IT services to hit $5.2b in ME

The IT (information technology) services market in the Middle East is expected to record a double-digit growth to $5.2 billion in 2012, compared to $3.6 billion in 2011, finds a recent Dubai Chamber of Commerce and Industry study.

Released on the occasion of the Gitex week, the study examines some of the major trends in the IT services market in the region, namely the increased adoption of project-based IT services, increasing awareness about cloud computing, emergence of local vendors in IT services market and growth in outsourcing of IT services.

The major growth driver for the IT services market in the region is the government support for IT initiatives. Several regional governments such as Saudi Arabia, the UAE, and Egypt have taken initiatives to implement e-governance in offices, schools, and colleges, which is driving the growth of the market. Another major growth driver is the increase in the demand for IT services because of the rapid growth of the SME segment in the Middle East.

The IT services market in the Middle East has continued to grow since the economic recession of 2008. Large corporations, small- and medium-sized enterprises (SMEs), and government organisations are the major customer segments of IT services in the region.

Key markets in the Mena in 2011 were Saudi Arabia ($1.5 billion) and the UAE ($1 billion). Combined, the two countries accounted for nearly 70 per cent of all IT services spending in the Mena. Other important markets include Egypt and Kuwait, accounting for $50 million in spending, approximately 15 per cent of the Mena market.

According to analysts, the IT services are becoming more prominent in the Middle East, their adoption is also increasing in the region as they help to significantly reduce the overall costs of an organisation.

Currently, the market is witnessing certain trends, which suggest that the IT services market in the Middle East will grow more quickly in the coming years.

The increased adoption of project-based IT services including customised software development, IT consulting, application development and maintenance, project-based ERP and CRM implementation, and system integration services by the public sector and large corporations have been the major trend setters in the IT services market in the region.

The study further states that project-based IT services enable efficient integration of IT software and hardware to maximise business benefits and align the IT infrastructure according to the requirements of a project. The public sector, large corporations, and SMEs are also becoming aware of the benefits by integrating cloud computing in their IT infrastructure. The advantages of cloud-based services such as scalability and cost-effectiveness have prompted government and private organisations to integrate their in-house IT infrastructure with cloud-based services. The study also informs that some global IT service vendors have joined with local players in the Middle East while large corporations from the oil, manufacturing, and communications sectors have started outsourcing IT services to vendors in the sector to leverage cost benefits and IT expertise.

The outsourcing of IT services to the Middle East was pioneered by the Banking, Financial Services and Insurance (BFSI) sector. Now, governments are also taking positive steps for the protection of intellectual property rights, which has increased the confidence of large corporations in outsourcing IT services.

The study states that outsourcing of IT services helps to reduce the product development lifecycle and allows the rapid introduction of products to the market. Thus, the growth in outsourcing is likely to continue with an increased penetration rate in the IT services market in the Middle East.

Still, the IT services market in the region faces certain challenges including the lack of qualified IT professionals as well as the increase in regulations since the economic recession of 2008, which has restricted the growth of the offshore IT services market in the Middle East.

Other risks to IT in the region include regulatory hurdles. Software can affect privacy and the legality of data sharing which cross-cut laws. Further, in places where there is inadequate telecommunication infrastructure it is challenging to roll out data-centric high-end IT services, informs the study.

Cost-effective solutions

Most IT solutions are relatively cost-effective, scalable and are reliable. In business terms this means that organisations that are early-adopters have the opportunity to become more cost effective quicker and increase their profit margins. This also means that there will be increased competition to deliver better services among IT vendors and firms alike.

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