By Khaled Habib EgyptNetwork’s AhmedIbrahim is hoping totransform Mansoura’s economy. By Khaled Habib By Khaled Habib Need to get into EgyptNetwork’s server room? Get ready to be scanned. By Khaled Habib The EgyptNetwork team: Ready to transform a Delta economy.

By Fatima El-Saadani

Quick: Can you find Mansoura on a map? Few people could when we ran that little experiment in our office recently, and we would be willing to bet that the nation’s information and communication technology (ICT) community is no more geographically aware than our staff. That fact alone might have something to do with how it is that while the government is trying to draw business from India to software powerhouses in Egypt, most of the business stays in the capital city, where the infrastructure and labor force are more readily available.

Imagine the challenge, then, of setting out to build a world-class IT startup in Mansoura, 120 kilometers north of Cairo in the fertile Delta region, where the word “farms” refers to the real thing, not rooms full of servers. That’s exactly what EgyptNetwork founding partners Ahmed Ibrahim and Karim Khorshed set out to do in 1997 when they launched a small-town internet service provider. Remember: That’s nearly four years before then Minister of Communications and IT Ahmed Nazif’s free-internet initiative kicked off.

After scaling one mountain after another —including weathering an early regulatory setback that saw many other ISPs unceremoniously exit the playing field — EgyptNetwork has emerged not just as a top-10 national ISP, but as a burgeoning software exporter. With more and more of their revenues coming from the export of an industry-leading SMS service and the platform that makes it possible, EgyptNetwork could help re-draw the nation’s IT map.

In fact, Ibrahim and Khorshed now find themselves wondering if Mansoura couldn’t turn into the nation’s answer to Bangalore — with some investment in local infrastructure and maybe a competitor or two with whom to bounce around ideas, that is.

Being an ISP in the 1990s meant not just delivering achingly slow dial-up service, but also having to simultaneously create infrastructure and market demand. It was exciting enough in Cairo and Alexandria, but to try to get into the game in Mansoura was to truly be on the digital frontier.

“We tried to start out as a full ISP, but we couldn’t,” says Ibrahim, the company’s CEO. “We were attracted to the idea of providing something new that was becoming popular in Cairo, and we would be the first ones to tap the Mansoura market. With the lack of infrastructure, we were told that all we’d able to offer in Mansoura was email service,” Ibrahim remembers. “So we started with something smaller: providing local internet service like an internet café in 2001, before the introduction of free internet.”

EgyptNetwork started out with an 090-prefixed number, accessible without a pre-paid subscription. It charged LE 6 per hour during the day and LE 4.50 in the evenings. This was back in the day when a stable internet connection was a novelty and many consumers preferred to access the internet through EgyptNetwork’s 090 number rather than pay an absolute minimum of LE 50 for a monthly subscription with a single ISP. Why plunk down a fistful of cash if you could simply choose to pay as you go?

Then came the age of regulatory reform: Overnight, the burgeoning telecommunications industry — fixed-line, wireless and ISPs alike — found itself under the tutelage of the National Telecommunications Regulatory Authority (NTRA). Among the NTRA’s first acts of business was to issue a new classification scheme that left EgyptNetwork and other small-scale proto-ISPs out in the cold as it issued licenses only to four large providers.

“There weren’t any clear-cut lines for us [] they said that there would be two classes: class A and class B,” recalls Khorshed, EgyptNetwork’s president. “Class A would be the four large [ISPs ] who had the right to bring in international bandwidth, and class B would buy service from class A.”

Class A licensees included LinkdotNet, Nile Online, TEData and EgyNet, whereas class B included Yalla, Internet Egypt and Raya. At least 60 other small-scale ISPs bought their bandwidth from class B. By then, EgyptNetwork had made small — but for it substantial — investments in setting up infrastructure in Mansoura’s telephone exchanges. Then the NTRA issued class-C licenses that allowed smaller players to buy from the class-B resellers.

“We got a class-C license [] and after the new regulations, the A and B classes were the only ones controlling the market,” says Ibrahim. EgyptNetwork feared it had lost its investment when the NTRA got down to business and sliced up the sector, but Ibrahim and Khorshed found their silver lining as the market reorganized under the NTRA’s classification scheme.

“What happened was that the free internet initiative came at the same time as the classification of the ISPs and the new model that required us to have a point of presence in every phone exchange. []. A lot of companies couldn’t find the funds to do that, but we already had our points of presence,” explains Khorshed, who notes that the business model they were operating under then left ISPs earning LE 1 per user per hour. Of that figure, 70% went to Telecom Egypt (TE, bt100 number 4 — the owner of the pipes along which the data flowed) and 4% to the state’s coffers, which left the ISPs with LE 0.26 per user per hour.

“There was no way that this could be a successful business model, but what people didn’t see was the [potential for] growth,” says Khorshed.

Before the free internet launched, an ISP with 1,000 customers paying LE 40 per month earned a handsome LE 40,000 each month. With the new tariff, the same customer base brought in only LE 2,000–5,000.

“Many operators didn’t look ahead to see that the 1,000 customers could become 150,000 customers nation-wide,” explains Khorshed, explaining why EgyptNetwork held on. “The growth was huge — unexpected actually. When the free internet started, there were 125,000–150,000 households subscribers, by the end of the year, there were 980,000 households connected to the internet.”

Free internet debuted in Cairo in January 2001 before arriving in Alexandria three months later. By the beginning of September, it was ready for its prime-time roll-out across the country. At year’s end, the number of households using the internet had grown ten-fold. “Part of our success was purely coincidental,” Khorshed laughs as he recalls how he and his partner hung on through the rough times and sought to offer what few others did.

“[Other ISPs’] slogans were that they offered the highest speed and that they didn’t have any busy lines, etc.,” says Ibrahim. “We contracted an agency to help us develop a message for the market. We didn’t have exposure because we started in Mansoura and we were operating according to the size of the competition that was there.”

With the help of the agency, the EgyptNetwork founders figured they had to add value to their service. “Our model was to provide a value-added service that was directly connected to the amount of time that users spent online through our service,” says Ibrahim. “We set up a credit system like frequent flyer miles, where every hour spent online would give the user four credits and they could use the credits to access other services on our website.”

Chief among those services is the in-house invention EgyptNetwork is now selling to mobile telephone network operators throughout the Arab world and beyond: An online SMS service.

“The [credit] model was very successful and started to generate more traffic than we had expected,” recalls Ibrahim. “Our cash flow started to grow and we started to venture outside Mansoura.”

Heading for the big city, EgyptNetwork found it didn’t have enough budget to launch a massive television-based campaign — or anything, for that matter, that could match the big bucks that LinkdotNet was pumping into its marketing and image building campaign. The alternative was a small and more subtle SMS campaign to introduce its access number to potential users. The traffic picked up and the cash flow increased even faster.

“We invested our cash flow and created a good business model supported by an advertising campaign that started small. That’s how the company’s name started to grow and we started to gain market share which, I think, put us among the top 10 ISPs,” says Ibrahim.

Khorshed says EgyptNetwork now commands a 12% market share of users and accounts for 10% of all hours spent online. Not only did people want to accumulate credits so they could use the free SMS service, but dial-up also gave them access to riwayaty.com, a website that posted popular comics and stories.

“We didn’t really have the know-how to be able to finish [the SMS service] and offer itit’s not cheap,” says Khorshed. “We also had to develop our own server from A to Z to be able to offer the service and we couldn’t afford to buy one from abroad.”

Leading a small team of developers, Ibrahim, who had set up the company’s network himself, started to develop an SMS server. “We built an innovative product called the Messaging Platform Service, which is a server we sell as one of our own products,” Khorshed concludes proudly.

The platform was a success in Egypt, with corporations lining up to send out mass SMSs to their clients — a cheap and efficient way of getting the message across via one of the only then-unexplored direct-marketing frontiers. But the platform had been built for use by web-using youth who would send 10-20 SMSs a day. “After we developed the server, we found that there was a very big market [for it] in the Middle East as a whole, not just in Egypt,” Khorshed says.

So Ibrahim went back to the drawing board to develop a product more suited to corporate needs than to young retail users. The result sells as EgyptSMS here and abroad.

“The service began to gain popularity in the Middle East and we started to gain an unbelievable market share,” Ibrahim says. “First we had a connection with Mobinil and Vodafone, but now we have relationships with more than 16 GSM operators around the world. We cover, through them, the entire Middle East; almost 70% of our [SMS] market is outside Egypt.”

The success of the messaging platform opened up the gates of innovation. In addition to mass mail-outs, EgyptNetwork’s SMS technologies are now being used to securely deliver customized information to users. Clients even trust EgyptNetwork to deliver life-changing information: “In cooperation with the Ministry of Education, Vodafone and Mobinil, we post thanaweya amma results through our premium SMS service,” Ibrahim smiles.

In addition to GSM operators around the region and beyond, customers on the SMS side of the house range from SaharaNet (Saudi Arabia’s number-two ISP) all the way across the Atlantic Ocean to a top American provider of internet security services.

The SMS service has also led to software integration jobs: Saudi Arabia’s Bank Al-Rajhi first bought messaging services from EgyptNetwork, then hired the team to integrate its branches, CCTV and security systems.

Like other technology entrepreneurs, competition for talent is a significant obstacle to growth. And if you think it’s bad in the capital city, try recruiting a top developer to Mansoura. Almost as bad: While the Ministry of Communication and Information Technology (MCIT) has been very active in training for the needs of the market, its key initiatives —Nile University and the courses offered by the Information Technology Institute — are based in Cairo.

No surprise, then, that Ibrahim and Khorshed found their business had come to a fork in the road: Around two years ago, they had to decide whether they should continue in Mansoura or move their operations to Cairo.

“We expanded. We thought about whether we should continue in Cairo. By then our services were starting to spread outside Egypt. We were about 20 employees at the time, so we were thinking about where to continue our operations: Mansoura or Cairo. Each one had its minuses and pluses,” Ibrahim recalls.

The pair took the risk, as they put it, and stayed in their hometown to fight the very trend that leaves Mansoura lacking the high-caliber staff they were looking for. “The problem that we faced was that there was talent, but without experience,” explains Ibrahim. “If I’m looking for a project manager, I need someone with three years of experience, who doesn’t exist [here]. The mindset in Mansoura is that graduates leave the city or the country, just like their parents did before. They could have a good opportunity here but they can’t see itthey follow in their parents’ footsteps.”

When they made the choice to stay put, they knew they were not only going to have to work on growing their business, they would have to play an active role in reshaping the city’s mindset, too.

Part of that process is a slate of training and development programs for staff members to grow — and retain — the talent they have. “We were growing 70-80% per year in terms of revenues and profits and employees,” says Khorshed. “We had to figure out what to do to sustain this growth. We don’t just want to grow because there will come a time when it will all fall apart. We used to only plan two to three months ahead, but now we have to think two to five years ahead.”

That leaves EgyptNetwork running a finishing school for talent —and praying the challenge of helping improve their home- town will keep the new staff loyal, engaged and able to resist the lure of the big city.

“We try to bridge the gap between the fresh graduates and the higher level [employees we had],” explains Ibrahim. “We tried to focus on the key personnel who we [put in contact with the fresh graduates] to ensure the knowledge transfer.”

Today, the company’s training program and retention efforts have helped it earn the US-based Software Engineering Institute’s coveted CMMI certification, a big help its bid to remain globally competitive.

“Our employees all like a challenge. We hire fresh graduates [and we] keep them with us for as long as possible,” says Ibrahim. “We also hire people with experience from different industries; if we’re looking for sales people, we can recruit from the pharmaceuticals industry and feed them the knowledge about IT.”

Both men know, though, that the only long-term solution to their HR problem is to quickly put Mansoura on the nation’s IT map, and they’re reaching out to the academic community as a start. Already, EgyptNetwork is sponsoring initiatives to improve curricula and help students develop the skills the market demands. The state may pay for the process in Cairo, but EgyptNetwork is going it alone here.

“We need people to graduate at least knowing what quality assurance is and what a process is and all the things that I need,” says Ibrahim. “So sometimes we don’t hire the fresh graduates; rather we opt for those who have completed MCIT’s track which is three months of English [and basics] and then programming for nine months and this produces not such a bad caliber.

“But we can’t always find them. We felt that we couldn’t wait for society to give us what we needed — we had to go out and make it.”

That’s why Ibrahim and Khorshed want the rest of the country to know that their Delta town has the potential to make a national contribution.

“We want to draw attention to the fact that Mansoura has the potential to become an IT zone. Why not?” Ibrahim asks rhetorically. “People don’t think that there’s an IT zone or a local private sector that can create a good, internationally competitive product in Mansoura?”

Convince another startup that Mansoura’s lower cost of living and quieter, more family-oriented lifestyle is worth the risk and they might just be on their way.  bt