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Dubai Is Tech Center of the Middle East - and HP Takes It Up a Notch

By Rob Enderle
May 22, 2006 5:00 AM PT

Last week I was in Dubai and, much like when I went to Beijing to visit Lenovo a few months ago, I was surprised at the incredible progress and Western influence that is currently evident in this region. I'm also forced to compare the advancements there to the lack of progress in the United States. It makes me wonder whether the U.S. will become the new Third World one day if we don't do something dramatic to improve our own competitiveness.

While thinking about all this I began comparing countries to companies, and when news of Hewlett-Packard's solid quarterly financial performance came out I realized that if old firms can revitalize themselves like it clearly has, entire countries surely can as well.

Dubai Is Tech Center of the Middle East  - and HP Takes It Up a Notch

Dubai's Digital Consumer Channel Conference

New companies entering the marketplace often fascinate me with their apparent need to retrace both the successes and mistakes of their predecessors. I observed incredible advancement in both Beijing and Dubai, but I also saw what appeared to be an inability to think strategically, and to avoid some of the mistakes the U.S. has made.

In Dubai, I spoke at the Distree-backed Digital Consumer Channel conference about the so-called "Secrets of Silicon Valley." This leading regional conference brings many of the major technology vendors and distributors in the locale together with major area retailers.

The Middle East is one of the fastest growing markets in the world. With a rapidly growing middle class, resorts are sprouting up in Dubai at an incredible rate and its skyline looks like a wheat field of contemporary skyscrapers, many with absolutely stunning designs.

Interestingly, custom-built PCs are actually more popular with consumers there than branded machines are. Buyers go into shops and, with help, choose the components they want and the machines are built to their custom specifications. This goes on in the U.S. and Europe as well, of course, but not to such a degree.

Dell hasn't been particularly successful in this area because people generally want to buy from local retailers they know and trust. However, Dell evidently dumps large quantities of products into the market there three times a year at very aggressive prices. As a result the retailers and distributors move against the company at any and every chance they get.

Building Reputations

The two vendors that stand out as playing this region very well, however, are HP and Acer. Both had a presence at the Distree event and are very well regarded. Acer's advantage is its ability to manage distribution better than any other company on the planet, often being the first to market with leading technology from Intel or AMD. HP is seen as unbeatable in terms of its position as a printer vendor, but Lexmark is making a mark in the area, too, and has fostered a great deal of loyalty with the distributors.

It is interesting to see how big AMD's influence is in the region. Intel is clearly a power as well, but AMD was the Distree event's lead sponsor and many of the distributors spoke very highly of the firm.

It should be noted that, according to distributors and retailers I spoke with at the conference, U.S. goods are considered very high quality and generally preferred to those coming out of China and Taiwan. Apparently it's not uncommon for a consumer to choose a product -- even one of inferior quality -- just because it has a "Made in the USA" label on it.

It is also interesting to note that, unlike the U.S., Sony has maintained a solid reputation here due to high quality products. This is because the retailers take care of support which means the local buyers in general never have to experience Sony's painful support organization.

One thing that really surprised me was that the iPod has had little success in this market. I was told that this is because MP3 players had been given away for free in large quantities before the iPod showed up here and few could figure out what to do with them. As a result, the entire class of product, evidently, has a bad reputation.

Impressions of Dubai

Dubai itself was most fascinating to me. You couldn't help but be stunned by the level of technological advancement going on in this, one of the seven emirates that make up the United Arab Emirates, or UAE. After all, this is the place where a floating resort, and even a flying one, are supposedly in the works. The event I attended was held at Le Meridien, which boasts long white beaches, huge pools, and decent food. The people and staff were very friendly and most seem to have come from other countries for the work.

Something else really struck me as I watched the traffic, smog and trash blowing across the desert. Much like Beijing, the incredible rate of growth is resulting in increasing levels of pollution that, like it is in the West, will increasingly become a regional problem. I also wonder if Dubai is on the right track; currently it is a trading center and in the energy business. It appears to be trying to become a resort center as well and is making good progress on that strategy.

This is much like a company that knows, as Sun should have, that it will lose at some point a large part of its existing revenue source -- in this case oil. So, it will need to have another major source of income at that time. Dubai is not a company, however, so there are two important things it needs to consider. The first is, if it doesn't keep the level of pollution under control its ability to market itself as a resort country will become increasingly difficult. The second is, changing industries should be avoided if possible. If Dubai is in the energy business now, why not remain in that business and focus on being a provider of what comes in the energy biz after oil? This could be ethanol, solar or wind power technology, or geothermal technology.

By being a leader in the next generation of technology, and using whatever that is itself, Dubai could maximize its exports while it has oil and, once the oil runs out, would be uniquely positioned to supply the next big wave of energy purchasers. Were Dubai to lease rather than sell the related technology it could develop an annuity income that could exceed at some future point what it now earns from oil.

Online trading in goods and services is also in line with what Dubai is already good at. Increasingly the markets will become electronic and if this region wants to maintain its critical position in local trade it will need to be there when the market moves. However, given how technology-savvy the region is, I have a hard time believing this isn't going on behind the scenes. It's more likely that the market is not yet ready to move and that's what is keeping me from seeing it.

In the end, the fact that Dubai is investing in its future, regardless of the path, is what many Western countries, particularly the U.S., should take to heart.

HP vs. IBM

HP's stunning financials in the second quarter, largely supported by the company's resurgence in the PC market, provided a clear counterpoint to what IBM did when it dumped its PC unit. HP also announced plans to apply its own technology to consolidate its own data centers and become a showcase for its own products. IBM has, since the early '90s, refused to update its systems. Louis Gerstner, the firm's former CEO, was known to have said he wanted to focus more on consumers' access to new technology rather than IBM getting it itself. I still think this is B.S.

I'm a firm believer in companies eating their own dog food, so to speak, because if they don't their customers will feel the pain caused by bad products first -- then the firm will slowly lose touch with their customers' needs and expectations. This doesn't solve all problems -- for instance, Sun Microsystems uses its own products and that hasn't protected it from a massive market change that made the company mostly obsolete. However, it generally does result in better overall sales performance. HP is clearly demonstrating this phenomenon.

While it is now hard to see how IBM will compete with companies like Dell over time, HP is currently kicking Dell's hindquarters and that's all about execution. If HP can think strategically and step up to the challenge of competing with Dell, and China and the UAE can make the commitments and the investments necessary to turn themselves into world powers, then you have to believe that the U.S. can step up to the challenge too and do what it takes to remain competitive in the tech arena.


Rob Enderle is a TechNewsWorld columnist and the Principal Analyst for the Enderle Group, a consultancy that focuses on personal technology products and trends.


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