|23 January, 2020

Spending on digital transformation set to soar

Spending on artificial intelligence in the META region will top $600mln in 2023

Image used for illustrative purpose. Hand holding digital image of brain.

Image used for illustrative purpose. Hand holding digital image of brain.

Getty Images/ Yuichiro Chino

Investments in digital transformation and innovation will continue to increase across the UAE, as organisations look towards creating new revenue streams, reducing operating costs, and seeking new opportunities for growth, experts at the IDC Directions 2020 event said.

The latest research by the International Data Corporation (IDC) ahead of the event revealed that investments in digital transformation and innovation will account for 30 per cent of all IT spending in the Middle East, Turkey, and Africa (Meta) region by 2024, up from 18 per cent in 2018.

"The digital economy is at a critical tipping point," said Meredith Whalen, IDC's chief research officer. "In just a few short years, IDC forecasts that nearly half of all GDP worldwide will come from products and services offered by digitally transformed organisations. In order to thrive, organisations must define their new role in this digital economy and proactively address new customer requirements around personalisation and trust. They must also develop new capabilities around digital innovation, work, and intelligence, and build a digital IT infrastructure that supports resilient operations and pervasive experiences."

IDC's research also showed that government enterprise IT spending is increasing at a CAGR of 5.7 per cent and will top $8 billion in 2021. In addition, annual security spending will top $3.6 billion by 2023 as digital trust becomes a priority. Spending on artificial intelligence (AI) will top $600 million in 2023, doubling from 2018 levels; while IoT spending will reach $17 billion in 2023, six times the value seen in 2018. At over $6 billion, manufacturing will account for 23 per cent of all digital transformation spending in 2020.

Like Whalen, Jyoti Lalchandani, IDC's group vice president and regional managing director, noted that digital transformation in the UAE has initially been driven by organisations who realised that they need to change their operating models to better cater to customer expectations.

"A key driver towards digital transformation in the UAE started off with transforming the customer experience," he said. "The next phase of digital transformation investments will revolve around creating new revenue streams for companies, monetising data, creating new opportunities to grow the business, and leveraging technology to reduce costs while creating new opportunities for growth."

Data, he said, is a key component in the digital transformation journey, and there has been a lot of focus on government agencies getting involved to ensure that the data is used in an ethical manner. "Education will also be a key component in any long-term plans in the region, because there has to be a focus on developing new skills and capabilities. Right now, there is a significant shortage of relevant skills, and the situation is further complicated by the fact that technology is evolving at a very fast rate."

Similarly, Ammar Al Malik, managing director of Dubai Internet City, which was the strategic partner at the event, spoke about the importance of ensuring a steady pool of talent.

"Acquiring and developing talent is going to be a major challenge and a critical step for organisations over the next decade," he said. "In the short term you can acquire talent, but you can't sustain innovation without developing and preparing your own homegrown talent. This is why it is very important for companies to have long-term partnerships with universities and other education centres; and to provide support for entrepreneurs, as well as funding for their startups."

Looking ahead, he noted that digital transformation will play a key role in the various smart city initiatives that will impact the life of residents across the UAE. Several companies such as Emirates Airline and Emirates NBD are already providing excellent examples of digital transformation models, and highlighting the appetite for future growth in new technologies.

IDC forecastes a 5.1 per cent year-on-year jump in IT spending to $8.45 billion in the UAE this year.

"From e-commerce and cloud computing to fintech and cybersecurity, the UAE is leading the region in digital transformation," Al Malik said. "We believe that the biggest budget in the history of Dubai, announced earlier this year, sends a strong message to the business community. It will be a catalyst for growth that stimulates entrepreneurship, innovation, and the ecosystems supporting a diversified, knowledge-based economy."


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