ICT-Based Transformation to Lead KSA Government Spending, Says IDC
11 Dec 2013
International Data Corporation (IDC) today announced its annual predictions for 2014 for Saudi Arabia's information and communications technology (ICT) industry. IDC's predictions reflect the ongoing factors that will set the trend for the kingdom's ICT development. Experts anticipate that the trickle-down effect of these predictions will initiate a change within a variety of industries, such as government, healthcare, logistics, and finance.
"ICT-based transformation initiatives such as smart cities, mobility, and security will be the hot topics for 2014 in Saudi Arabia, directly affecting government investments in cyber security and corporate investments in cloud technologies, and driving a major shift in consumer brand preferences toward tablets and smartphones," says Abdulaziz Al-Helayyil, country manager for Saudi Arabia at IDC. "The Saudi market is unique in terms of technology adoption and investment, as well as infrastructure development, specifically in relation to fixed and wireless broadband, mobility, and cyber security, following recent developments in the country across these three areas. All of this is likely to play a major role that will also have an impact on other domains, including the numerous nationalization initiatives underway across the kingdom."
IDC's predictions for Saudi Arabia in 2014, presented by Al-Helayyil at a press conference today, include the following:
- The transformation of telecom operators will accelerate as they develop their roles as end-to-end ICT solution providers – Telcos will move beyond merely launching ICT offerings to develop clear strategies aimed at acquiring a broader influence in the ICT solutions value chain. Partnerships will flourish as an increasing number of operators move to offer complex IT services, and acquisitions that boost the IT service delivery capabilities of telcos or expand their professional services offerings cannot be ruled out. To this end, opportunities across the digital services spectrum, including mGovernment, mHealth, and mEducation, will be closely monitored by telcos, while machine-to-machine (M2M), cloud, mobility, smart cities, and industry-intelligent solutions will remain key technology focus areas.
- Enterprise mobility will become more prevalent, supported by the rapid penetration of SMBs – Instant globalization facilitated through the use of social media, connected applications, and mobile resources will continue drive to acceptance of enterprise mobility in 2014. Growing economic activity backed by the government's focus on diversifying the economy will continue to push businesses, particularly SMBs, to acquire ICT solutions in general and mobility in particular. Businesses are enthused about cost optimization and process efficiency delivered through mobility solutions, which will drive the mobility solutions market in 2014 and beyond, continuing a trend that started in 2010.
- M2M market will grow further with growing and diversifying demand – IDC believes the utilization of M2M services in the kingdom will increase in 2014. According to IDC's 2013 Enterprise Communication Survey, 40% of enterprises that already use M2M in Saudi Arabia plan to implement 'fleet management' within the next 12 months, while 38% plan to do the same for 'digital signage'. M2M represents a strong opportunity for operators to generate revenue, and IDC expects these kind of M2M services, as well as security monitoring and smart metering, to spread further among enterprises in 2014. 'Application support', 'vertical-specific solutions', and 'consulting/service expertise' were also mentioned among the most important factors by the enterprises when selecting partners for M2M projects.
- Cautious approach to cloud adoption will finally change; strong growth anticipated in medium term – Cloud spending in Saudi Arabia will continue to increase significantly from $26.34 million in 2013 to $40.30 million in 2014. As international cloud players continue to expand their footprints in the kingdom, primarily through partnerships, cloud adoption will be met with considerable vigour, while telcos will continue to position their cloud offerings in 2014, contributing positively toward market maturity and paving the way for future investment. Public cloud spending will gradually increase to reach $18.12 million in 2014, up from $11.47 million in 2013. Upcoming sectors like education and healthcare, along with BFSI and telecommunications, will continue to adopt cloud services while the government will be more sceptical regarding the security and control aspects of cloud-based services.
- Nationalization initiatives will impact skills shortage and market stability; 'alternate' managed services to see lukewarm response – As the kingdom's nationalization initiatives gather steam and the government continues to push organizations to comply with Nitaqat regulations, IDC anticipates that the availability of advanced IT skills will become scarcer, and uncertainties around regulations pertaining to onsite support will continue. This will put more pressure on providers to hire and train nationals more rapidly, a development that may be adversely affected in the short term. IDC also believes there will be delays in projects, especially large infrastructure-driven mega projects, and existing contracts will face profitability pressures as resource costs go up. The national pool of IT talent will eventually grow and the market will stabilize in the medium term.
- Line-of-business (LoB) users will drive analytics investments; demand for advanced analytics will set the base for future Big Data investments – IDC believes that LOB users will increasingly make a case for better insights from the vast amount of data they generate across the kingdom, driving demand for advanced analytics. While many sectors are still investing in core applications, verticals like energy and manufacturing, BFSI, communications, and retail will drive investments in supply chain management (SCM), risk, inventory, and customer relationship (CRM) analytics. IDC anticipates spending on business analytics software to reach $62.7 million in 2014, up from $51.0 million in 2013. Analytics on mobile devices will gain popularity in the public sector as mobility adoption increases.
- Consumer brand preferences for mobile devices will begin to shift – The brand consciousness that had been driving consumers in Saudi Arabia to give preference to higher-priced tablets from the top players in the past few years will now start shifting to lower-priced options. These options are being made available by several multinational vendors that are expected to continue offering an expanding portfolio of low-cost Android-based tablets, causing the average end-user price of tablets shipped into the country to decline to around $370 in 2014. Additionally, the declining prices of ultra-slim notebooks and convertible notebooks, coupled with early adoption habits of consumers in Saudi Arabia, will generate greater demand for these product categories, contributing over 14.0% of portable PC shipments into Saudi for the year 2014.
- Increasing cyber threats will force government and businesses to strengthen security, as the challenge spreads beyond traditional IT, particularly in the oil and gas sector – The occurrence of high-profile cyber attacks since 2011, and, more specifically, the 2012 Shamoon attacks on Saudi Aramco and Rasgas, have been considered as real game changers for many companies operating inside the kingdom. As the topic of IT security will remain a top priority for most Saudi oil and gas organizations in 2014 and beyond, IDC believes security will not only become a major area of investment for oil and gas CIOs in the country, but also a key influencer for all technology investment decisions in the years to come. IDC expects IT security software spending in Saudi Arabia to increase at a compound annual growth rate (CAGR) of 16.1% between 2012 and 2017.
- Mobile banking will be tapped as a key technology for driving new customer acquisition and positive service quality in Saudi retail banking sector – As the kingdom’s economy grows, so too does demand for retail banking services among its population, of which approximately 70% are under the age of 30 years old. Members of this younger generation are demanding more from their banks, and are more willing to switch institutions if their service quality expectations are not met. IDC predicts that with customer experience being so critical to the retention of this young and technology-literate population, Saudi banks will invest in various technologies to ensure customer experiences are as positive as possible. In particular, we expect the kingdom's banks to zero in on launching and improving their mobile applications targeting the under-30 age group.
- Saudi Arabia will increase its focus on Smart City initiatives, both for greenfield and existing cities – There will be two dimensions to Saudi Arabia's focus on its Smart Cities efforts: a focus on existing cities, and a focus on greenfield initiatives. In terms of its existing cities, IDC predicts the discussion around Smart Cities will move to the next level in 2014. Municipalities in the kingdom will start to allocate resources toward the development of ideal Smart City projects, given the specific requirements of their citizens. As a complementary effort, Saudi Arabia has been investing billions of dollars in building new Economic Cities in order to diversify its economy away from the hydrocarbon sector. IDC predicts that, starting in 2014, demand for ICT solutions and services arising from developments relating to these Economic Cities will begin to gain traction. As the kingdom is building these cities from the ground up, they will be able to adopt the very latest technology solutions necessary to make them truly competitive. IDC expects that the immediate focus of IT spending will be concentrated on the deployment of fixed and wireless broadband infrastructure.
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