Software Business in the Middle East

Just after we started in Dubai I had spent pretty much time learning about how people make their business in UAE, where they get new contacts and partners. As you understand, one thing is what they write in nice glossy magazines about cool businessmen, and another thing is to meet real people, who are dealing with all the issues on daily basis.

Dubai is very good environment to meet people and learn new stuff. There is a number of Business Clubs and a number of different Networking Events each month where people from different business domains meet to talk to each other. Some countries have their own Business Councils – like American Business Council, Swedish Business Council, and many others.  

I plan to post about all different ways how I met people in Dubai - starting from Business Councils. 

Business Councils

Basically, I dealt mostly with Swedish Business Council (SBC), as we claimed to be a Swedish company. I think I met with Roland Sossi, who was in charge for SBC at that time, already couple days after I had arrived to Dubai. SBC became a very good source of information for us – for example, from Roland I knew that Arab Health, the largest Healthcare Exhibition in the region, was about to start in a few days. That was definitely a place for me to visit.

Later on, when I got the company license, our company became an official member in Swedish Business Council. Every second year they print a Member Directory, and that is really something that can promote you without spending any money at all. Time to time SBC organizes excellent events, like the next one will be a breakfast with a lawyer firm to learn more about corporate law in UAE.

They also organize social events for its members, Go-Cart, Pub Meetings and so on – just to make people meet together from time to time.

But the most advanced event was Swedish Conference, with over 100 people from Sweden, or from Swedish companies working in the region, or just people, who would like to work with Swedish companies. The conference got visitors form Swedish Embassies in all GCC countries – all of them made presentations about their country development and business opportunities.

During the conference they organized 20-30 minutes sessions with representatives from any Swedish Embassy in GCC countries - just to talk about your business and discuss how Swedish Embassy might help you to move forward. I had a meeting with folk from Swedish Embassy in UAE. I told them about our idea to develop Drug Database for UAE and they advised to contact them if I would fail with my efforts to get support and cooperation from official authorities like Ministry of Health in the country. It really sounded like a huge and promising support - I never even thought that Embassy of any country might actually help with your business if you work abroad. But now it seems logically for me - I believe one of the main roles of the Embassy is to promote their country business.

To be continued.

Finally, I got all the official papers that allowed me to run the company. Now it’s a good time to summarize what ideas we had in mind about what to do.

Consulting

This is definitely a way, at least to get money to keep company running and pay our bills for a while. We thought we could develop custom systems for our customers, or help them with their own development.

It took me a few weeks to figure out that consultancy for us has very little opportunity. One of the reasons is a large competition from Indian developers who work for a very small amount of money. It is probably good money comparing to what they could get back in India, but it is not enough to keep company running the way we wanted. There was a way to employ a number of developers from the subcontinent, but in this case we would treat them as very cheap workers without taking care about how they live and what they eat, so it was not something we wanted to do.

There are definitely exclusions from these pretty pessimistic outlook at IT consultancy. For example, I met a guy from Germany who had been working in Dubai for pretty long time. Suddenly, he got several companies from Germany asking him to help them with their projects here in Dubai. This guy quit his job and started to work with those German companies charging them normal rates per hour as he would work for them in Germany. This is the excellent way of working but unfortunately it happens pretty rare here. In our case it means we would try working with Swedish companies to get this kind of consulting job.

Consulting for Healthcare

It is basically consultancy too, but since some of us had been working with software for Healthcare in different companies for the last several years, we separated this kind of consultancy into the separate option. Healthcare is booming now in UAE, and that sounds like a good opportunity for us. Just as an example, one of the largest projects started in Dubai is Dubai Healthcare City – a special area in the city that would have around 12 hospitals and 300 clinics by year 2010. At this moment they have opened around 24 clinics already. Also, they work closely with Ministry of Health, and it sounds like they are going to have a lot of development in the near future.

Develop Our Own Product

Just before I left Sweden, we thought we could develop our own product while I was running around in Dubai trying to get some work for us. In the middle of 2005 we started to use Agile with Scrum at my last employer, but we had hard time to find out any existing software to be used for project management using this methodology. So, together with my partners we agreed on the requirements that we would implement for the first version, and we also agreed that until I get some work in Dubai to keep all of us busy, they would work on this product. Basically, it was assumed to be the classic product start-up when people work on evenings and week-ends before the product brings enough money to quit their jobs – all three of them would stay employed by their employers until we can pay their relocation to UAE.

My partners made a prototype that demonstrates how User Interface would look like, but that was unfortunately all they were able to develop. For some reasons they never got time to finish even the first version. That was pity because I still think it was a good idea. By now we would have probably got good sales on this product, or at least we would get a very valuable experience on how to promote and sell our own product.

Drug Database for United Arab Emirates

At Siemens I was working a lot with the Drug Database for United States. When we discussed different options of what we could do in Dubai, the idea to develop Drug Database for the local market popped up in our minds. We spent a lot of time searching in the Internet to learn if there was anything similar already existing in UAE, and we did not find anything. The only list of available drugs was found on the web site of Ministry of Health, but it was just a pure list of drugs with their prices without any detailed information. By beginning of March 2006, when it was clear that nothing else would work as we thought, we felt that Drug Database is the only thing that might make sense for us.

From this point we concentrated ourselves only on Drug Database – and this is the product we sell and develop further at the moment. At the same time I spent pretty much time to keep learning about software development and entire business environment in UAE – although we already decided what we’re going to do, it is never wrong to keep your eyes opened to catch the right opportunity.

Read Part 1

This is a summary of the post made by Max Kraynov. The translation is made from Russian and it is done in free style – the main goal was to express the meaning of the original post.

The reason I made this translation is to explain my English-speaking colleagues the hidden troubles in acquisition offers.

The fourth – What the buyer wants to do with the startup after acquisition. 1). Shut down the product or team – they simply want to get rid of the competitor. Even if the competitor is not very dangerous, they might cause larger company certain headache. In this case the buyer is interested neither in the product nor in the team.

2). Shut down the product and use the team for another project. This is a typical scenario of acquire-to-hire. The only problem here is that team most likely will not be happy when their baby they spent so much time and effort on will be closed.

3). Develop the product further using the same team. The development strategy might be changed to align with the buyer’s needs. This is a more optimistic option of the previous one. The product is still alive, and although it will move in the different direction, the team might be OK working on it further on.

4). Invest into the product and continue development. This is the perfect case, but a very rare one. If your product is so good, then you would look for investments rather than selling the business to anybody else.

The fifth – What happened to all the companies acquired by larger company before? This is the question you would ask the buyer to get information about:

1). How they undertook due diligence and how fast the acquisition was made. Also, it is not a bad idea to ask for contacts of the people from previously acquired companies.

2). Problems that came up during acquisition. It might be problems related to due diligence, or disagreement in price or conditions, etc. The reason of those problems might be that the smaller company has not grown enough or both parties misunderstand the acquisition process.

3). Plans for other acquisition of other companies. Answer on this question might help you to understand the real reasons why the larger company has made you an acquisition offer.

If your company is the first one in the list of acquisitions planned by the buyer, it might make sense to agree on merger rather than acquisition.

The sixth – How large the buyer is and what their primary businesses are. You can use the following test to see how serious the buyer is with his acquisition offer.

1). If the buyer is the same size as you, the possibility of acquisition is less than 10%. Possibility of merger is 30%.

2). If the buyer is 3-10 times larger than you, then possibility of acquisition is equal to 30%, and possibility of merger is equal to 10%.

3). If the buyer is really large and serious company, then…large and serious companies do not often buy young startups, although there are exceptions like Google that used to buy startups. So the possibility of either acquisition or merge in this case is almost 0%.