By Mohamed Allouba By Mohamed Allouba By Mohamed Allouba By Mohamed Allouba

By Tom Gara

Four months ago, this writer profiled an exciting company doing high-tech research and development right here in Cairo (“Right Here, Right Now,” bt, April 2007). Founded by an Ain Shams graduate who obtained his PhD in Electrical Engineering from UCLA, Newport Media specialized in state-of-the-art research into wireless video broadcasting technology.

Many months later, assigned to a new story, the writer comes across an innovative, entrepreneurial Egyptian business, Sysdsoft, founded by a former Cairo University professor with a PhD in Electrical Engineering from MIT, that specializes in developing cutting edge wireless communications technology. In many cities of the world where such businesses are commonplace, similarities like this would hardly be noticed; in Cairo they inspire deja vu.

And optimism.

It isn’t just that the two companies have made a sound business model out of conducting high-tech R&D here — it is that their reasons for doing so hit at the possibility that the nation will grow an indigenous technology sector. Such a development would be transformative in its effect on industry, the economy, and employment prospects for the nation’s best.

Both companies recognize that the ‘cream of the crop’ of Egyptian technical talent is as good as it gets. Both believe that attracting experienced people back home to take on challenging assignments —’reverse brain drain’ — is a win-win-win situation for the individual, the company and the country. And both companies have demonstrated the characteristics of the best of global entrepreneurism: risk taking; a willingness to jump, head first, into big, challenging markets; and a dedication to their business that borders on the fanatical.

In the case of Sysdsoft, these attributes, among others, have led to a position today as a small-but-serious player in the global wireless technology business. The company employs almost 100 employees in its Maadi offices, working on solving some of the most challenging technical issues facing cutting edge wireless technologies such as WiMax, WiFi, Bluetooth and the CDMA mobile phone standard.

In a long, freewheeling interview with Business Today Egypt, Sysdsoft founder and CEO Khaled Ismail shared his thoughts on the past, present and future of his company and the emerging Egyptian technology sector. Edited excerpts:

Yes, I think this company is quite unique. Very honestly, I may be biased, but as far as I know, this is the first time that this model has been applied in Egypt — a group of people inside the university take a space there, use the brains that are around the university environment and start a company that aggressively caters to global needs, not to service local demand or a project for the government or for the university.

It started like that, as a nucleus, but the first project we ever had was for Phillips. It was just a very small entity, getting out there and talking to very big entities. And the number of people who started, we were four people, but we had a very aggressive plan overall in terms of growth and how many people we should hire.

This was in September 2002 — four people were there at that point in time. But then comes January 2003, there were about eight, and then in March there were 15, and then the year after there were 30. Now we are 90, so we had very aggressive growth based primarily on attracting good brains.

In many cases — like the entire department of radio frequency (RF) design, for example — we had no customers, we had no projects, we just attracted good, bright people, starting with Emad [Hegazi, head of Sysdsoft’s RF Design team] when he came back from the US. He collected a bunch of very bright, young, fresh-out-of-school people, mostly engineers, and said, “Let’s build this unit and pursue customers worldwide.”

Now, it took four, five months to get started, with no customers or orders, but we had, before the end of the year, a contract with an international company. Then we had the second and the third and the fourth contract and so on.

It’s all about the people. At the end of the day, we’re selling brainware. We don’t have merchandise, we don’t have products that you can feel and touch, its all the output of brilliant brains. That is all that we sell.

Initially it was just an experiment, but here you get something that you don’t quite see in the US: the sense of added value, that you are more valuable — to society, to people, to the company. Professionally, you benefit just because you come at a stage where you can quickly vault from a junior level to mid-level manager. You get placed in a higher position than you would get somewhere in the US, so there is a sense of added value that you cannot make elsewhere.

All the time, it is a reverse brain drain. We’re not exceptional, we have a lot of senior staff who have PhDs from the US, work experience in the US. Some have advanced industrial experience out of the US. They spent many years working there, and then eventually wanted to come back; we made them the right offer, and here they are. But it was the first time for these people to find the same level of intellectual challenge here that they had in the US.

When we were in the States, nobody complained about the environment, the technical challenge, the projects they worked on — no-one had those problems. But the problem was we were small fish in a big pond, and we were not helping our country in any positive way.

The best thing is, by far, the ability to select the cream of the crop. Every year there are about 7-8,000 graduates from the IT, ICT sector. We select the best 10-20 of them. So that ability to select is great. The disadvantage, of course, is that we are a target. Every multinational company, or new company in the market that wants to start here, they want to hire people immediately with experience.

Our staff are mostly —90% — fresh out of school or back from the US, so that’s our model. But if a new company comes, like Newport Media, they are coming from the US and they have to deliver something in a very short time frame. Their target is, within 12 months, to bring a project to life and that is it. Of course then their main thing is to find experienced people immediately. We find people, we train them, we get nothing out of them in terms of productivity for the first three to six months, typically. But that is because we’re here to stay.

So the downside is that after two or three years, our engineers become very valuable, very experienced and others may come and attract them. That is a price we have to pay.

There are two stages of communicating with an external customer. The first level is just to get their awareness and the willingness to open up to listen to you. In that case, yes, there is a struggle — where you are coming from can be a liability or an asset. In Egypt’s case, it is not a liability — we’re not Burundi — but it’s not an asset like the case of India or China.

We’ve had our ways to bypass the first stage, through colleges, through knowing people and so on. So if somebody knows you, or knows who you are and what you do and your previous history and accomplishments, they may just forget where you’re located, it becomes kind of irrelevant.

The next challenge is a technical one, where we already open discussions with the company, now they want to give us a contract. Obviously, they want to see how good we are, so they interview engineers, they talk to the senior managers and so on. And in that second phase, so far, we’ve never had a company walk out. Which means that we have put together the right technical team — whenever they sit eye-to-eye with any customer — multinationals, Fortune 500 companies — they speak the right language, they tell them what they know, they convince them, and we get the contract.

I would say the first stage is always more difficult, and the second one is more or less in our hands — Egypt has nothing to do with it. When they come and want to see what Emad knows, it has nothing to do with where he’s located. And that’s the second phase.

I think you have to forget financials, initially. Our very first project was with Phillips, and we offered them the first phase for free. Four people — what’s the cost in Egypt, you know, sitting in the university? It’s not a big cost. But basically, we wanted to reach a level of comfort that they know us, they know what we do very well before they commit anything.

You have to put yourself in their shoes: I’m going to give a contract to an Egyptian company. I have a manager, and if I fail in this contract, my manager will kill me, because how can you give that project to an unknown Egyptian company? If he says, “I never paid them anything, it was zero risk,” he will never be punished for it. The minute we do that first project successfully, then he has a good argument to go to his manager and say, “By the way, these guys, in one month, delivered this and that, perfect quality, everything was very good,” and so on.

I see a lot of entrepreneurs come in, and they have a good idea, but then they just go for the money, straight from day one. They meet Phillips and they say, “Well, we want this amount of money,” right from day one! This is one of my major pieces of advice: not to be very greedy at the beginning, think more long-term. Also, I think, they have to have the right management team. So a good idea is not good enough, there has to be a team that can nurture the idea, grow it, be the proper interface with the companies. At the end of the day, if they are convinced that there is good management, they are convinced that there’s a good company.

No, not even — one of our projects is outsourced to us by an Indian company called Wipro, they are the third-biggest IT company in India, and they don’t have the expertise, so they gave it to us. It’s not about cost, because India is not expensive. When I get projects from the US, cost is a factor. But when I get a project from Wipro, it is basically because I have technical expertise that they are in need of. With their 60,000 employees and our 90, we are still very valuable to them.

Yes, it is relatively big, and growing. It is probably around 25-30% of our business.

Well it is important to remember that most wireless technologies have gone through the same adoption process, people just forget the recent history. Bluetooth, people talked about for 5 or 6 years before it had a really good, successful application. Today, your phone, my phone, everything has Bluetooth in it, even new cars. Similarly, WiFi struggled in the early 2000s; today, WiFi hotspots are everywhere.

With 3G, the same thing, it took at least three years and people paid zillions of dollars for licenses, nothing happened. But it is picking up now. So there is no reason to believe that WiMax will behave any differently, basically a period of incubation while the idea is being tossed around, people trying pilot projects, but eventually making it out to become a real technology.

Initially, WiMax is great for people who are deprived of good cable connections or decent copper fixed-line network. There are hundreds of millions of people in the world who cannot access the internet, just because their connectivity is bad. With WiMax, you just install a piece of equipment of top of the roof, a piece of equipment somewhere else — 20 kilometers down the road — you connect these guys.

That has a big impact on connecting people to the Internet, broadband, they get very wide bandwidth and so on.

Moving right along, I think that the next thing is 4G: The evolution of connectivity from 1G, 2G, 2.5, 3G, has always been towards mobility of course, but also more and more bandwidth. More and more content, from voice, to SMS, MMS, to streaming video, to data, to e-mails. So as we see, progressively, the demands that people have while they are mobile, access to everything, is increasing.

WiMax is designed to cater to this. Is has mobility, it has the bandwidth that can give you video, voice, and data. It can allocate bandwidth efficiently, so that there is no congestion. It has a low cost of entry because the technology is standardized, so it is not expensive — and so far the licenses have been relatively inexpensive. Combine all of that, and you can see that this is a technology that can make it.

Well, first of all, I disagree that it is disruptive, to the level that it will put them out of business. The amount of network coverage today, connecting something like 3 billion people in the world, it is irreversible. This is an existing network that is connecting this number of people, so any new technology will be an add-on. It may disrupt further profitability and growth, yes, but it will not disrupt current operations.

As the saying goes, “If you can’t beat them, join them.” My gut feeling is that a lot of operators — Sprint, one example in the US — are joining WiMax. France Telecom is using WiMax, Orascom Telecom in Egypt is using WiMax. British Telecom is toying around with WiMax. The only ones that are resisting today are Vodafone, as an operator, and Ericsson, as a supplier. Otherwise, everybody is toying around with WiMax today.

So I wouldn’t call it disruptive, I would say there is WiFi, there is WiMax — which is a parallel path to the regular voice trend — that is IP telephony, and all of this will eventually converge, giving you mobile access to everything.

Everything we work on is so hot. Seriously, our customers are at the forefront, and what they ask us to do is what they need for tomorrow. So, to give you an example, downstairs we are doing work for one of the major intellectual property providers in the world for WiFi. As you know, WiFi is not a stagnant thing, WiFi is increasing in bandwidth, costs are dropping, more services and so on. We’re participating in that.

The WiFi standard has evolved, and we’re moving with that. We’ve participated in almost every stage in the evolution. In another area, we’re working on one of the most exciting new standards: wireless USB. Today every PC has a USB port, but you need to connect to it, a hard connection with a wire. Now, that is being converted into wireless USB, which means you can connect devices with no wires, no hard connection.

Wireless USB will be great for homes, for offices, for connections where you need huge bandwidth, streaming video from video cameras, for example. Have you ever watched a cameraman carrying a video camera on his shoulder and pulling along a rope of cables? This will be all done wirelessly using wireless USB. So that is the second standard we are working on, obviously WiMax is a third wireless standard we are working on.

The are other wireless standards that we have participated in: Bluetooth 2.0, which is the newest version of Bluetooth, as well as the optimized version of the CDMA standard for mobiles.

There is a big problem with the education system. Basically, the number of graduates I told you — about seven to eight thousand — I’m not even able to interview more than a hundred of them, just interview. So there are some, a small percentage, 5%, who have graduated and are very good — despite the system. And I underline despite the system. There are six thousand and some who are not usable in the industry, who need another year or two of training to become usable in the industry.

This requires a fresh look at the curriculum, at the practicality of what they are doing there, and relating their material to real life, what is happening in the world out there, what kind of expertise is needed and so on. That is not happening yet. So, I would say I’m lucky. But if I wanted to grow to a thousand people in the next two years, I would not be able to do it — and I would be limited by the pool of human resources that I can attract.

It’s a full selection of problems. Curricula are not updated, there is too much in terms of content, material, memorizing — but very little on practicalities, on engineering. More time is spent on physical sciences than on engineering sciences. A lot of professors do not even have the know-how and the background of what the industry is doing; they are pure academics.

Very little hands-on experience is provided, and most engineering graduates have very, very limited soft skills, because they spent five years competing, exam after exam after exam. They have no time to read, they have no time to communicate, make presentations. Language skills are not great in many cases

I don’t want this to be misinterpreted: I’m looking for very special people. If I was a software company or something simpler, I wouldn’t have had all of these demands. But my field is very difficult. I need fully integrated people with knowledge, personal skills, English, documentation, communication theory, communication networks, software.

My departments are so difficult that all the comments I said that are negative, from my point of view, would not affect others who have simpler projects or simpler companies to build.

For academic purposes, if you want the best PhD, you go to Stanford or MIT and that goes without saying. Nobody even competes, not even European universities compete with MIT and Stanford. But for industrial experience, I think a PhD is in many cases useless. I have one, but I’m not using it. Emad has one, a lot of us have PhDs here, but basically, what counts more in an environment like ours is the hands-on experience, the industrial experience.

People that don’t even have a master’s degree, but have been working in the field of wireless for six or seven years, they are some of my senior people now. Without a PhD, without masters, one day they will become the CTOs and VPs of this company, without any sophisticated degrees.

So of these degrees, a master’s is good, but a PhD is primarily an academic degree — you get it to prepare yourself for teaching and supervising research and things like that. That’s not very useful for me here.

I would like to see more technology companies in Egypt, I would love to see them collaborating. Sometimes there is this stupid sense of competition, which is not productive when all of us are so very, very small. The market out there is so big, the demand is very high, but if there are three companies, each with 25 employees, they start fighting. That is very stupid.

We need to get out of that type of mentality and into the mentality of “let’s work together.” Maybe one day we will merge, maybe one day I will have a spillover of projects, I’ll give it to you. Maybe you have a spillover of projects, you give it to me. We can cross-utilize resources of knowledge, there is nothing wrong with that. So far, I haven’t seen many Egyptians think this way, unfortunately, but that is my dream: To see a real selection of companies in special niches grow and eventually work together or merge or capitalize with each other.

If you ask me how I could help others, and improve this ecosystem, I like to help other startups here, helping them in that crucial early phase. We have learned how to go through this difficult early growth phase, the first five years in the life of a start-up, and we want to give that knowledge to the next start-ups, to others, particularly those that are interested in wireless.

We could help them, eventually merge them with us, buy them out — but this is something I would like to spell out: If any of your readers has an idea, if they want to start something, we are very willing to work with such newcomers, new ideas, new people.

Some very successful companies have grown all the way like that, such as Cisco. They have one good idea, but then the rest is all about acquiring the right ideas, working with startups. Buy this company, acquire this, merge with that, and so on — and then they became Cisco! So this model is very appealing to me as well.

We started last year by developing our own intellectual property (IP). Prior to that, we were a pure design services company, so a client comes and says ‘I want this,’ and we do it. Last year we started saying to ourselves ‘What will the world need?’ and then building it ourselves.

For WiMax, we built the MAC [Media Access Control] layer for a mobile WiMax station, so the entire software protocol that runs a mobile station will be working on WiMax. If you Google today, go check it yourself, “mobile WiMax MAC,” the first company that you will see on this entire list of 200,000 will be Sysdsoft. [At press time, Sysdsoft pages remained at numbers one and two out of over three million search results for the term]

Worldwide, we are number one because we are very specialized in that. And we gambled, we invested our own money and we built that thing. So now we have customers who are asking for it, and I think it’s a good success. I would like to move more and more into this type of work, building our own ideas, translating them into IP, maybe eventually translating them into products, or for products. That is an evolution that I would like to go through.

It’s not really patents that we are after per se, it is the sense of owning the product and being able to sell it multiple times. That’s why I call it intellectual property. Now there would be problems if you sell IP to somebody, and that somebody puts it on open software the next day — but nobody would pay me money and then give it to others to compete with. So, I think we’re safe. We’re not selling in Egypt anyway so, it’s not a big deal.

It’s not R&D, it is really about developing market-driven, market-oriented products for the future. R&D is always associated with an intellectual sitting there and dreaming problems — we’re not like that. We’re market-driven, and we produce things that the market, in our expectations, will need in the next year or two. For R&D centers, IBM is one of the biggest in the world. The record holder for the number of patents developed in the last fifteen years is at IBM’s Thomas J. Watson Research Center — and I worked there for many years, so I know what an R&D center looks like. Hypothetical problems, the future, the world in 2020 and so on. We’re not like that.

Our goal is very clear. It is to grow and become a major global player in the wireless arena. Whatever helps us achieve that goal will do. Be it a merger, be it acquired by a bigger company, and increasing our capability to grow, being acquired by a company that has more market access, and more products, be it an IPO that allows more money to flow into more investments, all of these will achieve the goal.

None of these ways are right or wrong, but the goal is the same: to remain here, to grow, offer more opportunities for challenging Egyptian intellectuals, and to become a ‘star’ company. I hope that one day, as you said in the beginning of the discussion, why would international companies come to a country like Egypt that is not known for extremely high technology? I would like to sit with you in 10 years and see this not even be an issue, because there is Sysdsoft, an icon of technology coming out of Egypt. That is my dream.  bt