Growth in IT spending by consumers and businesses has turned negative in the UAE and is expected to record an 11.6 per cent drop in 2009 before growing by 7.6 per cent in 2010, a new research has revealed.
In contrast, spending grew last year by 28.1 per cent over 2007, research firm IDC said. "In the past six to eight months we have seen negatives both in the consumer and enterprise segments," Naser Sha'sha'a, Programme Manager of IDC's IHD Group – MEA, told Emirates Business. "Consumers have felt insecure about their jobs and unsure about the workplace. On the business or enterprise side there was similar sentiment with no certainty within organisations.
"Declines in profits and revenues have been seen since the end of 2008 and the companies that survived have started cost-cutting, resulting in negative growth of IT spending."
Last year, customers were not concerned about returns on investment but now limiting capital expenditure was a top priority, said Sha'sha'a.
"The revisiting of budgets has impacted IT spending in the region and therefore concepts such as outsourcing are being considered by enterprises. Firms at this point are hoping the worst is past and are reconsidering their IT investments. IT software and solutions companies are not saying that their products are the best but there is a big focus on savings."
Fawwaz Qadan, Director of Hewlett-Packard's Middle East Enterprise Storage and Server Group, said: "From partner and customer inputs there was a sudden hit in the first part of 2009 as IT spend by major customers dropped. There has been a decline of up to 30 per cent in the overall IT spend based on the feedback from our key customers. Despite the international slowdown the percentage of spending with HP has increased."
The financial climate has definitely affected IT budgets and companies across the board are feeling the pinch, said Mohammed Amin, Regional Manager of EMC Middle East, North-West Africa and Turkey.
"In the Middle East the first six months of 2009 has been bad but in the IT infrastructure space storage and security has seen spending. This is why EMC has grown 20 per cent even though the overall IT market has hit bottom. On the whole, the market will experience a long bottom as it declined in the first quarter of 2009 by up to nine per cent."
Customers have changed their purchasing cycles as approvals take longer, said Nidal Abou-Ltaif, Area Vice-President of Avaya for Mena and Turkey.
"Organisations are still spending but there is a definite change in behaviour," he added. "The purchase and approval cycle is taking longer. Even though budgets are released it is important to justify these investments.
"Earlier it was about getting one or two signatures but now there are committees set up to approve these budgets. Spending has to be rationalised and IT companies like us are adapting to this new trend."
Avaya specialises in telecoms solutions and has seen growth in this sector.
"There are cutbacks but as telecoms technology is required to increase productivity and reduce costs we are seeing solutions like the one deployed by Dubai Islamic Bank. It implemented a unified communications solution to reduce 50 per cent of telecom costs. Contact centres are also enhancing spend on the telecom front."
Sergio Maccotta, Managing Director of SAP Mena, said many customers were using this period to strengthen their market positions.
"Buying patterns may change but customers still have to keep investing. This is why we hope to see a lot of market changes by the middle of 2010. The recovery may be sporadic as there are mixed feelings in the market. Control of cash flow is most important for customers in the region."
Maccotta said customers were finalising deals to improve their market standing.
Technology firms executives predicted that the Middle East would recover more quickly than other markets.
Qadan said: "The Middle East is expected to recover faster than the mature countries. Regional countries are positioned as such that recovery will not be delayed."
He said the public sector had continued spending as it had a broad national responsibility. Abu Dhabi, Saudi Arabia, Qatar and Kuwait had been less affected in the region by the downturn in terms of IT spending.
Amin of EMC said he expected the decline to continue until the end of the year but was positive about the beginning of 2010.
"The third and fourth quarters of this year will be flat in terms of growth," he added. "Next year will be a different ball game as different growth areas will emerge and customer preferences will change.
"There will be a lot of consolidation in the market and consumers will opt for business continuity solutions.
"Outsourcing will become acceptable in the Middle East and a lot of decisions will be based on consolidation in the IT market. The telecom and financial sectors will continue to lead in terms of IT spending," said Amin.
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