Analysis: Middle East IT Spending Trends 2014

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Middle East is one of the fastest growing IT markets in the world, providing UAE with opportunities to leverage its diverse foreign human capital in IT related areas.

Middle East IT spending
A typical data center. According to research firms, IT spending in the Middle East is one of the highest in the world.

Recovering global economy has improved IT spending, which is anticipated to be USD 3.8 trillion in 2014, an almost 3.2 percent increase over 2013, according to Gartner, which is one of the world’s leading information technology research and advisory company.

“Globally, businesses are shaking off their malaise and returning to spending on IT to support the growth of their business,” said Richard Gordon, Managing Vice President at Gartner.

The Middle East (ME) is going to be the one of the most active players in the fastest growing IT markets and the region’s IT spending is estimated to be nearly USD 211 billion, an 8 percent increase over 2013.

“The Middle East is projected to reach USD 243 billion by 2018, which will represent 5.6 percent of worldwide IT spending,” said Peter Sondergaard, Senior Vice President and Global Head of Research at Gartner.

According to Gartner the increase can be attributed, partly, to mobility, smart government, big data and Internet of Things (IoT) and also to increase in investments by verticals such as communications, media and services, banking and securities, government, manufacturing and natural resources.

The ME spending on devices (mobile phones, tablets, PCs, printers) is projected to reach USD 37 billion in 2014, with mobile phones spending to exceed USD 39 billion by 2018.

The ME software spending is likely to grow by 12 percent in 2014, whereas the telecom services will grow by nearly 5 percent in 2014.

2013

2014

2015

2016

2017

2018

Devices

30.0

37.2

41.3

47.4

50.5

56.5

Data Center Systems

3.7

3.8

3.9

3.9

4.0

4.0

Software

4.0

4.5

4.9

5.3

5.8

6.3

IT Services

8.7

9.3

9.7

10.1

10.5

11.0

Telecom Services

149.2

156.4

160.1

162.6

164.1

165.0

Overall IT

195.6

211.1

219.8

229.2

235.0

242.8

(Table 1. Middle East – IT Spending Estimate (US$B). Source: Gartner, March 2014)

An Analysis

A similar observation was also made by International Data Corporation (IDC) earlier in December 2013. However, IDC projected the ME IT spending to be USD 32 billion in 2014.

However, IDC report also points out that the ME will be one of the fastest growing IT markets in the world.

“Organizations will be faced with a growing need to adapt in 2014 as effects of the 3rd Platform continue to disrupt and change industries in the region,” Jyoti Lalchandani, Group Vice President and Regional Managing Director for IDC in the Middle East, Africa, and Turkey remarked.

The growth in the IT spending was attributed to Smart City roll out in various GCC countries (Lusail’s Smart and Sustainable City, Pearl-Qatar Island, and Energy City Qatar, Masdar City in Abu Dhabi and Smart City Dubai), which may increase the machine-to-machine interaction by 19 percent on year in 2014 to reach USD 224 million.

Gartner also anticipates government IT spending in the ME to reach USD 11.9 billion in 2014.

“The Gulf countries are transitioning from an oil based economy to a services based economy. Vendors will benefit by offering innovative delivery models and by creating new monetization opportunities for the governments,” said Anurag Gupta, Research Director at Gartner.

“Saudi Arabia is the largest Gulf Cooperation Council’s (GCC) member and is investing on various eGovernment initiatives. UAE & Qatar lead the adoption of GCC eGovernment programs and now linking various government departments to offer a single interface point for citizens,” he added.

According to analysts, Mobile devices will be a key player in increased ICT spending.

The IDC report states that ‘mobility first’ mindset continues to grow among the ME CIOs. Mobility may increasingly become connected to emerging elements of the IT mix like cloud computing, data analytics and social business.

Similar views were also echoed by Sondergaard, “Mobile phone adoption has been paramount in human and business development. With new apps proliferating, users in general will continue enhancing communications and economic growth at various levels of the society in the ME.”

Telecom services were reported to be the largest spending market in 2014 comprising 74% of the total IT spending in the region in 2014, a prediction also shared by the IDC report, which says that ‘telcos will further strengthen and verticalize their current IT service portfolios.’

Significance for UAE

Sondergaard sees huge potential of increased IT spending within the UAE context.

“There is a great opportunity with the UAE’s Vision 2021 initiative, and the grants that support it, as it will serve as a major catalyst for IT initiatives in education, manufacturing and government services. The UAE is emphasizing clean energy initiatives, such as solar power and nuclear energy, which will serve to create jobs, attract non-petroleum-based businesses to the region and help diversify the economy. The UAE government is looking to diversify its economy, and it estimates that manufacturing will account for 25 percent of its GDP by 2015,” Sondergaard told Dubai Eye 103.8 Radio during Business Breakfast show.

Business IT spending in the UAE is forecast to touch USD 4.63 billion in 2014 and the positive trend continues between 2013 and 2017, according to IDC’s United Arab Emirates Vertical Markets 2013-2017 IT Spending Forecast.

The public sector, which includes government, education and healthcare organizations, is predicted to top the IT spending followed by the ‘Combined Finance’ and Consumer IT.

The report concludes, “IT vendors will find the biggest opportunities in the government sector, as it is the largest and fastest growing market. Communications finance, and oil and gas will continue the other major vertical markets for IT spending, while healthcare, transport, and utilities are growing the fastest.”

Photo-Torkild Retvedt/Flickr

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