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Kuwait Information Technology Report Q1 2010
Business Monitor International, Jan 2010, Pages: 54
Business Monitor International's Kuwait Information Technology Report provides industry professionals and strategists, corporate analysts, information technology associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Kuwait's information technology industry.
Market Overview
Kuwait, the third largest computer market in the Gulf, was hit hard by the effects of the regional economic slowdown, but local IT spending is expected by BMI to reach around US$761mn in 2010. Despite the subdued trading environment, the market is relatively well placed to withstand current economic headwinds and should continue to provide opportunities for information technology vendors over the publisher's five-year forecast period.
Kuwait's IT spending is forecast to record single-digit growth in 2010 after the global economic slowdown hit demand last year. There could be a boost from computer hardware tenders delayed from 2009, but much will depend on confidence in a sustained economic recovery.A similar scenario applies to the consumer segment in 2010, with economic uncertainty, a reduced population and tighter credit all potentially having a dampening effect.
BMI projects a 2010-2014 IT spending compound annual growth rate (CAGR) of 8%. Kuwait's IT market has a number of enduring strengths, including its relatively small but tech-literate and wealthy population, which makes Kuwait an important regional testing ground for new products. Industry
Developments
In 2009, directors of the Central Agency for Information Technology (CAIT) called for an updating of business laws and legislation dealing with e-commerce. CAIT has led the drive to launch the Kuwaiti government's new portal for e-services, making all government services available through a single site, and eventually over a mobile platform. With CAIT playing a co-ordinating role, Kuwait has ramped up its e-government efforts, rolling out a number of new services for citizens in 2008. 2009 saw continued implementation of projects from various state organisations. The social welfare ministry, the defence ministry and the finance ministry are recognised as particularly advanced. Despite such progress, big challenges remain to Kuwait's e-development, particularly excessive bureaucracy and lagging education systems.
Company News
The Kuwaiti PC market remains dominated by global vendors, such as Acer, HP and Dell, with international players holding most of the top 10 spots in the PC rankings. In 2009 the emergence of small form factor notebooks as a PC market growth area have attracted vendors such as Toshiba to attempt to strengthen their presence in this segment with new product releases. There were signs that some leading vendors were looking more closely at in-country distribution. In 2009, Dell signed a contact authorising regional IT distribution giant Redington to carry its consumer product line-up in Kuwait. The tie-up with Redington is merely the latest in a series of new partnerships for the region that Dell has announced recently.
In 2010, software market leader Microsoft hopes that sales of its Windows 7 operating system, launched in October 2009, will boost its sales in the Kuwaiti market. In 2009 Microsoft was among vendors who reported that regional sales in the oil and gas segment had been affected by the economic crisis, with some clients cutting back spending on systems. The company warned of 'challenging conditions'.
Computer Sales
In 2010, the Kuwaiti computer hardware market is expected to reach a value of US$319mn, following a sharp contraction last year, as the economic slowdown belatedly hit home. Despite the global financial crisis, overall computer hardware sales were estimated at around US$310mn in 2009, making Kuwait the third largest market in the region after Saudi Arabia and the UAE. Over BMI's five-year forecast period, demand is expected to grow at a CAGR of 7% to around US$420mn by 2014. The public sector and e-government projects will continue to be a mainstay of the market, with sizeable budgets allocated. Privatisation initiatives will boost spending, as will retail channel evolution, and more foreign investment. Small and medium-sized enterprises (SMEs) will be a key segment, as growth in regional trade encourages many to invest in information systems. Software
In 2010, total spending on software is forecast at US$205mn, up from US$195mn the previous year. The market decelerated in 2009 as enterprises came under pressure to focus more on the bottom line. With trade liberalisation and growing regional competition continuing to fuel enterprise spending on software and systems, however, there should still be opportunities across many sectors. Commercial organisations remain the most significant driver of Kuwait's IT spending. In the medium term, facing change and seeking efficiencies, SMEs are likely to generate opportunities. Manufacturing and trading firms are both seeking to transition from manual environments to full automation of backoffice systems.
Services The Kuwaiti IT services market is projected to be worth around US$236mn in 2010 and is forecast to grow at a 8% CAGR to a value of US$324mn by 2014. The economic situation, and credit tightening, has had an impact on projects in some key verticals that have been driving IT spending. These include not only oil and gas but the financial, government, education, construction and healthcare sectors.
In 2009, there were reports of IT managers in various areas looking to cut costs. However, the emphasis often seemed to be more on scaling back projects by 10-20% rather than cancellation. In the near term, budgets have often already been commissioned, and so the effects were more likely to be felt in H209 and 2010.
E-Readiness
Kuwait is one of the most advanced technological markets in the Gulf, but high subscription costs continue to restrict internet penetration. Growth in the numbers of broadband subscribers has been stronger, but the numbers are still very low. Competition is limited in the supply of broadband services, and thus prices have remained high, deterring many potential subscribers.
The government hopes to drive IT development with its broadband access initiative. Alcatel was chosen by Kuwait's State Ministry of Communications (MOC) to supply a gigabit passive optical network (GPON) solution that will serve about 60% of access areas involved in the ministry's present roll-out. The MOC's access network is gradually being upgraded by replacing the existing copper access with a passive optical fibre infrastructure.
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