For the 17 years that I have been covering the Oracle and SAP skirmishes, Oracle has always led in total revenue and always trailed in application sales. The one exception has been in the Middle East, where Oracle enjoys a much stronger presence. We recently braved 12-hour flights and a desert safari to gather more details. Oracle: 2,700 customers across the Middle East and Africa We were in Dubai to attend the Oracle EMEA Analyst Summit, a two-day event hosted by Sergio Giacoletto, executive vice president for the 59-country region that spans across 12 time zones. Looking north-south, Oracle EMEA has 139 offices from Helsinki to Cape Town. Last year, EMEA accounted for $6B of Oracle’s overall $18B in revenue, with the vast majority coming from sales in Europe. The region is home to more than 80,000 customers. If you focus only on the Middle East and Africa region, it covers more land than the United States, Europe, Brazil, China, India, Australia, and New Zealand combined. Yet, the total MEA population is less than 1.3 billion, slightly smaller than China’s. And, despite all the buzz, the region’s total economy is half that of Italy’s. The day opened with a welcome from Her Excellency Shaikha Lubna Al-Qasimi, the minister of foreign trade for the United Arab Emirates (UAE). The U.S.-educated minister noted that while petroleum is important to the region, 65% of the UAE’s economy revolves around non-oil markets, mostly construction, real estate, and tourism. That figure grows to 95% for Dubai. There’s not a lot of manufacturing here. Since starting its Middle East operations 20 years ago, Oracle MEA has grown to 1,500 employees in 20 offices. The largest presence is in Egypt, home to 600 employees, of which more than 400 work in newly opened global support center in the Smart Village near Cairo. Oracle also has centers of excellence in Lebanon and Jordan. Oracle’s MEA customer base includes nearly 3,000 middleware customers, half of which use Oracle’s applications. To put that in perspective, the installed base for applications about double that number of Oracle’s operations in greater China. Indeed, despite the attention given to China, MEA generates more revenue for Oracle. The early investment in MEA has helped Oracle achieve strong penetration in government, banking, telecommunications, real estate, large retailers and wholesalers, energy and utilities, and airlines. During one presentation, an Oracle executive put up a slide showing 100% market share for government, the 20 largest banks, and telecommunications. While that may look like saturation, the executive noted that there were 2,400 banks in the Middle East, with 300 in Bahrain alone, and that a new bank was being started every week. He added that the new banking startups “want everything on Day 1 ... often before they have hired a CIO.” Likewise, new telcos are being created on a weekly basis. Selling in the Middle East requires patience. During a break, one Oracle executive noted that a prominent government deal took five years to close. He added that some could take 7 or even 10 years. Sales cycles tend to be longer here, with smaller deal sizes than in other parts of the world. Most revolve around projects. As you might guess, relationships are very important. In response, all of Oracle’s MEA offices are led by locals. On my drive in from the airport and seeing the massive amounts of construction going on, I couldn’t help but think of Shanghai (read more about Dubai’s growth here). However, the one obvious difference in Dubai is the lack of presence by global companies. The vast majority of Oracle’s customers are local or regional firms. This is a sharp contrast to China where there is a huge footprint of American, European, and Asian firms, often represented in neon in Shanghai. The lack of multinationals could serve as an important barrier to entry for SAP. “10-year lead over SAP in the Middle East” While this was an Oracle event, there were lots of references to archrival SAP. SAP executives have told me that this region is one area where Oracle dominates. One Oracle executive described his company’s leading share here as “our Germany.” He estimated that Oracle has a “10-year lead over SAP in the Middle East.” SAP executives have told me they made a mistake by allowing a third party to represent them in the Middle East and North Africa instead of building their own presence. Last September, SAP announced that it was acquiring SAP Arabia for an undisclosed price. According to ArabianBusiness.com, the price was reportedly $280M. SAP Arabia had amassed a base of 150 companies, with a quarter in the oil and gas sector. It had 70 employees covering 19 countries. A March 2008 press release by SAP listed the current customer base at 180. SAP Arabia is now a reseller focusing on selling SAP products to small and midsize companies. South Africa is one market where SAP has a stronger presence, though Oracle said it is narrowing the gap. When we visited South Africa 11 years ago, most of the large companies in steel, defense, consumer products, and chemicals were R/3 users. I’m not sure if this has changed, though I suspect that I will get a full briefing on SAP’s MEA strategy at next month’s SAPPHIRE. Skills shortage is global One recurring theme of the conference has been the challenge of attracting IT talent for vendors and customers. At the end of the first day, Oracle hosted a panel of four regional customers. I asked the panelists if they were being affected by a skills shortage. Two had worked in the United States and said that the Middle East has the same challenges as the United States when it comes to hiring and retaining IT talent. One Saudi executive noted that Oracle is working closely with King Saud University to help speed IT training, but it seemed that even with this initiative, demand will continue to outpace supply. Earlier in the day, I had asked Oracle about services partners in the region. The first vendors mentioned were Accenture, Hewlett-Packard, IBM, and Deloitte, with an acknowledgement that several Indian firms—Satyam, TCS, and Wipro—had significant presence in the Gulf States and are now expanding. Most of the IT services market is in the hands of small local players. When I was at NASSCOM in Mumbai in February, I had asked many Indian firm executives whether they were targeting the Middle East. One told me that it wasn’t a good opportunity because there were no legacy systems. While this may be true, there are other barriers: one is language (Arabic) and another could be prejudice. One Oracle executive noted that since most of the construction workers here are from India and Pakistan, those arriving on flights from India are often assumed to be laborers, not executives. There is a large Indian presence here, about half of the expatriate population. After the panel, I asked one of the American-educated CIOs whether he would recommend Dubai to a young IT person looking for an exciting new opportunity. He said Dubai had a lot to offer: beaches, beautiful weather, nightlife, lots of opportunities, and no taxes on the first $87.5K of income. He cautioned, though, that you need to be smart about money. The local currency, the dirham, is pegged to the U.S. dollar. During his more than four years here, there have been four spikes in inflation. One Oracle executive said that the “unpublished inflation rate” is about 30% thanks to the weakness of the dollar relative to the euro. Despite the seeming surplus of housing, it can be expensive. The CIO said housing costs were 40% higher than when he lived in the United States. Still, despite inflation and housing, he said it was a great place to do business. One caveat, though. The drivers here are a bit mad. One expatriate told me that Dubai averages 400 car accidents per day, and 300 fatalities per year. He said he usually sees five to eight damaged vehicles on his drive to work. Apparently, some people believe in leaving only a few feet between vehicles even at 70 miles per hour. Advice: get an experienced driver and enjoy the place. Next week: At the VALS event in San Francisco For a person who is supposed to be spending more time in the office, I’ve certainly managed to rack up the air miles. This reminds me of a Who song (highly modified): Mumbai, Dubai, leave me alone. Mumbai, Dubai, nowhere is home. Inside outside, where have I been? Out of my brain on flight 515. The travels continue. As you read this, I am in San Francisco for the Virtual Appliance Leadership Summit. This is the annual software appliance conference hosted by rPath. Look for our analysis next week. In the meantime, is Dubai or the Middle East on your agenda? Do you think SAP can catch Oracle in the Middle East, or will it continue to trail by a decade or so? Any bets on whether I rode a camel on the desert safari? As always, I welcome your feedback and ideas—brichardson@amrresearch.com.
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