IT service providers need to become strategic advisors as the UAE market gears up for a sustained period of growth, says IDC in their latest report.
- UAE IT services market set to grow 15.5% year on year in 2014
- UAE IT services revenue set to reach $3,356.44 million by 2018
- Services providers to face some challenges as they grow in magnate and as the market expands
The UAE IT services market is set to grow an impressive 15.5% year on year in 2014 and at a compound annual growth rate of 11.3% over the coming five years, according to the latest forecasts released today by global advisory services firm International Data Corporation (IDC). With IT services revenue set to reach $1,962.91 this year and $3,356.44 million by 2018, IDC says the UAE market’s stellar performance is being spurred by growing levels of investment by organizations in the public, banking and financial services, retail, healthcare, and transport sectors.
As well as announcing its latest market projections, the research firm also released actual data for 2013, with the UAE’s IT services market confirmed to have expanded 15.0% last year to total $1,699.8 million. Increased investment in datacenters, disaster recovery (DR) sites, application modernization, infrastructure consolidation, and the refresh of existing infrastructure resulted in ‘project-based services’ being the largest macromarket, while the ‘support and installation’ and ‘outsourcing services’ segments also posted steady growth.
Meanwhile, new projects in the government, construction, banking and financial services, healthcare, and retail verticals helped the areas of systems integration, network consulting, and integration services expand strongly. IDC has also seen a rapid increase in end-user organizations adopting managed and datacenter services as they strive to improve their operational efficiency and achieve better results.
“The UAE government has planned and launched multiple ambitious megaprojects that are expected to have a significant positive impact on the country’s IT services market,” says Saurabh Verma, research manager for IT services at IDC Middle East, Turkey, and Africa. “Outsourcing services have gained significant traction in the last few years and with the increased availability of managed and datacenter services providers, these markets are expected to maintain the growth momentum seen in 2013.”
Despite this promising outlook, Verma warns that the future will not be plain sailing for services providers. “The existing challenges they face will only grow in magnitude as the market expands,” he says. “This includes challenges around the lack of skills in the marketplace, unclear project scopes, competitive pricing pressures, project delivery issues, stringent SLAs, and the emergence of new market players. As such, those vendors that can transition from being a traditional IT services provider to becoming more of a strategic advisor to their customers are likely to be successful in the long run.”
In further developments, there has also been increased interest in the adoption of 3rd Platform technologies, namely big data and analytics, enterprise mobility, social platforms, and cloud computing. However, the interest and adoption levels have varied across verticals and in some cases been very industry specific. For example, numerous retail, transport, and banking and financial services organizations have started piloting big data and analytics projects, while other verticals are quickly adopting basic business intelligence and dashboard-based performance management tools.
Similarly, enterprise mobility is more prominent in the retail, manufacturing, telecom, and government verticals. Cloud services, meanwhile, are increasingly gaining adoption; however, customers across verticals still harbor inhibitions around data security and data locality. That said, IDC believes the adoption of cloud services has moved significantly from test to live environments, and there are now multiple use cases in verticals such as retail, professional services, manufacturing, and communications.