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Perspective Karim Sabbagh Ramez Shehadi Shant Oknayan Next-Generation ICT Parks Bridging the GCC Technology Gap Contact Information Beirut Ramez Shehadi Partner +961-1-985-655 [email protected] Dubai Karim Sabbagh Partner +971-4-390-0260 [email protected] Shant Oknayan Associate +971-4-390-0260 [email protected] Ramy Sfeir, Philip Stork, and Sandeep Ganediwalla also contributed to this Perspective. Booz & Company EXECUTIVE As the countries of the Gulf Cooperation Council (GCC) SUMMARY seek ways to diversify their economies, information and communications technology parks (ICT parks) will continue to play a central role. ICT parks—which typically house clusters of technology companies in cities or near universities—help to nurture fledgling technology industries by building pools of both native and evolving talent. The GCC’s existing ICT parks focus on either achieving commercial success or fostering the development of local talent, but not both at once. To be more effective, the GCC’s next-generation ICT parks will need to combine and broaden their objectives to create stronger links between government, education, and industry in the ICT arena. In order to attract and retain talent, these parks will also need excellent lifestyle amenities such as schools, housing, landscaping, and retail and entertainment outlets. Structured correctly, these new ICT parks will be able to operate along the full ICT value chain, from ideation to commercialization, and will be well positioned to help fulfill the expanding economic missions of the GCC. Booz & Company 1 ICT PARKS UN’s e-Government Readiness Index in 2008, up from 13th place in 2003 PLAY A (both indexes measure the maturity of SIGNIFICANT ICT in a region). ROLE IN Today, the countries of the GCC ENABLING find themselves in a similar position of being full of economic potential NASCENT and asset-rich, but still needing a far TECHNOLOGY more mature technology industry to thrive. Indeed, because the region INDUSTRIES relies considerably on imported skilled labor, most of the technology projects in the GCC, by default, go to foreign contractors. Typically, these contrac- tors are not committed to the long- In the 1990s and well into this decade, term effort of building a grass-roots Key Findings the South Korean government reaf- technology industry in the GCC. firmed its commitment to Daedeok The GCC region will need to grow its Innopolis—a research and develop- To change this dynamic and to organi- own technology talent—not domi- ment district initially established in cally grow and enhance technology nantly import it from other countries— 1973—with political backing and skills and knowledge in the region, the in order to diversify its economies. funding. South Korea did so because, GCC—like South Korea before it—is Many countries rely on ICT parks— like many developing countries, it turning to the model of ICT parks. which provide office space to hun- had arrived at a point in its eco- ICT parks enable a concerted leap into dreds of technology companies, nomic development when it needed the digital age by creating a dynamic researchers, and academics—to a more mature technology industry environment in which local talent is improve their indigenous technology in order to advance. The effort and incubated, cultivated, and shared. The capabilities. investment paid off; South Korea has GCC’s next-generation ICT parks— been listed first on the International with broader and more advanced mis- The GCC’s ICT parks tend to focus on Telecommunication Union’s Digital sions than existing ICT parks—will either driving rental fees or incubating Opportunity Index, between 2000 and be able to serve as prime drivers in the local talent—but usually not both. 2006,1 and rose to sixth place on the GCC’s diversification efforts. Next-generation ICT parks can be used to create a vital link between government, education, and indus- try, and to address pressing lifestyle needs of the talent they attract. ICT parks enable a concerted leap into the digital age. 2 Booz & Company THE There is no question as to the raw The growth of non-oil sectors creates potential of the GCC. The GCC increasing demand for sophisticated GROWING NEED economies continue to grow at an expertise. Most of this expertise FOR LOCAL unprecedented pace. Over the past has not been available locally. The five years, oil revenue has allowed resulting gap is filled with an influx ICT TALENT the GCC to start a number of large of foreign skilled labor often lured development projects intended to spur by the opportunity to earn a lot growth in non-oil sectors in order of money on a particular project. to diversify its economies and lessen Many expatriate workers do not stay their dependence on hydrocarbons. long, rendering the GCC countries Of the GCC’s US$1.5 trillion pipeline dependent on a continuous cycle of of projects, 78 percent exists outside “knowledge through acquisition.” the oil industry, predominantly This is not ideal for establishing a mega-infrastructure projects.2 These knowledge-based society. investments have multiplier effects. They provide opportunities to grow What is needed, as the GCC secondary sectors and services as countries take steps toward economic well as inject liquidity into the diversification generally and toward market, ultimately serving to create becoming knowledge economies a more sustainable socioeconomic specifically, is an investment in local environment. talent development. ICT needs to be a primary focus, as economic growth depends on technology. Booz & Company 3 THE GCC’S ICT, according to its technical defini- This growth is driven by increased tion, consists of the hardware, soft- demand for ICT from both the public ICT OUTLOOK ware, networks, and media necessary and private sectors. ICT now plays a for the collection, storage, process- key transformation role in telecom- ing, transmission, and presentation munications, oil and gas (digital oil of information (voice, data, text, fields), construction (smart-city tech- images), as well as related services. nologies), healthcare (integrated health It can be both a core industry and networks), and public institutions an enabling one. As a core industry, (e-government). These projects help ICT offers products and services that bridge the digital divide in a region in improve people’s lives through the use which most households have yet to use of technology. As an enabling indus- ICT to its full range and potential. try, ICT provides technology solutions to other sectors of an economy, allow- The current ICT effort in the GCC ing them to operate more efficiently remains mostly imported, a good and improve their services. or service provided by international companies that have limited under- Since 2003, ICT spending in the standing of the local environment and GCC has grown by a double-digit culture, and little incentive to settle percentage, to $33 billion in 2007. in the region and contribute to the The rapid growth—more than twice development of a grassroots industry. the average of the Organisation This is a major impediment to progress for Economic Co-operation and and produces significant challenges. Development (OECD) countries, Inconsistent quality of service is one; a and 50 percent higher than the global lack of responsiveness to some of the average—is expected to continue region’s most important development in the coming years (see Exhibit 1). projects is another. The issue is exac- Exhibit 1 ICT Spending Continues to Grow ANNUAL ICT SPEND GROWTH RatES BY REGION (2004–2011) 18% 16% 14% 12% 10% CAGR CAGR 8% 2004–2007 2007–2011E 6% GCC 15.6% 9.9% 4% Global Average 9.6% 6.2% OECD 7.3% 4.1% 2% 0% 2004 2005 2006 2007 2008E 2009E 2010E 2011E Note: OECD data excludes Iceland and Luxembourg; global average includes the 75 countries with the largest ICT spend Source: WITSA, Digital Planet 2008; Booz & Company analysis 4 Booz & Company erbated by most GCC countries’ lack Characteristics and Trends of ICT Parks of an actionable national ICT agenda ICT parks are geographically delimited, physically secure areas, operated by a to help develop ICT capabilities, single administration, that house companies in the ICT business. The following limiting the positive role the region’s six characteristics determine the construct of ICT parks and help determine the educational institutions might play. type of tenants that ultimately move there: Furthermore, the GCC still lacks trans- parent policies and regulations pertain- • Vision ing to intellectual property (IP) and copyright protection and does not have • ICT Clusters a mature venture capital infrastructure. • Infrastructure & Services Currently these factors make the envi- ronment for startups suboptimal. • Enablers & Stakeholders • Regulations & Governance To overcome these gaps and fur- ther ignite the development of a • Target Markets regional ICT industry, GCC coun- tries are beginning to apply the 1. Vision: This refers to the purpose, overall objectives, and focus of the ICT lessons learned from more advanced park. An ICT park’s vision is typically aligned with the host country’s economic countries. For instance, the GCC development needs and aspirations. countries now direct some invest- 2. ICT Clusters: The different companies drawn to an ICT park can be grouped in ments toward state-of-the-art ICT “clusters” depending on the customers they serve or the pieces of the technol- research and development (R&D) ogy solution they provide. For instance, an ICT cluster could serve the needs of and are forging partnerships with the energy industry, as many of the ICT parks in the GCC do, or it might serve world-class technology universities, the needs of the government sector. ICT clusters might also serve industries like similar to the South Korean approach finance, aviation, and aerospace and defense. The companies in the cluster typi- with Daedeok Innopolis ICT park.

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