Egypt's Software Push: Working Out The Bugs

As Country Strives For Exports, Some Call For Consolidating Efforts

By Dan Bernard

Computers around the globe function thanks to software programmers in Seattle, Tokyo -- and maybe Cairo. Egyptian-made software is inside every computer that sends e-mail with Microsoft Outlook or creates images with Adobe Illustrator, for instance: Components of those programs were made by ITWorx, a company headquartered in the Nasr City Free Zone. And anyone who's worked in the Persian Gulf in recent years likely received a paycheck thanks to Al-Motammen accounting software from Microtech, based in Dokki.

True, the dream of Egypt elbowing its way to a spot alongside the PC powerhouse nations is still mostly a dream. Egypt exported just $50 million worth of software in 2000. Software is one of the smaller sectors of the Egyptian information technology (IT) industry -- roughly 15 percent of total IT revenues estimated at US$849 million for 2001. But analysts say software has one of the highest growth potentials. Software exports doubled in 2001 by initial estimates, and Egypt's Ministry of Communications and Information Technology hopes they will rise to $500 million annually by 2005. And as Egyptian entrepreneurs, government officials and international aid groups passed the two-year mark of Egypt's initiative to expand the domestic IT industry, the boosters are heartened by success stories like ITWorx' and Microtech's.

Yet, two years in, industry experts also are expressing concern about existing programs for training software programmers and marketing software abroad. They say the programs need to be consolidated and focused -- and soon, before another developing nation takes the position that Egypt is pursuing.

"From the government side, different players across different ministries have to realize how critical this industry is, and how much attention it needs it it's going to develop into a major contributor to gross domestic product," said Wael Amin of ITWorx. "It's recognizing that this could be the way out for the country."

Egyptian government officials in charge of the IT push respond that some sense of drift is an unavoidable outgrowth of the domestic and international economic slowdown. But the officials said they are preparing to issue a five-year plan in 2002 that should provide new clarity.

"With the absence of tourism and with the economic recession around the whole world, everyone is recalculating what he is going to do," said Ali El Moselhi, a top official in the Ministry of Communications and Information Technology. "We are planning to revisit that -- with them. We will not pronounce the [strategy] ourselves, but working with the different organizations involved in the industry, we will address, 'What next?'"

Many Helpers

Egypt's run for a prized position in the world software market is showing some concrete signs of progress. In Sixth of October City, construction is proceeding for the first "Smart Village," envisioned as a sprawling IT business complex with tax and tariff benefits where software companies are expected to open in fall 2002. In Dokki, a new office building holds the government's Software Engineering Certification Center, charged with raising professional standards for software developers. In the Nasr City Free Zone, down the road from the building that ITWorx christened in June, a different software maker named ITSoft opened new offices in the fall.

The buildings are the most visible signs of the software push that began in September 1999, when President Hosni Mubarak announced a concerted effort to grow Egypt's IT economy. Mubarak named exporting more software as one of the top priorities along with upgrading the country's e-infrastructure and training more qualified professionals. Those goals -- laying the wires, ensuring Egyptians are qualified to work with them, then making software strong enough to export -- are interrelated. IT professionals need quick and cheap communications systems in place, as well as developers who are familiar with the state of the art in the industry, in order to compete in the fast-moving international market.

Mubarak ordered the formation of the Ministry of Communications and Information Technology (MCIT) to organize the IT initiative. Since then, the MCIT has laid out ambitious goals and moved forward on several, including cracking down on the sale of pirated software in order to increase the confidence of international companies. The government's efforts are supplemented by business-assistance programs funded by the U.S. Agency for International Development (USAID) and, to a lesser extent, the European Union. Several industry associations also are offering their suggestions and strategy.

The ministry and its head, Minister Ahmed Nazif, have been roundly praised on their work toward upgrading telecommunications infrastructure -- providing quick and inexpensive telephone and Internet access. While upgrades in telecom service are being driven naturally by private-sector companies eager to tap Egypt's populous consumer market, industry officials gave the government credit for encouraged the upgrades by devoting focused effort and streamlining the permitting process. The free zones, too, have been praised for simplifying exportation by removing the usual customs hassles (free zones are treated like offshore operations).

Less visible than the new office buildings is the work being done behind the scenes by executive coaches, such as at USAID's lead agency for helping IT entrepreneurs, the Center for Business Support. CBS, which is funded by USAID and managed by the U.S. nonprofit International Executive Service Corps, has advised several aspiring software exporters on the secrets of breaking into foreign markets. CBS holds seminars and lends consultants to companies at home; it also assists them on trips abroad scouting for customers. CBS recently gave select firms a guided tour of California's Silicon Valley, coaching them in advance, subsidizing their travel, and having a consultant meet them for visits to potential client businesses.

The quality of Egyptian software is not in doubt, said Tarek Nabhan, CBS' director of firm-level assistance: It's the management of the product that needs help. There is an impulse among some Egyptian entrepreneurs to spread their energies across a range of business activities, Nabhan said. When they reach their goal with one product or business activity in the domestic market, they may diversify rather than building on a specialty. CBS' advisors "ask Egyptian companies to be focused, not to be everything to everybody," Nabhan said. "They should have specific highlighted areas of activity --to know what you want from American companies, to have your objectives defined.

"Most of the businessmen in these fields, they are excellent technicians. But they need lots of assistance in the business aspects of running their business -- how to market themselves, how to manage orders, how to process it internationally to be able to deliver on those quality products," Nabhan said.

Success Secrets

The advice that Egyptian software entrepreneurs need to specialize is echoed by Wael Amin of ITWorx. The firm is regarded as one of Egypt's top successes in the information economy. Its niche has been approaching Fortune 2000 companies and offering its services in making systems for the businesses' needs, whether they be e-business applications like intranet sites or discrete components for the businesses' own software products. ITWorx' programmers make add-ons for Microsoft's Outlook e-mail/calendar program. They figure out new features for the Adobe's image-manipulation program Illustrator, such as an effect that simulates a camera lens flare. ITWorx landed its contract with Microsoft thanks to thorough advance research about the company's needs, both by reading publicly available documents and by developing acquaintances among the decisionmakers within the American software juggernaut.

Since its founding in 1994 by Amin and CEO Youssri Helmy, ITWorx has doubled its revenues every year, boasting $4.5 million in 2000. Outgrowing its Heliopolis office, the firm approached the Egyptian government about moving into the tax-exempt Nasr City Free Zone and took up residence in early 2001.

Amin, the company's technical director, says the secret is not to develop specialties to meet known opportunities in the marketplace, but to seek opportunities that match the firm's natural talents.

"Understand very well what your core competencies are and how those core competencies translate into a mission for the company," Amin said. "Align the structure of the company, the processes and the culture with that mission. Then just go after it."

By culture, Amin means "values, norms, the things you value. When you're trying to sell across the world, across time zones, you're already dealing with cultural differences. You have to manage your corporate culture and one of your resources."

While ITWorx was getting in the know with big corporate clients, Microtech was conquering the niche of business management software around the Middle East.

Al-Motammen, Microtech's Arabic-language package for accounting, human resources and other corporate activities, is dominant in the Persian Gulf. The firm reports 2,300 clients in 14 countries. It's one of Egypt's oldest IT firms, having opened in 1986. It has kept its position by asking customers what features they would want added to the next version of Al-Motammen. Other companies that started around the same time as Microtech and attempted to export software were weak on that sort of customer follow-up. They're not around anymore.

"In the software field, the frequency of problems that the customer needs to contact the provider about is very high," said Tamer Maher, Microtech's vice president-business development. "Several companies that started with Microtech closed down because of that reason."

In fact, early Egyptian software exporters failed to even provide basic after-sale tech support -- to such an extent that it almost stunted Microtech's growth, Maher said.

"We experienced this when we first tried to sell in the Gulf. People were prejudiced

against Egyptians because of some history they had with Egyptian companies in the past," Maher said. "They would say, 'Where is this made? Oh, Egypt,' and they'd leave."

Following up with customers was always a priority for company founder Mohy Gamaledin, who worked for IT companies in the U.S. including Tandy before returning to Egypt. Microtech made client care a duty of its marketing department, then its own department in 1995.

A Call For Leadership

Despite the high points, industry experts say that two years after its launch, Egypt's IT initiative is in serious need of a new round of clarifying goals and unifying resources. That applies to software in particular. Experts say clearer leadership is needed on the part of government officials, educational institutions and business associations.

"You feel that you are in a confusion status -- where to go, what to do," Nabhan of the Center for Business Support said. Egyptian government officials "have a very ambitious plan, but a clear strategy of the whole country is really needed," he added.

Nabhan expressed confidence that the MCIT would clarify the national strategy soon after consulting with private businesses and the donors. But that would not be sufficient in the opinion of ITWorx' Amin. Given the seriousness of Egypt's recession, and given the "unlimited" moneymaking potential of IT, Amin says building the industry should become a priority for Egyptian society as a whole.

"This is one of the most promising industries we have," Amin said. "If it becomes a national drive, then it transcends a single ministry."

MCIT official Moselhi said it's sensible for one agency to lead the IT initiative. "It doesn't mean that it is the only ministry that can take a development role, but is the ministry that is in charge of setting the targets, the objectives, and decomposing them into projects," said Moselhi, senior adviser to Minister Nazif.

At the same time, Moselhi noted that MCIT is fully collaborating with the Ministry of Education on a long-term push to teach computer skills in public schools four hours per week. Because it would be cost-prohibitive to add computers labs and hire computer teachers at every Egyptian school, the government is looking to outsource computer education: The ministries have challenged the private sector to come up with a proposal to provide the learning on a service contract basis. They'd start in fall 2002 with students in grade 7 through 10 at 50 schools.

That would begin to address the most commonly heard anxiety in the software industry -- that Egypt's schools and vocational programs are behind the times.

"I think it starts in kindergarten," said Mohy Gamaledin, president of Microtech. "That's the main asset for the industry -- it's people. Even if I have a very good communications infrastructure, if I don't have the actual managers, project managers, technical writers and designers, then I don't really have a software industry."

The MCIT in 2001 began paying to train 3,000 recent university graduates as IT technicians. That's through the Professional Development Program, under which IBM by contract provides training materials for 30 centers around the country. But software industry officials were disappointed with the first batch of trainees.

"The whole process of the training did not produce the expected results with the new graduates," said Prof. Adel Ghanam of the Egyptian Software Association. "Although some have good scores, when I interview some of the people who have good scores, they don't have the skills that we need."

Ghanam suspects the trainers were underqualified and didn't have time to absorb the course material. MCIT officials are more upbeat, saying the trainers will improve with experience and that all trainees will bring skills to the workforce.

"If you are talking about technical training, this is a new industry," Moselhi said. "It's not ideal. We cannot say it is ideal. But we cannot wait. If we have money and we can put it in our human resources, you are not wasting anything."

Training likely will remain one of the hottest areas of debate -- and competition for limited funds. Ghanam of the software association is trying to persuade MCIT officials to take part of the budget for training recent university graduates and spend it instead on retraining professionals already working in the field who need a refresher. The association has separately arranged for Cairo University to hold brief retraining courses at reduced fees starting in January.

Organizing The Organizations

But the challenge is being put not just to government. Industry observers say non-governmental bodies and business groups also need to focus their strategies. Aid groups can sometimes be redundant, with two groups not realizing they're both subsidizing Egyptian companies to participate in the same international trade exhibition, for example. At the same time, Egyptian IT companies have founded a large number of trade associations that some called duplicative: The industry associations may often be working toward similar goals or working against each other even while many individuals are members of multiple organizations. Nabhan and Moselhi suggested that some of the associations ought to merge so the industry will have a unified voice.

Ghanam of the Egyptian Software Association resisted the notion of consolidating the groups, saying the marketplace benefits from a diversity of voices representing specialized perspectives. But there is nevertheless a move toward a common agenda. Egypt's newly formed online security regulatory body, the IT Development Authority, will include a committee with representatives from each industry association. And Ghanam said that when representatives of the various IT associations met with MCIT Minister Nazif on December 10, it was by an invitation they issued jointly.

"I don't want to reach a situation when your right arm does not know anything about what your left is doing," Ghanam said. "Coordination between different organizations in different fields is not always easy. But things are moving and are actually improving."