The compact picture of the ICT value chain in the UAE encompasses vendors, distributors, power retailers, resellers, system integrators, and other small retailers. There is no manufacturing. Most of the vendors and distributors are in the central market hub of the region that is Dubai’s free trade zone and they redistribute it to the wider Middle East. Domestic demand is driven by expatriates, tourists, shopping festivals and regular specialty electronic retail events.
The region’s investments in digital transformation and innovation will mark in the book of accounts for 30% of all IT spending in the Middle East, Turkey, and Africa (META) by 2024. That’s according to last year’s predictions by International Data Corporation (IDC). Spending in these two areas is leaving the rest of the market in its wake, increasing at a compound annual growth rate (CAGR) of 18% versus 1.5% for the rest of IT. META region’s dynamic ICT markets included government enterprise IT spending is increasing at a CAGR of 5.7% and will top $8 billion in 2021. At over $6 billion, manufacturing accounted for 23% of all digital transformation spending in 2020. Annual security spending will top $3.6 billion by 2023 as digital trust becomes a priority. Spending on artificial intelligence will top $600 million in 2023, doubling from 2018 levels. IoT spending will reach $17 billion in 2023, six times the value seen in 2018.
The market condition of 2019 was quite bitter during that period and the domestic ICT market remained affected by stiff competition, declining margins, low entry barriers, lack of bank support and slow economic growth. The industry leaders initiation to address these challenges already gave different confidence to ICT market in the MENA region.
One of the significant programs of ‘IDC Directions’ is the region’s seminal ICT industry event and the year 2020 explored the theme of ‘Multiplied Innovation Goes Mainstream: Thriving in the Digital Economy‘. The people of the region’s foremost technology vendors, telecommunications operators, and IT service providers together under one roof analyzed the ICT market trend for the upcoming five years. The IDC event conducted in January 2020 in Dubai, showcased insights from IDC’s chief research officer, Meredith Whalen, who presented a keynote speech on ‘The CEO’s New Agenda for Running a Digital Enterprise’. During this session, she explained that IDC’s global research had identified three of the most pressing items on this new agenda as the need to build digital trust programs enables the development of an intelligent organization and embraces new industry ecosystems. This strategic event along with Dubai internet city has a critical role in driving the ICT industry trend in this part of the world.
As she mentioned the digital economy is at a critical tipping point, in just a few short years, nearly half of all GDP worldwide will come from products and services offered by digitally transformed organizations. In order to thrive, organizations must define their new role in this digital economy and proactively address new customer requirements around personalization 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. The emerging opportunities that exist in key markets such as Saudi Arabia, Egypt, Africa, and the UAE, latter to see a 5.1% year-on-year jump in IT spending this year to $8.45 billion.
The context of the event was critically notable that the UAE’s ICT market remains affected by stiff competition, low and declining margins, low entry barriers, the reluctance of banks to support, reliance on tourist inflows (which currently show sluggish growth rates compared to the past) and slow economic growth. The imposition of new taxation and customs duties on certain electronics-related products in India and the persistent political climate in the region has negatively impacted the overall demand for ICT products.
As Ammar Al Malik, managing director of Dubai Internet City said: “From e-commerce and cloud computing to fintech and cybersecurity, the UAE is leading the region in digital transformation. “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. “Analysts continue to predict that ICT investment in the region will rise and the appetite for future growth is promising. As such, investment insight is crucial to ensure the 1,600+ start-ups, entrepreneurs, and Fortune 500 companies based in Dubai Internet City continue to leverage growth opportunities, and we are working closely with our partners at IDC to make this happen.”
Being one of the region’s biggest markets of IT and communication Saudi’s telecommunication segment amounts to 55% and IT – 51% of the general market in the region. Saudi’s Ministry of Communication and Technology introduced an ICT Strategy for the years 2019-2023, that aims for creating a modern and solid virtual architecture and supporting the technological development of the country.
In 2018 Saudi’s ICT market grew by 6% and was worth 36 billion dollars. It’s mostly due to the governmental, telecommunications, financial, and oil sectors. New investments are being made, as the need for intelligent management, modernization of the infrastructure and so-called “giga” projects are gaining more and more popularity. “Giga” projects serve as a way to recreate Saudi Arabia as a modern business and touristic hub in the region.
IT sector in the Middle East is steadily growing. Many countries keep increasing their budgets meant for the technologies. Since 2008 the funding was made 5 times bigger, and in 2019 amounted to 207 billion USD. Still in the year of the pandemic, 2020 ICT market was growing upwards. The strongest part of the story is laying down there that Middle East registers growing popularity of the digital technologies not only within the group of the private users but also among the SME companies and offices. Currently, the numbers of the digitalized companies are not high – 17% in Egypt and 5% in Saudi Arabia. The statistics are rising steadily, and the need for the software meant for the management, revitalization of the existing structures and ideas is also showing. Online payment, which is mentioned in Saudi Arabia’s Vision 2030, is aiming to increase the statistics by 70%.
Even though the entire business ecosystem is highly volatile recent trends in the Middle East and African markets indicate a promising market situation for every stakeholder of the ICT value chain in the region. Thanks to the technological transformation that already began!