IT spending seen growing 10.2% - Emirates24|7

IT spending seen growing 10.2%

Spending on IT services in the UAE is expected to expand 10.2 per cent year on year in 2011, following 9.3 per cent growth in 2010, when the value of the market reached $1.17 billion.

In a recently published study, market research company IDC forecasts the UAE IT services market to expand at an average annual growth rate of 11.4 per cent to exceed $2 billion in 2015, driven in the long term by large-scale infrastructure projects spanning various sectors. Such projects include the ENEC nuclear power plant in Abu Dhabi, the Dubai World Central expansion project, the Dubai and Abu Dhabi metros, Al Ain Airport, countrywide railway developments across the UAE, Khalifa Port and Industrial Zone, and the expansion of the Ruwais refinery.

"The UAE economy has gone from boom to recession to recovery in the space of three years. This has drastically altered the IT requirements of organisations operating in the region, and services providers need to ensure they have the necessary capabilities and expertise to cater to this change in demand," said Rima Ruhman, research manager for IT Services, IDC Middle East, Africa, and Turkey.

"Although organisations will continue to grow and to spend on expanding their infrastructures, they are now more focused on the returns on their IT investments and on improving operational efficiencies. This will lead to an increase in spending on efficiency-driven initiatives, such as infrastructure and application consolidation, virtualisation, and datacenter optimization," he added.

The systems integration category accounted for the largest share of IT services revenue in the UAE in 2010, at 19.3 per cent, followed by hardware support and installation, with 13.7 per cent, and software support and installation, with 10.9 per cent. The combined outsourcing category made up 24.6 per cent of the country's total IT services market.

"A relatively healthy economic outlook is expected to create a positive environment and encourage spending on IT services, which will particularly impact large-scale infrastructure projects," said Ruhman.

"These projects will involve large investments across the entire spectrum of IT services, including consulting, systems integration, and network consulting and integration services."

The biggest market in terms of IT services investment in the UAE in 2010 was the government sector, which accounted for $328.22 million in services-related spending and 28.1 per cent market share. The finance vertical placed second, with 17.2 per cent share, followed by telecommunications (11.1 per cent) and the combined agriculture, construction, and mining vertical (8.5 per cent).

UAE IT market becoming less concentrated

The IT services market in the UAE is becoming less concentrated, with the top 10 players accounting for about 49 per cent of total market value, down from more than 60 per cent in 2009.

According to a report by market research company IDC, although established domestic IT service providers continue to dominate the UAE market, the competitive landscape is changing, with global IT vendors and telcos becoming much more active in the country's IT services space.

"This relatively small market has shown a tendency to favour large integrators that can offer services across multiple areas and service lines, and they will most likely retain the lion's share of the market in the foreseeable future," said Rima Ruhman, research manager for IT Services, IDC Middle East, Africa, and Turkey.

"However, the UAE market is very dynamic, and smaller players can grab a share if they capitalise on specialised services as the technology becomes more available and affordable. Also, as the market matures, especially in regard to managed services and cloud computing, international players are more likely to be attracted by the growing demand."

Spending on IT services in the UAE is expected to expand 10.2 per cent year on year in 2011, after 9.3 per cent growth in the previous year, when it totalled $1.17 billion (Dh4.3 billion).

Investments in IT services have continued to grow, as a result of businesses realising the long-term benefits of managed services, systems integration, and new hosting models. UAE companies are moving from internally managed non-standard IT systems (which are difficult to operate and maintain) to the standardised IT services (mostly related to hardware but also software) that are available in datacenters.

MDS Holding was the leading IT services provider in the UAE in 2010, with IT services revenue of $167.03 million and 12.8 per cent market share. Injazat Data Systems placed second, with $84.23 million and 6.4 per cent market share. Wipro ranked third, with $66.01 million and 5 per cent share. CNS and Emitac rounded out the top five IT services providers in the market in 2010, with 5 per cent and 4.8 per cent shares, respectively.

Although companies in the UAE have traditionally shown a very strong preference for internal IT management, IDC has registered a growing interest in and adoption of services, particularly managed services, as decision makers are more willing to relinquish total control in exchange for reduced capital expenditures.

"Adopting a new technology just to be on the bleeding edge is mostly a thing of the past, given the tight operating budgets in the current economy," says Ruhman. "Today, the market demands that IT solutions not only support the mission and vision of the organisation, but also demonstrate an ROI that justifies the IT investment. Investments must be viable in terms of cost and deemed essential for the company to survive and thrive."

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