Saudi Arabia Information Technology Report Q2 2010
Business Monitor International, April 2010, Pages: 55
Saudi Arabia 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 Saudi Arabia's information technology industry.
Saudi Arabia has the biggest IT market in the Gulf region, with a forecast value of US$3.3bn in 2010 expected to rise to US$4.6bn by 2014. IT spending held up better overall than in some countries in the region. Consumer segment spending was partly supported by government stimulus packages, but sales still fell across major IT-purchasing industry verticals such as banks, government and petrochemicals. Despite the economic slowdown, the Kingdom will continue to be a lucrative market for technology products and services over the forecast period as it invests to upgrade its IT and communications infrastructure. Certainly Saudi Arabia appears better placed than some other markets in the region to recover strongly from the current economic slowdown.
In 2010, Saudi IT spending is forecast to record higher single-digit growth compared with 2009. Saudi Arabia’s IT market has a number of positive drivers, including a growing population and government projects. BMI predicts that per capita IT spend will reach US$173 by 2014, as PC penetration rises to more than 30%. Youthful demographics and a growing population will support a positive market trajectory.
Industry Developments
In August 2009 the Saudi Council of Ministers approved the establishment of a new joint stock company called Saudi Electronic Information Exchange Company (Tabadul). The new company, which is owned by the state-run Public Investment Fund, has been created to take advantage of opportunities generated by government-driven e-projects. Major activities of the company will include installation and maintenance of IT and communications systems, as well as development, ownership and operation of such systems.
In 2009, despite the economic downturn, Saudi Arabian government bodies were pressing ahead with ambitious e-government and IT projects. Among major projects, the Medical Services Division (MSD) of the Ministry of Defence and Aviation (MODA) was implementing a nationwide unified medical system. The system aimed to link all 26 MSD hospital and 68 medical centres and clinics across six of the Kingdom’s regions.
The Saudi Arabian State Budget 2008 placed ‘special emphasis’ on e-government. Spending on eadministration in Saudi Arabia is set to be worth hundreds of millions of dollars a year, as government organisations become more aware of the potential efficiencies from applying information technology.
Competitive Landscape
Microsoft was among vendors who reported in 2009 that regional sales had been affected by the economic crisis, with some customers in the key oil and gas segment cutting back spending on systems. However, in early 2010 it was announced that Saudi Post had opted for the Microsoft Operations Framework (MOF) to improve business efficiency and lower overall operating costs. There were signs in early 2010 that the flow of enterprise projects had picked up after a slowdown due to business uncertainty. In January 2010, SAP announced that Chemanol, a leading Saudi producer of methanol-based chemicals, had fully upgraded its SAP software system. In September 2009 SAP won a contract from Saudi’s Arabia’s first private power plant, NOMAC, to implement an enterprise resource planning (ERP) solution.
In August 2009, Lenovo appointed Asbis as a new distribution partner for Saudi Arabia, saying that the move was designed to raise Lenovo’s profile in the Kingdom and increase market share. Meanwhile, HP distributor Advanced Integrated Media (AIM) revealed that it was preparing to launch a new distribution company that will focus on non-HP franchises and value-added services.
Computer Sales
Computer hardware sales including PCs, notebooks and accessories are estimated at US$1.8bn in 2010, after the market contracted in 2009 as a result of the global economic downturn. Sales fell across both notebook and desktop segments, and across major industry verticals. Vendor reports in H209 suggested that many companies still had IT budgets but had not spent them due to the economic uncertainty. In 2010 Saudi businesses are expected to remain cautious, but there could be a boost from computer hardware tenders delayed from 2009. PC penetration is currently about 24% and should increase to more than 30% by 2014. In contrast to other states in the region, such as the UAE, which have recently been hit by an exodus of expatriate workers, Saudi Arabia’s growing population will be a positive market driver. Stronger demand in the notebook sector is the main growth area, as consumer sales feel the benefits of aggressive channel promotions. Despite a contraction last year, notebook sales should be buoyant, with the availability of wireless access technologies driving demand among small and medium businesses.
Software
BMI forecasts a software market value of US$611mn in 2010, up from US$558mn in 2009. The software segment is projected to grow at a CAGR of 10% over the forecast period. Some vendors reported cutbacks in commercial purchases of software in 2009, but manufacturing and trading firms continued to seek efficiencies by transitioning from manual environments to full automation of back-office systems. Oil and gas is the largest software vertical purchasing sector, followed by government and telecoms, but there is a growing interest in vertical solution in industries like retail, construction and engineering. Over BMI’s five-year forecast period, software-as-a-service (SaaS) business models are expected to provide a growing opportunity for vendors, with increasing demand for industry-specific applications.
IT Services
The Saudi Arabian IT services market is estimated at around US$971mn in 2010 and is expected to grow at a CAGR of 9% over the 2010-2014 forecast period. The economic slowdown has inevitably had an effect on demand in some of the key IT spending verticals. These include not only oil and gas but government, education, construction and healthcare.
In the near term, budgets had often already been commissioned, and so the effects were more likely to be felt in the second half of 2009 and in 2010. Support and maintenance account for around one-third of spending on IT services, but the market for more complex services such as outsourcing has grown.
E-Readiness
Increased public awareness of the internet, the growth of broadband services, the decreasing cost of internet access and computers (both PCs and laptops) and a wider range of internet services have all been cited as reasons for the strong internet usage growth.
The widespread deployment of wireless broadband networks by the three new national fixed-line consortia will help to drive increased broadband take-up. Although ADSL connections will play a crucial role in the development of the market, we predict that much of the new growth over the next few years will come from wireless services such as WiMAX.
Investment in broadband and government initiatives has seen an improvement in e-services development and utilisation, which was reflected in the UN’s most recent e-government rankings, in which Saudi Arabia rose 10 places.
Meanwhile, a report released in July 2009 by consulting firm Arab Advisors Group ranked Saudi Arabia first among Arab countries for e-commerce growth. The report valued e-commerce transactions in Saudi Arabia at SAR12bn with 14.26% of the population engaging in such transactions. The report identified government support and growing internet penetration as key factors behind the growth.
Executive Summary
SWOTS
Saudi Arabia IT Sector SWOT
Saudi Arabia Telecommunications Industry SWOT
Saudi Arabia Political SWOT
Saudi Arabia Economic SWOT
Saudi Arabia Business Environment SWOT
Middle East and Africa IT Business Environment Ratings
Regional IT Business Environment Ratings
Middle East Regional IT Markets Overview
Market Overview
Government Authority
Industry Developments
Industry Forecast Scenario
Table: Saudi Arabia’s IT Sector – Historical Data And Forecasts (US$mn unless otherwise stated)
Country Context
Table: Rural/Urban Breakdown, 2005-2030f
Table: Consumer Expenditure, 2000-2012f (US$)
Internet
Table: Telecoms Sector – Internet – Historical Data & Forecasts, 2007-2014
Competitive Landscape
Table: Regional Broadband Penetration Overview, 2007
Macroeconomic Forecast
Table: Saudi Arabia – Economic Activity
Company Profiles
IBM
HP
Microsoft
Country Snapshot: Saudi Arabia Demographic Data
Section 1: Population
Table: Demographic Indicators, 2005-2030
Table: Rural/Urban Breakdown, 2005-2030
Section 2: Education And Healthcare
Table: Education, 2003-2005
Table: Vital Statistics, 2005-2030
Section 3: Labour Market And Spending Power
Table: Employment Indicators, 1999-2006
Table: Consumer Expenditure, 2000-2012 (US$)
BMI Methodology
IT Ratings – Methodology
Ratings Overview
Table: IT Business Environment Indicators
Weighting
Table: Weighting Of Components
How We Generate Our Industry Forecasts
IT Industry
Sources
- IBM
- HP
- Microsoft
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