October 6, 2009

Bridging the GCC Technology Gap through Next-generation ICT Parks

ICT parks enable a concerted leap into the digital age through incubation and growth of ICT talent.

As GCC countries seek ways to diversify their economies, information and communications technology parks (ICT parks) will continue to play a central role in helping to nurture fledgling technology industries by building pools of talent, finds a new report by Booz & Company. Existing GCC ICT parks focus on either achieving commercial success or fostering development of local talent, but not both together.

“To be effective, next-generation ICT parks will need to create stronger links between government, education, and industry in the ICT arena,” explained Karim Sabbagh, a partner at Booz & Company and global lead of the firm’s communications, media and technology globally. “Furthermore, to attract and retain talent, these parks will need well-appointed offices, desirable living amenities and other consumer services.” Structured correctly, they will operate along the full ICT value chain, from ideation to commercialization, and will be positioned to help fulfill the economic missions of the GCC.

ICT Parks Play a Significant Role in Enabling Nascent Technology Industries

The countries of the GCC are full of economic potential, but need more mature technology industries to thrive. Because the region relies on imported skilled labor, most technology projects go to foreign contractors—who are not typically committed to the long-term growth of a grass-roots technology industry.

To change this, and to organically grow and enhance technology skills and knowledge, the GCC is turning to ICT parks. They allow a leap into the digital age by creating a dynamic environment to incubate, cultivate, and share talent. Next-generation ICT parks will thus serve as prime drivers in economic diversification efforts and transition towards a knowledge-based society.

Growing Need for Local ICT Talent

GCC oil revenues over the past five years have allowed the development of a number of large projects—spurring growth in non-oil sectors to diversify economies and lessen dependence on hydrocarbons. “These projects have multiplier effects: they provide opportunities to grow secondary sectors and services and inject liquidity into the market, which serve to create a more sustainable socioeconomic environment,” commented Ramez Shehadi, a partner at Booz & Company, who leads the information technology practice in the Middle East.

Non-oil sector growth creates increasing demand for expertise in the GCC, which relies on foreign skilled labor to fulfill this need. Many expatriate workers however do not stay long, meaning GCC countries depend on a cycle of ‘knowledge through acquisition’—not ideal for establishing a knowledge-based society. As GCC countries move toward economic diversification and become knowledge economies, investment in local talent is key and ICT needs to be a primary focus. 

ICT Outlook in the GCC

ICT spending in the GCC grew to $33 billion in 2007—over twice the average of OECD countries and 50 percent higher than the global average, with spending expected to continue growing. “This is driven by increased demand for ICT in telecommunications, oil and gas, construction, healthcare, and public institutions,” commented Sabbagh.

That regional ICT efforts are mostly led by international companies brings challenges of inconsistent quality of service and a lack of responsiveness in the region’s most important development projects. This is exacerbated by the immaturity of national ICT agendas to develop capabilities, limiting the positive role educational institutions might play. The region also generally lacks copyright protection and transparent policies and regulations on intellectual property (IP) and a mature venture capital infrastructure. These make the environment for startups suboptimal.

To promote the development of ICT, GCC countries are directing investments toward state-of-the-art ICT Research & Development and are forging partnerships with world-class technology universities. They set up Special Economic Zones (SEZs) to create favorable economic and regulatory climates for ICT companies and also aim to improve availability of ICT services and capabilities: Dubai Internet City and Qatar Science & Technology Park (QSTP), for example, encourage the development of local ICT resources and cater to their countries’ fast-changing ICT needs.

The Main Business Models of GCC ICT Parks

The GCC has more than a half dozen parks that focus on ICT and follow one of two basic business models: commercial ICT parks or incubator ICT parks.

“Commercial ICT parks attract multi-national companies (MNCS) that focus on the latter stages of the ICT value chain: sales, implementation, and operations. These are successful where demand is high for ICT services and the supply of office space is tight,” said Shehadi. The main objectives are to offer the best commercial environment, attract the largest number of tenants, and maximize financial returns from leasing or selling land or buildings.

Incubator ICT parks are built around R&D and are less focused on financial results. They often house satellite campuses of renowned technical universities—as academic influence generally leads to innovation and entrepreneurship and provides technical expertise. The primary purpose of ICT parks is to develop local ICT talent and create greater socioeconomic development. These ICT parks can play a pivotal role in integrating government, industry, and educational institutions.

Incubator ICT parks focus on creating broader economic value, but the path is more challenging. To develop a grassroots ICT industry, the GCC needs self-sustaining ICT parks combining the characteristics of both commercial and incubator ICT parks. Next-generation ICT parks will create value through research and incubation of ICT projects, and will capture value by commercializing ICT products and services. “They will have facilities that help them attract and retain the companies and talent whose early-stage development they are helping. In providing such benefits, ICT parks will create self-sustaining ecosystems for an indigenous ICT industry in the GCC and help the countries transform into knowledge-based societies,” Sabbagh explained.

Value Propositions that Set Apart ICT Parks of the Future

To create self-sustaining ICT parks, countries must put in place a hierarchy of value propositions. It starts with a set of value propositions that are relatively basic and that gives park tenants the “right to compete.” It then graduates to value propositions that are critical for transition to a knowledge-based society, followed by value propositions that give ICT parks sustainable ecosystems for long-term viability.

Basic Value Propositions, Enabling the Right to Compete

Four basic value propositions are essential to ICT parks to compete:

  • 1) Cost Advantage: ICT parks can attract companies by offering financial incentives including tax benefits, full foreign ownership, and repatriation. Many have moved beyond being tax havens and offer advanced incentives on real estate costs, employee salaries, and business support services.

  • 2) World-class Business Infrastructure: Most ICT parks offer infrastructure making it easy for tenants to set up, including customizable office spaces, conference facilities, high-speed telecommunications and IT networks and convenient access to transportation hubs. Dubai Internet City has an advanced Metro Ethernet broadband infrastructure and the world’s largest commercial IP telephony network for example. Newer ICT parks benefit from smart-city technologies and advanced business infrastructure improves the efficiency, creativity, and productivity of tenants.

  • 3) Holistic Business Support: Modern ICT parks support their world-class infrastructure by providing value-added services. These essential services are especially important for startups and smaller enterprises that lack the scale to run a full-fledged support division. The fact that the services are available through a single point of contact is a major benefit.

  • 4) Market Insights and Opportunities: ICT parks play an important role in identifying business opportunities for tenants by providing insights on, and entry into, local and regional markets. These again are especially important for startups and smaller enterprises.


Next Tier Value Propositions Transitioning to a Knowledge Society

After establishing basic value propositions, ICT parks can begin to implement three value propositions that are critical to transition towards a knowledge-based society:

  • 5) Advanced ICT Education and Research: “Links to universities allow ICT parks to help host countries transition to knowledge-based societies. Some have set up their own universities, offering IT, media, and telecommunications courses,” Shehadi commented. ICT parks are also an integral part of the research infrastructure in most countries. The Centre of Excellence for Applied Research & Training (CERT) in Abu Dhabi, for example, was set up as the commercial arm of the UAE’s Higher Colleges of Technology. The organization supports technology development through the CERT Centre for Supercomputing, the Embedded Systems Application Development Center, and other units. QSTP, for example, liaises closely with a number of world-renowned engineering institutions that have established satellite campuses in Qatar.

  • 6) Assistance with Transforming Ideas into Businesses: Incubation services and business accelerators are important catalysts of innovation, providing business advice and mentorship to companies that need them. For example, The Knowledge Mine, a business incubator facility at Knowledge Oasis Muscat in Oman, supports and encourages the creation of knowledge-based and technology-based startups, providing an affordable working environment and a host of other services.

    Funding for startups is also a key enabler of innovation. Dubai TechnoPark (DTP) set up a $300 million venture capital fund to attract early-stage tenants with viable commercial projects. The Dhahran Techno-Valley Business Incubation Services, linked to Saudi Arabia’s King Abdullah bin Abdulaziz Science Park (KASP), has established a proof-of-concept fund for its startups.

  • 7) Integration of Government, Industry, and Education: Next-generation ICT parks should provide access to government ICT initiatives, help drive the enhancement of the ICT curriculum in universities, and serve as a liaison between industry and education. In some developing countries, government-led policy reform is such a core part of the ICT park agenda that government agencies set up satellite offices inside. In Oman, the government IT authority is an anchor tenant of Knowledge Oasis Muscat.


Advanced Tier Value Propositions, Creating Sustainable ICT Ecosystems

The two final and most advanced tier of value propositions makes it possible for an ICT park to ensure its own long-term viability. This is achieved via a long-term commitment to ICT development and a sustainable lifestyle for workers.

  • 8) Long-term Commitment to ICT Development: Next-generation ICT parks must focus on long-term partnerships that attract and retain strategic tenants. The factors that help with this include the availability of capital and the promotion of innovation. “Other factors include an unwavering respect for intellectual property and copyright protection laws, and proven processes to attract quality ICT companies and workforces needed to staff them,” stated Sabbagh. Dubai TechnoPark has promised to fund R&D projects that address major socioeconomic challenges in the region.

  • 9) Sustainable Lifestyle for Workers: The GCC’s ICT parks must provide facilities that make life easier and more interesting, such as recreational facilities, green spaces, and retail and entertainment complexes. Dubai Internet City provides a strategic geographical location: although it doesn’t offer residential/entertainment facilities on its grounds, it was built near Dubai Marina, which has high-rise residential areas, entertainment, shopping centers, restaurants and beaches. “When ICT parks are farther from major international cities or recreational areas, they need to encourage the growth of these types of amenities and services in their neighborhoods—if not directly on their grounds,” Sabbagh commented. “These are key to attract talent to relocate to these parks.”


Three Imperatives: Clear Focus, Long-term Commitment, and Prime Location and Layout

As GCC policymakers plan ICT parks that could move their countries towards knowledge societies, they should integrate three elements in their plans:

  • 1) A clear direction for individual ICT parks: Next-generation ICT parks should have dedicated clusters incentivizing industry, government and other institutions to interact in new ways, and selected to meet market demand. ICT parks must integrate their mission with those of their host countries, as economic benefits of zone development are reduced when zones function in isolation from larger national objectives. Benefits are multiplied when ICT parks conform to national economic policies and help increase the competitiveness of domestic enterprises. “They are even greater when integration includes government and education institutions. Such efforts can be pivotal in moving host countries towards knowledge-based economies,” said Shehadi.

  • 2) A focus on long-term commitment rather than short-term profitability: Creating an indigenous ICT industry requires long-term commitment. Decision makers should complement current short-term financial measures of success with longer-term measures, such as the number of new tenants joining the ICT park, the number of local startups, the number of patents awarded, and the number of local ICT university graduates.

    Financial support should be secured early on and support from senior government officials is critical. Long-term success will also be determined by the strength of the ICT park’s management team. “This team should have expertise in both business and technical areas, with clearly defined roles and responsibilities, and supported by a Board of Directors that helps steer the ICT park towards its vision and objectives,” Sabbagh said.

  • 3) Selection of prime location and layout: A convenient location can be important in letting ICT park tenants connect with their suppliers and customers, and thus keep labor and materials costs under control. The ICT park’s building should be entrusted to a world-class master planner knowledgeable about smart-city technologies and urban-planning, to ensure a state-of-the-art development. The ICT park layout should be campus-like, focusing on “groundscrapers”—low or medium rise buildings. “Such architecture fosters communication and collaboration: it is essential for innovation and helps integrate the different businesses in the ICT park,” explained Shehadi.


The ICT park operator should accurately gauge future demand—how quickly the ICT park is likely to grow and the infrastructure and services that will be required. A phased growth plan offers the best chance to avoid overcrowding or empty spaces.