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Subject: [NYLXS - HANGOUT] Dubai wants IT business as well as U.S. ports
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Dubai wants IT business as well as U.S. ports
It’s encouraging companies to set up operations in the United Arab Emirates
News Story by Patrick Thibodeau
FEBRUARY 23, 2006 (COMPUTERWORLD) - The United Arab Emirates, which is
currently at the center of a controversy over whether outsourcing the
management of six U.S. ports to a company based in the Persian Gulf should
be allowed, wants to do more than manage ports: It wants Dubai, its capital,
to become a major IT outsourcing destination.
Dubai has been building a modern infrastructure and clearing away all taxes
and visa hurdles to encourage companies that set up operations there, said
Mehtab Ali Sayed, director of marketing at the Madar Research Group LLC in
Dubai. “They are positioning themselves against India,” he said.
Many U.S. IT vendors already have offices in Dubai, mostly to support
regional customers. Among them is Sierra Atlantic Inc., a Fremont,
Calif.-based provider of offshore IT services, which opened an office in
Dubai in August.
“Compared to India, it is expensive,” said Sierra CEO Raju Reddy, who noted
that labor can cost 50% more than in India, where the company has the bulk
of its operations. Moreover, “there is not sufficient local talent in
Dubai,” he said.
But Dubai will nonetheless be an important base for supporting customers in
the region, as well as delivering high-end architectural and design
services, said Reddy.
Because of issues like costs and the limited labor pool -- the UAE’s
population is about 2.6 million -- Dubai has barely made a ripple in the
global and competitive outsourcing world. And despite its handsome office
parks and zero taxes, it faces challenges. The contentious move by the
state-owned Dubai Ports World to acquire London-based Peninsular and
Oriental Steam Navigation Co. for $6.8 billion, allowing it to take over
operation of half a dozen U.S. ports, illustrates the UAE’s efforts to
diversify its economy.
But the port deal -- which would allow Dubai Ports World to run the ports of
New York, New Jersey, Philadelphia, Baltimore, New Orleans and Miami --
could also prove to be a problem in its efforts to become an IT outsourcing
hub if it fails.
“If there is a reversal of a major business deal, I would assume that will
cause people to take a cautionary view with where and how they can do
business,” said Jane Siegel, director of the Information Technology Services
Qualification Center at Pittsburgh-based Carnegie Mellon University’s School
of Computer Science.
While the UAE is considered an ally, the port takeover has met with vocal
opposition from House and Senate members upset about plans to allow a
company from a hostile region to manage the U.S. ports. The White House has
said it won’t allow the deal to be blocked.
While routine IT support isn’t going to get the attention the port agreement
is receiving, “you can make the case that if they are handling anything that
involves strategic or sensitive data transaction, that that could be a
concern,” Siegel said. Even then, she said, it’s not on par with scenarios
envisioned by some in Congress if Dubai manages U.S. ports.
If the port management deal goes through, “it could establish Dubai as a
credible place to do business with from the U.S.,” said Jeff Perdue,
associate director of Carnegie Mellon's IT services center. “It could have a
Despite the limitations of the UAE’s labor pool and the geopolitical risks,
firms focusing on the Middle East and West Africa “see Dubai as an excellent
location for basing regional operations,” said Atul Vashistha, CEO of NeoIT
Inc. in San Ramon, Calif. Vashistha said Dubai wants to establish itself as
the Singapore of the Middle East.
Rita Gunther McGrath, an associate management professor at Columbia Business
School in New York, has been advising Ireland on attracting foreign
investment. She said Ireland sees the UAE as a potential rival.
McGrath, who has been to Dubai, described it as relatively friendly country
that’s high-tech and with an “appetite for modernity.”