Better for Less

Margaret Adam of IDC looks at the realities facing IT service providers in the UAE

Tags: IDC Middle East and AfricaOutsourcingUnited Arab Emirates
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Better for Less (IDC, 2009)
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By  Margaret Adam Published  December 16, 2009

Historically, the UAE has been characterized by massive investment in IT infrastructure and a high propensity to in-source IT services.

Whilst the IT services market in the UAE has shown strong year on year growth - growing 26.4% in 2006 to 2007 and growing 24.5% in 2007 to 2008 - the vast majority of clients still prefer to manage the majority of their infrastructure in house.

In comparison to more mature IT markets in the MEA region, the contribution of IT services to the total IT market in the UAE is still relatively small. For example, in South Africa, IT services contributed 35% to the total IT market in 2008, whilst in the UAE, its contribution was only 20.4%.

Up until very recently there were also very few IT services focused providers, with many of those that did exist providing ‘bodyshop' or ‘labour sourcing' services rather than structured, contract driven professional services.

However, the pace of investment (historically), increasing complexity of infrastructure and increasing pressure on resources has resulted in more and more UAE based companies starting to look to IT service providers to provide cost effective but high quality services to alleviate some of these pressures.

The days of hyper-growth in the UAE have come to an abrupt end. Not only are clients going to be more careful in terms of their IT investments but are also likely to become more demanding of their service providers, insisting on a much higher quality of service than in the past.

In fairness, most IT services providers in the UAE have also faced the challenges of growing too fast and will now need to look at ways to increase efficiency, optimize resources, and streamline services portfolios in order to remain competitive.

As illustrated in the figure, it is clear that the most common grievances UAE organizations have with their IT services providers are quality of service, inflexibility, and inability to meet deadlines.

As competition heats up, service providers will have to prove their ability to add value and justify service charges or face the inevitable pressure to compete purely on price.

IT services providers who are able to streamline processes and deliver innovative, comprehensive, and flexible high-quality services while remaining profitable should be able to take advantage of the increasing appetite for third-party services in the UAE.

However, to secure new business, these providers will need to sell to both IT heads and financial decision makers, which will require a sales discussion that is less about bits and bytes and more about dollars and common sense.

Whilst IT vendors and providers have consistently ‘marketed' topics such as ROI and TCO, real pressure is going to be put on them to prove these concepts in real time and in a local context.

This view is supported by research conducted by IDC in Q1 2009, where return on IT investments was ranked second only to the current economic slowdown in terms of current business concerns in the UAE.

To capitalize on the increasing importance of IT to business operations, IT providers must extend their influence beyond the IT room and into the boardroom.

IDC believes that, in the current negative economic climate, the ability to align business and IT goals will become increasingly important, and pressure will be put on IT services providers to better support this alignment.

Margaret Adam is Research Manager - IT Services (ITS), IDC - MEA (Middle East, Turkey & Africa)

Note:  The information provided from this article has been extracted from IDC's "United Arab Emirates IT Services 2009-2013 Forecast and 2008 Analysis" report which is available for purchase on www.idc.com or www.idc-cema.com.

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