On the rebound

Finally, some hard data on how the Middle East IT market is bearing up

Tags: EgyptIDC Middle East and AfricaSaudi ArabiaUnited Arab Emirates
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By  Andrew Seymour Published  January 24, 2010

Attempting to calculate where the IT sector is at and in which direction it is heading remains a daunting task for even the most well-informed market expert these days.

Yet it is difficult to remember a time when the entire channel community has been so desperate for information that might reveal when the market will bounce back.

One organisation with a crystal ball larger than most is IDC, and ahead of its CIO summit in Dubai this week the analyst firm held a press conference to share its outlook on the state of the regional market as it stands right now.

Only time will tell whether its predictions turn out to be wholly accurate or not, but given the general scarcity of market data on the regional IT sector its views undoubtedly provide a valuable insight into how the bigger picture appears to look.

So, without further ado, here's a rundown on the numbers that matter...     

First off, let's deal with the painful bit: 2009. Now, you don't need to be told that the past year has been the most turbulent the region has ever known, but it is still useful to learn just how dramatically each market has been affected by what has gone on.

As a headline figure to get us on our way, IDC believes overall IT spend in the Middle East and Africa is likely to have dropped around 5% year-on-year to US$44 billion once its final bit of number crunching has been done.

What does that translate as in volume terms? Well, it means that about US$3 billion of IT sales were shaved off the market compared to 2008 - not something that can be dismissed lightly when you consider how the fast the market had been growing.

IDC is still finalising fourth quarter numbers for each country, but initial estimates suggest that annual IT spend in the UAE slumped 15% year-on-year to around US$4.1 billion during 2009, making the UAE the worst hit of all the regional markets.

Elsewhere in the Gulf, the Qatari and Kuwaiti IT markets contracted 4% and 6% respectively, while Saudi Arabia bucked the trend by squeezing out 2.5% growth, a figure that reinforces why vendors have been so eager to sharpen their focus on the country.

Taking a trip northwards, Egypt and the other North African markets appear to have fared better than the Gulf in general, experiencing a decrease in year-on-year sales of just 3.5% and 2% respectively.

But what about the question the channel really wants a reply to: will 2010 bring an improvement in fortunes?

According to IDC, the answer is a resounding "yes". In fact, it even goes as far as predicting a "big recovery", as businesses begin to release the purse strings and consumer sentiment picks up.

Saudi Arabia looks set to maintain its momentum with anticipated growth of 14% in 2010, underlining its position as the largest market in the Gulf and the second largest market in the entire MEA region behind South Africa.

Kuwait is predicted to enjoy a 13% improvement over last year's numbers, while Qatar could spike 22% due to some large energy projects that are in the pipeline. Egypt and North Africa, meanwhile, are expected to increase 7.5% and 12% respectively, capping a speedy recovery after last year's difficulties.

Meanwhile, the UAE market, which all vendors and regional distributors are keeping an anxious eye on given its significance to the region as a whole, is slated to register a 12% rise in IT spend having apparently reached the bottom in 2009.

However, even 12% growth wouldn't signal the market's complete recovery due to the extent at which IT expenditure fell last year. It will actually take until 2011 before the UAE market is back to anything like pre-global recession levels, according to IDC.

IDC analysts point to a number of factors that suggest the regional market is on the road to recovery, not least improving consumer sentiment, a robust public sector, the prominence of regulatory issues that will drive IT investment and an anticipated pick-up in spending among banks and financial services companies.

So how does the Middle East stand in comparison to other territories? Pretty well actually, because the region's markets are recovering almost as quickly as they tailed off.

MEA sales receded 5% last year, but are due to increase 11% this year, whereas Western Europe, for example, is poised to grow just 1% this year despite only falling 4% in 2009.

In fact, only Central and Eastern Europe - which plummeted a staggering 20% last year but should grow 9% in 2010 - is expected to see a more emphatic turnaround in fortunes and even then it won't be enough to set the market back to the level it was before the crisis.

Furthermore, the MEA region represented 6% of worldwide IT spending last year and 17% of net new spending - the latter statistic putting it ahead of every region apart from Asia-Pacific and North America.

IT spending as a share of GDP in several of the region's larger markets is already on a par with what could be considered some of the world's more established markets, according to IDC, while IT spending per capita in markets such as the UAE is US$700 even without re-exports factored in, which is far ahead of most emerging economies.

At this early stage of the year, IDC claims it is still exercising "cautious optimism" about how 2010 will turn out. Whether you take that as a disclaimer or not, it seems there is enough evidence to suggest the much-awaited revival is gradually getting underway.

Middle East IT market at a glance

Middle East & Africa: Sales down 5% last year, tipped to grow 11% in 2010

UAE: Fell 15% last year, poised to grow 12% in 2010

Saudi Arabia: Grew 2.5% last year, will grow another 14% in 2010

Qatar: Down 4% last year, anticipated growth of 22% this year

Kuwait: Dropped 6% last year, slated to grow 13% in 2010

Turkey: Retracted 4% last year, should rise 12% this year

North Africa: Down 2% last year, projected to grow 12% in 2010

Egypt: Decreased 3.5% last year, should increase 7.5% this year

Rest of MEA: Down 4% last year, expected to grow 13% in 2010

(Source: IDC)

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