Software Business in the Middle East

Basically,  you have two major ways to start your own software company – either you provide consulting services to your customers to help them resolving the particular issue, or you develop your own product to sell it to as many customers as possible. You can of course work as consultant in the beginning until your product sales are good enough to pay your bills, but this is normally temporal thing because as soon as you get enough sales you will be busy developing new versions of your product and supporting your customers.

Living in Sweden, it might be very good idea working as consultant. You might probably charge as much as $120 per hour with today’s currency rate and I guess after all taxes you would have about $50 per hour left in your pocket. Having about 160 working hours in a month, you can earn pretty good money. Counting that probably you might get signed month or year based contract with much lower rates per hour you will still get good money.

Now let’s see what is going on in UAE. The IT market here is very different. There are IT companies that will agree to develop the stock management program or kind of CRM or ERP for you spending couple months for couple developers and they will charge you as much as $5’000–6’000 for the complete work. Simple calculation gives your about $1’250–1’500 per developer per month. I am not sure about the quality these people provide and I heard many stories about customers who were not able to find such companies in a year or so for support as they have already been closed.

The majority of the companies that charge customers so little are Indian companies – they either send the work back to India (which probably makes sense considering salary level over there) or they have developers brought form India to UAE.

Other companies charge you as much as $3’000 or $5’000 or more per developer per month depending on what you need – more complicated stuff is more expensive.

In my experience, salary of $3’000 per month is the minimum level for the developer to have reasonably good level of living in UAE. Calculation is very simple and it is also very rough:

• For the apartment in not expensive area as International City you will pay as mush as about $1’000–1’200, which together with water, electricity, phone and Internet bills will easily comes to 50% of your salary salary. In very nice areas the rent prices are almost double higher, so it is simply not affordable the salary of $3’000.
• Expenses for food take another $500–700 per month as you must likely will eat your lunch in some lunch restaurant next to your office.
• Add here expenses for car, petrol and car insurance as public transportation is not something very well developed yet in UAE.
• If you have family, it will add to your monthly expenses.
• Most likely you will not spend you week-ends sitting at home, so add here the additional expenses.

If developer salary is less than $3’000 per month, he will be forced to live in the apartment shared with other people and make many restrictions in his live to survive. This is not the way you would want to treat your developers, I believe.

In case you are a consultant firm, you need to pay salary to your developers and you need to pay the rent for your office space, your company license, insurance and thousand other things. Just for example purposes, 700 sq. ft. (about 70 sq. m.) office will cost you at least $2’500–3’000 per month.

Now let’s calculate – let’s say you have yourself and two other developers. Each of you gets $3’000 per month plus you need to pay for the office another $3’000 per month. Totally you end up with $12’000 per month. For simplicity we do not count your bills for phone, Internet, license, travel and other expenses. This money is the minimum what you have to charge your customer to simply have zero balance at the end of the month. It will end up with $4’000 per developer per month – and that might be considered too high for some of the customers, who used to get stuff much cheaper from Indian companies based in UAE with very low salary levels for their developers.

As an additional opportunity, you might work only with European or US companies and you charge about 50–70% from European or US average hour rate. It will still be cheaper for your customers, and you would get enough money to have net profit.