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28 March 2024

Shortage of funds hurting IT penetration in region

Governments across the region are investing in IT. (ASHOK VERMA)

Published
By Nancy Sudheer

The adoption and use of technology in the Gulf is not on par with global markets, said analysts.

But the Gulf has the advantage of not having a legacy and, therefore, a complete Greenfield network with the latest technologies can be deployed.

However, investments being made in the region are not uniform across the Middle East and North Africa mainly due to lack of availability of funds.

Broadband penetration across the region is also not same though it is making inroads in the GCC with operators making huge investments.

Technology companies still see higher adoption levels in the UAE, Saudi Arabia, Egypt, Kuwait, Qatar, Bahrain, Jordan and Lebanon mainly due to the high penetration of PCs, internet and most of all a young population.

Emirates Business spoke to industry analysts Samir Al Schamma, Regional Director, Intel, Middle East; Rabih Dabboussi, Systems Engineering Director, Cisco; Charbel Fakhoury, General Manager, Microsoft Gulf; John Hoonhout, Managing Director, HP; Husam Dajani, Senior Vice-President, Oracle Middle East and Africa; and Khalifa Hassan Al Shamsi, Senior Vice-President, Marketing/Consumer, etisalat.


What is your opinion about the maturity of technology adoption in the Middle East?

Al Schamma: The Middle East at large is a fluid and mobile market with a heavy mix in key countries such as Saudi and the UAE. What is special about the region is that the youth population is very large, 60 per cent are under the age of 25, and they are the main early adopters of latest technology. A good example of how the youth in the region are changing the landscape of the market is the higher adoption of smart phones, such as iPhones and Blackberrys, in the region, which is driven by the youngster's desire to send instant message and chat with friends anytime anywhere.

Dabboussi: Cisco believes technology adoption in the Middle East in general and the GCC states in particular is fairly good to excellent in some areas and somewhat lacking in others.

For example, there are many technology advancements and innovations that are built-for and tested first in the Middle-East and then launched worldwide. This region has been a pioneer in technologies that span from mobile infrastructure to oil and gas and transport. There have been some iconic developments that required cutting-edge technological deployments.

Fakhoury: There is always confusion between emerging and developed countries. This region lies in-between, where, in some cases, it is at the basics of IT and at the same time quite developed in other aspects of the market. Penetration is at a higher ratio, especially in the area of e-services. There are a lot of online services, with a lot of competition, and also the government has set up a deadline to get 90 per cent of services online.

Governments are investing in IT, which is good for tourism and helps the region to be productive in terms of public services. At the same time, it increases competitiveness on the global level.

Hoonhout: On the consumer front, it is not different compared to mature markets but on the enterprise front it is a mixed story. In areas such as virtualisation it is still not mainstream like in mature markets. In these markets it is a default option and therefore the adoption rates are quite high.

The region is still low in these technologies and is behind the curve. In fact, the first five of HP's new product 'Matrix' – a bundle of hardware, software and services – was sold in the Emea sector. This was at the front of the wave and we are seeing early adoptive behaviour.

Dajani: The region in certain cases is better than other developed countries. Very often we start with a blank page with no legacy and can take the latest technology to use. In other countries, there is a lot of legacy, which is pulling them behind.

Al Shamsi: Earlier there was a lot of focus on the North American and European market when it came to technology, advanced services and adaptation. With gaps in other parts of the world, growth in the Middle East is faster than the European markets.

For etisalat, it is reflected in our implementations and experience, with the gap reducing to a large extent. Investments in telecommunications networks such as fibre optics, advanced services to offices and homes are bringing about higher productivity levels.

Though technology networks are Greenfield operations for IT companies with the deployment of the latest technologies. Is that a scenario across the region or only in developed countries such as the UAE and Saudi Arabia?

Al Schamma:
This scenario is true mainly in a handful of countries such as the UAE, Saudi Arabia and Kuwait, where we see them adopt the latest and top of the range technologies. Other markets prioritise the cost and often opt for entry-to-medium-range products. Clearly the availability of funds to invest in latest infrastructure and technologies gives those who can afford it an added investment protection with more features available and longer time until their equipment needs a refresh.

Dabboussi: According to the latest reports on broadband penetration, Bahrain is the leader in many of these areas. Many IT companies are trying to adopt new technologies in emerging markets, which the UAE and Saudi Arabia are part of. Particularly in the UAE and Saudi Arabia there are many technological advancements around the buildout of smart and connected cities, green urban development and in many large education and sports projects.

Fakhoury: In the Gulf, there is no single government that does not see IT as a strategic investment. IT is seen as a booster and big investments are happening in the public administration. The whole ecosystem has to evolve in terms of trading and capacity. Big investments in the education sector will also help boost technology in the region. Skills and the labour force have to be created to feed the economy. By doing this the market will get competitive and attract more investment. There is a lot more financial strength in the region, which is a remarkable proposition. Different countries and governments move differently and many of them are faster in execution.

Hoonhout: It is not consistent but limited to the UAE and Saudi Arabia. Qatar and Oman are early adopters and there is a lot of interest in Bahrain, Kuwait, Egypt and the Levant. The adoption of software driven management or automation solutions is ramping up but is still lagging compared to developed markets.

Time to implement is a problem as customers order for solutions and speed to market was the most important criteria last year. But this year, as operational budgets are cut affecting capital expenditure, they are looking back at investments in the past two or three years. Customers want to find out return on investment (ROI) from these solutions and how to optimise and better utilise assets.

Dajani: Technology is there across the region but the difference between the countries is the availability of funds. Traditionally it has been higher in this part of the world than the rest of the region. Government and enterprise customers know what they have to do and also have allocated funds. While in other countries they have the need and knowledge but no funds. It is not that people are sleeping, they are well aware that technology is required to improve lifestyle, productivity, better financial controls from the government. Budget is the issue.

What do you think are the challenges for technology adoption across the region?

Al Schamma:
Broadband penetration is low and there is still a growing number of small and medium businesses (SMBs), which are trying to grasp the idea of efficiency through IT. SMBs need to be educated on the high ROI potential they can obtain through deploying IT in their businesses and strategies. By enhancing their IT capabilities, they have the opportunity to reduce their costs and increase their functionality and efficiency.

On the other hand, the recession held back many of the enterprises from spending on IT. We, at Intel, always say, "You can't save yourself out of a recession", as companies can emerge stronger after a recession but only if they continue to invest in innovation and development.

Dabboussi: Broadband penetration and adoption is probably one of the key areas that prevented a wider technology adoption across the region. Government and telecom authorities regulations have also played a significant role in preventing the adoption of key technologies such as IP-Telephony, internet telephony, P2P applications. etc.

Fakhoury: There are ambitious visions but capacity is catching up. In terms of cultural readiness and technology adoption it is high on one side but businesses also have to adopt IT and go online. Adoption of security is essential as homes and businesses have to be aware about the affects of technology. Education is part of the evolution and the best part of this region are the youths, as they are familiar with technology.

Hoonhout: The whole economy was on a steep growth curve as companies were on an expansion mode and cost factor was less important. It was essential to penetrate into the market, ramp and scale up and capture market share. Adoption happened fast but again it should have been done according to the growth of the economy.

Dajani: Technology adoption deepens on the organisation's ability to make a selection requiring a certain level of competence.

The ability to establish confidence and get good ROI from investments is essential. Finding the right source of funds and reserving then becomes another factor, which can accelerate the decision. Successful implementations have taken place in large-scale government systems and in regions such as Bahrain, Uganda, Oman and Egypt.

Al Shamsi: Private and government forums have to work towards the community. The gap is closing down in terms of technology adoption compared to other markets. As a telecom service provider, we have put focus regionally and also globally.

Which part of the region do you think the adoption is still slow and what do you think are the impediments for this?

Al Schamma:
The adoption is definitely higher in GCC countries in comparison to North Africa. If you take, for instance, Egypt, although you have a population significantly larger than both Saudi Arabia and the UAE, according to the latest IDC report, the penetration of PCs in comparison is significantly lower.

This is due to a number of factors including economic considerations as well as internet penetration rates. The stronger the internet penetration, the more fluid technology adoption will be with specific technologies such as PCs.

Dabboussi: I believe the most advanced in the region in the adoption of technologies is the UAE, Saudi Arabia comes next followed by Bahrain and Qatar. Bahrain is more advanced in some areas due to the deregulation that took place a while ago.

Hoonhout: If you look at organisations with 50 plus employees for enterprise scale projects, exposure to technologies has not happened. Specialist resources have to be made on board and there has been a slow adoption rate on this front.

Training of employees has also been cut due to budget pressuere, which has had an impact. Companies are not developing skills though technology companies assist them on this front.

Which regions lead in technology adoption?

Al Schamma:
The GCC is in the lead for technology adoption in the Middle East and North Africa.

The TAM (total available PC market) is led by Saudi Arabia with more than two million units, followed by the UAE with 1.5 millio units and Egypt with more than one million units. In regard to the GCC versus the entire Mena, PC shipments saw double-digit growth in the third quarter and we expect the whole Emea market to grow by 14-15 per cent in Q4 versus Q3.

Dabboussi: GCC leads compared to the rest of the Middle East. Egypt, Jordan and Lebanon are ahead in the NA and Levant area.

Al Shamsi: This again depends on the economic status of the countries however UAE and Saudi Arabia though lead in this space.

Do you think the Middle East is on par with global markets in adoption?

Al Schamma:
Although the Middle East is one of the fastest-growing markets, it is still below such markets as the US, Japan and Western Europe in terms of adoption of latest technology.

This also returns to the fact that the mix of internet penetration and accessibility of technology in the Middle East is still a growing trend that has a long way to go in developing markets such as Morocco and Algeria, which are trailing behind other strong markets such as Saudi Arabia and Kuwait.

 

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