This report was prepared with financial assistance from the Commission of the European Community. The views expressed herein are those of the Consultant, and do not represent any official view of the Commission.

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Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i

2. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

EXECUTIVE SUMMARY

Objectives The objectives of this Needs Assessment are to:

1. Quantify the Palestinian IT sector's size and delineate its subsectoral components/current business activities
2. Assess its competence and status in the context of global IT realities and trends - a gap analysis
3. Identify its developmental needs and opportunities
4. Identify barriers to its development
5. Recommend ongoing company/subsectoral development programmes which will advance the sector’s competitive advantage
6. Recommend sectoral strategic development platforms and organisations which will accelerate the sector’s pace of development

The Needs Assessment is a Phase 1 evaluation of the Palestinian IT sector in order to provide a focus for follow-on development assistance, especially by C.P.E.D. This two-month effort was devoted to fact finding through interviews with IT firms, as well as governmental and non-IT private sector organisations, in Palestine, Israel, Jordan, Bahrain, the Kingdom of Saudi Arabia, Egypt and within the European Union. The numbers of organizations interviewed is as follows:

1. West Bank/Jerusalem - 18 organisations (15 IT companies)
2. Gaza - 15 organisations (14 IT Companies)
3. Israel - 7 organisations
4. Regional (Gulf Cooperation Council States and Egypt) - 18 organisations
5. European Union - 6 organisations

Size of the Sector: Although no official figures are available depicting the sector's size or employment complement, our estimates, based upon extrapolations from the interview sample domain, is that the sector employs approximately 1,800 people, full-and-part-time, in 215 enterprises. The average IT company employs a staff of six and is in existence less than five years. A conservative estimate of current revenues is $60 million; this includes direct sales, maintenance revenue, consultancy/professional income and training fees.

Subsectoral Components/Business Activities: The main activities that the IT sector in Palestine is involved in are the following:

1. Computer hardware sales and maintenance
2. Software development and customization
3. Telecommunication product development and operations
4. Service Bureaux
5. Education and training
6. IT publishing
7. Consultancy

Competence and Status: In terms of addressing current local business opportunities, the management cadre of the sector is very technologically competent as is the entire IT workforce. Palestinians enjoy a deservedly high reputation in the region for IT expertise. But the sector in its entirety is in the unenviable position of responding to a limited local market that is itself retrograde, in an international context, in its own usage and deployment of information technology. In contrast to technological competence, there is a marked lack of business structure pervading the sector: lack of business planning, lack of corporate identity (brochures and other promotional material) and lack of dedicated marketing/sales staffs. Our conclusion is that the IT sector is four to five years behind peer sectors in other nations in terms of overall competitive advantage. Focused company/subsector development assistance programmes will clearly narrow this gap.

Current Business Expansion Strategies: There are three general profiles that are identifiable:

1. To increase technological competence in order to better penetrate existing local governmental and private sector client bases.

 

2. To export current and/or enhanced existing products, skills and services

 

3. To form joint ventures with regional and international IT firms for bilateral marketing and manufacturing activities

The first of these is a reasonable strategy and, with the proper training, is easily achievable. The reality is that there already is some entrenched local competition in both sectors which is not easily displaceableThese latter two “strategies”, if actuated, are essential to the development of the sector. Without their realisation, the sector will survive but will not develop materially. One reservation - a major one - is that without developmental assistance, these goals are not achievable and are not coherent strategies, but visions.

Developmental Barriers: The most critical barriers to development that were identified are as follows:

1. Israeli occupation and closures
2. Lack of an IT focus and a focal point
3. Lack of end-user technological awareness
4. Lack of IT culture
5. Lack of a Palestinian IT strategy
6. Lack of copyright protection
7. Lack of Arabization standards
8. Scarcity of leading-edge software developers
9. Lack of practical telecommunications skills
10. Lack of managerial, marketing and sales expertise
11. Lack of effective promotional material

Company/Subsectoral Development Programme Recommendations: The following are focal point recommendations for C.P.E.D. in both promoting and actuating IT subsector and company development activities:

1. Companies within the sector would be well advised to avail themselves of developmental assistance programmes offered by C.P.E.D. (Diagnostic Studies, etc.). these programmes will have the effect of helping the IT companies to help themselves in terms of better positioning to allow them to be more competitive, in light of the following recommendations:
2. In the course of performing diagnostic studies, C.P.E.D. and its consultants should be alert for joint venture possibilities within and across subsectors in terms of achieving economy of scale advantages with respect to both products/services and local markets
3. C.P.E.D. can play a vital role in disseminating information to the sector as regards the availability of C.E.C.-funded collaborative IT R&D programmes and grant entitlements.
4. Individual companies, and the sector as a whole, should seek out regional and international market opportunities and strategic alliances with customers, partners and original equipment manufacturers (OEMs). This will require both C.P.E.D. assistance as well as an impetus from a core sectoralorganisation - see “Sectoral Development Programmes Recommendations” (below and in Section 7)
5. IT companies should focus on developing managerial, marketing and sales competence
6. IT companies should develop business plans (these are a sine qua non for strategic alliances)
7. There should be more focus than at present upon company and product image and identity, e.g., brochures
8. IT training companies should develop up-to-date IT curricula, especially in the areas of Oracle, UNIX and structured development methodologies. Moreover, the development of IT traskills, resources and curricula should apply to companies in all subsectors, not only to the IT training subsector
9. IT training companies, universities and the vocational training infrastructure should consider utilising the Internet as a vehicle for distance learning curricula
10. IT training firms should consider entering into alliances with E.U.-based training firms, vocational institutes and universities for curriculum certification purposes
11. Hardware and software firms should ramp-up their Oracle and UNIX expertise, including porting existing applications to these platforms, as this is a here-and-now Government IT standard. Training firms should, likewise, develop Oracle and UNIX curricula and acquire proper related training materials
12. Hardware and/or software subsector companies should focus upon developing and marketing integrated hardware/software and/or turnkey solutions
13. Palestinian IT subsectors should assess telecommunications-oriented opportunities based upon the “extendibility” of their current products/services and/or the future needs of their clientele
14. Software/telecommunications firms should form distributor and VAR alliances with international providers of such network management and customer billing applications with a view to customising and maintaining such applications for the Palestinian PTT, PALTEL
15. Palestinian telecommunication providers, hardware resellers and software developers should shape their plans to horizontally expand their products and services to be Internet and intranet-compliant
16. Palestinian hardware/software/telecommunication companies should consider developing Web-based help desk competence, especially Arabic-oriented, in order to both reinforce relationships with their IT suppliers as well as to position themselves for future strategic alliances with regional and international IT product/service companies
17. Local publishers and software/telecommunication subsector companies should seek out local database publishing opportunities and, at the same time, develop relationships with regional and international web-based content providers for creating arabized versions of internationally-reputable Internet-based directories
18. IT software developers should focus upon information warehousing/archival systems, especially Web-based, as a local business opportunity
19. IT software developers should consider both Internet-based banking and multi-branch order consolidation and customer account reconciliation as development opportunities. In addition, IT firms who have clients in a multi-site environment that can benefit for internal electronic commerce via intranets should begin to plan to develop products for this medium
20. Non-consulting subsector firms should investigate the opportunity of horizontally integrating their resources into consulting services
21. Consultancy firms should consider developing applications that will have general appeal in the local context, such as simple capital equipment inventory database managers and report generators

1. Formation of a Palestinian Information Technology Unit: The formation of such an organisation is necessary in order to advise and to promote the sector, locally, regionally and internationally in order to both maximise local opportunities as well as facilitating export market penetration and strategic alliances with regional and multinational IT firms. Another very important task of this Unit, together with that of the IT Training and Development Centre (below) should be instilling IT awareness into the local user community. Another task of this Unit should be the formulation of a comprehensive Palestinian IT development plan. The charter of this unit, therefore, goes far beyond that of a loosely-coupled IT association, although it could very well be the extension of one, i.e. ITSIG

 

2. Formation of an IT Training and Development Centre: This facility is needed in order to provide state-of-the-art “fast track” Information Technology and project management skills training to both entry level and more advanced IT professionals alike. This organisation should, moreover, be structured as a software application development “incubator” facility to provide outsourced and contract software application development to the various Israeli software development subsectors

In exploring these several points and recommendations, this document will also focus upon:

• Company/subsector development action programmes - why, what and how
• Sector-wide development - why, what and how

2. INTRODUCTION

Rationale The Information Technology (IT) industry, nationally and globally, consists of those organisations trading in the production, distribution and sales of products and services comprising computer hardware, software, telecommunications (both conduit and content), IT training, IT publishing and IT consultancy. Driven by the Global Information Highway and the pervasiveness and crashing costs of personal computers (PCS), this industry is and will for decades to come remain the fastest revenue growth industry sector worldwide and is characterised by both low entry barriers and fierce price-point competition. It is axiomatic that information technology will be the key strategic enabling component in the economic growth of nations in the coming decades. Knowledge, intellectual capital and the ability to effectively leverage this resource is the new sustainable wealth of a nation, the key to a thriving IT industry and as important an element in economic terms as coal, oil, steel or iron have been in the past. Neither Palestine nor any nation can any longer afford to ignore the tremendous economic growth and employment potential that information technology has to offer.

The Palestinian IT sector - estimated at approximately 215 companies - is by international standards a very junior and struggling component of its global family, yet nonetheless by any metric a strategic component of the Palestinian economy in terms of potential Gross Domestic Product (GDP) contributions, employment and stature. In a local context, the critical mass of the Palestinian IT sector is sufficiently large and competent to satisfy the indigenous need for IT products and services. But as our findings also indicate, this same sector is, without very focused assistance programmes and platforms, not able to bridge the gap to be a significant regional, let alone international, player in the IT arena - a primary requirement for its competitive development. Moreover, as the C.E.C. has observed, easing import-and-export tariff barriers between E.U., U.S. and Pacific Rim nations, on one hand, and Mediterranean nations on the other, might have the adverse effect of “smothering” an emergent Palestinian IT sector by the introduction of unwanted price-point competition from abroad. Because the Palestinian IT sector is so small in relative terms, so young in maturity, so localised in terms of market penetration and so under-capitalised - and yet so potentially vital to the Palestinian economy - this is indeed a valid concern.

The sector is at the crossroads of its development - and herein lies the challenge and the rationale for this Needs Assessment. The sector’s competencies - "centres of excellence" - are definable, as are the barriers to its development - both geo-political and systemic weaknesses. The task ahead is to build on strength and to remedy weakness. Beset by barriers of occupation and closure, the telecommunications component of the indigenous IT sector is, for example, one such centre of excellence.

Driven by an exponential growth of Internet users, telecommunications, a virtually barrierless global commodity, is the fastest growth component of the global IT industry - a reality being capitalised upon by a small number of local IT enterprises. Telecommunications-based products and services can easily span "hostile" terrain and are not impeded by the bureaucracy of customs authorities, although their hardware platforms are.

One significant systemic weakness barrto the growth and prosperity of the Palestinian IT sector is the critical dearth of practical, not theoretical, IT software and systems training - of end users as well as developers. The pace of development of any national IT sector is driven by its supply of trained development engineers. 1996 Israeli IT revenues, for example, totaled $1.2 billion, yet Israel is confronted by an critical shortfall of software developers. A trained "outsourcing" pool of Palestinian developers would in this case be an appealing added-value enterprise. But before this opportunity can be realised, there must be a trained supply of IT product and service developers for local government and private enterprise customers. It is for these reasons that the Center for Private Enterprise Development (C.P.E.D.) has commissioned this Industry Needs Assessment, i.e. to determine the nature of developmental assistance that can be brought to bear in order to develop and position these companies to be more competitive locally, regionally and internationally.

Needs Assessment Scope and Methodology The process of selecting Palestinian IT interview candidates, abetted by the recommendations of local consulting firms, was based upon targeting firms that either produce or add value to IT products and services within the domain of information technology and deliberately omitting the so-called computer stores which, although a component of the IT sector, merely retail shelf products. The interviewed firms' range of activities, detailed in Section 4, is:

1. Computer hardware sales and maintenance
2. Software Development and customisation
3. Telecommunication product development and operations
4. Service Bureaux
5. Education and training
6. IT publishing
7. Consultancy

All interviews were conducted on-site and averaged one and one-half hours apiece. For Palestinian firms, discussions centred around:

1. Current size of staff
2. Years in existence
3. Lines of business (products and services)
4. Customer/market segments
5. Business expansion strategies
6. Impediments to development

The discussion script in the case of regional and European organisations focused more upon inclination toward joint product development, cross licensing arrangements, bi-lateral market alliances, and co-operative research ventures, etc., with Palestinian IT companies, and their overall impressions of Palestinian IT competence.

In every case, whether the organisation was Palestinian, regional or European Union, the requested information was openly volunteered with the understanding that the same would be kept strictly confidential. In a handful of cases revenue figures were openly offered, with the anticipated exception of internal financial information, e.g., net operating income, etc.

As previously stated, there are no official figures available depicting the sector's size or any other relevant metric. Our estimates, based entirely upon the interview sample, is that currently approximately 1,800 people are employed, full-and-part-time, in 215 enterprises.

Assumptions, extrapolations and the basis for the sector size and employment estimates are as follows:

Table 2.1 Estimated Sector Size and Employment - All Locales

The estimate of the total number of companies in the first class (1 to 10 employees) is based on two assumptions:

• No computer stores or retail stores, part of whose product line comprises computer hardware, software, publications and supplies were interviewed. There are many of these.

• There is an estimated 150 - 200 “free-lance” software engineers who are not part of any one company.

A conservative estimate of 1996 revenue is $60 million. This includes direct sales, mainten- ance revenue, consultancy/professional income and training fees. This estimate is based upon input from several of the companies interviewed. The range was $50 to $100 million.

3. The International Information Technology Industry -

Overview and Trends

Information technology is profoundly changing the manner in which we conduct our businesses and, indeed, our lives. This is apparent in our homes, in the small business environment - the commercial backbone of our society, as well as in large commercial and government enterprises. Sweeping changes in telecommunications technology will continue to have a tremendous impact upon our society throughout the balance of this decade and into the next millennium. The thirst for more and more interconnectivity will be the primary accelerator for hardware and software solutions, e.g., better search engines, data warehousing, etc. Proceeding hand-in-hand with technological change is the increasing price-point attractiveness of telecommunications, witnessed by downward spiraling international and interexchange tariffs. Through multimedia technology advances, such applications as distance learning and telemedicine are now affordable. Crashing costs of innovation and production are exerting impressive market pulls for IT products and services by the masses of our society - not merely by large enterprises. These products and services, moreover, are not deficient in the context of leading edge technology. Home and small business consumers can avail themselves of information technology offerings that are down-scaled (and down-priced) mirror images of those used in Fortune 1000 companies.

In the last ten years, the unprecedented rate of technological development, coupled with crashing costs and miniaturization of products, has resulted in a wide range of new and improved services that will dominate the remainder of this decade. In the years ahead, three trends will characterise IT developments for all markets:

• Globalisation. National borders are becoming less and less relevant to technology. The partitions separating our occupations from our homes are disappearing, as evidenced by the upsurge in the "telecommuting" phenomenon;

• Multimedia. One of the most dynamic forces of change is the convergence of telecommunications, computer, broadcasting and information access in the creation of an expanding number of new added-value and integrated communication services. The market pull of the Internet created a demand for open global networks capable of simultaneously transmitting voice, data and images to multi-function desktop workstations;

• Economic leverage. Telecommunications bandwidth - its availability and cost as a commodity is a bargaining chip. For this reason telecommunications is now recognised as the key technology underpinning our global information village, as is now evident in its consistent inclusion in bilateral, regional and multilateral trade agreements and accords. A good case-in-point is the inclusion of software applications in the World Intellectual Property Organisation (WIPO) copyright recommendations.

The upshot of this technological change and this democratisation of technology products and services is an increase in flexibility and productivity at all levels of our society. The catalyst for this impact is, and will continue to be, the continuing pervasiveness of PCS and the Global Information Highway within all consumer sectors. Information technology is increasing the information intensity of services, such as banking, and is breaking down barriers among other service industries. Airlines, for example, through their reservations systems, are now in the business of hotel reservations, car rentals, software development and supplying spare parts. Service providers, traditionally small and decentralized, are being linked internationally through telecommunications technology, increasingly through intranets.

If there is one salient reality that will dominate the global IT industry well into the next millennium, it is this: IT product and service providers who develop and market complete integrated “open” solutions will prosper; those companies that continue to sell boxes and programmes or, at best, proprietary solutions will increasingly lose thecompetitive edge. This oversight, which nearly drove computer “giants”, as IBM, Wang and Data General to the wall as recently as seven years ago, has caused and is continuing to cause the demise of countless smaller, less capitalised firms. There are cautionary implications here for the Palestinian IT sector.

The Palestinian IT sector is a neophyte sector within a developing state. The rapid advance and diffusion of information technology in industrialised countries, as they establish standards for IT trends and progress, poses major new challenges for developing countries. These challenges, in turn, also raise fundamental issues for development assistance. For development assistance agencies to respond to a rapidly evolving environment they must understand the current and potential roles of information technologies in developing scenarios. This understanding should be based upon current IT experiences in these developing states as well as upon widespread solutions in industrialised nations - no mean task.

A competitive strategy for IT development must be country-specific. It should recognise the interdependencies within the local IT industry as well as among user needs within the local economy. Before the Palestinian IT sector can embark successfully - as it must - on expanding its reach into the region and beyond, it must first capture the home market. The most advantageous route for the development of any local IT sector cannot ignore the short-and-long-term effects on domestic user sectors. Developing countries that are latecomers to industrialisation or that are unlikely to become major participants in the export of IT products and services still need to build technological capabilities that will support the requirements of local IT consumers - or external competitors will.

3.1 Computer Hardware

The handwriting is on the wall and it essentially says that profit margins associated with the sale and distribution of boxes will continue to evaporate, evidenced by a continual 20 percent annual decline in the real cost of computer hardware.

Those companies - both manufacturers and resellers - that shall survive and prosper will be those that sell solutions - and end-to-end solutions at that. When computer product price points were relatively high, IT consumers were forced into comparison shopping for single-vendor products and their balance sheets usually reflected this phenomenon. The downside was that the manufacturer might have excellent printers but ineffective and maintenance-intensive storage devices. Wang was an example of this in the office automation environment. Because of rapidly declining computer hardware costs, the name-of-the game today and in the future clearly is the provision and acceptance of turnkey solutions. In simple terms, a turnkey solution is a minimum cost, total IT platform that a customer requires to fulfill an IT need. Such solutions comprise hardware, software, functionality integration, customisation and training, and usually are not single-vendor specific. Approximately 80% of the Palestinian hardware and/or software subsector companies interviewed have not reached the stage of developing and marketing either integrated hardware/software or turnkey solutions. Our recommendation is that they should focus on this as a development strategy.

As the Internet and intranets rapidly become the "industrial strength" vehicles for inter-and-intra enterprise transactional commerce, the market for computer mainframes (large computers) and minicomputers, both now in decline, will fall even sharper. Global markets for PCS for intra-enterprise usage are even now on the wane. In contrast, the market for Internet-connected PCS in business, in government ministries and homes is exhibiting a compounded annual growth rate (CAGR) of 14 percent. Sales of these PCS, in reality multimedia information workstations, are also being impelled by Internet compliant software application (e.g.,web browsers) and peripheral PC hardware (e.g. voice-and-image compression devices) solutions that enable both voice-over-the-Internet (VOI) and personal teleconferencing. With the exception of Palnet, the Palestinian hardware, software and telecommunication subsectors are only marginally positioned to capitalise upon the Internet market “pull”. Our recommendation is that Palestinian telecommunication providers, hardware resellers and software developers should shape their plans to horizontally expand their products and services to be Internet and intranet-compliant.

Figure 3.1 below illustrates the trend away from closed enterprise IT solutions, and toward the business of Information Highway products and services in the 1995-2010 timeframe.

FIG. 3.1 IT MARKET EVOLUTION 1995-2010 Courtesy: TTH 1996

The above chart is obviously heavily influenced by IT trends and developments in developed nations and clearly does not reflect the current (1997) status of the Palestinian IT sector or its user community. In the case of decreasing usage of, and development for, minicomputers worldwide, there is at present in Palestine a focus upon Data General minicomputer platforms because it is the standard used within the Government Computing Centre. This is a valid but limited-use and (probably) short-lived opportunity. In the minicomputer case, the Palestinian IT sector is now where the global industry was in 1991. As to producing and selling enterprise PC and LAN solutions, the sector is generally in step with international trends, but the hardware and software subsectors should recognise that enterprise PC/LAN solutions are beginning to decline in market acceptability: users elsewhere are increasingly looking toward devices and software/telecommunication solutions that are World Wide Web compliant.

It should be noted that there will be an impressive 900 percent increase from 1995 to 2010 in Internet and Internet transactional content users, respectively. With the exception of Palnet and the emergent PALTEL telecommunications operator, no IT firm in Palestine is remotely positioned to begin to offer its own content over the Internet: no proprietary database or directory is in evidence. But there exist a few companies who have realised that they should begin to develop commercial transaction (electronic commerce) intranet solution for local multi-site customers, especially banks and insurance companies. Our recommendation is that IT firms who have clients in such a profile and which can benefit from intranet connectivity should begin to plan to develop products for this medium.

3.2 Computer Software

For the past four decades, computer science practitioners, especially software developers, have been straining at the bounds of commercially available computers and language compilers, hoping for an IT panacea, a technique, a universal system that would transcend the rigid bounds of purely procedural, processor-oriented and algorithm-intensive coding languages. The ideal paradigm was to develop a transparent user interface that would in effect become the computer. Although the ultimate goal was to eliminate dependency upon operating systems, there were no ultimate solutions. So software developers fell back to the next best scenario: designing, implementing and selling programmes. Horizontal sector software developers accommodated them by selling to the industry what it needed to develop these applications: language compilers, database management systems, network control programmes, etc.

But now a universal information processing mechanism exists: the World Wide Web. In the Web, the information component is tightly bound to the software component - an open system with a lightweight language, the HyperText Markup Language (HTML), that non-programmers can easily master. Future Web innovations will make these mechanisms even more transparent to the end-user. Dropping the programmer out of the equation will allow people skilled in specific information-intensive areas to create their own interfaces to the information they require. At present, the tools and capabilities at hand are weak, but the is clear: we can look forward to an IT future in which the most significant computer-based applications will not be developed by conventional computer programmers, but by people whose primary expertise is in other fields of knowledge.

The challenge for current and prospective software developers is also clear. Successful firms in this sector are even now re-engineering themselves to become “one stop shopping” solution providers, especially for niche market sectors. Internet-based opportunities for software developers will arise in the context of creating Web development tools (an estimated $1.2 billion market by 1999), as well as porting conventional enterprise-based applications to the World Wide Web. As has been previously recommended, the sector should position itself to participate in Web-based opportunities. Examples of applicable ones in the local context are:

1. Electronic shopping and advertising. As regional Internet usage, now in its infancy, develops, this will prove to be a very cost efficient means for local commercial establishments to promote their wares over the Web. The opportunity for the software subsector here is to position itself to offer the creation of Web home pages as a service

 

2. Hospital information systems. Local hospital information systems, where they exist at all, are stand-alone and proprietary. A hospital is, in reality, a multi-site business complex and, as such, is an ideal intranet venue

 

3. Information warehousing and archiving applications. All enterprises, whether governmental or commercial, are information-intensive. The problem, in Palestine as elsewhere, is that information tends to be paper-based. An information warehousing/archival system has the functionality to capture paper records and to store and organise these on various media geared to the frequency of use of the information: less frequently used information is stored on “slower” storage devices, as tape cartridges, etc. The combination of the Web and relational database structures, as Oracle, provides a catalyst of opportunity for developers to enter this market. Our recommendation here is that, because this is a low-entry barrier opportunity for software developers, C.P.E.D. IT company development strategies should focus upon this opportunity.

 

4. Automation is a technology concerned with the application of mechanical, electronic, and computer-based systems to operate and control production. The computer has had and continues to have adramatic impact on the dvelopment of production automation technologies . Nearly all modern production systems are implemented today using computer systems . The term computer integrated manufacturing ( CIM ) has been coined to denote the pervasive use of computers to design the products, plan the production, control the operations, and perform the various business related functions needed in a manufacturing firm. CAD/CAM ( computer - aided design and computer - aided manufacturing ) is another term that is used almost almost synonymously with CIM. This technology includes:

• Automatic machine tools to process parts
• Automatic assembly machines
• Industrial robots
• Automatic material handling and storage systems
• Automatic inspection systems for quality control
• Feedback control and computer process control
• Computer systems for planning, data collection, and decision-making to support manufacturing.

1. Internet-based banking (fund transfer, etc.)

 

2. Multi-branch order consolidation and customer account reconciliation

The latter two areas fall into the overall category of Web-based transactional commerce, which globally (according to AT&T), now accounts for over 60 percent of Internet bandwidth usage (E-Mail is a distant second at 15 percent). Our observation is that these two application types would have merit in the local context (banks, insurance companies and perhaps Government ministries). Our recommendation in this regard is that web-based electronic commerce should be a strong IT company development platform.

As software firms re-engineer (and reorganise) themselves to capitalise on Web-based product development opportunities, there will be a heightened emphasis upon both the usage of computer assisted software engineering (CASE) tools and the conformance to international quality assurance disciplines (i.e. ISO 9000).

Opportunities for Palestinian companies in the software subsector are clearly toward products that foster connectivity and away from stand-alone scenarios. Market share for horizontal market sector products, as word processors, spreadsheet applications, database management systems, etc., has already been preempted by the major players; it would be a futile and fatal effort for the local software subsector to attempt to compete with IT industry giants, as Oracle, Microsoft, SAP, etc.

3.3 Telecommunications

One of the most significant economic indicators of a nations’s economic status and growth is its teledensity - expressed as a ratio of the number of wireline telephony circuits to 100 units of population. As the International Telecommunications Union (ITU) has vividly demonstrated, and as depicted in Figure 3.2 below, there is a high correlation between teledensity and GDP, a fact that is contributing to the mobilisation of investments to modernize and deploy public switched telecommunications platforms in developing nations as a high infrastructural priority.

Figure 3.2 TELEDENSITY/GDP INDICATORS: ARAB STATES

Source: ITU 7/96 (Worldwide Average is 12 % - No ITU Statistics are available yet for Palestine)

The two fastest - and most profitable - developing telecommunication trends are:

• Internet connectivity
• Wireless communications.

3.3.1 Internet Connectivity

As of December, 1996 the Internet comprised more than 75,000 networks in ninety countries. Gateways that allow at least E-mail connectivity extend this reach to 160 countries. At the beginning of 1997, 6.7 million computers were connected to the Internet, encompassing 45 million users.

As has been previously recommended, a positioning strategy for both Palestinian software and telecommunication-oriented firms is to develop products and services that are Internet/intranet-oriented because this is where the rest of the region (and the world) is headed. Illustrating the dramatic increase in Internet usage in the region alone, Figure 3.3 below depicts the growth in Internet-connected host computers (predominantly PCS) in the Arab States in the past five years. Currently, Palestine has less than five Interconnected-connected hosts.

FIG. 3.3 ARAB STATES INTERNET HOSTS

Courtesy: ITU 6/96

Internet-based network growth continues at approximately 10 percent per month and is expected to burgeon to more than 100 million connected computers by the year 2000. Internet access is provided over almost any medium from simple telephone dialup to satellites or extremely high-speed fiber optic connections. Internet service providers (ISPs) currently number more than seven hundred and depend upon a combination of “user friendly” computer software access applications and available bandwidth - an increasingly scarce commodity. The most common services are simple file transfers, E-mail, and the World Wide Web’s multimedia functionality.

The Internet is also rapidly becoming a catalyst for software-and-hardware product and customer support as more and more international IT vendors create their own Web-based “help desks” or outsource this activity to third-party help desk service centres. Our recommendation in this regard is that Palestinian hardware/software/telecommunication companies develop Web-based help desk competence, especially Arabic-oriented, in order to both reinforce relationships with their IT suppliers as well as position themselves for future strategic alliances with regional and international IT product companies.

3.3.2 Wireless Telecommunications

In the area of voice telecommunications (personal and business), the fastest growth segment is that of mobile communications - a high productivity phenomenon in developed nations and often a necessity in the Third World. In some Middle East nations where there is a poor public telecommunications infrastructure, as is the case in Lebanon, it is not uncommon for residential telephony customers to opt for the mobile telephone as the most efficient alternative to the wireline hand set.

Fig. 3.4 MOBILE CELLULAR SUBSCRIBERS PER 100 POPULATION

Courtesy ITU (4/96)

The earliest and most prevalent global standard for digital cellular service is the European Global System for mobile communications standard - GSM. GSM, which operates in two distinct frequency bands: 900 MHZ and 1800 MHZ, is indeed a true global standard, evidenced by the fact that European GSM equipment vendors (e.g., Ericsson) are successfully penetrating U.S. markets because GSM platforms can achieve considerable capacity gains over competing U.S. cellular infrastructures. There are, moreover, strong indications that GSM will be the Israeli standard-of-choice, as it already is for the Palestinian telecommunications operator, PALTEL.

In the public switched telephony domain, wireless interconnection to customers is steadily proving to be a more cost-efficient alternative to

Wireless Local Loop is the utilization of conventional radio technology (spectrum space and radio-based equipment in the VHF to 10 GHz spectrum), instead of copper-or-fiber wireline, to achieve connectivity between the local exchange switch and the subscribers. This connectivity, outbound of the local exchange switch, is conventionally known as the local loop or access network. The deployment of wireless technology as a pervasive and cost-effective telecommunications conduit in distribution and access networks is clearly no manifestation of any major technological breakthrough; rather it is indicative of the need to provide basic and affordable “plain old telephony service” (POTS) to residential and business subscribers worldwide at competitive costs. In this sense wireless-based services are, if anything, indicative of a groundswell of service provider products tailored to both fit the consumer pocketbook and, at the same time, to rapidly recoup trunk investment outlays. It is indeed the positive inherent price performance and low maintenance cost characteristics of WLL that highlight its appeal in Third World scenarios where teledensity is strikingly low.

Wireless access in general, and WLL in particular, are consumer-driven economic breakthroughs that are attractive to equipment and service providers who must respond to the thirst for affordable voice-and-data communications and, at the same time, maintain price-point competitive advantage in the liberalized telecommunication arena. Investment and maintenance costs of WLL platforms in access networks have, as is the case with other telecommunications delivery systems, dropped drastically over the past three years. It is now clear that WLL can now and will continue to provide a more cost-effective alternative to wireline especially at lower subscriber densities (below 200-400 subscribers per square kilometer) because wireless system costs do not increase with the distance to the subscriber - within the propagation constraints of cell structures.

FIG. 3.5 Wireline vs. WLL Life Cycle Cost Comparison

$ Per Subscriber

Courtesy: Qualcomm 1997

Opportunities in the global IT arena are clearly directed toward products and services that aid and abet an information-based society. Within this arena, telecommunications is the most rapidly evolving phenomenon, as corporations, institutions, governments and private consumers have become dependent upon telecommunications content, conduit, hardware and software products. IT users are taking advantage of new technologies as soon as they become available. Big businesses now expect to have high quality and low-priced desk-to-desk communications regardless of whether the desks are in the same building, at opposite ends of the country or at opposite ends of the world. Indeed, the availability or non-availability of a high quality communication infrastructure in a particular country is now a major factor in the decisions taken by international businesses on the siting of new operations and subsidiaries. Individual consumers now demand to be able to contact or to be contacted immediately. This has led to the explosive growth of mobile cellular subscribers which has jumped by 70 percent in Asia alone in the 1990-1996 timeframe. The development of telecommunications-based products and services will prove to be an excellent positioning strategy for all Palestinian IT subsectors because:

• Telecommunications products and services within Palestine represent a “green field” opportunity for all IT subsectors. This arena is as yet underpenetrated , but the firms currently involved are beginning to exhibit a healthy growth as more and more customers are experiencing the telecommunications “pull” that is pervading the rest of the region and the world

• There is an acute current need between and among isolated Palestinian centres (West Bank-East Jerusalem, West Bank-Gaza, etc.) for more efficient voice and data connectivity. This need will accelerate as more bandwidth is demanded of and deployed by Bezeq and PALTEL

It is our recommendation that companies within all Palestinian IT subsectors should assess telecommunications-oriented opportunities based upon the “extendibility” of their current products/services and/or the future needs of their clientele.

3.4 Training

Organisations, IT included, receive value from their investments in hardware, software, communications and human resources only to the extent that the work force is able to utilise what has been provided. For both entry-level and advanced software application developers and hardware/communications engineers, structured training is a growing area of concern for developer and user sectors alike, for as computer hardware costs decline rapidly, personnel expenses are rising just as dramatically. In developed nations, and in many developing countries, where there is a mature IT culture, there is a continual shortfall of trained IT developers. In the case of Israel, which reputedly has the highest proportion of IT revenues to total GNP, there is an alarming shortage of trained IT developers. Israel’s intake of developers from the Former Soviet Union (FSU) has long been exhausted. India, once a net supplier of IT developers, is now experiencing similar shortages.

IT training has three - often mutually exclusive - objectives:

1. To provide basic computer literacy skills (e.g. word processing spreadsheet, etc.) to entry-level personnel
2. To provide tools and expertise to more advanced IT professionals in order to enable them to capitalise upon rapidly developing local, regional and international requirements. An example of this in the local context is the re-gearing of Palestinian training firms to provide Oracle and Data General skills in response to the GCC’s standardisation of these platforms. This is known as “fast track” training
3. To position IT professionals to compete in terms of becoming competent in more broad-based and general skills in response to global IT trends. This is usually the domain of the university as opposed to that of trainiinstitutes.

Successful IT training demands the usage and deployment of up-to-date training materials (documentation, visual aids, etc.); this becomes an expensive proposition, especially as technology product release cycles, currently nine months, are continually shortening. Unless an IT training establishment can keep in step with global trends, it will lose whatever competitive advantage it had initially. The Internet, as it has in other IT activity spheres, can provide an efficient platform for maintaining IT current awareness.

Distance learning is a newcomer to the Internet scene because the course development tools that applied to computer assisted instruction (CAI) were not amenable to the Web. These tools are now available. Web-based distance learning is a very attractive opportunity for local IT training companies, and of course for universities such as Birzeit in terms of capitalising upon their curriculum expertise and horizontally integrating this into a different medium. The geographically segmented (and isolated) components of the Palestinian end-user community is clearly suited to this mode of instruction and training. Our recommendation is that IT training companies, universities and the vocational training infrastructure should consider this as a development opportunity.

3.5 Consultancy

Traditional financial and business consultancy firms are finding that their practices are becoming more IT-intensive, while smaller IT software firms are finding it beneficial to horizontally integrate into the broad-based consultancy business. Rationales for these trends are that the global end-user community itself is becoming more IT-intensive and that there are distinct benefits for smaller firms to be able to offer wider ranges of services beyond the IT domain; such a strategy tends to enhance their competitive advantage.

As other IT subsectors cross the boundaries into consulting services, consulting firms themselves are beginning to develop software applications and tools as their own branded products in order to leverage more IT consulting opportunities with their clientele.

Examples of such applications and tools are self-auditing “checklist” programmes, report generators, etc. Often these tools are offered gratis to customers to secure long term contractual commitments. Our recommendation is that Palestinian IT firms consider developing applications that will have general appeal in the local context, such as simple capital equipment inventory database managers and report generators.

4. The Palestinian Information Technology Sector

Overview, Gap Analysis and Opportunities

The IT sector within Palestine is primarily engaged in commerce and business opportunities with and within the local community - as opposed to exports of goods and services - and consequently suffers by virtue of a restricted marketplace and a lack of multinational involvement with the sector. There are a few exceptions. Some firms have been able to penetrate regional markets; other have been successful in the Israeli marketplace. In the commercial IT sector there are a relatively small number of companies of size and substance, and a total absence of hardware, software and telecommunications multinationals with branch offices in Palestine, let alone regional headquarters there. In general, most IT activities are of a low added value, distributor type nature with little or no genuine research and development operations. There are no hardware or software multinational firms with regional representation in Palestine. It is accurate to state that the Palestinian IT Sector, with exceptions, even appears to be far from generating significant profit margins derived from IT products and services in its own local market, let alone in a regional or international context. The sector primarily redeploys and rebundles technology, but does not innovate it. But the potential for growth and development is clearly present, as our observations and recommendations underscore, by virtue of both acquiring added-value technological competence in tune with international trends as well as focusing upon enhancing and upgrading individual company structures - i.e. by becoming “more professional”.

Not only is the local market, whether Government, financial institutions, commercial enterprises, etc., restricted in terms of size. Our observation and the input from the IT sector itself points to the fact that the IT user community is retrograde in its own use and deployment of information technology. Government and private sector use of IT is low and approximately four years behind international levels and standards. There is currently little or no co-ordination or co-operation between the IT suppliers and their clients, except in the telecommunications and consultancy subsectors, other than on a supplier/purchaser basis. We have heard time and time again the complaint that local end-users cannot even communicate IT specifications. The net effect of this situation is that there is lack of the technological “pull”, present in developed nations (Israel is a prime example) that impels the competence of the IT supplier community upwards. Our recommendation in this regard is that a joint role of both the Sectoral IT Unit and the IT Training and Development Centre should be that of ramping-up end-user IT awareness.

There is no doubt also that the sector suffers from the lack of a cohesive sectoral strategy - a Palestinian IT “road map” for the development of the IT sector which could highlight the proper avenues for growth and which would go a long way toward enabling international and regional strategic alliances and cross-border exports of products and services. Such a national strategy would formulate and document the actions necessary to develop a strong export-oriented industry and to exploit IT to improve productivity and competitiveness in every sector of the Palestinian economy. It is our recommendation that this document be implemented by the IT Unit.

The average IT company interviewed employs a staff of six and is in existence less than five years, therefore we are dealing with a relatively young, sub-critical mass sector. Based upon the interview sample, firms in Gaza, as Tables 4.1 and 4.2 portray, are decidedly smaller and younger than those in Jerusalem and the West Bank.

The vast majority of the companies interviewed, despite their other business components (training, application development, etc.), have as a backbone business the reselling and maintaining/customising of computer hardware, networking and software operating systems and applications. In this scenario, these companies have been appointed as both exclusive and non-exclusive sub-distributors and agents of regional distributors, usually based in Israel, of such technology products. There are, however, isolated cases of distributor "pipelines" into Palestine directly from Europe and the U.S. It is important for the growth of the sector that this mode of total dependency upon Israeli importers be eliminated.

The Palestinian market for computer hardware, software and telecommunications products is essentially personal computer (PC)-based. With the exception of the Palestinian Authority's IT technology platform and that of some banks, Palestine is essentially a PC market domain, which influences the orientation of the IT community in terms of development focus, technology acquisitions, human resource requirements and training.

Although the management and development cadre of the sector is quite well versed competent in information technology and the adherence to development standards, such as ISO 9000, the level of technology used and required by the local market is significantly retrograde in a global context. Although the user community (with the exception of the GCC, one hospital and PALTEL), was not surveyed during the fieldwork, the feedback from the IT sector was unanimous in respect to the lack of technology awareness on the part of Palestinian end-user sectors to the extent that the pent-up competency of the sector is approximately four years ahead of its only available market.

As has been mentioned previously, most of the sector’s companies are multi-product/service establishments. There is virtually no difference between IT firms

in the West Bank and those in Gaza with respect to lines of business of their various divisions or components, as illustrated in Figure 4.1 below. Publishing activity is minimal as a line of business (one company) and bureaux operations are essentially extensions of hardware, software and training business components.

FIG. 4.1

There are, however, significant differences, as portrayed in Figure 4.2, between IT companies in the West Bank and Gaza in respect to their respective market segments. One apparent "surprise" is that the government market is slightly more significant in the West Bank instance, compared with that of Gaza - the seat of government. The key reason for this apparent discrepancy is that the majority of firms in Gaza, being less well capitalised than their West Bank peers, incur better margins - because of lower investments in technology development - by orienting products and services toward non-government and non-institutional customers (e.g., the home market) as well as to training clientele. The few firms in Gaza that have carved out the government niche for themselves have done so with laudable results and have therefore in reality erected strong competitive barriers.

4.1 Computer Hardware As to IT products sourced, developed and sold by the Palestinian IT sector, the inventory is clearly market-driven and comprises:

4.1.1 Minicomputers (Palestinian Authority, Banks and Insurance Companies):

4.1.2 PCS and Printers:

4.1.3 Local Area Network (LAN) servers:

4.1.4 Other:

Practically all computer hardware products in use in the Palestinian market are of U.S. manufacture, imported into Israel and shipped by surface into Palestine. In addition to the above better known manufacturers, there exists a relatively smaller quantity of third-party assembled turnkey hardware products. There is no indigenous Palestinian computer hardware manufacturing or assembly operation. The significant proportion of hardware profit margins (and even these are shrinking rapidly) accrue to manufacturers and regional distributors. The bulk of Palestinian IT hardware resellers are at the bottom of the hardware “food chain”. It is therefore our recommendation that IT companies directly approach IT multinational product/service providers with a view to establishing direct “pipelines” with these firms.

4.2 Computer Software

Over 90 percent of horizontal market, or system software, products (operating systems, graphics production applications, database managements systems, language compilers, etc.) are all imported into Palestine via Israel. These must be distinguished from software applications developed by Palestinian IT firms for local markets.

4.2.1 System Software:

4.2.2 Locally Developed Application Software Applications

This area and that of telecommunication network implementation and that of IT training are the three areas that rank highest in terms of added-value potential for the sector. Locally developed (designed, implemented, tested and maintained) applications include:

These applications have been implemented in a variety of languages (C++, Basic, etc.) for, primarily, PC platforms and in some cases for minicomputers. The Palestinian IT firms that create/customise software applications, as opposed to reselling systems developed by the international industry, are reacting to specific customer needs, but not positioning themselves for any technological evolution of their market. They are in this sense fortunate - for the time being - that the Palestinian end-user community is retrograde in its own use of information technology. It is precisely these applications, where there is both technological competency and market presence, that are most relevant to such company development recommendations as those noted previously, i.e.

• Hardware and/or software subsector companies should focus upon developing and marketing integrated hardware/software and/or turnkey solutions

• Palestinian IT subsectors should assess telecommunications-oriented opportunities based upon the “extendibility” of their current products/services and/or the future needs of their clientele.

• Palestinian telecommunication providers, hardware resellers and software developers should shape their plans to horizontally expand their products and services to be Internet and intranet-compliant

• IT software developers should consider both Internet-based banking and multi-branch order consolidation and customer account reconciliation as development opportunities. In addition, IT firms who have clients in a multi-site environment that can benefit from internal electronic commerce via intranets should begin to plan to develop products for this medium

4.3 Telecommunications

Because the telecommunications industry, both for content and conduit, is the word's fastest growing sector, not only within information technology but also across all sectors, it is noteworthy that there are a handful of telecommunications-oriented firms in Palestine. Telecommunications is clearly one “centre of excellence” of the sector; the few firms (and there should be more) engaged in leveraging telecommunications solutions and networks are on a par, in terms of competence and positioning, with their international peers. The scope of these firms’ activities range from operation of Internet gateways to deployment of fiber optic platforms and implementation of VSAT networks. This latter is occasioned by adversity: VSAT-based telecommunication is being found to be the fastest rollout solution in Palestine for communications among isolated - and often “closed” regions - as Gaza. While entry barriers into the hardware, satellite and switch provisioning sectors of telecommunications are expensive; telecommunications software is not - given the right customer. One “right customer” in the local context is PALTEL which has well-defined requirements for telecommunications software applications, as network management systems and cellular billing systems. Our recommendation here is that Palestinian software/telecommunications firms form distributor VAR alliances with international providers of such applications with a view to customising and maintaining such applications for the Palestinian PTT.

4.4 Training

Fourteen percent of the 56 business units among the 29 Palestinian companies interviewed are engaged in training, either training integrated with their other business activities or vocational or career enrichment training per se. The former category includes training in the use of developed-or-distributed computer hardware and/or software applications; the latter category comprises:

• IT literacy (word processors, spreadsheets, PC operating systems, etc.)

• Software development skills (Basic, Oracle, C++, etc.)

• Secretarial skills (telephony, typing and keyboard familiarity, etc.)

IT training is one of the fastest growth businesses of the Palestinian IT sector because it serves a local market where there is a high demand for IT curricula and also because there is a new emerging demand for the latest software development platforms and tools, especially relational database management system (RDBMS) structures, as Oracle, as well as the UNIX environment - both of which have been selected as development standards for software applications by the Palestinian Authority's Government Computing Centre - a component of the Ministry of Planning and International Co-operation. Palestinian training firms are therefore of necessity reacting to local demands and are performing credibly in this regard. But, because the GCC is only one user (albeit it a large one), there is the danger that in time the supply will outstrip the demand and there could very well be a glut on the market of Oracle and UNIX developers.

It is because IT training is one of the fastest growing local opportunities that local consulting firms and software development companies are expanding their activities to encompass this activity. This will also create inter-subsector competition for the traditional local training companies and will (or should) consequently provide a stimulus to become more professional and state-of-the art. But because IT training is so vital to the growth of all IT subsectors, our recommendation is that the development of IT training skills, resources and curricula should be a key component of C.P.E.D.’s company development activities.

4.5 Consultancy

Consultancy - IT and otherwise - in the Arab world is a relatively new business enterprise phenomenon because there is an innate resistance in the Arab business environment to paying large fees for something as insubstantial as advice without any tangible product. Consultancy gained its presence as a result of large multinational consultancy firms being retained for financial auditing services. Now, the handful of home-grown consultancy firms in the region and in Palestine are coming into their own. Local firms in Jerusalem/West Bank and Gaza are quite proficiently providing the following broad range of services:

• Software application and telecommunications topology design
• Organisation optimisation
• Interim staffing (body shopping)
• On-site training for a host of general and IT-specific topics

Our observation is that the local consultancy firms are doing an excellent job in horizontally integrating into the IT domain, especially in the area of IT training, because it complements their other services - it is an easy “add-on”. But consultancy can also be a clear-cut opportunity for other subsectors, too, especially for software firms. It would not require any major company restructuring to leverage software development competence into application software consulting for existing customers. Our recommendation is that non-consulting subsector firms investigate the opportunity of horizontally integrating their resources into consulting services.

4.6 Publishing

Publication of application software documentation, brochures, or directories is a key backbone business serving the global IT industry. Directory publishing for the Internet is rapidly becoming a strategic growth business globally, a reality recognised to-date by only two companies in the West Bank.

As illustrated in Figure 3.1 on page 12, Internet-based content, whether transactional or static, is shaping up to be the highest growth IT opportunity area. Web-based Content, or database, publishing ought to be considered a clear area of opportunity for the local IT sector for the following reasons:

• It has been demonstrated time and time again in the information industry that if a printed directory is profitable, its electronically-distributed version will be more profitable because it will accelerate the sales of the printed version for reference purposes. Anyone, regardless of sector, that owns intellectual property rights to a directory or database should be able to benefit from dissemination of the same via the Internet. This in turn should create consulting and software development opportunities for local subsectors

• There are opportunities for IT companies in terms of forming strategic alliances with international database publishers, e.g., Jordans (U.K.), S&P (USA), etc. for creating arabized versions of their directories that are already available on the Internet. This is especially germane in the case of financial information

• Wherever there is a regional market for internationally-developed software applications, there is an opportunity for arabization of relevant documentation for that market. Although this is more of a print-oriented opportunity at present, as Internet-based “help desks” become more prevalent, this will apply to that medium also

Our recommendation is that local publishers and software/telecommunication subsector companies seek out local database publishing opportunities and, at the same time, develop relationships with regional and international web-based content providers.

5. The Palestinian Information Technology Sector

Current Constraints and Developmental Barriers

There are two classes of obstacles that militate against the growth and development of the Palestinian IT sector: political difficulties and company systemic shortfalls, or weaknesses. Solutions to the political obstacles are outside the scope of competence of the sector or of C.P.E.D.; systemic weaknesses, on the other hand, are addressable by focused company development programmes.

Political Obstacles

Israeli occupation and enclosure, especially in the Gaza case, is a serious barrier to development of the sector. Because a significant opportunity for the sector’s development is its internationalisation (regional and international joint ventures), the current situation militates most severely against the unobstructed transit of goods to and from regional and international customers and suppliers - more pertinent in the case of hardware products than software applications - to say nothing of travel restrictions imposed upon Palestinians themselves. Although, as previously mentioned, national borders are becoming less and less relevant to technology (primarily due to telecommunication advances), political realties in the Palestinian case clearly impose a significant dampening effect upon orderly commerce. There exist de facto import and export restrictions in many cases which legally, by various accords, should not exist at all. A case in point is Article 36 (Telecommunications) of the current Accord which legally sanctions the importation of telecommunications products from the E.U. et al. directly into Palestine. This Agreement, however, is honoured more in its breach than in its observance. Inbound shipments, whether hardware components, software “shrink wrapped” applications or documentation, unless from Israeli suppliers and distributors, are conventionally delayed at Israeli customs for inordinate periods of time.

Another de facto Israeli embargo by-product is the case of the scarcity of telecommunications circuits in Palestine. Bezeq, the Israeli PTT, has proven itself to be most dilatory in deploying voice-and-data circuits into the West Bank and Gaza. When Palnet, the Palestinian Internet service provider, began operations, it was located in theWest Bank and was able to obtain only five voice-grade circuits for its start up operations. It wasn’t until Palnet physically moved from the West Bank into East Jerusalem that it was able to obtain the wideband circuits necessary for its development. This general situation clearly is not endemic to the Palestinian IT sector; it is applicable across the board to all sectors.

Sectoral Shortfalls/Weaknesses

The following growth obstacles and their recommended solutions are categorised as those that are the domain of the sector itself, and those that should be the focus of C.P.E.D. on a per-company development basis

Weaknesses falling within IT Sector domain:

1. Lack of an IT focus and a focal point. There is currently no single section or unit responsible for the co-ordination and control of this potentially vital area of the Palestinian economy. For further progress to be made, this must be addressed without delay

 

2. Lack of end-user technological awareness. With the notable exception of the Government Computing Center, the sector’s clientele are not sufficiently technologically literate to effectively plan for the deployment of IT within their organisations. This same lack of end-user IT focus causes a lack of confidence in the capabilities of the IT sector itself

 

3. Lack of IT Culture: largely due to the lack of IT focus and technological awareness, there is no apparent IT culture within Palestine. Although IT is accepted within the Government and business community as a means of information processing, there is still a lack of understanding and awareness from the most senior levels downward of the vast potential that IT has to offer. This can only be addressed over a period of time though education and IT literacy programmes. However, if addressed properly, these programmes can play a major role in stimulating IT projects and activity within the local community. This, in turn, will aid in presenting Palestine to its potential export market as a country with a strong IT culture and an advanced user of information technology

 

4. Lack of a National IT Strategy. There is the need for a strategy document, endorsed by the entire IT sector, which integrates all aspects of the IT infrastructure and clearly delineates plans in respect to future IT development. This document should focus on:

• Human Resources
• Export potential and priorities and multinational liaisons
• Effective education and vocational training
• IT Culture and Awareness
• Telecommunications
• Consultancy
• Software applications
• Collaboration and linkages among all sectors of the industry, but especially with respect to industry-University linkages

1. Lack of Copyright Protection. The lack of acceptable patent/copyright laws and the means of enforcing them, if they existed at all, will result in a high level of software piracy which will certainly dampen the revenue potential of the IT sector and will eventually create a somewhat hostile environment for the establishment of local subsidiaries of multinational IT firms in Palestine

 

2. Lack of Arabization Standards. The current uncertainty regarding the establishment of a single acceptable Arabized IT standard, as evidenced by the recent disputes between Al-Alamiah (Egypt) and Microsoft, as well as the proliferation of various manufacturers and software developers with proprietary Arabization standards, is causing a negative situation in respect to market opportunities for Arabized products, especially for niche market products. Resolution of this issue may well be outside the scope of any Palestinian initiative. However, there would be a significant “public relations” advantage if Palestine were seen to be taking a leading role in a move toward defining and implementing common “open” Arabization standards (“help desks”, document translation, etc.)

 

The above six deficiencies can be effectively addressed and remedied, on a sector-wide basis, by the formation of a representative IT Association and the establishment of a Palestinian Information Technology Unit (this might be one and the same entity) - the first of our strategic sector-wide recommendations. This Unit will fulfill the need of a credible lobbying and promotional platform to enhance the sector’s visibility with government and private sector organisations. In addition to promoting the sector, this Unit should play a major role in being the sector’s focal point in setting the standards and tempo for IT growth.

 

3. Scarcity of Leading-Edge Software Developers. There is a shortfall of software application development expertise, especially in Structured Query Language (SQL) platforms and tools, e.g., Oracle, as well as a scarcity of developers familiar with UNIX

 

4. Lack of Practical Telecommunications Skills. Similar to the scarcity of software application experts, there is a scant supply of engineers with practical - not theoretical - telecommunications network implementation skills. In a similar vein, there is a scarcity of professionals with Internet/intranet development expertise in a world where all trends point toward a rosy future for Web-based applications and content

This critical skill shortfall can effectively be addressed and remedied by the establishment of an IT Training and Development Centre - the second of our strategic sector-wide recommendations.

Weaknesses falling within the C.P.E.D. Domain: The following two weaknesses, endemic throughout the sector, are clearly within the competence of C.P.E.D. in launching company development activities, based on Diagnostic Studies.

1. Lack of managerial, marketing and sales expertise. The cadre of the IT sector, with the exception of the consultancy subsector, is primarily comprised of technologists who founded IT companies. As these companies approach a critical mass of staff, the lack of managerial and marketing expertise becomes a barrier to orderly development

 

2. Lack of effective promotional material. There is a notable scarcity of marketing, “corporate identity” brochures and business plans produced by companies within the IT sector. This shortfall, more rife in Gaza than in the West Bank/Jerusalem, is a consequence of selling into a small local market by word-of-mouth. This situation will present an obstacle to initiating regional and international strategic alliances and sales

It is our recommendation that these shortfalls should be addressed as company development opportunities by C.P.E.D, in addition to the range of our tactical ongoing company development programme recommendations,as set out in Section 6 below.

6. Development at the Company/Subsector Level

Local, Regional and E.U. Opportunities

A. Local Opportunities

In a local context, the sector is fortunate in possessing a "captive" market. Government ministries and commercial/institutional establishments alike clearly would prefer to transact business with Palestinian IT companies as opposed to their Israeli, Jordanian or Egyptian counterparts. The irony is that this same local client base, itself barely technologically competent, is not at all convinced that the local IT sector is at all as technologically competent as its peer sectors in Jordan, Israel, the Gulf or Egypt - let alone international IT product/service providers. In other words, there is a credibility and self-esteem issue at play that says in effect "if it's Palestinian it can't be as good as Egyptian", and so forth. In local eyes, "bigger is better". This is not merely our observation; we've heard this not only from local IT companies, but also from the Palestinian diaspora in Jordan and the Gulf and even from Egyptian IT professionals who are conversant with local realities. There are of course developmental action steps that can and should be taken to enhance company, subsector and sectoral IT competence; these will be evident from our recommendations. But technological added-value is only half the battle, perhaps less than half the battle. The major challenge is to imbue the companies with a discipline of professionalism that can be projected to its current and potential clientele. We refer to bolstering weaknesses in management structure, sales and marketing acumen and, very importantly, "image" (brochures. business plans, etc.). This class of company development assistance is part and parcel of our recommendations later in this section.

What are these local opportunity areas that are as yet rather underpenetrated? Taking an IT subsector perspective, the following opportunities present themselves:

1. Development of end-to-end turnkey, as opposed to piecemeal, solutions for all market sectors (Government ministries, banks, insurance companies, hospitals, international agencies, etc.).

 

2. Development of Oracle/UNIX expertise to cater to the Government market

1. Develop/extend expertise in information warehousing/archival applications. This area is on a current "high roll" internationally. The prime commercial markets in Palestine are banks and insurance companies; Government prospects would include finance, taxation and municipality records

 

2. Extend capabilities to encompass Internet/intranet-based banking and multi-branch order consolidation, account reconciliation, etc., application development skills for all market segments

1. Expand their existing applications and services to be Internet/intranet-oriented. This will tend to put these subsectors into a leadership position especially with multi-branch banks

 

2. Explore the establishment of Web-based help desks as service offerings for local clients - in all customer segments - of Israeli-distributed as well as internationally-produced products and services. Here is a cogent Arabization opportunity that is at the same time a leading-edge opportunity

 

3. Deploy existing talent into consulting services for existing and prospective customers. IT consulting tends to be a high-margin utilisation of exiting resources; it also conveys an aura of professionalism to even small firms

1. Accelerate Oracle and UNIX curriculum development to prepare for theheightened demand for these skills among professionals in the hardware/software subsectors

1. Seek out local database publishing opportunities as well as clients who can capitalise upon the Internet for advertising, i.e. providing Web page creation services

1. In a similar fashion as hardware/software/telecommunications firms horizontally integrate into consulting services, consulting firms themselves should consider developing or acquiring simple but useful software applications that can be provided to their client base, perhaps gratis. This practice works well with large international consulting firms; it enhances corporate "image"

B. Regional and E.U. Opportunities

Based upon the Needs Assessment Terms of Reference requirement to interview regional and E.U. companies and institutions in order to assess strategic alliance and market possibilities in those nations, we met contacts in Jordan, where there are many Palestinian owned-and-operated companies, together with a rather sizeable Palestinian workforce and in Bahrain and the Kingdom of Saudi Arabia where is also a sizeable Palestinian diaspora, coupled with a significant need for expatriate IT development. In the Gulf Cooperation Council (GCC) states, most IT development is the domain of expatriates and/or multinational companies. In Bahrain, especially, the IT sector is, if anything, smaller than that in Palestine. The offsetting advantage for alliances there is a high level of capital investment earmarked for IT, especially from the financial institutional infrastructure. Another reason for Bahrain as a venue for these meetings was that, during this period, Bahrain was hosting the major annual Middle East Telecommunications and Information Technology Conference - MECOM/INFOTECH. The rationale for Cairo was that Egypt has the well-deserved reputation of being the IT core for the Arab states and possesses many sizeable IT firms and enjoys a high level of Government support for this industry.

The reason for visiting European Union and the C.E.C. organisations was obviously to assess both commercial strategic alliance prospects as well to identify Euro-agency funded collaborative R&D projects that would benefit the Palestinian IT sector. We therefore met organisations in Brussels, Antwerp and Dublin for these purposes. We were fortunate, logistically, in having Siemens personnel from Munich meeting us in Antwerp

In a regional context, we found a universal willingness in Jordan, the Gulf and in Egypt to consider joint ventures with Palestinian firms. Palestinians - as individuals - enjoy a very positive reputation as IT professionals. There is however little or no awareness in the region, with the exception of Jordan, of the status or capabilities of companies within the Palestinian IT sector. We found the same receptivity in almost all Israeli IT companies with which we met, especially those that have had successful dealings with individual Palestinian companies previously. Of course, the incentive to regional prospective joint venture partners is and will be gaining Palestinian end-user market share. Relationships discussed were:

1. Cross marketing agreements. e.g. marketing and maintaining each other's software applications on a per-sector basis: banking, healthcare

 

2. Arabization of Israeli (Hebrew-based) applications for the travel/tourism and healthcare market segments

 

3. In one case, co-locating an Egyptian manufacturing facility to Gaza (unfortunately this was the only case of its sort encountered)

(Although not a market opportunity per se, but worth mentioning at this point is an Israeli project in its formative stage to create a development centre somewhere near Gaza to train Palestinian IT professionals and engineers to meet the demands of certain future Israeli development projects.)

We did, however, encounter some regional reservations that might dampen such ventures. Palestinians in certain Saudi Arabian companies privately expressed a healthy interest in such strategic alliances, but also cautioned that there would be Saudi Government resistance to such ventures. An Egyptian contact advised us that he (and other Egyptian firms) would countenance such alliances so long as no Israeli firms would benefit from such ventures.

On the E.U. front, market prospects being negligible at present, we found that the incentive to enter into strategic alliances with Palestinian IT firms was healthy but was entirely dominated by market share considerations, although in one case (Siemens) there was a willingness to invest in a holding company type of venture with a Palestinian consulting firm that has influence with PALTEL. Siemens, or at least their public-and-private network divisions, is most interested in picking up a segment of the Palestinian telecommunications switch market and, without some local partner, Siemens views Telrad's (Israeli) entrenched local position as difficult if not impossible to displace. Other E.U. commercial alliance possibilities - both with Irish firms - were:

1. The need for a Palestinian Web-based IT distance learning course provider

 

2. A Palestinian partner to co-develop telemedicine applications and re-sell and install image compression equipment in Palestinian Healthcare facilities

In addition to commercial IT opportunities in the European Union, there is funding and resources available from the European Commission, especially in D.G. III and D.G. XII, for collaborative research with E.U.-based enterprises (commercial companies and universities alike), such as ESPRIT and the Keep-In-Touch (KIT) programme. Whilst this is and should be a strong reason to have a Palestinian IT focal organisation, as will be proposed in Section 7, C.P.E.D. itself can play a vital role in disseminating such information in the process of providing company development assistance.

Recommendations

The previously-mentioned opportunities are based upon the technological acumen of companies in the various Palestinian subsectors to rise to meet these challenges. But added-value information technology itself is only one leg of a three-legged stool. Itshould be clear that the three major components of Palestinian IT company dethen are:

1. The enhancement of IT competence across all subsectors;

 

2. The development of companies themselves as competitive entities, i.e. structural enhancement. This involves management, market focus and image

 

3. The need for an organisation to provide the latter two classes of development assistance services

In short, for Palestine IT subsector companies to develop and to acquire more competitive advantage, a paradigm shift is necessary and the sooner the better. Recommendations may be grouped into three categories: IT development, company structural development and the role of C.P.E.D. with respect to these two classes of assistance.

1. IT Development:

1. Individual companies, and the sector as a whole, should seek out regional and international market opportunities and strategic alliances with customers, partners and original equipment manufacturers (OEMs). This will require both C.P.E.D. assistance as well as an impetus from a core sectoral organisation - see “Sectoral Development Programmes” - (Section 7)

 

2. IT training companies should develop up-to-date IT curricula, especially in the areas of Oracle, UNIX and structured development methodologies. Moreover, the development of IT training skills, resources and curricula should apply to companies in all subsectors, not only to the IT training subsector

 

3. IT training companies, universities and the vocational training infrastructure should consider utilising the Internet as a vehicle for distance learning curricula

 

4. IT training firms should consider entering into alliances with E.U.-based training firms, vocational institutes and universities for curriculum certification purposes

 

5. Hardware and software firms should ramp-up their Oracle and UNIX expertise, as this is a here-and-now Government IT standard

 

6. Hardware and/or software subsector companies should focus upon developing and marketing integrated hardware/software and/or turnkey solutions

 

7. Palestinian IT subsectors should assess telecommunications-oriented opportunities based upon the “extendibility” of their current products/services and/or the future needs of their clientele

 

8. Software/telecommunications firms should form distributor and VAR alliances with international providers of such network management and customer billing applications with a view to customising and maintaining such applications for the Palestinian PTT, PALTEL

 

9. Palestinian telecommunication providers, hardware resellers and software developers should shape their plans to horizontally expand their products and services to be Internet and intranet-compliant

 

10. Palestinian hardware/software/telecommunication companies should consider developing Web-based help desk competence, especially Arabic-oriented, in order to both reinforce relationships with their IT suppliers as well as to position themselves for future strategic alliances with regional and international IT product/service companies

 

11. Local publishers and software/telecommunication subsector companies should seek out local database publishing opportunities and, at the same time, develop relationships with regional and international web-based content providers for creating arabized versions of internationally-reputable Internet-based directories

 

12. IT software developers should focus upon information warehousing/archival systems, especially Web-based, as a local business opportunity

 

13. IT software developers should consider both Internet-based banking and Multi-branch order consolidation and customer account reconciliation as development opportunities. In addition, IT firms who have clients in a multi-site environment that can benefit for internal electronic commerce via intranets should begin to plan to develop products for this medium

 

14. Non-consulting subsector firms should investigate the opportunity of horizontally integrating their resources into consulting services Consultancy firms should consider developing applications that will have general appeal in the local context, such as simple capital equipment inventory database managers and report generators

2. Company Structural Enhancement

1. IT companies should focus on developing managerial, marketing and sales competence. It is important to note that practically all of the local, regional and E.U. opportunities listed above require a strong market focus

 

2. IT companies should develop business plans (so necessary for strategic alliances)

 

3. There should be more focus than at present upon company and product image and identity, e.g., brochures

3. The Role of C.P.E.D.

1. Companies within the sector would be well advised to avail themselves of developmental assistance programmes offered by C.P.E.D. (diagnostic studies, etc.). These programmes will have the effect of helping the IT companies to help themselves in terms of better positioning to be more competitive

 

2. can play a vital role in disseminating information to the sector as regards the availability of C.E.C.-funded collaborative IT R&D programmes and entitlements. It is suggested that C.P.E.D. develop its own WWW Home Page for such information dissemination, or at least enter into its own "strategic alliance" with Birzeit University, or with the Sectoral IT Unit (Section 7) for this purpose

Action Plans

The crucial elements involved in both forging ahead with opportunities and remedying company systemic weaknesses are:

• The enabling organisation
• Starting point
• Methodology
• Follow-on programmes

In this instance it is clear that the enabling organisation will be C.P.E.D. and the starting point the Diagnostic Study/Business Plan development structure, which is geared to identifying specific company needs in order to enhance and accelerate competitive advantages. Diagnostic Study output will comprise action plan(s) which the companies will use, as a first step, to achieve their respective competitive advantages. Although the Diagnostic Study process may involve the use of experts and facilitators, it must be emphasised that this programme is a cooperative process - i.e. the companies' involvement at all stages is crucial. Below is a suggested Diagnostic Study/Business Plan development methodology - a normative model or approach that is sufficiently flexible to be adapted to specific circumstances:

1. Identify the focal point in the company. This individual or individuals must have decision-making responsibility and should be dedicated to the study for its duration

 

2. The team together surveys the organisation and its relationship to its existing market

 

3. The team arrives at a vision of the mission-critical development of the company, based upon:

• Market sectors, geographical and industry segmented, that can/should be penetrated
• The company's capability to attain these markets (human and financial resources, etc.)
• Assessment of competitive threats

1. Key issues for focussing on product and markets are:

• How much does the timing of entry and initial choice of strategy matter? In particular, will the rewards of early entry compensate for the extra risks, and are there entry strategies that can overcome the penalty of later entry?
• As the market evolves toward maturity, what new capabilities must the IT company acquire, and how should the strategy be adjusted to ensure long-run success?

1. Once the mission is clear and realistic, the team decides how each component of the organisation can serve it and draws up a Business Plan - a blueprint - for realising the defined goals

 

2. The plan is then reviewed for consistency and flaws and then jointly endorsed by the company's focal group, the Diagnostic Study facilitator and C.P.E.D.

 

3. Identification of the next point-of-departure in the context of C.P.E.D.'s follow-on assistance programmes

This process, one of macro-design and which is a simple paradigm, is workable and should not exceed four days, perhaps less, in the Palestinian IT context. But, as it is a macro-level model, it would be well to identify some of its crucial constituents. It is vital for the company's management team to recognise the differences between what is ideal (or wishful thinking) and what is reality, and to be willing to compromise to reach a workable middle ground. It is equally vifor the facilitating consultant to distinguish between what is conveyed to him/her and what is valid. Drafting the development blueprint will also entail many crucial organisational considerations, especially if the company's systemic weaknesses involve management/marketing shortfalls. Examples are:

• Who does what job?
• How does work get assigned and completed?
• How does change open up new opportunities for the company to solve new problems or take on new responsibilities?
• How well does/will information move between individuals and groups?
• What are the metrics for success? Where and what are go/no go decision points?

The selection of the consultant is also vital. The consultant is more than an "expert", and more than a resource. The consultant must be a process facilitator! It is, moreover, our recommendation that, in the course of performing diagnostic studies, C.P.E.D. and its consultants/facilitators should be alert for joint venture possibilities within and across subsectors in terms of achieving economies of scale advantages with respect to both products/services and local markets.

Once the development blueprint has been endorsed by all parties, it is recommended that the Diagnostic Study?Business Planning team meet with C.P.E.D. executives to map out plans for follow-on development assistance services, which in any individual company case might include, for example:

• Sales and Marketing Planning
• Training
• Identification of strategic alliance prospects
• Identification of investment opportunities
• Design and production of brochures, etc.

7. Vision 2000 - a Road Map for Sectoral Development

Company/Subsector Vision

The year 2000 is less than three years away, but this intervening period is vital for the development of the Palestinian IT sector for, whilst the remedies for current geo-political obstacles are outside its control, the solutions to its systemic weaknesses are not. These weaknesses have been identified, opportunities noted and action plans presented, on a company/subsector level, which both C.P.E.D. and the companies can initiate to focus upon enhancing competitive advantage. These strategic initiatives can and must be commenced now to launch this sector on the path toward its healthy growth and the full realisation of its potential as a key contributor to Palestine’s economy.

Looking forward to a year 2010 horizon, in a “nothing new happens” scenario (i.e. no resolution of the political obstacles, no remedies to weaknesses, no developmental assistance programmes, etc.), the Palestinian IT sector will survive but will not develop appreciably.

Instead, our vision for a scenario of success at the end of this timeframe is the following:

1. The Palestinian IT sector will have effectively fortified its position with respect to its local market, in effect by erecting the requisite competitive barriers. Sustainable competitive advantages associated with slow-cycle, sheltered markets arise from establishing either a geographic monopoly or a unique set of product/service attributes attractive to the client base in those markets, or both. Several such attributes, e.g. leading the market into the realm of Internet/intranet-based applications

 

2. Companies within all IT subsectors will, through C.P.E.D.’s company development assistance programmes, have evolved into more professional organisations with clear-cut managerial, marketing/sales and corporate image platforms

 

3. There will be fewer IT companies than now, but the companies will be significantly larger than currently in terms of staff complements. The reasons for this will be:

• Inter and intra-sector mergers and acquisitions will occur as a natural consequence of economy-of-scale leverage in offering more “end-to-end” services to existing clientele
• Individual companies now, on average, tend to be below critical mass size (>15 is a good rule of thumb) with respect to developing managerial and marketing/sales structures in addition to their current development and support activities
• There will be an evolutionary “shakeout” of those companies who “don’t get the message”

1. There will, or should, by 2010 be at least 25 strategic alliances with regional and international IT firms. These joint ventures will be triggered primarily by the sector’s competence in developing those telecommunication-oriented applications that have been previously recommended as well as an enhanced reputation of company professionalism resulting from aforementioned company development assistance programmes. Continuing C.E.C. nourishment of E.U./Palestinian collaborative research and development programmes will also play a large part in enhancing the reputation of the sector, as more and more E.U. firms and institutions become comfortable with working with Palestinian partners

 

2. By 2010, Palestinian IT firms, through these same strategic alliances with suppliers and developers alike, will have significantly decreased their dependence upon Israeli agents and distributors - the current IT middlemen

 

3. By 2010, hopefully much before, there will exist both a strong Sectoral IT Unit and a Development/Training Centre. The former will be a world-class focal organisation for promoting the sector locally, regionally and internationally, in addition to its other activities; the latter will be the catalyst for developing IT professional development skills, educating the end-user, and mobilising Palestinian IT expertise to be an effective outsourcing pool, especially in the Israeli context

 

4. It is recommended that the IT sector as a whole should assess a sectoral development strategy that has worked well in other regional IT developing scenarios, e.g., in Viet Nam and Brazil: the “leap ahead” strategy. This means focussing upon one or two “bleeding-edge” technologies whose time has not yet come and which are heavily R&D intensive, but whose market benefits are apparent even if unit production costs cannot yet justify market offerings. Examples are many: computer/telecommunications-controlled photovoltaics, indium phosphide wafer fabrication in the “blue spectrum”, the latter even now has significant appeal for both the aerospace and automotor industry sectors. This is yet another reason for participating in C.E.C. collaborative research programmes, especially ESPRIT

 

5. Finally, the Sector as a whole will be viewed nationally as a significant component of the economy in terms of GDP contributions and employment. How big is “significant”? This is impossible to accurately forecast, but based upon experiences with other IT more-or-less green field IT development situations in the Balkans, the FSU and even in the Gulf region, it would not be untoward to predict an 8-10 percent CAGR in employment and a 10-12 percent CAGR in revenue

Vision for Development at the Sectoral Level

Up to now, the focus of this Needs Assessment has been at the company/subsector level, i.e. recommendations and developmental action plans to “help the companies to help themselves” in order to acquire and sustain a competitive edge. It is well now to view what the sector as whole can and should do in order to accelerate its total development. With a view to accelerating IT development at the sector level, our vision and recommendations are that two broader initiatives be addressed: Creation of an Information Technology Unit, and implementation of an Information Technology Training & Development Centre

1. Information Technology Unit

It is obvious that an essential ingredient is lacking at the sectoral level: there is no focal organisation to function as the overall “spokesperson” for the IT industry in Palestine as a whole; there is no unit to lobby for and to promote the sector to its local, regional and international clients and prospective strategic alliance partners - and there should be. There exists an Information Technology Special Interest Group (ITSIG) under the aegis of Birzeit University which is a step in the right direction. But ITSIG’s charter comprises only a partial (albeit effective) solution to an overall IT sectoral focal point requirement.

The Unit proposed should consist of a very small team of people (Unit Direct, Administrative Assistant and potentially a Technical Assistant).

In focussing upon the development of the IT sector, the unit should work in close co-operation with the various subsector component companies (Software, Hardware, Telecommunications, Training, Consultancy and Publishing), as well as with Government and University representatives (for linkage purposes). Above all, the Unit should be representative of all subsectors, and might even be staffed - full or part-time - by individuals seconded from the various IT companies. It is equally as vital that the charter and activities of the Unit be in accord with the representative views of the majority of IT companies in the sector.

The Unit’s charter should be:

• To promote the development, growth and profitability of the Palestinian IT industry

• To achieve the maximum possible level of indigenous Palestinian employment in the IT sector

• To work in a complementary partnership with the IT sector to maximise revenue potential domestic and export markets

Proposed activities of the IT Unit should comprise:

• Liaising with and advising Government in all matters relevant to the sector’s development

• Liaising with the educational (University) and vocational training institutions to ensure a ready supply of IT professionals, as well as to participate in the

• Drafting a Palestinian Information Technology Strategic Plan, or at least a White Paper IT Direction document

• Recommending to the Government a workable Copyright Protection law that is in conformance with the recommendations of the World Intellectual Property Organisation (WIPO)

• In co-operation with key University representatives, especially with Birzeit University, establishing maximum IT sector participation in Euro-agency funded research and development projects, as ESPRIT, INCO, Keep-In-Touch, etc.

• Facilitating linkage/subcontracting opportunities between Government and local IT firms

• Identifying and disseminating potential niche export market opportunities, particularly within Israel, the Gulf and wider Arab world regions

• Preparing a promotional brochure and directory of the Palestinian IT sector

• Organising IT exhibitions and seminars targeted toward local and regional potential end-user attendance

• Actively supporting local IT companies in enhancing product and service quality. It is recommended that the Unit implement a National Palestinian Product Certification seal or certification process to enhance a product’s acceptance in export markets

• Functioning as an information source for global IT trends/opportunities

• Promoting the development of “open” Arabization standards for IT products

• Liaising with international and regional IT bodies and organisations, such as the Regional Information Technology Software Engineering Center (RITSEC-Cairo), King AbdulAziz Center for Science and Technology (Riyadh) and the Kuwait Institute for Science and Research (KISR).

In addition to justifying the rationale for such an organisation and recommending its constituent activities, it is important now to focus upon organisational alternatives and to recommend the one that would appear to be the most effective.

• Requiring Governmental budgetary sanction, it would be slow to get off the ground
• Because it is a component of Government, there might be a bit of suspicion, on the part of IT sectoral companies, in respect to whether the Unit would represent them or Government

As to the all-important question of funding the activities of the IT Unit, any or all of the following sources of funding are feasible:

• Direct funding from the IT companies themselves in the form of annual dues, as is the case of members of an association. It is our experience that the amount of the per-company annual subscription should be a fixed amount regardless of the staff size or profitability of the company. To derive a subscription amount based upon the latter parameters would be based upon either complete trust or some sort of auditing procedure. The former is always open to scrutiny; the latter would be a time-consuming procedure. A direct “levy” against all IT companies would not be desirable either; such would be perceived as overly bureaucratic.

• The IT Unit could charge individual companies fees for specific services, as either fixed fees or those based upon time-and-materials. A case-in-point would be certification of IT products - a “national” seal of approval.

• Partial funding for the IT Units’s activities might be sought from the C.E.C. itself. We don’t know whether there is a precedent for this, but it wold certainly appear to be in line with the C.E.C.’s desires to promote this and other sectors.

2. Information Technology Training and Development Centre

In addition to the establishment of the sectoral Information Technology Unit, the second sector-wide recommendation is to establish an Information Technology Training and Development Centre for the following reasons:

• To address the current and prospective shortfall in IT development expertise
• To ensure a steady supply of qualified IT practitioners for the future
• To instill and to elevate IT awareness in the local IT user community
• To create the nucleus of a subcontracting and outsourcing pool, especially for the Israeli software development market

This Training Centre is envisaged as a multi-site operation, comprising at least two facilities: one in the West Bank and one in Gaza. These sites would be linked via wideband wireline or wireless communications. In addition, the IT Training Centre complex could easily be structured to be the hub for realtime distance learning within Palestine and across the immediate region.

There is such a burgeoning interest in local IT training from all quarters - developers and end-users alike, even consultancy firms - that there are several initiatives afoot in the government and private sector to create IT training centres, whose focus will be to elevate the competency of developers, end-users and computer neophytes alike. There, moreover, exists at least one scheme for combined training and development centres to create a pool of trained software developers to serve the huge Israeli software industry which is experiencing a dearth of software developers, and will continue to do so.

A vision for the Training and Development Centre’s curricula model is as follows:

• Organisation Specific: Computer hardware, software and telecommunications applications used or planned to be used within specific organisations

• End-User Products: This is an overview programme oriented toward entry-level individuals, and would include word processing, spreadsheets and general office automation

• IT Specialist Productand Tools: Development platforms (Oracle, UNIX, etc.), operating systems, hardware maintenance courses, data communications and systems management

• Advanced Technology Awareness: Introductory and advanced level courses focusing upon the “concepts and facilities” of technology. This curriculum is structured for IT specialists who require a detailed “hand on” knowledge of current technology

• Skills Development for IT Specialists: Structured Programming, Systems Analysis and Design, Team Leadership and Project Management

• Technology Briefings: Introductions to new or emerging technologies (e.g., Imaging, Internet/intranet, Data Warehousing, Communications Security, CASE tools, Geographic Information Systems, etc.)

• Technology Management: IT Strategic Planning, Managing the IT Organisation, Disaster Recovery Planning and IT Contract Management

• Academic: In liaison with the Universities in the West Bank and Gaza, this component would include part-time/evening degree-oriented undergraduate and post graduate courses specialising in Computer Science and Information Systems Management

It may well be asked “why is such a Training and Development Centre required if we’re developing the core competence of the IT training subsector?” and “Cannot these training companies fulfill this mandate?” The answer is that these are private companies that must be allowed, encouraged and supported to seek out their own niche markets. What is focused on here is a sector wide, or even national, initiative. No one Palestinian IT training company is big enough, nor will likely ever be, to embark upon this large initiative, but this is not to say that they cannot effectively participate in the dynamics of this organisation. They should.

As is the case for the IT Unit, there are a number of organisational options for the Training and Development Centre:

Option 2 is the favoured option. Although Option 1 has as its advantage the fact that such an initiative has already been strategised by the GCC and has, we assume, the approval of Government, Option 2 has the advantage of being private-sector and therefore, presumably, more responsive to the IT sector as a whole. There is an additional advantage to Option 2: that of start-up funding. The Training and development Centre facility construction will be expensive (a similar one in Oman cost the equivalent of US$ 3,000,000). Of course, this initial facility expense can be reduced if there already exists a “shell” facility in the West Bank or in Gaza. At any rate, the initial buildout expense can well be a component of the strategic alliance agreement. Of course, in either option, ongoing operating costs can be defrayed by enrollment fees.

In either option, it will prove worthwhile to establish cross licensing arrangements with leading international IT product and service vendors, as Oracle, IBM, Novel, Microsoft, Siemens, etc. Certifications from such firms will substantially advance the Centre’s credibility and drawing power, and, as experience has shown, such firms are more than willing to have their products in evidence..

Conclusion .

Information technology has the potential to be a most strategic and important element for the future economic development of Palestine and cannot be ignored (and it clearly isn’t, witness C.P.E.D.’s company development programmes) by virtue of its tremendous potential to provide both GDP growth and sustainable employment opportunities.

Although there are many problems and obstacles to be faced, Palestine has everything to gain and relatively little to lose by initiating these ventures. Both the IT Unit and the IT Training and Development Centre are legitimate and viable aspirations which can only be achieved through top-down commitment at all levels of the IT sector, their ultimate beneficiary. But, as the current global IT arena is more fluid than most business sectors and is continuously impacting upon evolving skill requirements, it is vital that enabling strategic decisions are taken without delay, especially at the company/subsector level. The inherent danger in ignoring the opportunities presented is that it will become increasingly difficult (and more expensive) to begin to face these same issues later. The important thing is to get it right the first time.

As we design and enable technological and sectoral policies for the next millennium, new, more expansionary visions should be taken. Instead of a go-it-alone, we-they mentality, the clarion call is for cooperation and developmental assistance that leads to a positive outcome with benefits enjoyable by both the private and public sectors.