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Saudi Arabia Information Technology Report Q1 2012
Business Monitor International, Jan 2012, Pages: 58
Saudi Arabia has the biggest IT market in the Gulf region, with a forecast value of US$3.8bn in 2011 expected to rise to US$5.7bn by 2016. 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. The country's relative political stability compared with some others in the region will also attract vendors.
In 2011, Saudi IT spending is forecast to record high single-digit growth compared with 2010. Government-driven investments in transportation, property constructions, and water and power plants, will drive opportunities for IT vendors. The government's five-year development plan focuses mainly on infrastructure and aims to boost the role of the non-hydrocarbon private sector.
Youthful demographics and a growing population should drive demand as BMI predicts that per capita IT spend will reach US$181 by 2016, with PC penetration rising to more than 30%. Meanwhile, in 2011 the government has announced US$93bn in handouts, including wage increases, which should boost consumer spending on electronic items such as PCs.
Industry Developments Saudi Telecom Company (STC) established a US$50mn tech fund in November 2011 aimed at encouraging innovation and creativity in the field of IT and telecommunications in the kingdom. The fund will facilitate start-up, small and medium-sized companies operating in the fields of telecoms and IT in the Saudi market and also in other international markets. STC will be the only investor in the initial stage, but it will invite other local and international companies at a later stage.
Microsoft confirmed the release of its Office 365 software package in early December. The release takes the form of a trial package geared around businesses of all sizes. Office 365 is intended to allow users to transfer to cloud computing without altering familiar ways of working.
Indian IT services and consulting company Wipro was the leading IT service provider in Saudi Arabia, according Times of India. Wipro entered the region about a decade ago in partnership with Saudi Arabiabased Dar Al Riyadh to serve a number of clients across the country. The company also contributed to building an IT base in the kingdom by hiring and training a large number of Saudi nationals, who account for 38% of the joint venture's employees.
Competitive Landscape In April 2011, Acer announced a partnership with incumbent telecoms operator STC to distribute Acer notebooks. According to the agreement, STC will provide Acer's Aspire One D255 netbook free with a broadband subscription. Acer hopes that the deal will help it to take top spot in the local PC market. The company has aggressively strengthened its channel infrastructure in Saudi Arabia over the past three years.
Competition has intensified in the enterprise software market, where SAP and Oracle are the leaders. Among other wins by SAP in Q111, Saudi-based Alfanar Electric announced that it had implemented SAP's CRM solution. In 2010, SAP's wins included Chemanol, a leading Saudi producer of methanolbased chemicals. Meanwhile, Epicor Software, a specialist in enterprise resource planning (ERP) solutions, announced plans to strengthen its channel network in Saudi Arabia.
In 2010, the consumer goods sector reported growing demand for e-business solutions, offering vendors opportunities. In November 2010, Alfia Foods, part of leading Saudi industrial group the Savola Group, announced the implementation of the Oracle E-Business suite to support long-term growth strategies and integrate and streamlining manufacturing processes.
Computer Sales Saudi computer hardware sales including PCs, notebooks and accessories are forecast to reach more than US$1.9bn in 2011. PC penetration is currently about 24% and should increase to over 30% by 2015. 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. The growing popularity of tablets is expected to provide a growth area in 2011, after around 190,000 were reported sold last year. Small and medium-sized enterprises (SMEs) are exhibiting a stronger tendency to favour mobility, accounting for a growing proportion of notebook shipments.
Software BMI forecasts a software market value of US$777mn in 2012, up from US$699mn in 2011. The software segment is projected to grow at a CAGR of 9% over the forecast period. In 2011, investment in software continued to grow, with a number of new implementations announced by Saudi companies in Q111.
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 such as 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 forecast at around US$1.1bn in 2011 and is expected to grow at a CAGR of 9% over the 2011-2015 forecast period. The next period promises to see more opportunities in sectors such as oil and gas, financial services, healthcare, education and communications. Increased spending on ICT infrastructure and legacy investments in hardware and software should also translate into long-term growth in IT services investment. 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 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.
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.
Business Monitor International's 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.
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