▎How do Chinese companies overcome barriers and get good business to the Middle East when they go overseas?
In the beginning of 2023, flights to and from the Middle East will become busy. Groups of government agencies, investors and business delegations from China come here one after another. The topic they are most concerned about is not oil and rich people in the Middle East, but technology and digitalization.
Changes are taking place across the land of the Middle East.
In recent years, in the national development strategic visions of wealthy countries such as Saudi Arabia, the United Arab Emirates, and Qatar, the demand for economic diversification and digital transformation has frequently appeared, and the voice of reducing the proportion of the oil economy and turning to the digital economy and high-tech fields has become stronger and stronger . In this context, industries such as e-commerce, logistics, social networking and financial technology are developing rapidly, and the transformation and upgrading of a large number of traditional industries is also accelerating.
For Chinese companies that have accumulated experience in digital transformation, this is undoubtedly a new blue ocean, but the cultural and language barriers and the challenges of local policy compliance are also obvious. How do Chinese companies overcome barriers and get good business to the Middle East when they go overseas?
Go to the Middle East!
"Many people say that globalization is dead, but as long as you come to the Middle East, you will find that it is completely different. After the epidemic, the investment of Chinese companies in the Middle East is growing rapidly. We receive people from every week or even every day. Chinese delegations, governments and enterprises in the Middle East are also very eager to communicate with China." A representative of a Chinese-funded enterprise in the Middle East told TMTPost.
Walking on the streets of Saudi Arabia or the United Arab Emirates, people often see the names of Chinese companies written on the construction signs of high-rise buildings that are rising from the ground; Many of them are also from China.
Located in a key position connecting Asia and Europe, and accounting for 60% of the world's total oil reserves, the Middle East has long been a hot spot of diplomatic, economic and trade attention for all countries in the world. Abundant resource reserves not only brought huge wealth to the Middle East countries, but also provided the foundation for the rapid development of science and technology.
Take the rich “six Gulf countries”—Saudi Arabia, the United Arab Emirates, Kuwait, Oman, Qatar, and Bahrain—as examples. Although the population here does not exceed 60 million, the penetration rate of smartphones is extremely high, and the penetration rate of the Internet is much higher than that of China. . Due to the strong willingness of users in the Middle East to pay, and the relatively uniform religion and language, many mobile Internet companies have also been able to take root here.
While enjoying the huge wealth brought by oil, an important proposition for decision makers in Middle Eastern countries in recent years is how to get rid of dependence on traditional energy sources and transform to a diversified economy.
In the Middle East region, eight of the ten countries' national vision strategies have clear digital government and digital development strategies. For example, under the continuous promotion of Bahrain's 2030 economic vision, policies such as "cloud priority" have been introduced, trying to build Bahrain into a regional and even world-class data center; Saudi Arabia also clearly supports digital transformation in the 2030 vision, Huawei Cloud, Tencent Cloud, Alibaba Cloud Capital has reached cooperation with telecom service providers in the local area; Qatar, driven by the 2030 national vision, has invested heavily in e-government projects and the ICT industry, which has further fed back the cloud infrastructure market; the UAE stated in its economic recovery plan that the government will encourage long-term investment in digital services. Investment in the economic field focuses on the development of cutting-edge technological fields such as 5G technology, artificial intelligence, biotechnology, and green economy to promote economic transformation and upgrading.
The advantage of wealth enables technology to quickly land in the Middle East, and decision makers are more willing to embrace advanced technology. Take the artificial intelligence pre-training large model that has swept the technology circle recently as an example. Saudi Arabia has long cooperated with Huawei Cloud on large natural language models, and is currently considering launching an Arabic version of the large model.
It can be said that in the tide of digitalization, the Middle East is unwilling to miss any node.
"Middle Eastern countries are paying more attention to the development of digital technology than ever before." Analysts said that many Middle Eastern countries have small land boundaries and populations, but from the perspective of digitalization, as long as there are sufficient funds and the correct business model , the scale of the digital economy in the future will not be lower than that of the oil economy. Leaders of Middle Eastern countries are aware of this, so IT spending has skyrocketed in recent years.
However, although the Middle East countries have ambitious digital construction plans, compared with East Asia and North America, their own technological level is not developed enough, IT infrastructure is still relatively weak, and technical talents are relatively lacking. It is precisely because of this that many international manufacturers are embracing the wave of digitalization in the Middle East, and this blue ocean market is attracting global companies to enter.
Opportunities and challenges coexist
Driven by the digital vision of countries in the Middle East, the demand for cloud in the local market is also increasing year by year. The MarketsandMarkets report, a research firm, predicts that the cloud computing market in the Middle East is expected to grow from US$14.2 billion in 2021 to US$31.4 billion in 2026, with a compound annual growth rate (CAGR) of 17.2%, indicating huge growth potential.
The Middle East is becoming a hot spot for global cloud computing manufacturers. Not only are AWS, Microsoft, Oracle, Google and other international manufacturers deployed, but Chinese cloud manufacturers such as Huawei Cloud, Alibaba Cloud, and Tencent Cloud have also entered the Middle East market one after another. Some of them are in the Middle East. Set up cloud computing data centers, and some frequently cooperate with operators in the Middle East to get closer to local customers and expand market share. But the layout logic is different: Alibaba Cloud focuses on exporting methodology in the field of e-commerce and payment, Tencent Cloud prefers game and content manufacturers, and Huawei Cloud has more experience in serving government and enterprise customers and providing cloud service infrastructure.
HUAWEI CLOUD is one of the earliest Chinese cloud computing vendors to deploy in the Middle East, and has already exported mature cases in many countries in the Middle East. In 2019, Huawei cooperated with Ankabut, the largest ICT service provider in the UAE's education industry, to establish an education cloud in the UAE and the entire Middle East. The cloud data center solution provided by Huawei is more friendly in terms of cost and construction threshold. Today, Ankabut's service scope ranks among the best in the entire Middle East and North Africa region.
With the deepening of digital demand in the Middle East, enterprises are no longer satisfied with using cloud infrastructure services to obtain elastic computing resources, and thus have a stronger demand for technologies such as AI, cloud-native application development, and big data.
"Different from China's cloud service market, most of the customers in the Middle East who pay for cloud services in the Middle East market are government and enterprise customers. These customers use the cloud in a relatively traditional way. In the past, they generally adopted the overall solutions of major international companies, mainly based on virtualization technology , but in recent years, they are speeding up their transformation to cloud-native, looking forward to more agile and lower-cost SaaS solutions, which is precisely the opportunity for Chinese manufacturers.” Dai Boyao, President of Huawei Cloud Middle East and Central Asia Cloud Business Department, told TMTPost.
HUAWEI CLOUD's cloud-native solutions also have extensive customer practice in the Middle East. Take Ebdaadt, an e-commerce platform in Qatar, as an example. Relying on Huawei Cloud's native database, the company modernized the Mzad Qatar application, which increased the loading speed of the website by 50%, increased monthly orders by 23%, and achieved significant growth in commercial revenue.
"In the cloud service industry, customers in the Middle East want nothing more than good technology, low cost, and good service. This is actually the advantage of Chinese manufacturers." Dai Boyao mentioned that in the past, the solutions of many international companies often adopted globally unified technologies. system, it is more difficult to customize for local special processes and enterprise transformation needs. In contrast, Chinese cloud computing vendors are very "volume" in terms of cost, experience, and business model, and are more willing to open up technology sharing for customers and invest in localized services. This has become the unique competitiveness of Chinese companies going global.
Not only that, Chinese cloud vendors, as rising stars, have gone through the independent road from adopting mature systems of Western manufacturers to self-developed systems, and have also done a lot of digital transformation planning and internal process IT governance. It is very valuable.
Almost no one would deny that now is a good time for Chinese companies to go to the Middle East for gold digging. However, in order to truly realize the gold rush in the waves, there are still challenges for overseas companies to solve.
Among them, safety compliance is the primary consideration for overseas companies.
Take the compliant circulation of data as an example. Since the governments of many countries prohibit the hosting of data overseas, enterprises develop and operate applications locally, and more often they need to choose local data centers for cooperation. In addition, there has been no international consensus on the issue of data sovereignty, and the privacy laws and regulations of different countries are different. Companies often need to follow several different laws and regulations at the same time, and the risk of violation is relatively high. For example, Amazon was fined a record US$888 million (approximately RMB 5.729 billion) by the European Union for violating data privacy, and Google was fined 50 million euros by French regulators for data privacy issues.
In the Middle East, Saudi Arabia, the United Arab Emirates and other countries regard boosting manufacturing as a major focus of their economic development, and have opened up a series of preferential policies to attract foreign investment. But in fact, the data and privacy compliance requirements involved in the manufacturing industry are much more complicated than those of the Internet. This requires Chinese companies to be highly sensitive and cautious about local policies and regulations, which has become the first barrier for many companies to enter the Middle East market.
In addition, technical support and localized operations are also the key to the overseas development of enterprises. Based on Huawei Cloud's research, 45% of enterprises will first seek technical partners in the process of going overseas, followed by consulting services on policy, legal, security and compliance issues, and assistance in product promotion and marketing.
Under the challenges, how can overseas enterprises truly achieve steady and long-term development? Constructing and improving the ecology of going out to sea may be the way to break the situation.
Seize the opportunity with ecology
“When an enterprise first arrives in the Middle East, it needs to understand and study the local market environment as soon as possible, clarify customer portraits, customer needs, business pain points, and investment budget scale, master the skills suitable for localized marketing, and create a sound financial, taxation, and legal system.” He has been working in the Middle East for more than ten years and has witnessed Huawei Cloud’s step-by-step deployment and development in the Middle East. In Dai Boyao’s view, the market experience of Chinese companies going overseas can be used for mutual reference and reuse. Companies with rich experience in the Middle East can serve as future partners. provide support and guidance.
Not only that, opening up the market also requires ecological "grouping".
Compared with the globally unified technical product solutions of other major international manufacturers, Chinese companies are better at localized services, and can provide customized digital transformation solutions for government and enterprise customers, which is undoubtedly a great advantage. However, customized needs often involve a wide range of issues, and not one manufacturer can solve them independently.
"Large customer groups not only have cloud requirements, but also upper-level application requirements. Without mature products, they need to customize and develop. There are many excellent companies in China that can do these products and technologies." A Saudi local solution Solution experts said that there are a large number of software SaaS companies in China. In fact, their capabilities can do many things in the Saudi market, but they lack a channel.
Dai Boyao also observed that there is an obvious difference between the cloud service market in the Middle East and China: the market size occupied by SaaS far exceeds that of IaaS+PaaS. In 2022, the total public cloud spending in the Middle East and North Africa region will reach US$5.8 billion, of which SaaS service spending will be the highest, accounting for 41%. In contrast, the development of SaaS in China is still insufficient, but it is also because of this that Chinese SaaS companies can also find broader business opportunities here.
It is imminent to create a prosperous and open business ecosystem for overseas enterprises.
With an in-depth understanding of local compliance policies and rich customer experience, Huawei has the ability to become a "bridge" for Chinese overseas companies to settle in the Middle East - rooted in the Middle East for 23 years, from the first 3G project, the first FTTX project, including Large-scale commercial use of 5G in Saudi Arabia...Huawei has carried out many forward-looking digital projects and solutions with customers and partners in the Middle East, formed a relatively mature localized delivery team and project management team, and also worked closely with local educational institutions to provide services for the Middle East. More than 150,000 ICT talents have been trained.
In 2022, Huawei released the "Go Cloud, Go Global" ecological plan to the world, providing a package of solutions for ecological partners, sharing Huawei's localization experience in compliance, human resources, and Huawei's cloud product and solution capabilities. In the Middle East, "Go Cloud, Go Global" can help partners familiarize themselves with local investment policies, connect with government agency resources, and start Middle East business with lower cost and threshold.
At the same time, Huawei also combined its own experience and the pain points of its partners to create a set of global business boosting solutions, including security compliance, application acceleration, intelligent localization, and enterprise services. The challenge of going overseas in entertainment, social, financial and other industries provides global one-stop cloud services with a consistent experience to help companies explore the global market.
Today, many Chinese-funded enterprises are facing the pressure of fierce competition and sluggish growth in the domestic market, and it has become a consensus to seek growth overseas. However, unlike Huawei's exploration of going overseas more than 20 years ago, now we don't have to fight alone. Huawei provides technical support and comprehensive solutions as a platform to support Chinese companies to better enter the Middle East and grow together.
It's time to go to the Middle East. Competing in the Middle East is not only a competition of technology, but also a competition of services and ecology. For Chinese companies that are about to go deep into the Middle East, they need the support of strong local resources, and the sea-going ecology on the cloud will definitely play a key role in it. It will not only lower the threshold for entering overseas markets, but also work together to build a stronger Competitiveness.
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