Changing face of the region’s IT landscape

The Middle East theatre plays host to a diversity of markets that all perform a pivotal role in shaping the overall development of the regional IT channel. That is particularly true of the non-Gulf states, which continue to represent a significant portion of spending.

Egypt and the Maghreb both lay claim to IT markets worth more than US$1 billion a year, while the Turkish technology sector is valued at a colossal US$4 billion, according to research from IDC.

If you count Turkey as a part of the MEA theatre then it can rightly call itself the second largest market in the region, someway behind its US$7.8 billion a year South African counterpart, but still US$1 billion larger than Saudi Arabia.

One of the most intriguing territories in the Middle East is the Levant region. Valued by IDC at US$616m in 2006, the market has been bolstered by ongoing growth in Jordan, but at the same time unsettled by events in Lebanon and Syria during the last 12 months. Jordan bypassed Lebanon as the largest market in the Levant last year, accounting for 38% of total IT spend.

All the evidence points to further growth this year as the implementation of e-government initiatives and demand for technology among the tourism sector ensures the dollars keep rolling in. Speaking at the recent CEO Interact Forum hosted by Dubai Internet City, Jyoti Lalchandani, VP and regional managing director at IDC MEA, said that the telecoms, banking and manufacturing sectors remain the largest spenders on IT, while buoyancy in the Jordanian retail market is partly fuelled by greater availability of credit. "We expect continued IT growth in Jordan thanks to tourism and foreign direct investment from the US," explained Lalchandani.

Yet Jordan's rise only tells half the story in a Levant market still hampered by instability due to the political situation in Lebanon.

In neighbouring Syria, the weakening US dollar and the existence of trade sanctions that have been imposed on the market are also proving destructive. "The dependence on the grey market because of the US sanctions is negatively impacting demand in Syria," explained Lalchandani. According to IDC, the legitimate market for IT products is estimated at just US$165m, a figure that confirms it as the smallest market in the Middle East region.

Meanwhile, the Egyptian channel continues to catch the eye following sustained public sector investment on the back of healthy GDP growth.

Government initiatives to increase PC penetration, coupled with the enormous potential of the SMB sector, means it has become an important focus area for vendors that are looking to extend their presence in the region. Elsewhere in Africa, IDC puts the value of the Maghreb region, encompassing Algeria, Morocco, Tunisia and Libya, at a massive US$1.4 billion a year. This region, along with Nigeria and Kenya, is expected to record annual compound growth rates of 11% to 14% during the next three years as software and services revenues augment the huge sales that are already being registered in the systems and hardware space.

An increase in demand for software and services, without eating into hardware sales, is set to be a prominent feature of the wider MEA market during the coming years.

Lalchandani elaborated: "70% of IT spend in Western Europe is on software and services and the rest is on hardware refreshes and upgrades. It is the opposite in our region. We see the hardware market continuing to grow, especially in the SMB market."

While the hardware market is set to demonstrate its resilience for some time to come, Lalchandani predicts a bright future for firms in the software and services sector. "The regional packaged software market will be worth US$5.4 billion in 2010," he said. "And the services market will grow to US$3 billion."