Dubai wants IT business as well as U.S. ports

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February 23, 2006 (Computerworld) -- The United Arab Emirates, which is currently at the center of a controversy over whether outsourcing the management of six U.S. ports to a company based in the Persian Gulf should be allowed, wants to do more than manage ports: It wants Dubai to become a major IT outsourcing destination.

Dubai has been building a modern infrastructure and clearing away all taxes and visa hurdles to encourage companies that set up operations there, said Mehtab Ali Sayed, director of marketing at the Madar Research Group LLC in Dubai. “They are positioning themselves against India,” he said.

Many U.S. IT vendors already have offices in Dubai, mostly to support regional customers. Among them is Sierra Atlantic Inc., a Fremont, Calif.-based provider of offshore IT services, which opened an office in Dubai in August.

“Compared to India, it is expensive,” said Sierra CEO Raju Reddy, who noted that labor can cost 50% more than in India, where the company has the bulk of its operations. Moreover, “there is not sufficient local talent in Dubai,” he said.

But Dubai will nonetheless be an important base for supporting customers in the region, as well as delivering high-end architectural and design services, said Reddy.

Because of issues like costs and the limited labor pool -- the UAE’s population is about 2.6 million -- Dubai has barely made a ripple in the global and competitive outsourcing world. And despite its handsome office parks and zero taxes, it faces challenges. The contentious move by the state-owned Dubai Ports World to acquire London-based Peninsular and Oriental Steam Navigation Co. for $6.8 billion, allowing it to take over operation of half a dozen U.S. ports, illustrates the UAE’s efforts to diversify its economy.

But the port deal -- which would allow Dubai Ports World to run the ports of New York, New Jersey, Philadelphia, Baltimore, New Orleans and Miami -- could also prove to be a problem in its efforts to become an IT outsourcing hub if it fails.

“If there is a reversal of a major business deal, I would assume that will cause people to take a cautionary view with where and how they can do business,” said Jane Siegel, director of the Information Technology Services Qualification Center at Pittsburgh-based Carnegie Mellon University’s School of Computer Science.

While the UAE is considered an ally, the port takeover has met with vocal opposition from House and Senate members upset about plans to allow a company from a hostile region to manage the U.S. ports. The White House has said it won’t allow the deal to be blocked.

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