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THE FIVE FORCES OF COMPETITION FOR THE ICT INDUSTRY IN EGYPT MOHAMED EL-NAWAWY TECHNOLOGY CONSULTANT TECHNOLOGY INNOVATION AND ENTREPRENEURSHIP CENTER

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THE FIVE FORCES OF COMPETITION FOR THE ICT INDUSTRY IN EGYPT MOHAMED EL-NAWAWY TECHNOLOGY CONSULTANT TECHNOLOGY INNOVATION AND ENTREPRENEURSHIP CENTER AHMED M. GAMALELDIN SENIOR R&D
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THE FIVE FORCES OF COMPETITION FOR THE ICT INDUSTRY IN EGYPT MOHAMED EL-NAWAWY TECHNOLOGY CONSULTANT TECHNOLOGY INNOVATION AND ENTREPRENEURSHIP CENTER AHMED M. GAMALELDIN SENIOR R&D SOFTWARE ENGINEER & CONSULTANT INFORMATION TECHNOLOGY INDUSTRY DEVELOPMENT AGENCY Abstract This paper discusses the five forces of competition, namely, power of supplier, power of buyer, threat of new entrants, power of substitutes, power of competitors, applied to the ICT industry in Egypt with the aim of analyzing challenges, opportunities, resources, infrastructure and discussing government s strategies for different ICT services in Egypt for increased competitiveness. Key Words ICT Industry; ICT Strategies; Competition Introduction With the emergence of Information Revolution in the early 1970s, the technological progress had a strong impact worldwide unlike previous revolutions (Lechman, 2015), where, for economies that are still developing, the Information Revolution has been described as a tsunami rather than a new technological wave (Hanna, 2010). Currently it is of great interest to study how this revolution affected the ICT sector in Egypt. Transforming into a digital society in Egypt faces the challenges that the concept of making information public is new to the society, there is a scarcity of web development tools in Arabic, there is an existing bureaucracy in organizations culture which needs to be well adapted and trained (Kamel, 2015). In (Simmons, 2011), market-oriented business is identified in terms of targeted marketing, evaluating customer needs, adding value to customer, time needed to respond to negative 1982 customer feedback, making customer information available across the organization, internal strength and weakness factors and competitor analysis. These analysis and strategy tools are crucial when applying to increase competitiveness of the ICT industry in Egypt. While the government supports an emerging industry, it has to focus on certain industry sectors to reduce cost and since the learning processes differ by technology (Lall, 2004). In sectors with high market entry costs, the government must implement policies to attract newcomers (Pietrobelli, 2015). These procedures represent main clear opportunities for ICT market growth in Egypt. Figure 1 Five Forces of Competition Power of supplier Among MCIT achievements are encouraging Open Source and mobile applications technologies, with EGP 70 Mn budget and 549 SMEs involved in this initiative, Cloud Computing Center with EGP 25 Mn budget, training university students & graduates according to the market needs In July 2008, the proportion of faculties/institutes at the university education level with communication specialty was 9.6% of public education (Egypt ICT Indicators Portal), 4.7% of 1983 Azhar University and 11% of private education. As for IT specialty, it constitutes 14.4% of public education, 6.3% of Azhar University and 42.7% of private education. These percentages are high enough to cover the market needs in terms of quantity. ICT s expenditures represent 6% of GDP (Egypt ICT Indicators Portal). However, in most cases, graduates, once entering the employment market, they face the inadequacy between what they have learned academically and the tools that the professional life requires. The government is working on establishing a cloud to improve ICT efficiency in the government apparatus enabling the storage, management and analysis of information through providing computing processing power, storage facilities, network bandwidth and access to software; and promoting software development and the use of testing, security and identity verification measures over the internet. MCIT seeks the development of the healthcare system in the country through the use of ICT, particularly in marginalized and remote communities (MCIT Yearbook ).There is full collaboration between the Ministry of Health and MCIT for enabling of the healthcare sector including building capacities for both medical and administrative staff, creating developed networks to improve communication and data collection and transfer, and automating procedures. Table 1 analyzes offered e-services in Egypt (Eid, 2009) based on the E-Government Service Index model (ESI) categorization (Zakaria, 2014). Table 1 Offered e-services in Egypt ESI Model Service Provider Service Academy of Scientific Research Alexandria Library Cairo Opera House Cairo Water Company Civil Status Office Delta and Upper Land Transportation Companies Egypt Air Egyptian Company of Telecommunication Egyptian Customs Authority Egyptian Organization of Standards and Quality Egyptian Railway Authority National Rewards Services Digital Assets Repository Egypt Memory Website Booking Service Water Bill Inquiry Service Birth Certificate Extract; Family Record Extract Bus Reservation Service e-ticketing Telecom Egypt Services Customs Tariff service Standardization and Quality Services Trains Ticket Reservation 1984 Egyptian Tax Authority Ministry of Environment Ministry of Health and Population Ministry of Investment Ministry of Justice Ministry of State Administrative Development Ministry of Trade and Industry Egyptian Tax Services Environmental Services Doctors Charging Services Investment Dispute Settlement Committee Court of Civil Crime Services Legal Portal Services Qualified Industrial Zone National Postal Authority Lost and Found Service Real Estate Finance Fund Mortgage Financing Fund Service Supreme Council of Universities University Hostel Application Tourism and Antiquities Police Tourism Complaints Egypt s ministry of communication aims at increasing internet users in the country by 1.5 million additional users by the end of 2016 to its current base of 3.4 million ADSL broadband users and increasing the minimum speed from 1 megabit per second to 2 megabits per second (Farouk, 2015). Power of Buyer The Egyptian government is working on various tracks to enhance and develop access to information and knowledge for all segments of society, through efforts related to, among other areas, public domain information, official information, public access points, free and opensource software, capacity building, and digital library and archive services (WSIS, 2015), (www.amcham.org.eg), (MCIT 2020 Strategy), and (ITU, 2015). These efforts are aiming to expand and improve Egypt s information society, increase the reach and uptake of e-government, 1985 International Association for Management of Technology motivate using and developing of ICT applications and services in business, particularly by SMEs. The emisr National Broadband Plan to increase broadband internet penetration in Egypt and promote the development of a digital society (El Demery, 2009). This plan aims at positioning Egypt as a frontrunner in digital communications; motivating economic growth, social cohesion and job creation; supporting the use of ICTs across government sectors to improve quality of life for citizens A survey undertaken by MCIT in cooperation with National Telecommunication Regulatory Agency with the aim of measuring the Mobile Data Services patterns in Egypt has shown a rise in Mobile Data Services (MDS) usage by almost 9% between 2010 to 2013 which indicates higher potential usage in future due the increase in the number of subscribers (El Shenawi, 2014). Figure 1 below shows types of MDS activities and their percentage of usage along the period showing that communication activities of MDS dominate while Commerce activities of MDS is decaying indicating that the government should take active measures and procedures to boost this sector. Figure 2 Types of MDS activities 1986 Threat of new entrants The ICT sector in Egypt has continued to grow and to create jobs, with a 41% rise from 2010 to 2011 in the number of people employed by international ICT companies in Egypt and an 18% rise in those employed by local companies, which indicates that the growth of this sector in Egypt is associated with an increasing demand for skillful professionals to satisfy market need and thus the market status currently could be considered open for graduates in this field with various opportunities provided by local and international companies. Moreover, Egypt is ranked as 40 over 100 compared to other countries regarding its intellectual property system where Egypt is a member of the World Intellectual Property Organization (WIPO) and has signed the Madrid agreement for international registration of trademarks and the Paris Convention of the Protection of Intellectual Property (Zouag, 2014). These measures indicate that the government is considering IP registration for companies as a priority which leads to protection of startups and young entrepreneurs against illegal competition. Power of substitute A challenge for the ICT market in Egypt, as well as for all low-income countries is to preserve the ICT skilled personnel who can usually earn much higher wages in other countries (MCIT 2020 Strategy). However, with more international companies interested in investing in Egypt and creating jobs for locals whether through outsourcing, overseas call centers, or establishing local premises, this challenge could be gradually overcome. It is worth mentioning that such challenges and threats are mutual between the government and local software professionals or graduates. Just as these software professionals can find more attractive opportunities in other countries, the government itself could seek solutions from outside if it would serve it better. First example for this scenario is that the government could have used outsourcing for establishing its e-government services from a foreign vendor. Moreover, the government could seek ready-made software solutions instead of local software analysts whom it relies on for building customized solutions. Power of competitors The Egyptian software sector is mostly focused on customizing existing software for specific businesses (e.g. providing the service of customizing banking or human resource applications) (United Nations Human Rights Reporting Program). Egypt s competitive edge lies in laborintensive services as opposed to one-time products (MCIT Yearbook ). It is worth mentioning that the government has taken an initiative through its Technology Innovation and Entrepreneurship Center, in cooperation with a multinational company, to raise 1987 awareness among startups and entrepreneurs about the revolutionary fields of Big Data and Data Science based on its belief that talented young ICT graduates could innovate in the field of data analysis in a way that would set up new business strategies, plans, and change organizational structure of ICT companies in Egypt with a high impact on the country s ICT industry. Conclusion With plans to encourage SMEs to adopt promising technologies such as Cloud Computing, and in increasing internet access and providing ICT services to sectors such as healthcare and e- government, the government in Egypt gives much attention to ICT as an enabler for its economy. The number of ICT service beneficiaries in Egypt is increasing as indicated by the increasing number of internet subscribers, Smartphone users, and mobile data service users across its different types of services. International ICT companies in Egypt highly contribute to the increase in the number of people employed, and there are serious efforts by the country s government to implement intellectual property agreements and laws to protect its market. However, relatively low income for ICT experts in Egypt compared to other countries still represents a challenge for the government although Egypt still has the advantage of availability of labor in its ICT sector. References [1] El Demery, Noha, ICT Diffusion in Egypt: Market Dynamism and Public Policies, [2] Eid, E. E. and AbdEl-Razek, M. M., 'Egovernment theory and implementation case study Egyptian e- government model'', The International Conference on Administration and Business, [3] Ehab Farouk (2015), [4] Hanna N. K., Transforming government and building the information society: Challenges and opportunities for the developing world. New York: Springer, [5] S Kamel, Electronic commerce in Egypt, Computing in Research and Development in Africa, Springer, [6] Lall S., Reinventing industrial strategy: the role of government policy in building industrial competitiveness, G-24 Discussion paper, 28, United Nations, [7] E Lechman, ICT Diffusion in Developing Countries: Towards a New Concept of Technological Takeoff, 2015 [8] C Pietrobelli, F Puppato, Technology foresight and industrial strategy in developing countries, [9] Nagwa ElShenawi, Mobile Data Services Market in Egypt, [10] Simmons, G., Armstrong, G., & Durkin, M. An exploration of small business website optimization: Enablers, influencers and an assessment approach. International Small Business Journal, 29(5), , [11] Mohamed R. Zakaria and Tarek R. Gebba, Towards Categorizing E-Government Services: The Case of Egypt, International Journal of Business Research and Development ISSN Vol. 3 No. 3, pp , [12] N Zouag, M Kadiri, Intellectual Property Rights, Innovation, and Knowledge Economy in Arab Countries, [13] MCIT Yearbook 2007/2014, Egyptian Ministry of Communication and Information Technology, official website, [14] World Summit on the Information Society, [15] American Chamber of Commerce in Egypt, official website, [16] MCIT Egypt s ICT 2020 Strategy. [17] Measuring the Information Society Report 2015 (ITU) 1989
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