Al Shibl is the man behind AEC's vision

It’s probably the largest local company you’ve never heard of, but for the past two decades Advanced Electronics Company (AEC) has been a powerhouse in the Saudi technology industry. Established in 1988 and initially focusing on the aviation and defense industries, AEC began to make its mark on the technology sector in the mid 1990s. With strategic alliances with Cisco, Acer, HP, Oracle and an exclusive partnership with Indian giant HCL, AEC is a rising star in the Kingdom. In a one to one with CIO Saudi, AEC’s CEO Dr. Gassan Al-Shibl explains why the Saudi giant was present at Gitex, how Saudi end users are still not adapting enough to technology, and why research and development should be a top priority for the Middle East.

CIO Saudi: You were here at Gitex. What are you looking to do during the event?

Gassan Al Shibl: I want to get AEC exposed to other IT companies, and one of the best platforms for that in the region is Gitex. AEC was known in the past for being purely in the defense business. That is however no longer the case. At the end of 1994 we began to diversify into the telecommunications business arena. As we started building capabilities in the telecommunications infrastructure market the technology industry started solidifying in the Kingdom. We noticed the significant growth in the market for technology solutions, and AEC started evaluating that business area.

As of today technology and telecommunications are two inseparable areas; they complement each other. We decided to get strongly into IT, especially after we evaluated the competencies that we have built through working in industries such as telecommunications, manufacturing, and electronics. We have a very strong technical base here in AEC, particularly in the software area. AEC has one of the largest software development teams in the country, and we pride ourselves on our research and development department where we customize systems to meet the requirements of the local market.

AEC is a partner to Acer, HP, Oracle, and Cisco

Add all those together into the mix and AEC had a clear and promising path into the IT sector. We began by partnering with globally known international companies – the likes of Cisco, Acer, and HP. Today AEC has teaming agreements with HCL, mainly relating to software development, deployment, and infrastructure management. We also have an agreement with HP where we work with them on implementing programmes and they work with us as part of the implementation team. With Oracle we look at implementing different programmes. It’s fair to say that AEC is a player with key international companies. On the hardware side we have an agreement with Acer where we are producing desktops today with the aspiration of producing laptops here in the Kingdom.

CIO Saudi: So you want to focus on exposing AEC to the outside technology industry?

Gassan Al Shibl: We’ve decided to participate in Gitex for three key reasons. Firstly, I’d like to increase the exposure of AEC to global players in the technology market and get it known as a regional player, to enhance our ability to strike deals with these players. Secondly we want to evaluate emerging technologies, assess ourselves as to where we are against vis-à-vis these technology, and then look at who would be the best partners for AEC in the future. By being a regional event Gitex opens doors for us with different segments of the customer community in the Gulf and the wider Middle East.

CIO Saudi: AEC is a Saudi company, but what are you doing in the rest of the region?

Gassan Al Shibl: Our operations outside of Saudi are very limited. You ask yourself why? If you look at the Saudi market and its size then you’ll understand that we are in the most demanding country in the Middle East. Our focus is on the local market. The next step for us is to expand externally into different verticals and we have done that with other segments of our business.

The company is a leader in Saudization

CIO Saudi: What benefits have Cisco, HP, Oracle, HCL and others taken from having a strong local partner such as yourselves?

Gassan Al Shibl: It gives different values to our international partners. The most obvious advantage we give to them is being local. By localizing their work it reduces their costs, which makes it more competitive for them. We are a local company which understands the local environment, we understand the local customer community and we understand how to shape their requirements for today and for the future. When it comes to implementation clearly selling a programme is a challenge by itself. Once it is done however the greater challenge is in implementation; it takes local resources and competencies to solve all the problems of implementation. AEC has a strong structure, we have integrity in terms of our business dealings, and the respect of our partners and customers. Our involvement with international companies in the implementation space has clearly helped them in the Saudi market.

CIO Saudi: How is the IT market changing in Saudi and what are you doing to keep pace?

Gassan Al Shibl: The IT market is changing rapidly. Just look a few years back – we only knew the hardware side, the likes of desktops, laptops and a few software programmes like Microsoft. If you talked to people about ERP implementations it wasn’t something that they were even willing to entertain. Today I think organizations see the benefit of going full thrust in terms of technology, in terms of competitiveness and productivity, in terms of cost reduction, and their ability to compete. It is a different mentality altogether.

On services, the area of outsourcing was again unthought-of in the past. Everyone wanted their indigenous capabilities to carry their load. Today they’ve started to realize that outsourcing brings them increased efficiency. When we studied the sector we noticed how much emphasis companies such as HCL placed on emphasizing security and privacy of their customers’ data which mitigates a lot of the concerns that companies here should have about outsourcing certain parts of their business.

CIO Saudi: But to what level is outsourcing accepted here by Saudi corporations?

Gassan Al Shibl: Outsourcing acceptance locally is still limited compared to global standards. We visited a number of outsourcing centres at HCL when we were with them and you would never think that their clients would ever think of outsourcing, including Toshiba. Why would a bank consider outsourcing? Clearly they have not done it from a vacuum. They have considered all the benefits that could accrue from outsourcing. We need to increase the level of awareness here of what outsourcing can do for you on one hand. On the other, you need to comfort organizations that by outsourcing you are not putting your destiny in the hands of someone else. You are still controlling your core business; however what you are outsourcing can impact significantly your bottom line.

CIO Saudi: Are companies adapting to IT or are trying to adapt IT to them?

Gassan Al Shibl: The idea is sinking in very slowly. Once people start realizing the benefits of adopting their organizations to IT then you’ll see a rapid transformation. Let’s take an example from AEC’s own internal experience. When we launched an implementation for an ERP system we faced a lot of resistance which was only natural. We also faced resistance surrounding the rigidity of the system. The system comes built around best business practices and so if you want to apply the same principles then you shouldn’t touch the system. People’s own tendencies are that they want to customize the system to the way they are used to doing business. If you do that you defeat the whole purpose. You don’t need an ERP system. Don’t waste your time and money implementing a system.

What we did here was we took an executive decision which was transmitted across the entire organization that the ERP will not be touched unless if there is a compelling need to do any customization. Any request had to go through a very cumbersome and long decision making process to get the approval; this in effect was a deterrent to anyone who wanted to change the system. The changes we made to the system were minimal. Today whenever Oracle introduces an upgrade to the system it is seamless. If you talk to Oracle we are the, or one of, their major successes when it comes to ERP implementation. We are their success story as we implemented the full suite in a very short period of time. Where we see a shortage in this market is where it relates to implementation is the lack of competent system integrators. Packages are available but implementation is a different challenge. Having companies that can help you in this area is a challenge by itself.

CIO Saudi: So what are you doing in this area? Does AEC offer implementation services?

Gassan Al Shibl: On a very limited scale. We will only claim what we can do, unlike others who like to overrate themselves. At AEC we are harsh on ourselves; we underrate our capabilities and I ensure that we have to excel in each area we enter into. That has been serving us very well. Our reputation in the market is outstanding but as you can imagine it is extremely demanding on the company’s resources as we are very critical in terms of evaluating ourselves.

CIO Saudi: Clearly you have significant local resources. What edge do agreements with multinationals give you?

Gassan Al Shibl: We have three key partnerships at HCL. The first is with HCL, as it gives us the capability to get into the areas of outsourcing, infrastructure management, and IT implementation. We are drawing on HCL’s global experience in terms of building our capabilities as a local partner. However, we are not thinking of only AEC in terms of the partnership; when we enter into an agreement, we get in for the long haul. We are a major player with Cisco in the Kingdom in implementing their solutions and though it is more related to hardware implementation clearly it is the engine to get the IT infrastructure up and running. With Acer our relationship gets us into the consumer market, and pushes us to think competitively about commodity products. At the same time the Acer agreement complements our other services and solutions.

CIO Saudi: You’ve been operating for under two decades in the IT space, an area which is new to the majority of Saudis. What are you doing in terms of training Saudis?

Gassan Al Shibl: Since its inception AEC has believed in Saudization, long before the government adopted this strategy. In some areas today of the market you see forced Saudization but AEC has been basically implementing this as a belief. When the government started pushing for Saudization AEC was way ahead of any governmental department in the percentages that we should achieve. Today 80 percent of our employees are Saudis; in some of our technical departments it is closer to 90 percent and in the R&D team it is 95 percent. Clearly as a profit making organization we are not doing this out of charity. We are doing this out of the belief that if you give young Saudis the right attention, the development, and responsibility and accountability then you can achieve a competitive workforce in your organization. We focused our Saudization programme on recruiting the best candidates from different educational institutions. We then put them through different development programmes but not through academic programmes. What we do is bring the young engineers in, put them on the job and let them learn from those with experience. This way they’ll learn much faster than if they were in a classroom. If you talk to any of our young engineers you’ll see that they are fully in charge of anything they do.

CIO Saudi: Is there a lack of vocational training in the Kingdom?

Gassan Al Shibl: I believe that the private and government sectors have a social responsibility to train young Saudi nationals. If we look at countries at the forefront of IT, at the US, Europe, and India, graduates from university are not expected to hit the ground running. Companies invest in these young people after graduation and in one year’s time they are very valuable employees. The key ingredient that is missing in our education system is building confidence in their graduates, in their ability to present their case and demonstrate their learning ability by moving fast on the ladder. But I don’t expect the educational institutions to give them practical training as that is done in the market.

CIO Saudi: Let’s move over to services and solutions? You went with HCL to fill a space in your portfolio. What other solutions would complement your overall offerings?

Gassan Al Shibl: There are three areas that we will be demonstrating. One is showing AEC’s capabilities and ability to implement in the software, hardware, and services arena. Secondly you will see a demonstration of AEC’s ability to develop new products and systems, such as Madar for fleet management, or different SMS based services. AEC is known for its ability to develop solutions for local customers, for its ability to understand their requirements and develop a unique system for them. The third is our ability to win programmes. Being a local company we understand the customer and we understand what it takes to have a winning strategy for a programme. Working with AEC does not mean a 100 percent win but it does enhance vendor’s ability to win programmes.

CIO Saudi: Are customers and partners surprised by AEC’s capabilities?

Gassan Al Shibl: I think they are. Any new visitor to AEC is surprised by what we can do. AEC is not a typical organization in Saudi Arabia; it’s more what you’d find in Europe. AEC has a developed structure, processes governed by policies and procedures, very professional staff that are dedicated to what they are doing and extremely disciplined in terms of productivity, attendance and ability to achieve targets. Our certifications and awards demonstrate that clearly.

CIO Saudi: How did AEC achieve this? Clearly, it hasn’t been easy.

Gassan Al Shibl: Through hard work, dedication and vision! There are tens if not hundreds of players in the IT industry here, so you have to be different. How did we do it? By focusing on localization, on the talent that is available in the Saudi market, and by looking to deliver a quality product. From its beginnings AEC focused on real capabilities where we can make a difference; our in-country presence, our understanding of the environment, and our ability to customize for local firms.

CIO Saudi: But not cost?

Gassan Al Shibl: Cost is a very elastic term. In terms of apple to apple, AEC is competitive. We focus on cost; we are not complacent and we evaluate our cost elements on a daily basis but it depends on who we are being compared to. The three other elements serve are a differentiator.

CIO Saudi: So how do you educate customers as to you get what you pay for?

Gassan Al Shibl: Through demos, briefings, interactions and the like. The most important means to educate is an element which always escapes the minds of the end customer - lifecycle cost. People look at initial procurement costs only every single time. What really costs you in the implementation of any programme is the maintenance, support, and upgrades in the future. If you have an entity next to you, especially in the IT industry, and you need customizations and problem resolution clearly it is much more competitive to do that locally. If you are working on a programme that spans over ten years and you do your homework on the total cost of ownership then you will end up in much better shape financially.

CIO Saudi: What other changes would you like to see in the region in regards to the IT industry?

Gassan Al Shibl: One element only; in all of the Arab world, especially in the Gulf, we need to see governments focusing more on R&D. This is where you can develop real in-country capabilities and it can serve as a great developer for nationals. I think governments need to start increasing spending in R&D and partner with companies in the private sector who have a track record in delivering R&D results.

CIO Saudi: Why is the Middle East so poor in R&D?

Gassan Al Shibl: We need to shape our vision. We don’t see the value of R&D yet. We have been used in the past when we had no capabilities. If you look 20 years back there were no local resources available. As soon as people graduated then governments would grab them for the public sector. Today with the abundance of talent that’s available here, there most be a focus to reshape our vision. We used to use our money to bring in the best companies worldwide to fulfill our needs. Today it has to be different. There is unemployment we need to address, national security we need to address, and our own independence that we need to work towards in relation to developing our own capabilities. We still have a blurred vision when it comes to R&D and we need to do more to address that.