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Kuwait Information Technology Report Q4 2010
Business Monitor International, Oct 2010, Pages: 56
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$755mn in 2010. Despite an expected sluggish recovery in 2010-2013, the market should continue to provide opportunities for IT vendors over our five-year forecast period.
Expected increases in both oil output and prices in 2010, and a forecast bumper year in 2012, should provide support for higher IT budgets in this key vertical. The non-oil business environment remains cautious, and subdued investment and bank lending mean that Kuwait is forecast to be a regional underperformer. However a four-year governent infrastructure spending plan, launched in February 2010, should mean more public sector IT opportunities.
BMI projects a 2010-2014 IT spending compound annual growth rate (CAGR) of 7%. Kuwait's IT market has a number of enduring strengths, including its relatively small but tech-literate and wealthy population, which make Kuwait an important regional testing ground for new products. Per capita IT spending is forecst to reach US$302 in 2014 from US$232 in 2010.
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 coordinating role, Kuwait has ramped up its e-government efforts, rolling out a number of new services for citizens in 2008.
Last year saw continued implementation of projects from various state organisations. The social welfare, defence and finance ministries are recognised as particularly advanced. Despite such progress, big challenges remain for 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 growth area has attracted vendors such as Toshiba to attempt to strengthen their presence in this segment with new product releases.
IT vendors are continuing to strengthen distribution strategies for the Kuwait market. In March 2010 Aspen Technology, a provider of sofware and services to the process industries, announced the signing of Arabesque Group as its new representative in the Kuwait market. Meanwhile, enterprise resource planning (ERP) vendor Sage has expanded its partnership with Kuwait-based Eastern Solutions to include the distribution of its ERP and customer relationship management (CRM) solutions in the country.
Investors are also looking to take advantage of the regional IT services opportunity. In April 2010, Capinnova Investment Bank announced a minority investment of US$20mn in Kuwait IT services vendor EBLA Computer Consultancy. The investment was one of the largest technology investments in the GCC in 2010.
Computer Sales
In 2010, the Kuwaiti computer hardware market is expected to reach a value of US$317mn, following a sharp contraction in 2009 as the economic slowdown belatedly hit home. Despite the global financial crisis, overall computer hardware sales were estimated at around US$296mn last year, making Kuwait the third largest market in the region after Saudi Arabia and the UAE.
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
Total spending on software is forecast at US$204 in 2010, up from US$194mn in 2009. The oil, gas and utility industries in Kuwait will remain a major source of spending and the government's plans to expand oil production to 4.0mn barrels/day in the next ten years will necessitate additional investment. With trade liberalisation and growing regional competition continuing to fuel enterprise spending on software and systems, however, there should be growth potential across many sectors.
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 back-office systems.
Services
The Kuwaiti IT services market is projected to be worth around US$234mn in 2010 and is forecast to grow at an 8% CAGR to a value of US$324mn by 2014. The economic situation and credit tightening have 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. There has been a trend towards larger deals, particularly from government, which is often keen to act as an agent of new technology adoption in Kuwait's industry sectors. A more volatile environment for the oil industry has encouraged companies to look for solutions that will increase operational efficiency and boost overall business agility.
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 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 ministry's access network is gradually being upgraded by replacing the existing copper access with a passive optical fibre infrastructure.
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