Cloud computing impact on Saudi Arabias economic diversification goals

The Kingdom has enthusiastically adopted new technology, such as cloud computing, to achieve its Vision 2030 transformation goals.

During the last 15 years, key business players including Saudi Aramco have adopted cloud-based systems. The public cloud came to prominence when Amazon incorporated Amazon Web Services around 15 years ago, and the industry has been growing ever since.

According to a Gartner’s report, end-user companies’ expenditure on cloud resources exceeded $250 billion in 2020 and growth of 18 percent is expected for 2021, with the coronavirus disease pandemic being an additional driver in the adoption, as more and more companies need to accommodate remote-working set-ups.

Cloud computing allows one to rent rather than buy IT infrastructure. Businesses which “move to the cloud” are essentially moving their IT processes offsite. Cloud solutions enable companies to focus on their strategic tasks and avoid the burden of hiring and managing full-fledged IT systems. Shifting to the cloud can involve moving numerous processes and applications on various devices. There are broadly three types of clouds — public, private, and hybrid — each providing a different level of security and requiring varying extents of involvement by customer companies.

The entire computing infrastructure of the public cloud is located in the cloud provider’s premises, and services are provided over the internet.

A private cloud, however, is exclusive to one particular customer. The infrastructure could be located in the customer’s premises or with the provider. It offers the highest level of security.

A hybrid cloud, meanwhile, is an amalgamation of public and private clouds. Customers usually host crucial IT applications on their premises and non-critical processes at the provider’s location.

Adopting cloud technology has many benefits and includes increased reliability and resilience by having multiple geographically-distributed fail-over data centers with cloud providers; the direct dependency on a company’s local set-up is removed, allowing for more seamless disaster recovery processes.

When a company leverages cloud infrastructure, it, in turn, is also able to offer a more reliable platform for their own clients. Cost effectiveness is also a key characteristic of cloud technology, as it provides for a reduction in upfront capital spending on physical hardware. With a migration to the cloud, physical hardware on premise is no longer needed as this sits in remote data centres with cloud providers.

Another factor is scalability. Cloud allows for enhanced and faster processing capabilities allowing for the ability to scale business functions.

Security is also the hallmark of this new technology. Data centers maintained by public cloud providers have dedicated teams securing the premises against invaders. Finally, cloud adoption leads to enabling innovation and technological transformation.

Saudi Arabia’s NEOM is in talks with companies to pick a lead partner for its first cloud computing deal that will lay the foundation for high-tech services in its flagship $500 billion business zone.

The talks with local and international tech firms come after a subsidiary of Saudi Aramco recently partnered with Google to bring its cloud services to the Kingdom, and Saudi Telecom Co. struck a similar deal with Alibaba Cloud. Google will open a “cloud region” where it can provide its cloud services in Saudi Arabia via a joint venture with Saudi Aramco, as COVID-19 prompts unprecedented acceleration in digital adoption across the Gulf. The collaboration taps into rapidly expanding cloud services demand in Saudi Arabia, which is forecast to reach a market opportunity of up to $10 billion by 2030.

Last year, NEOM announced a deal with Saudi firm STC group to establish a 5G network for its planned “cognitive” cities. NEOM’s flagship project is a carbon-free zone called The Line. Its construction will begin this year and the first phase will be completed by 2025. NEOM also plans to build a citywide operating system based on artificial intelligence in the business zone to better utilize data for its inhabitants. But it is not only the mega Saudi corporations that are actively seeking to install cloud technology.

The King Abdullah International Medical Research Center, a leading biomedical and clinical research institution, has subscribed to the Oracle Cloud Infrastructure in order to aid the complex research into a potential treatment for COVID-19 and other infectious diseases. The Kingdom’s Ministry of Health created a chatbot to respond to all COVID-19 queries and enhance the medical experience offered to citizens.

Cloud has made its way into the transportation sector as well. The Saudi Railway Co. has also initiated a major digital transformation with Oracle to enhance business agility, create a robust cyber security infrastructure, automate core-ticketing systems and reduce costs.

Oracle is enjoying the lion’s share in the Saudi cloud market. All this has led to a proactive Saudi regulatory framework. In February 2019, the Communication and Information Technology Commission, the telecom regulator in the Kingdom, published a document titled “KSA Cloud First Policy.”

The stated goal was to accelerate the adoption of cloud computing services by mandating that government and semi-governmental entities consider cloud options when making new information technology investment decisions.

On April 12, CITC issued an updated third version of the Cloud Computing Regulatory framework. These updates were driven by the pandemic, which increased the urgency of rolling out high-performance cloud services to match the rising demand in Saudi Arabia and was well received by service providers to enable more diverse services to be offered while simultaneously ensuring stronger data privacy protection.

• Dr. Mohamed Ramady is a former senior banker and professor of finance and economics, King Fahd University of Petroleum and Minerals, Dhahran.