IT spending in Mena set to hit $259bn

(SUPPLIED)   

IT spending in the Middle East and Africa is expected to reach $259 billion (Dh951bn) in four years as emerging regions are set to become a major force of technology growth, new research has revealed.

The forecasted figure for IT spending in the region in 2011 is up from $182 billion in 2007, leading IT research firm Gartner said in a report released last week.

Emerging regions will generate IT spending of $1.1 trillion in 2008, and will grow to $1.3 trillion in 2011, becoming a major force of IT growth worldwide, according to Gartner.

“The large size of the region, with its relatively lower IT penetration and its engagement in major telecommunication deployments, is making a strong IT trend,” the report said.

In the UAE, the big IT spenders are the telecommunications, banking and government sectors, according to Michael Wellington, chief executive of UAE-based Kurt Information Security, which specialises in securing data for the oil and gas, telecommunications, banking and finance, government and service sectors.

“The focus on this is from the government sector, which is the driving force, and obviously the banking and finance sector has to keep up with all the technology so for them there is no option,” Wellington told Emirates Business.

However, he added that growth is still not where it should be in comparison to markets such as Europe.

The surge in IT investment from the banking sector comes down to greater awareness of the security threat among UAE banks, according to Naveed Moeed, principal technical consultant for the Middle East and Africa at RSA, the security division of information management group EMC.

“We have had huge traction in the banking sector. It’s far and away the fastest growing sector of our business in the past three years,” he said.

“The bigger the banks grow the more they spend on security.”

It is estimated that resources allocated to information security have risen by more than 200 per cent year-on-year since 2005, with almost all the revenue coming out of the awareness of fraud – insider and online fraud in particular.

However, there is a shortfall in expertise in UAE companies, according to Wellington.

“There are companies where the expertise is lacking so they are dependent on third party organisations to support them,” he said.

According to the Gartner report, the Middle East and Africa (Mena) region shows a forecast compound annual growth rate (CAGR) of 77 per cent from 2006 through 2011, which is the strongest of all the emerging regions.

The CAGR for IT spending in emerging regions for 2006 through 2011 will be 8.5 per cent, compared to 4.3 per cent for mature markets, the report said.

Africa and the Middle East are strongly advancing in all IT areas and are narrowing the gap in IT spending with Latin America, said Gartner.

The region’s IT spending still falls below that of Latin America, which as the second-largest emerging region in IT spending, and is forecast to reach $279bn in 2011, up from $210bn in 2007.

IT spending in the Mena region also falls below that for the Asia/Pacific region, which is expected to reach $590bn in 2011, up from $447bn in 2007.

“China is substantially driving growth in other emerging IT markets such as Latin America and Africa, via imports and direct and portfolio investments. This creates increased opportunities for IT providers given the needs of local companies immersed in the supply chain with China,” the report said.

Brazil, Russia, India and China (BRIC) – forecast to make up about 39 per cent of all emerging markets’ GDP in 2011 – will also bolster their role as the driving forces for other emerging IT countries, said Gartner.

The firm predicted that IT would become more of a catalyst for gross domestic product increases in coming years via more-efficient private organisations and competitiveness.

“Current GDP growth is impacting IT spending because it offers larger financial resources promoting, in many cases, more-balanced development within nations with significant consumer middle-class growth, stronger business base expansion and larger demand for IT products and services beyond Tier 1 cities,” said Luis Anavitarte, research vice-president at Gartner.

“This growing ecosystem of economics and IT also provides credibility for countries to international lenders, boosting financial resources and investments that are so critical for IT expansion.”

Anavitarte added that providers must also clossely   monitor economic developments.

“Despite many emerging countries being in a better fiscal situation with larger international reserves than in the past, a US and China economic slowdown could be IT deterrents as emerging markets are highly dependent on these larger economies.”

The Numbers

$259bn: IT spending in the Middle East and Africa to reach $259bn in four years

$182bn: The forecasted figure for IT spending in the region in 2011 is up from $182bn in 2007

$1.1trn: Emerging regions will generate IT spending of $1.1trn

in 2008