Changing priorities

Spending on enterprise application software in the United Arab Emirates

Tags: Economic crisisEconomic recoveryIDC Middle East and AfricaJordanKuwaitSaudi ArabiaUnited Arab Emirates
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Changing priorities Ranjit Rajan, Senior Research Manager - Software, IDC Middle East, Turkey & Africa.
By  Ranjit Rajan Published  December 29, 2009

Enterprises in the UAE, as in most of the Gulf region, have traditionally relied on teams of internal IT personnel to conceptualise and build software applications that automate business functions such as accounting, inventory management, procurement, distribution, project management and others. This was done often on a reactive basis to cater to immediate needs of individual departments, leading to a plethora of disparate applications running across the organisation. In many cases, some of the critical functions, even those related to financial management and budgeting, continued to be performed using very basic IT tools such as spreadsheets. Over a period of time, these practices led to islands of information often incompatible with each other and extremely difficult to consolidate and scale.

Over the past few years, unprecedented growth in business volume, increased pressure to integrate with global value chains and access new markets and customers have increased the need for streamlining and automating processes and integration of these "islands" and presentation of enterprise-wide views of information. During this period, most large enterprises and many mid and small sized enterprises began to seriously evaluate and implement enterprise-wide packaged software applications such as enterprise resource planning (ERP), customer relationship management (CRM) and supply chain management (SCM) applications. As a result of this, the spending on packaged enterprise application software in the UAE, in terms of software license and maintenance, reached $120 Million in 2008, a growth of over 110% from 2005, positioning UAE as the second largest market in the Gulf, only behind Saudi Arabia.

The economic downturn that began in the last quarter of 2008 has forced IT heads in enterprises to downsize their IT budgets and re-evaluate their IT spending priorities. As a result, some of the large ERP and CRM projects have been put on hold, while some others have been cancelled. Implementation and maintenance contracts with application vendors and system integrators are being renegotiated in many instances. This has been particularly true in the case of small and medium businesses, some of who still consider IT to be a cost-center and are often quick to cut IT budgets in a downturn.

Industries such as real estate, construction, retail and financial services that were more severely impacted than others have, understandably, been more tentative with their enterprise applications spending. Government organisations, oil & gas, telecommunication, utility and financial services companies that typically plan their IT procurement over longer time horizons have continued with their spending, although cautiously.

Some large enterprises that have basic ERP systems in place, have begun to focus on spending on applications that help them leverage enterprise data to support regulation and more efficient decision-making at all levels. Such applications include business analytics, performance management and business intelligence applications. Globally, the economic downturn has increased pressure on companies to comply with industry and government regulations, especially those in sectors such as banking and financial services. Information made available through IT systems, especially enterprise-wide business applications is crucial for companies in their efforts to adhere to regulations.

As we come to the close of 2009, IDC believes that the economic downturn has had a severe impact on the spending on enterprise applications in the UAE this year and we expect the spending to slow down significantly but still show a low growth of about 3% from 2008.

Note: For further information on the enterprise application software markets in the UAE, the Gulf and the wider Middle East & North Africa region, please refer to IDC's recently published "Arab Middle East and North Africa Enterprise Application Software 2009-2013 Forecast and 2008 Vendor Shares" report which is available for purchase on www.idc.com or www.idc-cema.com

2811 days ago
Shiv

Hi, Brilliant work! Ranjith is an expert in his field and this research report is a flavour of his deep understanding of the Enterprie market he has. I truly appreciate the value he and his team at IDC are bringing to numerous ERP/BI/CRM solution providers who are in need of such well researched reports to realign their business strategies. Keep up the good work..

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