SMBs in the Middle East (pt I): Challenges

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July 28, 2012 by Dan Swinhoe

First some good news, it seems SMBs in the Middle East are on the up. Reports put Middle East spending on IT for this year well above the global average. And a recent survey found SMB IT budgets are up across the world, mostly due purchasing tablets and staff increases. And with 69% of business professionals in the region owning a tablet there’s no reason to think their companies’ budgets aren’t running on a similar trend. However, there are plenty of problems too. Some are governmental; some are more with businesses themselves. But more good news, none of them are impossible to fix.

Wide-Ranging Problems

Like SMBs around the world, security is still a big issue, both at a national and local level. The UAE and Saudi Arabia are amongst the countries most vulnerable for hacker attacks and cyber-crimes (attacks are somewhere around four times more common than in the US). DDoS (Distributed Denial of Service) attacks are on the rise, especially within the financial sector, and scams are also on the rise. Organizations need to be able to control these attacks, or risk losing the trust of their customers. And while worldwide spam levels are down, almost three quarters of all emails in the UAE are unwanted advertising or malicious attacks, up 81% on the year before.

Mobile security problems are rising, with one Symantec strategist warning that “the level of security on smartphones is nowhere near an acceptable level” for smartphones in the region. With smart devices and mobility being such a big enabler for SMBs, this is something that needs addressing quickly. And as Android phones are more at risk (and as they are gaining ground quickly on Apple) it should be a priority for businesses to increase security.

The move towards cloud computing and virtualization is gaining pace, but inevitably brings new challenges to security, and while many of them are still be worked out, care must be taken. Also it’s worth noting that while it wasn’t aimed at SMBs, the recent Flame attacks also serve as a reminder that political motives can also put business’s systems at risk.

The recent political instability has inevitably slowed the growth of all businesses in the region, and in some cases is still present to various degrees. For example Saudi Arabia is expected to grow by over 10% while Egypt, after IT spending contracted 20% last year, will likely only start to see spending return to normal levels once the elections and their fall-out have properly quietened down.

Problems On The Ground

On more local levels, Lenovo has said budget constraints and better collaboration tools to balance the appetite for new technologies are two big challenges SMBs in the region face. Polling revealed that IT budgets of small businesses in countries like Saudi Arabia, Egypt and the UAE are at the very most, $10,000 per year. 17% of these businesses aren’t allocating more than $5,000 to their IT budgets. Symantec said this poll was proof that “a high percentage of SMBs are making purchase decisions for IT on a need basis, without threat assessment of their critical information, and without long-term planning.” The also said backup and recovery was a major issue, with many SMBs using CDs or DVDs, and very few backing up on a daily basis.
Regulation and legislation are also stifling business. According to Worldbank, “The region has yet to move away from relationships between narrow political and economic elites that are not transparent and that undermine competition and pro-growth policies.” The ease of starting and conducting business varies, but many countries are making moves to relax the rules and encourage growth. As well as regulation, financial institutions are less willing to lend to smaller businesses than they are to larger, more established firms. While it’s understandable banks may be wary of lending to smaller businesses in tough economic times, the World Bank & Union Of Arab Banks warnthat”the lack of access to external finance constitutes a major constraint to SME growth.” Corruption also plays its part, but isn’t as bad as places such as India.

Many of the difficulties SMBs face was summed up very nicely by Dr Tarik Yousef, CEO of Doha-based Silatech. He claimed governments are not doing enough to help young entrepreneurs in the region. Lack of initiatives and lack of funding from financial institutions were stifling opportunities for the young, “Look around you in the UAE, in Qatar and most of the Gulf countries. How many banks are willing to actually lend to young people for business purposes?” he asked. At the moment this isn’t a problem, as entrepreneurs in the Middle East are generally older than those in other regions. But as they start to retire, the younger ones will need to be able to replace them.

SMBs play a massive part of the Middle Eastern economy. In Dubai alone they make up 95% of all businesses and employ over 40% of the country’s workforce. Doing business is easy, and starting one isn’t particularly difficult for most of the region (as long as you’re the right age). But security and regulation remain two of the biggest barriers for SMBs succeeding. Things are progressing slowly, but as technology moves on, the need to bump up security will only escalate.

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