Dubai: Chances of a ‘tech winter’ in the US spreading itself into the UAE technology sector are limited as companies here stick to their hiring plans and more digital startups get launched. And just as vital, tech spending in 2023 will continue to remain at elevated levels, with governments and the bigger corporate houses leading the way.
Analysts and tech industry sources are thus quick to dispel any concerns that the tech industry in the UAE - and other Gulf markets – will likely see a sharp contraction by catching some of the downbeat vibes emerging from what’s happening in the US.
“Here, we are probably seeing a different picture on the horizon, one that characterizes optimism with an element of caution as we enter 2023,” said Wilson Xavier, Senior Research Director for Services at IDC. “The outlook remains positive, with the government and private sector’s strategic digital prioritization acting as a catalyst for further acceleration of tech spend.”
Need to hire – and retain
IDC projects IT spending in the Gulf to put in a 5.2 per cent CAGR between now and 2026 – and that’s coming off a sizeable outlay through last year and most of 2021 as well. “This should provide reasonable cushion for any foreseeable impact (from happenings in the US or a global recession),” said Xavier. “In fact, in certain tech sectors like the Cloud, security, Big Data, AI, etc., this region will continue to face a dearth of tech talent.
“We expect to see continuing talent retention challenges, which organizations and governments need to pay close attention to.”
Xavier’s words should put to rest some of the incipient concerns that had been there within the region’s tech sector, with many worrying the sort of job losses sweeping across US tech will set off ripples here. Each of the systemically important Big Tech entities in the US has gone through layoffs, or put a serious squeeze on their new hiring.
Sure, there are reports of some personnel being let go at local tech firms, but sources say many of these had to do with personnel associated with projects that were completed.
With increased strategic focus by most Gulf governments and related entities’ initiatives such as incubation hubs, disproportionate startup capital allocation by public and private entities, capital markets in the region attracting investor appetite and demonstrating liquidity availability, tech sector is poised to gather further pace towards achieving critical mass.
Funding is still there
In 2022, some of the digital startups/early stage entities in the UAE, Saudi Arabia and elsewhere in the region went through record funding rounds. In Abu Dhabi, Bayanat AI, part of the G42 group portfolio, got through a highly successful IPO – and also roped in investment heavyweight IHC as a cornerstone investor.
And IHC has gone on record in saying that it plans to build its exposure within the local/regional IT sector. Which is also what e& enterprise (part of the UAE tech-telecom entity e&) is doing, notably with the buyout of Smartworld.
Christian Mischler is co-founder of Deskimo, a Dubai-based tech venture. He reckons there are a lot more investment possibilities in the air. “While it will require local entrepreneurs to keep a very close eye on burn rate and cash runway, it will have a less negative effect on the GCC,” said Mischler (who is also the founder of guestready.com, the short-stay rental management company).
“There are a lot of wealthy people in the GCC and the current macro-environment can even be a tailwind for these investors.
“I do believe that companies that now focus on building a business of substance that have positive unit economics and focuses on revenue growth (as opposed to user growth) will have good chances to raise more funding.
“And the large layoffs as we’ve seen them in other geographies can be avoided.”
Unsurprisingly, those that have recruited the most staff in recent years have been the first to try and shed staff. Amazon, Meta and Alphabet’s workforces are twice as large now than before the pandemic hit.
It’s US-focused
While the firings and general exodus at Twitter was the big tech happening in the final quarter of 2022, the earlier part of the year also saw the situation turn dire for IT professionals in the US. Joshua Warner, Analyst at Stone X Group, however makes a point of saying this should be viewed in its own context.
“The layoffs announced by Big Tech should be treated with caution when being read across the wider US economy,” Warner added. “For now, this is more a rebalancing act as Big Tech looks to shed excess staff in some areas while still hiring in key areas like R&D.
Tech always goes through cycles - 2022 is not an outlier, 2021 was. Too much money was raised, particularly in fintech, q-commerce, micro-mobility and some other verticals. Due to the low interest rate environment and QE, investors were seeking alternative investments to generate higher returns as traditional asset classes were getting frothy
“There is little doubt that headcounts need to be reduced as profitability comes under pressure. They will contribute to more layoffs in 2023 - but we will need to see cuts being made across many other industries for the jobs market to loosen.
“Unsurprisingly, those that have recruited the most staff in recent years have been the first to try and shed staff. Amazon, Meta and Alphabet’s workforces are twice as large now than before the pandemic hit. Therefore, Big Tech appears to be far more bloated than other industries following their hiring spree.”
In 2022, proptech portals had their big moment, while BNPL (Buy Now Pay Later) continued to attract heavy backing as they added new regional markets to their coverage. In Saudi Arabia, the logistics-focused TruKKer had funding rounds that played well on their valuations – and possibly taking them closer to a float?
And new startups keep emerging from the pipeline. Dubai-based Alfii recently launched a SaaS platform for end-to-end HR workflow automation, aimed at startups and SMEs. The company was founded by Yousef Albarqawi, Becky Jefferies and Dina Mohammad-Laity.
“We're 12 people - and 11 nationalities,” said Becky. “We're a fully remote team, and although many are based in the UAE we have colleagues in the UK, Romania, Kyrgyzstan and Tunisia.
“The founders come from backgrounds in tech and startups, including Uber, Deliveroo, Talabat, Property Finder, and more, while our CEO (Albarqawi) is a serial entrepreneur with an exit under his belt.
“We’re already onboarding a pipeline of clients across the MENA region as well as from the UK, South Africa and US, including some of the most notable startups in Egypt, UAE and Jordan.”
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