NO GREEN AGENDA: Even though the HP ProLiant SL6000 Scalable System is highly energy efficient, Middle East companies will consider it only if HP can make a strong business case to support such a technology choice.

Dubai HP began fiscal year 2009 facing thousands of layoffs and other cost cutting measures globally. Now, as the company looks forward to closing its books October 31 on this difficult interval in its history, there is a sense that 2010 will bring better days, especially in the Middle East.

“We’re seeing a significant increase in activity in the second half of this year both in consumer as well as in enterprise which is quite consistent across most of the countries that we look after in the Middle East,” said John Hoonhout, MD and Technology Solutions Group Lead for HP Middle East. “Different countries are impacted in different ways. For instance I would say that Qatar continues to be a buoyant market for us as is Abu Dhabi. Kuwait I would say is a little bit slower right now. In Saudi Arabia we see very solid demand.”

For the Middle East, Hoonhout stated that the products business was the part of HP’s offerings that was most significantly impacted by the downturn — specifically servers, storage and consumer products.

“The part of the business that has stood up very well during the downturn is the Professional Services business and our HP Software business,” he explained. “My view is that Professional Services has performed very well because even in a downturn, where for instance customers might be looking to reduce their costs or to optimize their operations, they still have a need for good quality professional services to help them achieve those objectives. It’s very similar in the HP Software business. You know many of the products we sell at HP Software are specifically designed to optimize or even to automate certain items of operation. So solid implementation of, for example, HP’s famous Network Node Manager tool will help to reduce operational costs. There are many HP tools that are designed to take out manual work and help customers reduce their operational expenditure.”

While the economy is picking up again in the Middle East, Hoonhout is well aware that the current business model for IT purchases is to question the need for every implementation and upgrade. He admitted that customers are putting more scrutiny into the business case before they commence new projects — whether it might be an optimization project or the deployment of some new system.

“There’s a lot more rigor and a lot more diligence being applied to fully understanding the business case before proceeding,” Hoonhout advised. But that doesn’t mean that companies are turning away from technology upgrades where it is clear that there is a strong return for the business. He pointed out that HP’s latest G6 processor delivers approximately double the processing capacity and consumes around half the amount of energy for about the same price point as the previous generation processor. For customers who have infrastructure that is in the three to four year old bracket, a very compelling business case can be made to replace such aging equipment with servers running the new processor, with payback anticipated less than 12 months after the upgrade.

It’s important to make that business case, because companies in the Middle East are a long way from considering energy efficiency as a top feature when investigating hardware purchases. In other geographies, legislation and tax breaks have organizations actively seeking energy saving equipment, but in the Middle East there is no trend in that direction.

“We’re seeing consistently across the Middle East that customers are more motivated by saving costs than they are by saving the environment,” Hoonhout said. “If you can help a company make a business case that by making certain (technology) investments there can be a reduction in the total cost of ownership — whether that be equipment costs, operational personnel or electricity for running and also for cooling — they are very much interested in what’s being proposed. But I don’t think generally technology choices here are driven by a green agenda. The motivation here is more the financial agenda.”

HP Middle East knows its customers well, in part because it has been present in the region since 1968. The organization here has survived the global downturn mostly intact. Hoonhout remarked that the company does review staffing levels as a matter of routine and there were some staff adjustments in certain areas over the past year, but that HP’s human resources changes in region have been quite minimal compared to the global picture. HP is the largest technology and solutions provider in the Middle East with 1310 employees and subsidiaries in Dubai, Abu Dhabi, Riyadh, Cairo, Ramallah, Qatar, Oman and three service Joint Ventures in Kuwait, Bahrain and Abu Dhabi servicing the GCC, Egypt and the Levant. The company has returned to hiring in fact, and recently recruited 33 fresh graduates to join HP’s sales organization across the Middle East.

The GCC countries have been a particularly bright spot for HP globally. Last week HP Technology Solutions Group (TSG) announced that it “has agreed on a three-year technology upgrade and automation strategy” with Qatari communications provider, Qatar Telecom (QTEL). The company also unveiled a deal signed with BankMuscat, the largest bank in Oman, under which HP and Avaya will consolidate the bank’s existing disparate technology infrastructure into an integrated and unified business system.

For the coming year, Hoonhout believes that there will be growing interest in outsourcing, particularly as the local banks have tightened lending which makes capital outlays for ICT an expensive proposition for all organizations.

“I would say that the Saudi Arabian outsourcing market is going through its first wave of maturity. We’re seeing some substantial organizations deciding to outsource operational IT. These are companies that decide that running an IT infrastructure is not part of their core business. Such companies are deciding to focus on core competencies and bring in an expert service provider to provide IT services for them,” Hoonhout explained. “My prediction is that this will continue and over the next one to two years there will be more uptake in the public sector, possibly even in the financial services market as well, as companies further optimize their operating model.”

According to Hoonhout, in the Kingdom as of yet, outsourcing is only being considered by the larger organizations. He pointed out that Saudi Arabian Airlines has stepped into this arena as well as the Saudi Arabian Monetary Agency (SAMA) with its SADAD payment system.

“In the enterprise space as well, we’re seeing significant interest in our data center transformation offering. It’s at the very core of our enterprise strategy and combines a number of elements including the consolidation of infrastructure, less equipment, using techniques such as virtualization which has started to become more widely adopted now in the Middle East,” Hoonhout said. “Data Center transformation is another means to reduce the amount of equipment that organizations need to own to run their operation and also to make it easier to manage those operations. Data center transformation is a combination of technology, software and professional services and in the enterprise space it’s a very hot topic.”

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