2008-11-25 10:55:07 -
United Arab Emirates Information Technology Report Q4 2008 - a new market research report on http://www.companiesandmarkets.com www.companiesandmarkets.com/Summary-Market-Report/United-Arab-Em ..
Market Overview The UAEs IT market is projected by BMI to reach a value of more than US$4bn by 2012, on the back of investment fuelled by new oil revenues. Despite an anticipated slight easing in economic growth after 2009, total spending on IT products and services should grow at a CAGR of around 11% over the 2008- 2012 forecast
period. Fundamental market drivers include population expansion and the development of the non-oil sector, particularly trade, tourism, and financial services. The federal government has stepped up the pace on e-government implementation, while Dubai and Abu Dhabi lead with their own ambitious projects.
The UAE is unusual in the region in that 80% of its GDP is derived from the non-oil sector. Key non-oil verticals for IT spending include Banking, which is likely to be the single largest industry vertical in terms of IT investments over the forecast period. Real Estate has also been an important source of demand for IT in the construction boom of the past five years, However, construction costs have risen steeply in 2008 and the possibility of a real estate slowdown is therefore a risk factor for our forecast, SMEs will be a key target for hardware vendors. Consumer PC sales were also strong in H108 with some vendors reporting triple-digit revenues growth. Buoyant consumer spending partly reflects a credit binge fuelled by negative real interest rates, and there is therefore a risk that tighter credit availability, or rising inflation, could restrict spending.
Industry Developments The UAEs Strategic Plan provides the framework for implementation of e-government programmes at federal government level. According to government figures, in 2007 about 90% of e-services completion and 50% of services transactions were achieved online. Among other recent initiatives, the UAEs Justice Ministry recently introduced new computer software to facilitate and streamline judicial processes.
Despite this, local government continues to account for around 20% of all IT services spending. Dubai expects to spend anything between US$1.6mn and US$2.2mn per year over the next few years implementing its plan of getting 90% of government services online. Meanwhile, the Abu Dhabi Finance Departments Strategic Plan 2008-2012 identifies twelve priority areas, including priority 10: Enable and maintain state of the art IT technologies to support the future roles and activities of the Department. Competitive Landscape The PC market remains dominated by international players such as HP, Acer and Dell, with the top five brands having more than 50% of the market. The share held by local assemblers continues to dwindle, due in part to their relatively weakness in the growth area of notebooks. Acer, which ranked second in the UAEs PC market last year, reported triple-digit year-on-year growth in Q108. Meanwhile, Dell has established a new central regional distribution hub in Jebel Ali.
IT services are set to be the fastest growing area of the market over the next few years, and vendors are focused on opportunities in the government sector, which accounts for as much as 40% of national IT spending. The Ministry of Governmental Sector Development recently signed a strategic agreement on federal government IT training with Microsoft Gulf. For its part, the UAEs federal government has signed up IBM as a consultant for federal IT initiatives.
Focus: Green IT Green IT is a 2008 IT industry buzzword , with vendors hoping to educate consumers to buy in an environmentally conscious way, and emphasising their green credentials, partly as a competitive differentiator. Many have launched new ranges of environmentally friendly solutions for both offices and households, incorporating features such as lower power requirements and reduced toxicity. Fujitsu- Siemens is among the local leaders in promoting the Green IT concept. This year the company has run a series of green IT business events in the Emirates, and also recently launched its Scaleo Green PC for consumers.
In the UAE, hype about Green IT has generally outpaced the reality of low environmental awareness on the part of consumers and other end-users. However, there are some signs that the concept is now beginning to receive greater consideration in infrastructure and construction project design, which may have implications for IT tenders. The American University in Dubai recently organised a two-day conference on environmental design. Meanwhile, in February 2008, Dubai Ruler Sheihk Mohamed bin Rashid Al Maktoum instigated a Green Seminar to encourage adoption of the green building model in Dubai. While surveys show generally low awareness of environmental issues in relation to IT procurement, there is an upwards trend, and Green IT is likely to account for an increasing share of IT budgets over the next five years.
Hardware The UAEs hardware market is one of the largest in the region, estimated at about US$1.4bn in 2007, up 12% from US$1.2bn in 2006. Much of the growth is being driven by small and medium enterprise spending, particular on mobile computers, which are expected to account for around 60% of sales over the forecast period. Notebooks are also proving popular with the consumer segment, particularly with the introduction of features such as wireless internet PC cards and entertainment features such as HD DVD.
Sales of PC notebooks and accessories are expected to reach more than US$1.2bn in 2008, while the compound annual growth rate (CAGR) for the 2007-2012 period as a whole is expected to be in the region of 9%. Investment in education and e-government, fuelled by new oil revenues, will lead to desktop rollouts in schools, colleges and government offices across the Emirates.
Software BMI estimates that the UAE´s software spending will reach aroundUS$477mn in 2008, representing around 17% of the IT spend. CAGR for spending on packaged software is put at 12% over the 2007-2012 period, with the UAE being of the regions fastest-growing ERP markets. CRM is also set to be a growing area of opportunity. The UAE has one of the regions lowest software piracy rates at just 35%, according to the Business Software Association (BSA). In 2008, the Ministry of the Economy launched a new antipiracy media campaign, and Abu Dhabi authorities also recently co-operated with Microsoft in raids on resellers retailing unlicensed software. BMI predicts plenty of room for growth in the forecast period as numerous untapped sub-sectors still exist. Key verticals include process manufacturing (mainly oil and gas), followed by the finance sector. Other key segments are telecoms and the public sector. During the next five years, in addition to CRM and enterprise resource planning (ERP), high-growth categories will likely include business intelligence, storage and security products.
IT Services BMI expects that the IT services market will reach a value of nearly US$1.2bn by 2012, with outsourcing accounting for an increasingly large portion of up to one-quarter. IT services revenues compound annual growth rate (CAGR) over the 2007-2012 period is expected to be 13%, encouraging vendors to shift their focus away from simply shifting boxes. Services are becoming an increasingly important component of many deployment contracts, as evidenced by recent projects by leading UAE corporations such as Emirates Airlines and Etisalat. Outsourcing is also predicted to be a growing trend, with recent landmark outsourcing deals awarded by entities such as the Abu Dhabi Water and Electricity Authority and civil service departments. Global vendors such as IBM Global Services are competing for this business with local companies such as Injazat Data Systems, which with its good government connections has grown to be a major force in the market, reporting BPO deals with 13 leading private and public organisations.
E-Readiness The UAE is implementing an ID card project which will be a key element underpinning future information society development. The project, supervised by the Emirates Identity Authority (EIDA), aims to and issue the whole UAE population with electronic ID cards. EIDA is creating a population register database and recently opened its 18th registration centre.
Government initiatives, particularly in the area of e-government, have helped to make the UAE leader on many e-society indicators. This was reflected in the most recent World Economic Forum e-readiness rankings, which gave the UAE the highest ranking (29th out of 127 countries) in the region. The country ranked even higher (10th) for e-government.
Overall internet penetration in the UAE was estimated at 43% by the end of 2007, far above the Middle East and North Africa (MENA) average, reflecting the Emirates status as one of the most advanced IT countries in the region. Broadband penetration was around 8.6% and is expected to rise to 22.1% over the forecast period. The Emirates benefits from a good regulatory environment and clear government leadership in leverage IT and promoting its use. In terms of e-government development, several new projects are to be launched this year (see Industry Developments).
