Research Press Release (Doc #prCEMA40902216 / Jan 7, 2016)
Annual IT Services Spend in Saudi Arabia to Top $3 Billion

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Riyadh, November 16, 2015 – Saudi Arabia's overall IT services market is expected to reach a value of $3.09 billion in 2015, according to a new forecast released by International Data Corporation (IDC). This represents a year-on-year increase of 12.5%, with the global technology research and consulting firm identifying large-scale infrastructure expansion and modernization projects in the government, finance, healthcare, education, and transportation verticals as the market's main drivers.

"In order to increase their business reach, better understand their customers, and enable effective decision making, private sector organizations are investing in business intelligence and analytics solutions, as well as in mobile technologies," says Uzair Mujtaba, a senior research analyst for IT services and software at IDC Saudi Arabia. "The government, meanwhile, is investing heavily in digitizing its citizen centric services. The Yesser egovernment program is supporting this initiative by consolidating IT infrastructure for government entities and ministries in order to centralize the provision of services to its internal clients."

"IT security continues to be a leading concern among business leaders, and we are seeing considerable investments being made in advanced security solutions," continues Mujtaba. "Organizations in the banking and finance verticals are investing in datacenter expansion and new buildouts, with a particular emphasis on integrating their business continuity and disaster recovery capabilities with their infrastructure to ensure maximum availability of services to customers. The telecom vertical is also undergoing major transformation as operators endeavor to fortify their services portfolios and become end-to-end IT services providers."

"The price-sensitive end-user community and the general lack of formal procurement procedures means the Saudi IT services market is characterized by its highly relationship-driven landscape," says Mujtaba. "In this environment, only the most progressive services providers will be able to increase their market share, and developing capabilities around emerging technologies should be a key priority. Additionally, the implementation of complex IT solutions requires use of skilled IT personnel to operate the new IT infrastructure. Organizations that lack these skills internally will consider investing in managed services. It will thus be critical for services providers to offer quality managed services tied together with well-articulated service-level agreements (SLAs) that help build trust-based relationships with their customers. Employing a consultative approach toward addressing the business problems of customers will go a long way to creating a competitive advantage for IT services providers."

The competitive landscape in the IT service market in Saudi Arabia is primarily led by local services providers, with more than half of the top 10 being locally based organizations. However, existing multinational providers are gradually increasing their market shares, giving rise to fierce competition and greater emphasis on service capability enhancements. In order to tackle the challenges stemming from various macroeconomic factors, services providers are continuously working towards the facilitation of lean organization structures. Due to these developments, managed and outsourced services are expected to gain significant momentum in the market as they increasingly become viewed as a more efficient and cost-effective way of conducting business.

"IDC expects the Saudi Arabian IT services market to continue exhibiting double-digit growth over the coming years, primarily driven by egovernment initiatives, ICT modernization efforts across verticals, and infrastructure developments such as datacenter expansion projects," says Hamza Naqshbandi, senior manager for IT services at IDC Saudi Arabia. "However, in the current economic context of declining oil prices and stagnating government spending, cost pressures and eroding margins are forcing Saudi organizations to reevaluate their IT budgets, which may slow the pace of IT services spending growth slightly."

"IT services providers will need to invest wisely in their solution-delivery capabilities – including quality management, project management, and governance, risk, and compliance (GRC) capabilities – as these are steadily becoming competitive differentiators in the rapidly changing Saudi Arabian IT services market," continues Naqshbandi. "Additionally, the strengthening of partner networks, as well as the move towards a more proactive consultative approach to project delivery that develops relevant solutions in response to end-user needs, will help services providers to become the trusted partners of choice."

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