June 2014 | Published in SME Advisor Magazine - Middle East
It's no accident that the SME sector is increasingly the focus of government initiatives and entrepreneurship coaching – it's simply the fastest-moving part of the regional economy. This is true not only in terms of the ferocious competition between businesses, but in terms of what an SME actually does. As businesses become more sophisticated, so do their needs – and that includes facilities, resources and accommodation. Here, SME Advisor assesses the changing landscape, and asks Laudy Lahdo, General Manager, Servcorp – Middle East, for her view on the style of office accommodation that spells competitive edge in an era when added-value is everything.
Laudy Lahdo, General Manager, Servcorp – Middle East
The region's SME space is a powerhouse of potential – not least because studies from Dubai SME show that the sector typifies the ‘20/20 rule'. In other words, more than 20 per cent of SMEs in Dubai grew by at least 20 per cent in 2013. Contrast this statistic with the Enterprise and Corporate sectors, where growth – albeit healthily ahead of global inflation averages – remains in single digits for more than half of the companies polled.
SMEs experiencing this dramatic growth often face a number of very vivid challenges: the need for second and third generation funding, bigger and better IT resources, guidance on strategy, and precise market intelligence. There's also the most basic need of all – suitably spacious office accommodation, offering the variety of support services that a business will need as it moves ahead of itself for the first time.
The SME picture isn't just about volatile growth and activity: it's about a changing business profile. One of the key trends that we're seeing emerge in the region's SME space is the need for SMEs to get closer to the cutting-edge of technology – and that's often because they're hi-tech businesses themselves. The old days of the region being a buyer of technology rather than an innovator are fading fast, and this is being reflected in the profile of SMEs with ever-steeper IT requirements and expectations.
Technology-focused business parks such as Dubiotech are experiencing their best-ever occupancy rates, and figures from Dubai SME show that about 13 per cent of start-ups have a technology remit. Five years ago, that figure was only 0.9 per cent. What's more, these businesses look set to further slant the growth statistics, because their technology angle can be highly attractive to potential investors, whether risk partners like banks, or investors such as venture capital firms and private investment specialists.
Changing profile = changing expectations
While mapping the changes in the SME sector, there's another factor to consider, too: the changing profile of the entrepreneurs themselves. In the GCC, we are witnessing the rise of the ever-younger entrepreneur – a trend fuelled by an increasing number of first-class entrepreneurship initiatives, and a sea-change in the view that the public sector is automatically first choice. Entrepreneurs in this demographic will often have direct access to generous start-up finance, but this cluster of advantages begs the question: will the realities of SME life be in keeping with advanced entrepreneurial expectations?
The truth is that great aspirations can be road-blocked by the formalities of business start-up – especially during the long weeks of securing a relevant, well-equipped office space (and one that's in a premium location is not – as we all know – easy to find, least of all afford). One of the paradoxes of the new generation of ‘techno-SME', for example, is that while it might seem to be the case that a hi-tech, or online, business, can operate from anywhere, in reality, the new breed of entrepreneur is more eager than ever to be in a prime city-centre location – close to investors and facilitating networking with compatible businesses. Figures from the UK's Federation of Small Businesses (with 220,000 active members, the largest SME lobby in the world), show that location was a top-five priority for more than 60 percent of businesses start-ups in 2012. Working with a business like Servcorp can leverage the many advantages of a prime city centre location. How many young SMEs could otherwise afford premium space in the likes of Doha's Tornado Tower, or the sparkling upscale spaces of the brand new Servcorp Boulevard Plaza, Dubai?
For businesses opting for the traditional route, there's a raft of further hurdles, too, over and above securing the site itself. Not least, the challenge of getting the right telephony and IT back-up in place – which can derail the best intentions for yet another few weeks.
As Laudy Lahdo, General Manager, Servcorp – Middle East comments: “In today's competitive business environment, it's vital that SMEs have access to state-of-the-art technology and at Servcorp, we see this as being a fundamental part of our business and in fact our competitive edge. Our vision of what it takes to deliver an effective business operation enables us not only to help the new generation of start-ups and rapidly-growing, entrepreneurial young businesses, but also provides an incredibly strong platform for the international brands that are venturing into the region to set up branches both cost effectively and hassle-free.
“We are proud to be an innovator of the Serviced and Virtual Office industry in our development of technology-driven solutions that benefit our clients' business. We have made that investment to deliver the most powerful technology platform, which is recognised as the best in the industry. We know that businesses cannot afford to fall behind and we provide them with an infrastructure of a multi-national making them more productive and more profitable – that's the Servcorp difference!
The statistics suggest that the Servcorp solution addresses key needs at a moment when the SME is most vulnerable; there is also good evidence to suggest that once the business is over this ‘hump', the future is decidedly rosier. For example, about 75 per cent of SMEs that survive the eighteen-month stage will go on to exist for five years or more. The next crisis point is after seven years – where the fall-out rate is highest of all.
On this purely financial level, the serviced office solution can make good practical sense. As Laudy comments: “The serviced office platform gives you a crystal-clear, fixed-cost basis to work from – you know exactly where you stand month on month, with complete control of your operating costs which is great for your projections. This also provides you with a very high level of support, which in all likelihood would be well outside your budget if you tried to source it independently.”
Practical assistance when it's needed most
What are the factors that a young business will be looking for in its choice of office space, and what does a solution like Servcorp's actually provide? As Laudy explains: “A start-up is typically looking for a corporate presence, infrastructure and support of a multinational without having to make the capital investment and commitment normally required. This is exactly what a Servcorp Serviced or Virtual office provides. Our executive offices are located in the most prestigious buildings around the world and at each of our 150 locations, they have access to uncompromising levels of service and technology-based solutions which help save time and money. From the basics such as provisioning a telephone number instantly, which is then answered in the local language by a dedicated receptionist; to booking meeting rooms globally in real time – right down to the finer details – Servcorp provides a total business solution. We live with our clients and listen to their needs, which helps us continue to develop new services to help them succeed.” For an SME – in fact, for any style of business – this connectivity is at the root of your ability to build the business and get things moving. You can't exist without it.
“Then, that same technology gives businesses access to a data and voice network of the highest calibre – and it all happens seamlessly. From Day One, you become part of what we call the Servcorp Global Network. This gives you tier-1 fibre internet services to every location and instant control over the way the myriad of support services project your identity to your clients. Simply access Servcorp online and you can change the way that receptionists answer your calls, customise your voice data messages and redirect calls to your landline, to a mobile, tablet or any of your devices. You can also review office availability in other cities and book meetings facilities instantly and in real time. Or, you can do this by using the Servcorp app on your mobile. What's more, you'll be able to make international calls all at local rates!”
“All of this is possible because we've invested more than US$ 50 million in our IT infrastructure, and have a state-of-the-art proprietary platform that is amongst the most advanced in the world. I'm delighted to say that this long-term investment is unparalleled and recognised as such in the market. It's one of the key reasons, for example, why we are so widely recommended by companies who specialise in one-stop start-up services and instruct their clients where best to go for office accommodation. Statistics speak for themselves: in terms of connectivity, our clients experience 99.99 per cent uptime and benefit from the fastest internet speeds in the industry.”
What the research tells us…
The focus on telephony and digital mobility is in line with the findings of recent research by Etisalat. As Govind Jaganath Rao, VP Small and Micro Business Sales, Etisalat, comments: “The reality is that the first priority for an SME is its connectivity. The need for telephone and e-mail contact is on a par with having a bank account – you simply can't start without it. Customers in the region are leading the way in terms of wanting full portability of data across all the company's devices. A younger demographic of entrepreneur is at the root of this change and we are putting more and more emphasis on having both call and digital connectivity as early as possible in the business' lifespan.”
An SME that starts working with a serviced office provider therefore has a powerful short-cut to the raft of telephony and digital services that will be its lifeblood in the quest for customers, inventory and marketing reach.
Getting things right from Day One
Statistics from Abu Dhabi's prestigious Khalifa Fund show that all too many SMEs take off an expansion path without getting the basics right. A misunderstanding of factors such as the relationship between office space and visa allocation, the requirements and limitations of life in a Freezone, or the style of work specified on a trade licence, can all come back to haunt a growing business – and amending these errors later on can be both prohibitive and costly. In fact, the need to ‘do things properly' across many areas of the business is now enshrined in the wording of the new 2013 Companies Act, which details very specific requirements for good Corporate Governance. Again, working within a good-quality serviced office environment can positively ensure the right fundamentals are in place.
As Laudy Lahdo comments: “We pride ourselves on being an international company that does business locally. We are dedicated to building strong relationships with local authorities which has enabled us to provide comprehensive solutions for our clients – ones that can be implemented smoothly because they're totally aligned with every aspect of the legislative framework.
“We provide services that are very much bespoke to the markets we work in – and there's no better example than the fact that, in every country we operate, our staff are fluent in the local languages. Here in the Middle East, our team are multi-lingual and have local experience. Catering to the local market is a Servcorp priority. In my own case as a frequent business traveller across the Gulf, I communicate in Arabic where relevant, re-enforcing the fact that we are an organic part of the local businesses' aspirations and in tune with the kind of opportunities and challenges they face. This allows us to better fulfil their needs and often exceed their expectations.
“In the eleven years I have been in Dubai, I have seen many companies that started from a Servcorp serviced office, grow and prosper to become large enterprises. This is testament to the fact that Servcorp is a nursery for SMEs. In fact, we're very much geared to help businesses grow: we even offer a ‘test the water' package that enables a company to test the market on an international basis and build a branch network without having to commit large sums up-front. My view is that this kind of approach will become even more relevant and helpful given the rise of the new generation of young entrepreneurs. We are very well-placed to work in line with their vision and ambitions and help them realise their goals. If you're going to compete in the ever-changing SME space, rule No.1 is that it pays to be part of a winning team with all the right strategies in place!”