Silicon Valley is in fact a real geological basin. It is named after California’s Santa Clara Valley and, clearly, for the multitude of technology firms that inhabit it. Scotland’s Silicon Glen is also a geophysical landmass as well as a technology hub. Meanwhile, London’s Silicon Roundabout and the Philippines’ Silicon Gulf appear to have simply borrowed the Silicon tag to denote tech centers of excellence.
It was only natural then that the government of Dubai would label its technology and startup focused free trade zone as Silicon Oasis. But can the Arab world successfully create new technology in the region in the same way California did? Can we build silicon palms in the desert that rival those on Californian shores, or will we always be a regional hub for western innovation? Putting it bluntly, could the Middle East be home to the next Silicon Valley?
Arabian investment anaemia
One of the traditional problems faced by this region is lack of funding for startup innovators. Without these mavericks of the technology-business landscape, many of the Twitters, Facebooks and Instagrams you know today would simply not exist. In America and Europe alike, it is not unusual to see Venture Capitalists in the West pouring hundreds of millions of dollars into tech startup programmes before a single penny or cent is reaped. This doesn’t happen in the Middle East on anything like the same scale. Even the region’s first ‘billion dirham company’, souq.com, is reported to have sold to Amazon for something like $600mn. In Silicon Valley terms, that’s small change.
Is this lack of large scale funding because our economic foundations are too new? Or because regional startups can’t ‘scale’ enough to justify the investment? Is it somehow due to a perceived difference in operational approach and workplace culture in the region? Have previously more stringent financial-legal regulations for business (in areas such as bankruptcy for example) held us back? Could it be somehow related to some unfounded concern over time zones and language?
Actually it’s probably none of those things in reality. High net worth investment in new startups for the Middle East have traditionally focused on industry verticals where a clearer path to definable profits can be projected. It is for this reason (and more besides) that the outside world thinks of the Middle East as a centre for tourism, hospitality, construction and of course petrochemicals. When it comes to the nebulous world of Internet ventures, regional investors seem simply risk-averse.
Silicon spring?
But that was then and this is now. Could the huge number of new startup investment programmes already in place in this region really create a new Silicon-type zone? Could the Arab Spring and the wider geopolitical imbalances being experienced around the planet have a permanent change on the dynamism of this region? Could the ubiquity of mobile connectivity and the flexibility of online commerce create new ventures where previously they lay dormant?
When we look at issues of scale, it’s worth bearing in mind that research from the Smithsonian Institute reminds us that the number one per capita YouTube consumer on Earth is Saudi Arabia. It is further estimated that the ‘largest plurality’ of people watching video on YouTube in Saudi Arabia is women and the largest category of videos that they are watching is education. New opportunity is opening up around every corner and Saudi YouTube user development does go some way to validate this suggestion.
Luis Ortega is managing director for Middle East, Africa and South Asia at enterprise software firm IFS. Ortega says that the Middle East may not be yet be a Silicon Valley, but with businesses increasingly operating in a multichannel world, a new degree of openness is on the way.
“With initiatives like Dubai Future Accelerators that allow for collaboration between the corporate world, the government entities and dynamic entrepreneurs globally, we should see technologies adapt to not just today's needs but those of the future,” said Ortega.
Emulation, imitation or replication?
The wider question should perhaps now focus on whether the Middle East should in some way seek to emulate, imitate and replicate the way Silicon Valley developed in the first place. That can probably never happen. Initial tech industry growth in California happened as a result of a special fusion between government, research institutions, a technology tipping point (with the PC just around the corner)… and the coming together of a relatively small number of gifted individuals from William Hewlett and David Packard through to Steve Jobs, Bill Gates and onwards.
“The Middle East is truly impressive when it comes to technology
innovation. But is the Middle East going to become the next Silicon Valley? The simple answer to this is no. It’s not just a copy-and-paste job of what was created in the United States in the middle of the 20th century,” said Helen Pospelova, CEO for MENA region at ABBYY 3A, a provider of document recognition, data capture and language-based text analytics technologies.
Pospelova explains that, in the US, innovations came from inside Silicon Valley. In contrast then, the approach in the Middle East region has largely been focused on accumulating the world’s best practices from technology to people, in order to create its own blend of high-tech ecosystem. She says that this approach is significantly more expensive and often takes longer, but it does allow for impressive results no matter the industry, be it education, healthcare, science, business or technology.
“While Silicon Valley attracts new start-ups and entrepreneurs to live and work here, new technology businesses in the Middle East can develop using a more networked-style approach. With advances in communication, cloud technologies and easy accessibility of the main regional economy and business centres, new companies should not be concentrated in one area, but instead contribute to the development of multiple technology centers across the region,” argues ABBYY’s Pospelova.
A time and a place
If this discussion leads us to any conclusion then, it is one where a like-for-like replication of Silicon Valley’s undeniably massive spread and growth not only cannot happen in the Middle East, or anywhere else for that matter, but that it should not. It happened in a time and a place and at a state of mind (in technology development terms at least) that has now passed.
We as a region must seek to specialise in specific technology areas such as local programming, gender diversity in technology and high-value technical consultancy to help digitise the workflow needs that are most prevalent in the local economies of all Middle East nations. Technology rarely looks backwards and neither should we. A technology co-location zone is not the solution in a connected world of infinite intellectual resource and it’s not the solution for the young talents and entrepreneurs of the Middle East. The answer doesn’t lie in a zone, but in the cloud…