Lebanese ICT companies weather political, economic challenges

26 January 2008

BEIRUT: A study by consulting firm Stanford Research Institute (SRI) International on the information and communications technology (ICT) business in Lebanon found that the sector continues significant and productive, despite the country's political instability and challenging economic environment.

The study added that the industry has sustained its overall size and level of activity due to a focus on exports.

The survey, which was published by Byblos Bank's Lebanon This Week, shows that ICT firms in Lebanon have an aggregate market size of between $380 million and $420 million in sales and employs between 6,500 and 6,750 persons. It noted that the market size saw a modest increase of 5-10 percent in 2006.

SRI indicated that nearly 87 percent of Lebanese ICT firms made profits during 2005 and 2006, with 64 percent reporting pre-tax returns on sales.

Software firms were more likely than hardware firms to report positive returns, while medium-sized firms were more likely to report profitability than small or large firms.

Medium-sized firms outperformed both small and large firms in terms of exports, while software companies were more active in the export market than hardware or mixed business firms.About two-thirds of firms said that at least 10 percent of their sales came from exports, with 28 percent generating more than 75 percent of sales abroad.

Also, Gulf Cooperation Council (GCC) countries are the most important export market for Lebanese ICT firms, followed by other countries in the Middle East. Almost 75 percent of responding companies reported sales to the GCC and 69 percent reported increases in sales to the region.

ICT firms continue to have a strong presence in the banking sector and distribution, followed by government, general trade and services, and insurance.

The majority of software firms said software programming and customization are the core capabilities of their firms, while hardware firms have focused on sales and maintenance and migrated away from hardware design and assembly.

The majority of software firms indicated that high quality and the ability to customize software to clients' needs were the most critical competitive strengths, while high quality and after-sales service were reported to be the most important strategies for hardware firms.

The two most frequently cited means for generating new business leads were client initiated contacts and referrals from existing clients.

The study was financed by the US Agency for International Development. - The Daily Star