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The enterprise cloud opportunity – the Middle East

August 1, 2011

Most people would claim cloud computing is a global concept and therefore the origin of the provider and the location of the datacenters do not matter. In theory this might be right. The reality looks different. Two major limiting factors are network bandwidth (or cost for it) and privacy or in a broader sense trust.

When you look at it, the majority of the major players in the cloud market are from the U.S.A. like e.g. Amazon, Google, Microsoft and salesforce.com.

In the Middle East we face a very interesting situation. It is a prospering area in terms of business growth and a huge opportunity. The two key factors that make it such a huge opportunity are lack of bandwidth or the high cost of it and the lack of trust into American companies and government alike.

Network bandwidth

Even while some of the biggest network cables between Europe and Asia run through the Middle East the cost for getting access to these is very high. In a sense this adds to the situation that the region is somewhat disconnected. Therefore the cloud services delivered from the datacenters of the big players which are either in the U.S.A., Europe or Asia would not work economically. So what you need is local infrastructure that could support the businesses in MEA without the need to tap
into the big networks.

Would this be possible? Yes, why not?

From a resource perspective it makes a lot of sense.

  • Educated workforce
    • There is a great pool of highly trained individuals available in MEA. They are very motivated (have a look at arabnet conferences to get an idea) and available in the market.
  • Energy
    • Always a concern when considering building datacenters especially if considering buildingthese in hot and dry regions.
    • On the other hand this is the region where today’s energy reserves are stored and as a result are comparably cheap and where at least partly the future of energy will be generated (think solar energy).
  • Software licensing/ownership
    • My advice would be not to take something from the existing enterprise software market and build it into a service. It would create license cost and might also affect the trust side of things. Use the creativity of the people to create something new. Why does an enterprise email and collaboration service in MEA need to be based on what we all now? Also you would strengthen the local branding by having created something with the look and feel of the region. Also localization will be easier if you created from ground up based on “free software” and self-created intellectual property

Trust / privacy

Apart from privacy being one of the big themes in general (more in a later blog post) there is a special situation in the Middle East. While speaking to many young and well educated folks I noticed a high skepticism towards companies from the U.S.A. Sure Google is cool and most of these folks would pick the opportunity to work for them but using them is another question. Microsoft is even facing a higher level of doubt. So I believe it is fair to say that a locally created service would find a high level of interest. But does this mean that the business beyond the IT community will pick such a service up? That pretty much depends on the economic model and to what degree privacy is guaranteed on a local level. It does not help if the datacenters will be in a country which grants less privacy to data then e.g. the European Union. By far it should be something that ensures what is regional stays regional. So the company building the datacenter and running the service should have no subsidiary in the U.S.A. to escape the fangs of the Patriot Act. On the other hand you want a certain level of control to not make it a data haven for criminals and terrorists. So it is a difficult balance but I strongly believe it an opportunity for a region or country to become a MEA cloud hot spot like Switzerland was one for banking for a century. But I am going too far into the privacy discussion in general. The one important distinction here is that I do focus on enterprise cloud computing and not the consumer space where cloud offerings have sparked several swings through protesting and using the internet to document and present what is really going on.

Who would be a player that could build a local service and grasp this opportunity? That could be several kind of companies but as the datacenters (you need at least
two) are a huge investment it limits the options somewhat to companies that either have the infrastructure in place or someone (individual, group or
company) who is able to take such an investment.

If you think about it the opportunity to create something that is relevant for the region, for the businesses and in the end touches everybody’s life is not only
a business opportunity but a fascinating endeavor to be part of.

Matthias

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