Outsourcing is in

Tough tests in east Jerusalem

By Sharmila Devi
Published: September 4 2007 17:35 | Last updated: September 4 2007 17:35

East Jerusalem is like a village with a lot of problems,” says Nabil Amad. “We live within the boundaries of a modern state and while next door is very technologically advanced, our area is very underdeveloped, from infrastructure to people.”

Mr Amad, 40, set up Al Quds Network (Al Quds means Jerusalem in Arabic), an internet service provider, on his return to east Jerusalem in 1999 from Oakland University in Michigan, where he studied computer engineering. “

We are resellers of connectivity, just like Israeli ISPs, the last-mile distributor of internet services,” he says. He serves the Arab east Jerusalem market, and from offering internet and telecoms services as well as virtual private networks and web-hosting to domestic customers, he plans to expand into media services such as “webvertising” and mobile content.

But he faces an array of obstacles. Mr Amad struggles to get service from Israeli telecoms companies, which guarantee 24-hour service but will not send technicians into east Jerusalem without security. He also had to create cash billing methods for his many clients with no access to automated bank payments or credit cards.

The status of Jerusalem is fiercely disputed. Israel annexed the Arab half of the city after the 1967 war and claims the unified city as its capital. But the international community considers the eastern half of the city to be occupied territory, along with the rest of the West Bank and the Gaza Strip.

Israel’s military administration classifies Palestinians with different ID status depending on whether they live in east Jerusalem, the West Bank, Gaza Strip or in Israel. This governs everything from movement and travel to setting up a bank account. East Jerusalemites, such as Mr Amad and his customers, have ID giving them residency but not Israeli citizenship. This allows them greater freedom than West Bankers but not as much as given to Israeli Arabs.

Nonetheless, Palestinian entrepreneurs in east Jerusalem, who have observed their highly successful Jewish Israeli counterparts, are trying to create their own high-tech boom.

Their first hurdle is finance. Israel has a well-developed venture capital industry and a grant-giving office of the chief scientist, but east Jerusalem entrepreneurs rarely benefit from either. “We have no access to financing from Israeli banks,” says Mr Amad. He started his company with about $100,000 (€74,000, £50,000) in loans from Arab banks based in the West Bank with guarantees provided by non-profit donors.

Mr Amad obtained an ISP licence from the Israeli Ministry of Communications with relative ease and he signed up with Bezeq, Israel’s largest telecoms company. Al Quds Network receives its basic infrastructure from Bezeq but has its own data centre to provide routers, firewalls and other services.

Finding office space is hard in overcrowded east Jerusalem where Israel rarely grants construction permits and regularly demolishes Palestinian homes. Initially, Mr Amad worked out of the Mount of Olives hotel, just above the Garden of Gethsemane, before relocating to street-front space next door. The modern, no-smoking office could be anywhere in the west, in contrast to the bustle and clamour outside.

Mr Amad now has 15 employees. He is a keen promoter of gender and religious equality. Employing Christian Palestinians also enables him to offer on-site servicing on Fridays while Muslim staff pray.”

Turnover “is up to $1m”, he says, thanks to constant innovation and good service. “Technology has pushed down prices by about 80 per cent over the past five years...so we have to keep inventing new products and services.”

Of his 2,000 clients, some 90 per cent are domestic while the rest are mostly small- to medium-sized enterprises and non-governmental organisations. He lost some clients in the Palestinian neighbourhoods that were cut off by Israel’s construction of the West Bank separation barrier.

Mr Amad has received several buy-out offers from Israeli companies but so far wants to remain independent. He would like to expand out of east Jerusalem into the West Bank market but would have to create a separate unit.

One east Jerusalemite who has expanded into the West Bank, Jordan and even the Gulf is software developer Munther Dakkak. Aged 41, he studied computer science in the US before setting up Dataset Software Tech in 1995 with $1,500 – the cost of a computer on which to write code. Clients across the region use his auditing and financial software. He is coy about turnover but says “business is good” and employees number eight.

Politics and conflict have inevitably shaped his company’s growth.

“The intifada [Palestinian uprising] hit us very hard in terms of lost opportunities,” he says. “One of our clients, a Bethlehem marble company, focused on the Jordanian market and through them we expanded there too. Marble companies are a small but very lucrative niche market and we now have another client in Oman...Understanding the market is what gives us the edge.”

The West Bank economy remains depressed because of violence and conflict. Israeli army raids and arrests occur nightly in cities such as Nablus, deterring most companies but leaving the field clear for determined local businesses. “For the big companies, going into Nablus is a risk but for us it’s an opportunity,” says Mr Dakkak.

East Jerusalem high-tech hopefuls and recent graduates were recently offered a chance to attend seminars to learn more about setting up in business. StartUp Jerusalem, an Israeli non-profit group that aims to stimulate development, brought in leading Israeli hightech businesspeople to advise.

At the summing-up session, Jafar Sabbah, an Israeli Arab who is co-director at StartUp Jerusalem, told the east Jerusalem participants: “Instead of just applying for jobs at Israeli companies that you’re unlikely to get, think creatively. Think how you could offer the same services as a contractor, not an employee. Think about setting up your own company.”

The participants might have taken heart also from Mr Dakkak: “If you can succeed in Palestine, you can succeed anywhere.”

Cash payment system to help customers

Nabil Amad, founder and chief executive officer of Al Quds Network, says that while other ISPs can offer uniform prices for services, he offers a banding system based on cash because many of his east Jerusalem clients are refused credit cards or other bank services. He also offers more “giveaways” to retain customers.

Customers who stay loyal do so because of high levels of service and on-site support not offered by Israeli companies in east Jerusalem. The lack of billboards or ad agencies means he advertises in the Al Quds daily paper at least three times a week.

Munther Dakkak of Dataset Software Tech says more Palestinian companies could expand in spite of the West Bank’s economic crisis, but continued conflict has induced extreme caution. He seeks out niche markets of little interest to big software companies, such as the non-profit sector that is heavily represented in the occupied territories.

Mr Dakkak has teamed up with an Israeli-Arab company to develop an accounting software package for the Hebrew market and is seeking a partnership in Jordan. With clients in the Gulf, he tries to counter a perception that Palestinian companies lack stability by continually proving his expertise.