Product innovation and success in industry are two faces to a hard currency in Jordan. The environment for growing industry is challenging and only a few companies get a sniff of success; the success that really only comes from penetrating the region’s export markets. Fewer still are those that reach beyond Arab markets and Eskadenia Software is one of those companies. After almost 10 years of strategic fine- tuning and brand building, the odds of going global are starting to look that much better for this software development firm. So what is the formula of their success?
By Bilal Hijjawi
The investor that bet big on Microsoft stock in the 1980s has become many times a millionaire today. So did the investors in Oracle, SAP, IBM and Apple and the few other software developers that continued to effectively serve the core needs of their clients. But for every successful software brand in the world there are hundreds of others that didn’t make it. The software industry remains one of the most competitive, and most difficult to navigate in the global market.
The true measure of success in this industry is sustained growth. So, it is not surprising to hear the two founders of Eskadenia Software, the local software development business, saying they haven’t yet crossed the threshold of their business establishment phase after 9 years of working in the Jordanian and regional markets. “The company has just now reached the end of its first chapter – almost a decade – and is ready for the next one, which will launch us globally,” says the company’s founder and Managing Director Nael Salah.
Eskadenia Software’s other founder is Doha Abdelkhaleq, the Executive Director. The story of their company began in Amman while their careers developed and matured in Sweden. Between 1983 and 2000, Salah had worked for Ericsson in Sweden, reaching a high-ranking VP position. He married Abdelkhaleq, who was also hired by Ericsson in the 1990s. Both spent four years in China, where Ericsson had a big presence. In 1999 Ericsson sent both to Lebanon. They would spend only one year there and then decide to finally settle in Amman to set up Eskadenia Software in 2000. Salah has an electronic engineering academic background and this has been the path of his career while Abdelkhaleq has a law degree and had practiced law in Jordan.
To keep a smooth conflict-free operation, the founders divide their organizational functions and tasks clearly. Salah manages research and development and market expansion and Abdelkhaleq oversees competence development and ensures the organization delivers to clients what is promised – market alignment. “I make sure clients get what is expected of the organization as a whole and I’m also involved in the strategic knowledge circulation and transfer systems... I’m sort of the organizational trouble-shooter”, she adds.
Amman-based Eskadenia Software has painstakingly built its business “a step at a time.” Following company establishment in 2000, the year the dotcom bubble was close to its apex, they managed a slow but consistent growth even after the bubble had burst in mid 2001 and the markets soured.
Their staying power has come from patiently cultivating a reputation for no nonsense software product development. “Our focus is on product development, stability of products, customer relations and we rely on certain customers to push for contracts in certain areas like telecom,” says Salah.
Eskadenia Software started with basic products and web development projects before bidding for local information technology (IT) tenders. Eventually the company found its way to regional markets. They kept a close ear to local and regional clients, listening to their requirements and using geographic proximity to out-serve and out-price international competitors
They also fought off the temptation to prematurely sell services in over-crowded Western markets at the start of the business, and continued to invest in a corner in the office for researching and developing software products that made sense to regional markets.
“We are focusing on added value generation and export activities, an IT factory so to speak. The software business model others adopted proved limited for some, and for some caused their collapse,” says Abdelkhaleq. In the late 1990s, most of their Jordanian counterparts pursued a different growth path, outsourcing services to Western software behemoths. They couldn’t survive with the competition from larger and more resourced software companies in India, Russia, China and others.
“Until now we haven’t really done any major outsourcing. We kept our focus on improving the 25 software products that we launched in 2000 and afterwards. It was steady growth, organic; every year we grew by steady percentages,” says Salah. The company started with 15 employees and has grown to 160 this year.
“We are a technology based enterprise. There are many companies working in technology, in the form of retailing agency and technology partnerships. We’re none of that; we build technology in Jordan from the base up, and our objective is to become a global supplier of software products,” says Salah.
Eskadenia Software’s product and service lines were developed so they’d integrate vertically into all of their client’s enterprise departments. This enterprise-wide approach to product development has allowed the company to compete in the tough market segment of Enterprise Resource Planning (ERP) software. “We’ve been focused on product development and stability, customer relations and on certain clients to push for contracts in certain areas like telecom,” he adds. The company has carved strong presence in the industries of telecommunication, enterprise, insurance, education and internet. It has also managed to penetrate export markets in the Middle East, GCC, Africa, Armenia, Kurdistan, Germany, Belgium, and UK. The Jordanian market currently stands for only about 15 percent of Eskadenia Software’s total sales of products and services.
Software might be a tough business to crack internationally but it has a great special advantage in its favor when it comes to exports. As a digital product it is immune to trade barriers and can be shipped electronically. Perhaps a cliché, but the term global village and empowerment in the software industry “comes alive as we rely on the web to ship our products; to upgrade and support them, and to troubleshoot problems without the need to leave Amman,” says Salah.
Going international is costly for any company. So, to be cost effective, companies find reliable local channel partners and partner with them. These partners bring local market knowledge that can save new exporters from making costly mistakes in foreign markets. “We rely on channel marketing because it is the most effective way to penetrate export markets. They are more effective in reaching more customers in their local markets,” says Salah.
Eskadenia Software’s focus on pursuing a software product strategy rather than a solution-provider approach to IT markets brings many financial and organizational benefits and is key to long-term growth. Abdelkhaleq says: “The cost of research and development happens once when building genuine products; when we eventually roll them out to different markets, the financial rewards are multiplied manifolds.”
Salah adds that the cost of product research and development in Jordan is relatively low when compared to developed markets. “The first time we did a product launch it was for insurance software and it was a successful total solution. We’re still rolling the new releases of this product in different markets today.”
Abdelkhaleq is satisfied with the supply of Jordanian talent in her industry. She’s upset, however, that many within the industry complain about the availability of Jordanian talent. “We cannot hold employees accountable for any results before we have thoroughly invested in them to build a specific capacity. If you go with the assumption that people simply can’t do the job, then don’t blame them for not meeting your expectation! Specialized competence development is the key here!" she adds.
Eskadenia Software, the partners state, has a low employee turnover when compared to their industry’s average. And even when their industry’s average is high, they still don’t mind it. They explain that “100 per cent retention rates are simply myths.” And Abdelkhaleq continues: “A very low employee turnover rate isn’t even healthy. New blood in the organization keeps it robust, innovative and idea-driven.”
But the company still wants to retain its core talent. This means implementing plans for retention of talents including stock options to keep high-value employees. Eskadenia Software changed its legal status to a private shareholding company in 2008 to prepare for integrating an employee stock-option system. "We will use options in our employee retention strategy at the earliest, as we have already introduced one form of stock-option agreement as early as 2000 and many of those who have signed on them are still with us today,” Abdelkhaleq says.
The Dream of Integration
Like most Jordanian entrepreneurs, the cofounders hinge their industry’s future vitality on the ever-more illusive dream of Arab market integration, and especially so with the GCC. “We truly wish that Jordan could eventually join the GCC market in some ways. We’re a natural fit and can offer a great talent pool, considering the level of education in the Jordanian population. Such a future will open up new and much wider doors for our industry,” says Abdelkhaleq.
For interregional integration to happen it has to be perceived as mutually beneficial between the MENA region countries, as it will help stabilize the region, adds Salah.
“It’s not just good for markets when this happens but when you allow the free movement of human resources and capital across different markets, the interaction that happens transfers the culture of devel- opment as well to underdeveloped corners of the Arab world. Development becomes infectious and investment follows.”
The service industry in the Arab world has great but untapped potential that is only possible through such integration of markets. “The future has to open up the borders and let labor and competence move around, let knowledge flow, let the investment flow,” Abdelkhaleq emphasizes.
“The Arab Development Report forecasts that by 2020 the MENA region will have to generate 50 million new jobs to absorb the growth in labor; this could only happen if we prepare for integration today. Any form of integration that happens has to be separated from politics to create the right future market environment,” adds Abdelkhaleq.
Jordan is very well equipped for the supply of IT services and human resources to the Arab industry. According to Eskadenia Software, the whole Jordanian IT sector was estimated to be worth around $900 million in 2007 and it has been growing. This includes all exports and local sales.
“In my own opinion and based on 2007 statistics, I’d say exports by the Jordanian IT sector would reach about $250 million by the end of 2009” estimates Salah. Both also agree that the IT industry has just started in the Arab world and still has a long way to go and grow. “We are busy preparing to participate in the supply of IT products and services from Jordan to the regional and global markets.”
© Venture Magazine 2010