Competition heats up in services market

According to a new IDC study, end users in the UAE are moving away from the basics of implementation and support to customisation and outsourcing.

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By  Sarah Gain Published  May 12, 2005

Spending on IT services rose a healthy 12.7% to US$308.5 million in the United Arab Emirates in 2004 according to the findings of a study by IDC. Moreover, the survey revealed, organisations are warming to service models because their IT infrastructure has been growing increasingly complex, necessitating highly trained IT specialists and contractors. As a result, IDC expects the UAE IT services market to grow consistently at between 11% and 12% for the foreseeable future, eventually reaching more than US$535 million in 2009. Competition intensified among IT services vendors in the UAE last year. Local players dominated the scene, constituting the top three vendors and seven of the top ten. The leading vendors included Mideast Data Systems, Emirates Computers, Computer Network Systems, Mercator, and GBM. However, no one vendor controlled the market, with the top ten only accounting for 54.2% of total revenue. "Things have really heated up between the main IT services providers this last year and are going to get hotter this year," says Philip van Heerden. "Government-owned firms have entered the fray, often winning key government contracts and reducing the available business for private vendors. The time is ripe for consolidation." Applications consulting and customisation was the largest single IT services segment in the UAE in 2004. Hardware support and installation was a close second and systems integration third. These foundation markets together made up just over half of the total IT services revenue last year. Of these three, systems integration grew the fastest, with revenue jumping up by more than 18% last year. "But the real barometer of maturity is the outsourcing segment," says van Heerden. "And outsourcing was the sweet spot last year in terms of growth. To take advantage of this, providers will need to re-invent themselves almost continuously, demonstrating clear specializations that appeal to potential clients. While larger firms may aim to be one-stop shops, smaller firms will are better off finding a niche in which they can excel."

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