My people often complain that I no longer get excited about contracts worth RO50,000,” says Ashok Sardiwal, CEO, IMTAC. The scale of projects in the IT (Information Technology) industry in the country has seen such a phenomenal jump that Sardiwal can hardly be faulted for being cold to such numbers. A RO25,000-RO30,000 project was considered a top draw for tier-one companies three years back. Today an average IT infrastructure project handled by a tier-one company ranges anywhere from RO75,000 and over.

Growth drivers
The government's ‘Digital Oman’ drive which aims to bridge the digital divide in the sultanate by increasing the usage of IT has been the main reason for the growth of the IT industry in the sultanate. The establishment of the Information Technology Authority (ITA) on May 31, 2006, has proved to be a landmark step in this direction. ITA was given the mandate to develop the ICT (information, communications technology) sector in the sultanate by Royal Decree 52/2006. Says Fawzi al Harrassy, public sector manager, Microsoft, “ITA has brought about a lot of discipline in the IT architecture of the government.”

ITA is working on the twin objectives of creating a national IT infrastructure and building ICT skills in society (initially amongst government departments). The leadership shown by ITA has led to a number of IT projects being implemented by government agencies. The Ministry of Commerce and Industry (MOCI) launched phase one of the electronic one stop shop (OSS) for commercial registrations in May 2006, the Royal Oman Police (ROP) has implemented an online visa facility from January 2007. The government is also working on a number of other projects like the Ubar Portal, which will be the main gateway for electronic services offered by the government, an e-payment gateway and a disaster recovery centre (DRC) which will host the disaster recovery systems of all ministries at Knowledge Oasis Muscat (KOM). The Muscat Municipality is working on a 'Public Programme Service.' The service will help people interact with the municipality (for rent agreements, licences etc) electronically. Most of these initiatives are expected to be up and running this year.

On higher ground
These projects have been keeping IT companies busy. Gulf Business Machines (GBM) is working with ITA on the Ubar Portal and also helping MOCI to develop the platform for OSS. Middle East Data Systems (MDS) is providing the software and application support for the government's Data Centre initiative, while IMTAC is developing the public programme service for Muscat Municipality.

The Seventh Five-Year Plan (2004-09) has allocated RO70mn to ITA for infrastructure spending. Says Salim al Ruzaiqi, CEO, ITA, “We actually spend much more than that.” All ministries have the mandate to spend up to RO25,000 without getting prior approval from the tender board. The fact that the cost of software has fallen by almost one-tenth of what it used to be five years back has meant that there is a solution for every budget. Says G Gopalakrishnan, CEO, Jawad Sultan Techno-logies, "IT spending is no longer seen as an expense but as an investment in an asset."

The increase in the number of projects being commissioned is contributing to the topline of IT companies. Says M K Janaki Raman, general manager, Bahwan IT, “The challenge for most companies today is not getting business but having enough manpower to handle that.” Almost all tier-one companies have seen a topline growth of 20-30 per cent per annum over the last three years. This adds up to 90 per cent growth in size.

The growth of the market has brought in a host of new players. Companies like MDS and Integrated Systems have set up shop in the sultanate in the last few years. Sensing the potential of the country's booming IT market, a number of companies from abroad have been quick to strike up partnerships with local firms. In June 2006, Take Solutions, an IT company operating out of Chennai, India, took a 51 per cent stake in W J Towell Computer Services. This led to the formation of Towell-take Solutions. Some other companies like Wipro Technologies and Tech Mahindra from India have tied up with OHI International Information Technology for short-term projects.

Though most companies are hesitant to share financial details, the rise in manpower requirement is a good indicator of their growth. In the last three years, OHI Interna-tional Information Technology has seen its headcount increase from 80 to 150 while Bahwan IT's strength has gone up from 80 to 140. Microsoft Corporation, Oman, now has an 18-member team as against six in 2004. “When we shifted to our new office in Qurm in 2006, half the space was empty. We are now looking at a situation where we may outgrow this office as our manpower requirements keep increasing,” says Raman.

Expanding knowledge base
The government's e-Oman initiative has been instrumental in raising awareness
levels in the country. This creates an understanding of the benefits that an-IT-based process can bring in. Says Raman, “IT is being recognised not just as an enabler but as a competitive differentiator.”

An automated system brings in a host of advantages. With HR retention being one of the most pressing challenges facing most organisations, an IT-based system helps reduce dependency on one set of people. A process-oriented approach helps qualified personnel take over an automated system in no time. Finally, this also compresses the 'time to market' considerably.

OSS is a good example of the efficiencies that an IT-based platform brings in. MOCI rolled out the first phase of its single-window system for 27 industrial permits in May 2006. The project started as a part of the ministry's efforts to eliminate paper work by capturing information through an e-file.

Every commercial application under the old system needed mandatory clearances from three to six bodies – MOCI, Oman Chamber of Commerce and Industry, the municipality, the Ministry of Manpower, the civil defence authority or ROP and the Ministry of Environment. The process took two to four weeks. Says Manal al Abdwani, director general of planning and follow up, MOCI, “The ministry embarked on a process re-engineering initiative for commercial applications in 2005 to improve efficiencies.”
GBM and Tata Consultancy Services (TCS) have been roped in to develop an e-solution. Says Olivier Mouries, general manager, GBM, “The idea was to empower people through an electronic solution.” The company developed an e-application that captures all the information at a single source (at MOCI). This data is then transmitted to various ministries and organisations, which in turn give their requisite approvals electronically.

The numbers speak for themselves. From the earlier figure of processing 3,000 applications per month, the number has now grown to 11,000. Almost 85 per cent of the approvals are done in a day while the remaining 15 per cent take no more than three days. This is because the approvals are done simultaneously by all the organisations (departments) instead of the sequential system that a paper-based system entailed. These efficiencies have been brought in without an accretion in the staff strength at MOCI. Says Abdwani, “This new system has helped us negotiate the tremendous economic growth that Oman has seen in the last two years.”

The growing knowledge level of IT managers in the last few years has been a welcome change for IT firms. It is helping companies to market their products faster. "Earlier when we spoke to ministries it was about basic entities and hardware, these have now given way to applications," says S Jayakumar, general manager, OHI International Information Technology . So if servers and PCs dominated the sales pitch of companies earlier, these have now given way to software solutions like ERP, BAAN, SAP etc.

Raising the bar
Promoting ICT skills among various government departments is the other big initiative that ITA has been working on. This is important because putting in place an e-service is futile unless those who are supposed to manage the system know how to use it. With entrenched mindsets being a hurdle, ITA is resorting to a carrot-and-stick approach to get its message across. "We are keen to work with various departments as partners, but people need to realise that things need to be done within a certain time frame,” says Ruzaiqi. The backing of a royal decree and the nod to implement a digital agenda from the highest levels have given a boost to ITA.

The authority has partnered with companies like Microsoft, OHI, Bahwan IT and MDS to upgrade the IT skills of officials, students and executives. ITA is setting up an innovation centre at KOM at a cost of US$8mn (RO3.1mn). ITA will invest US$5mn (RO2mn) while Microsoft will contribute the rest. The centre, which had a soft launch in January, will train and equip Omanis with IT skills. The authority has signed a three-year agreement with Microsoft for the purpose.

Training and upgrading skills of nationals is growing as an important revenue stream for IT companies. Microsoft Oman signed a contract with the government in June 2006 to provide software and technology support to 75 entities within the government. This excludes the ministry of education as the corporation already has a 'Partner in Learning' MoU with the ministry since 2004. Says Harrassy, “As a software provider we are helping the government in three areas – capacity building, infrastructure development and the national PC campaign.” Microsoft’s certified partners in Oman – OHI and Bahwan IT – are also helping it achieve these objectives.

How they stack up
Though other sectors like banking, oil and gas, healthcare, hospitality and aviation have also been increasing their spending on IT, the government sector continues to make up the lion's share of the turnover of most companies. It contributes 50 per cent of the top line growth for GBM, Bahwan IT and Microsoft. For OHI International Information Techno-logy, the public sector's contribution is as much as 60 per cent of its turnover. ITA is keen to strengthen this public-private partnership. It has introduced a new BOT (build operate transfer) model wherein private companies will work on a project for at least three years and then take on the task of running the project on their own. The government is keen on letting the private sector run most services except those which are important for national security.

ITA has been encouraging companies to summon the courage to roll out large projects. The authority approached a number of companies to develop and run the e-payment gateway project independently but all of them politely turned down the offer. "The government is handling certain projects which it should not be doing, because the private companies do not want to do those," says Ruzaiqi. Most companies feel that the value these projects generate in the short-term makes them financially unviable. They would also like to see how people accept these services before taking the plunge. Confident about the success of such projects, the government expects companies to buy out these services at a future date. Thus there are a lot of new opportunities waiting to be tapped by the private sector.

In another initiative that will go a long way in helping the IT sector, the government is giving final touches to an e-law. The e-legislation will provide a legal framework for governing the IT sector. Oman is the first country in the region to be looking at such a legislation. Apart from bringing in clarity, the e-law is also sure to raise the country’s credibility as an international business destination.

Achilles heels
Despite the promising showing, there are still a few snags that need to be addressed by the public sector and the market at large. Says C K Anchan, vice president, Towell-take Solutions, "Most people still want to capture marketshare and start making profits before they start spending on processes." While policy makers accept the existence of such naivete in certain quarters, there is a feeling that the market is maturing slowly.
Deployment of technology is another challenge. Though companies in Oman have the best in class technology, the country still has a long way to go when it comes to using it. "At times the decisions take so long that the technology itself gets outdated," says Raman. The sudden increase in the quantum of work since 2005 has led to an increase in demand for IT professionals. The fact that it is getting difficult to attract IT professionals from India has made things worse. Says Sardiwal, "Attrition is a worldwide problem as there is a growing demand for skilled professionals and it will continue to be an issue till the bridge between local expertise and expatriate manpower is bridged." The silver lining to this is that attrition rates in Oman are still at manageable levels compared to countries like India and the US where it is as high as 30 per cent.

Despite these challenges, most IT firms are confident about the growth in government spending and the future prospects of Oman's market. With the commissioning of new projects in Sohar, Salalah and Duqm and the proposed multi-billion tourism projects, IT companies are confident about the good times getting better.