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Saudi Arabia Information Technology Report Q4 2010
Business Monitor International, Oct 2010, Pages: 57
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. Despite the economic slowdown last year, the country 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 economic slowdown.
In 2010, Saudi IT spending is forecast to record higher single-digit growth compared with 2009. Pick-up in the flow of projects was reported in H110 and a number of complex projects are being commissioned by the public sector and the large company sector.
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
The government continues to regard development of the country's information communications technologies (ICT) industries as a national priority. Saudi Arabia's governing Shoura Council has a strategic objective for the IT industry to raise its contribution to GDP to 20% by 2020. Another key goal is to raise broadband penetration to 31% by 2013.
Despite the economic downturn in 2009, Saudi Arabian government bodies pressed 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 county's regions.
In 2009 the Saudi government signed off on a US$3.1bn plan to improve the education system. The focus of the plan, approved by the Saudi cabinet, is to equip schools to keep pace with scientific and technological activities. The King Abdullah Project has allocated around half the funds (SAR4.2bn) to improve the education environment and another SAR3.58bn for extracurricular activities.
Competitive Landscape
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 had won a contract from Saudi's Arabia's first private power plant, NOMAC, to implement an enterprise resource planning (ERP) solution.
In H110 IT vendors were positioning themselves to take advantage of an expected new wave of investment by the energy sector. In May 2010, Elecsys, a provider of data acquisition, telemetry and analysis systems for critical industries, announced that it had appointed Saudi company Gulf Energy Solutions Corporation (GESCORP) as a distributor partner. Meanwhile, in January 2010, Sahara Petrochemicals Company adopted HP systems to improve its data centre infrastructure. Saudi telecoms services provider Mobily has launched plans to roll out a series of cloud computing environments over the next few months. The cloud computing initiative follows what the company described as a careful audit of both its own internal computing needs and those of business customers. As the initiative continues the company hopes to be able to improve its infrastructure utilisation and reduce time to market.
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. 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 in 2009, 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, driven by an increased focus by Saudi Arabian enterprises on more sophisticated solutions that still offer value for money. Oil and gas is the largest software vertical purchasing sector, followed by government and telecoms, but there is a growing interest in vertical solutions 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. The next period promises to see more opportunities in sectors such as oil and gas, financial services, healthcare, education and communications. 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.
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