Diversification fuels IT spending

Economic diversification and various e-government initiatives will drive the IT markets of the region, with finance, communications and manufacturing verticals investing heavily in IT, as they fight to increase their customer base and streamline operations.

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By  Angela Prasad Published  March 13, 2005

Spending on IT in the Gulf States (Saudi Arabia, the United Arab Emirates, Kuwait, Oman, Bahrain, and Qatar) exceeded US$4.08 billion in 2004. Economic diversification and various e-government initiatives will drive the IT markets of the region, with finance, communications and manufacturing verticals investing heavily in IT, as they fight to increase their customer base and streamline operations, says global research firm IDC. By 2008, IT spending in the region should top US$5.85 billion. “Governments are paramount to IT spending in almost all sectors in the Gulf States,” says Philip van Heerden, senior analyst for IDC Middle East and North Africa. “They have opened up an exciting era in terms of IT through their diversification and privatisation initiatives. Officials are insisting on state-of-the-art hardware and software systems and solutions that will cater to their increasingly sophisticated needs. Nevertheless, although there is considerable IT diversity across the region and in different verticals, hardware will still represent the lion's share of spending over the next few years.” The country with the largest population, Saudi Arabia, accounts for around 50% of IT spending and should continue to dominate spending for the foreseeable future. At approximately 30%, the UAE came in second, largely due to the ongoing development of its economic zones, like the Dubai Internet City. In both markets, the finance, government, and communications verticals are expected to lead spending on IT over the next few years. While retail and wholesale will be important in the UAE, oil and gas will continue to dominate in Saudi Arabia. “The spike in infrastructure and systems in the two countries will create a need for IT services and IDC expects it to be one of the fastest growing technology segments in the two countries and across the region as whole,” says van Heerden. The rise of the finance sector in these two countries reflects a broader trend across the region. According to IDC, banks in the Gulf will represent the largest single vertical in terms of overall IT investments over the next five years. The government will be a close number two, as it has a major influence on other sectors that have not yet been or have only been partially privatised. Process manufacturing will rank third, as it is widely viewed as key to both economic diversification and the introduction of free-market forces through privatisation.

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