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Saudi IT market's value to rise to $5.7b by 2016

JEDDAH - Saudi Arabia's IT market, the biggest in the in the Gulf region valued at $3.8 billion in 2011, is forecast to rise to $5.7 billion by 2016, Business Monitor International said in its "Saudi Arabia Information Technology Report Q1 2012".

The Kingdom 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 report said. The Kingdom's relative political stability compared with some others in the region will also attract vendors, it noted.

BMI predicts that per capita IT spend will reach $181 by 2016, with PC penetration rising to more than 30 percent as youthful demographics and a growing population should drive demand, the report further said.

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.

Moreover, PC penetration in the Saudi market is currently about 24 percent and should increase to over 30 percent by 2015. 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.

BMI also forecast that software market value will rise to $777 million in 2012, up from $699 million in 2011. The software segment is projected to grow at a CAGR of 9 percent 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, the report said.

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.

The Saudi Arabian IT services market is expected to grow at a CAGR of 9 percent over the 2011-2015 forecast period from around $1.1 billion in 2011.

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.

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 utilization, which was reflected in the UN's most recent e-government rankings, in which Saudi Arabia rose 10 places.

© The Saudi Gazette 2012