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Saudi Arabia’s IT spending to rise to $5.6 billion

Saudi Arabia’s spending in information technology is expected to rise to $5.6 billion by 2013, a compound annual growth rate (CAGR) of 11 percent. Last year, the Kingdom, which is the biggest IT market in the Gulf region, spent $3.4 billion in the sector.

The IT market should continue to grow, driven by a robust economy and infrastructure investments in major verticals such as oil and gas, power, financial and telecoms, BMI said I n its latest report on the Kingdom’s information technology for the first quarter of 2009.

BMI predicts that per-capita IT spend will rise 42 percent to $200 by 2013, with PC penetration also rising, to nearly 30 percent. Saudi Arabia accounts for around 40 percent of IT spending in the Middle East region. Youthful population demographics, a regional economic boom fuelled by high oil prices and a buoyant real estate sector, and specific factors such as the growing popularity of e-banking, will all drive retail growth.

Computer sales including PCs, notebooks and accessories were expected to approach $1.5 billion in 2008, with the segment growing at a CAGR of 10 percent between 2008 and 2013. PC sales growth in 2008 remained strong, despite the global economic headwinds, with more than 500,000 units sold and the stock of installed computers increasing to around 4 million.

PC penetration reached about 23 percent, and should increase to nearly 30 percent by 2013. Several sectors have potential going forward – not only oil and gas but government, education, construction and healthcare. Telecoms liberalization, with new fixed and mobile licenzes, and a big push towards broadband penetration, is expected to drive demand, along with new campaigns for IT in education.

Software BMI anticipates a software market value of $637 million in 2009, up from $570 million million in 2008. The sector should continue to grow at a CAGR of 12 percent over the forecast period.

Saudi Arabia remains the largest market for software solutions in the region, ahead of the UAE. Oil and gas is the largest software vertical purchasing sector, followed by government and telecoms, but there is growing demand for vertical solutions in industries like retail, construction and engineering. Some large contracts are being seen in some non-oil manufacturing sectors such as chemicals and automotive.

With the evolution of the regional economy, more innovation is being seen from many Saudi Arabian companies.

The year 2008 brought a precipitous decline in oil prices, but there was no early sign that the government was planning to cut back on the infrastructure projects that for the past two years have fuelled substantial IT investments in the Kingdom. In 2008 substantial budgets were leveraged for e-government infrastructure development. Manufacturing and trading firms are seeking efficiencies, while demand for advanced IT services such as outsourcing, is expected to show a strong growth trend.

The Saudi Arabian IT services market was worth around $978 million in 2008, and is expected to grow at a CAGR of 13 percent over the 2008-2013 forecast period. In the past two years, high oil prices have driven spending on large IT projects by government as well as in industries such as oil and gas, transport and utilities. Support and maintenance account for around one third of spending on IT services, but the market for more complex services such as outsourcing has grown. The outsourcing opportunity was projected at around $178 million in 2008.

Saudi Arabia’s Internet penetration was around 22.8 percent in 2008, and is projected to rise to 29.8 percent by 2013.

However, the most dramatic growth will be in broadband penetration, which is projected to rise from 6.4 percent last year to 31.2 percent by 2013. By 2012 there will be an estimated 8.9mn broadband users in the Kingdom. Investment in broadband and government initiatives has seen an improvement in e-services development and utilization, which was reflected in the UN’s most recent e-government rankings, in which Saudi Arabia rose 10 places.

In June 2008, Saudi Arabia’s governing Shoura Council approved a draft national strategy for the IT industry which aimed to raise the contribution of the industry to GDP to 20 percent by 2020. The Council issued instructions requiring government bodies to implement e-government programs in line with national policy, and requiring relevant bodies to provide necessary funds for such implementation.

The Kingdom placed “special emphasis” on e-government. The Saudi government has signed off on a $3.1 billion plan to improve the education system. The focus of the plan is to equip schools to keep pace with scientific and technological activities. A separate allocation of SR2.4 billion has been earmarked to pay for training for 400,000 teachers. Providing teachers with computer skills is seen as essential to helping them become familiar with modern developments and changes.

Source:

http://www.zawya.com/Story.cfm/sidZAWYA20090418052738/Saudi%20Arabia%27s%20IT%20Spending%20To%20Rise%20To%20%245%2E6bn%20

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