Specialty Technical Services in UAE: In search of an Alternate Business Model

By

Anjan Chaudhuri PLAM-4 Student ID - 2219491

April 21, 2011

Abstract of the project work as the requirement for the certification for the course on Planning & Leadership Management Batch 4

Indian Institute of Management, Calcutta

BACKGROUND September 15, 2008, the world financial system is shaken to its core when Lehman Brothers filed for Chapter 11 bankruptcy protection in US. Two days later the UAE Central Bank said that there was no systemic risk to the UAE following the bankruptcy of Lehman Brothers. But the actual scenario was different than what portrayed. Due to false speculation about decoupling of UAE currency with US dollar and aggressive growth in real estate in UAE, the banks were suffering liquidity crunch from much before. UAE central bank was pumping billions to bridge the gap but it seems too less to fill the huge vacuum created. Oil price also starts falling, causing huge pressure of available surplus funds. On November 26, 2009, Dubai World, one of the biggest developers in UAE, declared that it needs at least 6 months more to pay part of its debt. The rumor starts taking shape. Property prices see a sharp decline, once booming real estate sector starts finding it hard to survive. Developers, Facility Managers & owners find it more difficult to be competitive, affordable & cost effective. Most of them start following the conventional measure of cost reduction namely outsourcing, downsizing & deferred service strategy initially compromising heavily on quality. Many building owners start finding it costly to enter into long term comprehensive service / maintenance agreement with professional service provider. Hence either they start employing own people to take care of basic services and limiting professional service provider on demand basis or with very limited scope. Many small players start dominating the market solely on cost by employing now easily available cheaper labor with some technical expertise. Specialty Technical services like Building Controls, Surveillance & Security, Elevators, ELV (Extra Low Voltage), HVACR (Heating, Ventilation, Airconditioning & Refrigeration), Fire Detection & Suppression system etc starts getting second priority over soft services like electrician, janitor, cleaner etc. Established companies find it difficult to survive competing with small players on price & bad credit terms. Conventional service delivery model for specialty technical service i.e. personalized services is now at threat. Everyone is looking forward to encash heavily on advanced technological platform to deliver state-of-the-art services at marginally higher prices using economies of scale over small sized competitors. The necessity of an alternate business model emerges to survive profitably. ABSTRACT This project will primarily look into the changing business environment for the specialty technical services over last couple of years, as well as its causes. The project will also try to indentify the industry value chain and critical analysis of the conventional business model and its possible limitation to address the changing requirement with a brief timeline. The primary objective will be to suggest an alternate business model addressing the major issues faced by the conventional model and try to understand the feasibility of the proposed model in conclusion. DATA SOURCE

The primary data will be collected mostly based on random interview with industry professionals and secondary data will be mostly based on published reports, journals, previous thesis & press releases. *****************************************************************************