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Saudi IT services market ready to boom

Multinationals are beginning to populate the market, increase competition

Saudi IT services market ready to boom
Competition in the IT services sector in Saudi Arabia is set to boom, according to the IDC.

The top 10 service providers in the IT services market in Saudi Arabia accounted for 52.7% of the total IT services market in 2010, according to IDC.

This is less than the 60% the top 10 garnered in 2009, which reflects the rapidly increasing competition in the Saudi IT services market.

The top 20 service providers accounted for 68.6% of the market in 2010, down 9 percentage points from 2009.

The majority of the top 20 players are local companies that are headquartered in Saudi Arabia and owned by Saudi citizens, but there is increasing competition from multinational vendors expanding their presence in the kingdom.

The IT services market grew approximately 14% in 2011, but competitive pressures are eroding market shares of many established players.
The IDC expects market competition to intensify further over the next few years, as multinational companies, including large Indian systems integrators, look to tap the growing IT services market in the kingdom.

According to the IDC, multinationals could be looking for acquisitions, joint-ventures or partnership models in Saudi Arabia, due to their large cash reserves and falling margins from their established geographic segments in North America and Europe.

Local telecom operators, faced with slowing growth in their core business, are also looking at IT services to widen their revenue sources, while leveraging their existing networks, and capitalising on their previous experience of offering services to a wide variety of customer base.

As they do this, they will begin to emerge as a unified point of contact for organisations' communication and IT needs - a favorable situation for both parties, according to the IDC.
New services delivery, such as cloud, will further increase competitive pressures by shifting the market differentiators from relationships and on-the-ground staff to cost and quality of service.

"The level of competition is expected to become even more intense as the kingdom attracts greater attention on the back of robust oil revenues, and increasing infrastructure and social spending," says Sony John, senior research analyst, IT Services, for IDC MEA. "Progressive vendors will differentiate themselves by matching expectations and fulfilling SLAs, while looking to ease customers into higher-value services and emerging delivery models by marketing strong value propositions, presenting convincing business cases, piloting implementations, implementing transition plans and support capabilities, and sharing some of the customer's risks through innovative deal planning."

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