Murad Tahboub is the first to admit that the year 2000 was not a good time to start his IT services business in the occupied West Bank.

"It was just before the second intifada, so it took us a long time to get going, and it wasn't until 2005 that we started landing some serious export business," said Tahboub.

"Even now, it's a challenge overcoming the stereotypes about Palestine. But our company ASAL Technologies has been growing healthily for the last ten years. We started with 10 employees, and today it's more than 150."

Tahboub's business is not an isolated example. Despite periodic outbreaks of fighting between Israel and the Palestinians (the most recent being Israel's offensive against Gaza last year) there is a flourishing IT software industry in Palestine, and its universities turn out more than 2,000 graduates in IT-related subjects every year.

Strong startup scene

The industry's strengths lie in software development in all areas, and there's a lively startup sector of small businesses with bright ideas looking for investors to take them to the next stage of growth.

So although a recent initiative by SAP may have raised eyebrows elsewhere, in Palestine it's seen as due recognition for their growing IT muscle. In 2005, information and communications technology (ICT) was worth $112 million (98.6 million euros) in added value to the economy; by 2013, it was $453 million at constant prices, according to the Palestinian Central Bureau of Statistics. ICT accounts for about 6 percent of GDP.

The SAP deal is this: in the last few weeks, eight universities in the West Bank have joined SAP's University Alliances program to develop graduates with critical IT skills. Palestinian graduates will also be recruited into SAP's Young Professional Program, where they'll receive training in SAP solutions and tools.

The deal with SAP also applies to Gaza, but the fraught political situation makes it impossible to include any institutions from there.

Although there is no guarantee of jobs with SAP, the graduates will effectively be part of the software giant's push into the whole of the Middle East. It has around 1,350 customers there already and the region is one of SAP's fastest-growing markets.

At Jaffa Net in the West Bank, IT professionals will be part of SAP's push into the rest of the Middle East.

So it was a hard-headed business decision, but Senior Vice President for Strategic Investments Marita Mitschein prefers to emphasise the social benefits. "SAP believes in the importance of IT to shape people's lives in the Middle East and we are proud to play a part in doing that in Palestine," she said.

On the ground in Palestine, they don't disguise their pleasure at SAP's move. "It's significant for the training of our graduates, but the connections that SAP partners will make with each other are more important," said Yahya Al-Salqan, chairman of the 150-strong Palestinian IT Association.

"It will be a network that will help us build a strong industry in the region, and we need that to hold on to our brightest graduates. They often have to go abroad to get a job. We have lots of bright people, a reputation for quality and great value because our costs are about half the costs in Europe and the US."

Outside help

SAP and Palestinian IT didn't just fall into each other's arms. The marriage broker was the Office of the Quartet Representative (OQR), which has a brief to promote economic development. Tony Blair is currently the Representative and the Quartet was set up by the EU, the UN, the USA and Russia. The OQR brought in David Dick, an IT industry executive, to attract the world's big IT players to the region – the likes of Hewlett Packard, IBM, Microsoft and SAP.

"I've had a whole career in IT, so I've been engaging with senior IT execs to persuade them about the opportunities in Palestine. SAP were quick to offer their support and they put me in touch with their Middle East business and their worldwide university training team," said David Dick.

"The key to drawing in the big global businesses is to get Palestine onto their radar. They already place much of their support work in low-cost locations anyway, so it's not difficult for them to add Palestine to the mix. SAP is just the first, and we hope to make another announcement soon."

Back in Ramallah, Murad Tahboub is brimming with optimism. "The SAP initiative is a wakeup call to all multinationals to take a look at the valuable resource we have here. Things are looking rosy for the IT sector here, and despite all the obstacles, I believe that the generation of jobs is the key element for peace and prosperity in the region."