Developments in the Middle East highlight need for region’s businesses to transform

Consultancy firm underlines effects of financial crisis and regional change on businesses 

Dubai, 17 March 2011, Management Partners, a top-management consultancy, has spoken out in favor of the growing number of companies and public institutions in the Middle East that have embarked on enhancing and rejuvenating their strategy, operations and service delivery models. The move is particularly important in the light of effects of the financial crisis and regional change on businesses. A provider of consulting services to such companies is Management Partners, which has celebrated the launch of its new Dubai office on Thursday, 17 March 2011.

Mr. Amar Shubar, partner at Management Partners, commented on the developments by saying: “The region is shifting its attention from a pure growth focus to a cost focus. While this is an important step, company executives need to think about productivity and performance in a more holistic way, which is much more fundamental for the competitiveness of their organizations and the development of the region as a whole.”    

 

Developments needed in the private sector in particular are performance improvements and growth, which are vital to ensure global competitiveness and to create attractive job opportunities for the growing youth population. On the other hand, reforming regulations and upgrading service delivery models is essential in order to improve the public sector performance in key fields, such as education and healthcare services, according to Mr. Shubar. 

When looking at market dynamics, the continued evolution results in challenges for companies and public institutions. Despite the global financial crisis, the Middle East continues to be an attractive market with solid growth projections. The region accounts for 29% of global oil production and 15% of global gas production. This share is likely to increase as the region houses 45% of the world’s proven oil reserves and 28% of the world’s proven gas reserves. According to McKinsey, cumulative financial inflows from hydrocarbon exports could exceed 9 trillion USD by 2020. Iraq, as the country with the second largest oil reserves in the world and with a planned production increase by over 5 billion barrels a day, will add significantly to this growth of the region.

However, countries of the region have also been affected to various degrees by the global financial crisis. With an economic slowdown following a period of multi-year double-digit growth rates, many businesses are still in the process of rethinking how to best adjust their strategy and enhance their operations in order to manage the new market realities. The challenges businesses currently face are versatile, such as increased pressure from competition, growing complexity of businesses, new technology enablers, changing regulatory frameworks and unsustainable cost base and operating models.

One common tool to drive transformation and achieve performance improvements is outsourcing and offshoring. While potential benefits are high, depending on the type of deal success rates vary, with strategic partnerships e.g., in which a single outsourcer takes responsibility for a big bundle of services, the deal is only 50% of the time successful, according to MIT’s Center for Information Systems Research. Typically, failed deals do not have a measurement framework to monitor the outsourcing impact and suffer from poor governance in managing the outsourcing provider. 

Dr. Petra Elgass, Partner of Management Partners said: “We are now seeing more business and IT transformation initiatives happening in the region, which focus on shared service centers, centers of excellence as well as on outsourcing. These initiatives, if designed and managed carefully, will have a significant performance impact. Management Partners has the international experience and a well-proven tool-set needed for clients to be successful in their transformation initiatives.”

From a country perspective, transformation requirements are specifically significant in countries like Iraq – public institutions require modernization, state-owned enterprises (SOE) require investments and the private sector needs to catch-up with international best practice. Moreover, infrastructure needs to be built up, new institutions to be established and complete new sectors have to be rebuilt. According to the Iraqi National Investment Committee, Iraq will attract 600 billion USD of foreign investment over the coming years. 

Regarding these observations, Achmed Al-Shahrabani, partner of Management Partners stressed: “With the significant uptake in economic activity in Iraq we are seeing a steady rise in interest from regional investors, multinational corporations and institutions. Many enquire especially about market studies, evaluation of investment opportunities and revitalization of public institutions and state-owned enterprises. Iraq has some unique business, security and logistic challenges and there are only a few firms like us that have the capabilities and resources to operate on the ground across all of Iraq.”

Management Partners is a top-management consultancy advising leading private and public sector institutions in Europe and the Middle East, with a particular regional focus on the UAE, Saudi Arabia and Iraq. The consultancy’s focus is assisting clients in areas such as designing growth strategies, implementing operational performance measures, indentifying cost improvement levers, reshaping organization structures, and managing outsourcing deals.