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Saudi nationalisation may disrupt IT projects, says IDC

Saudi's nationalisation programme may result in shortages of key IT skills in the short term

IT services companies in Saudi Arabia may face shortages of key skills as the Kingdom clamps down on expatriate workers.
IT services companies in Saudi Arabia may face shortages of key skills as the Kingdom clamps down on expatriate workers.

Saudi Arabia's nationalisation program is likely to disrupt IT service providers in the Kingdom in the short term, according to IDC.

The analyst company has warned that the Nitaqat regulations, which require Saudi companies to hire a certain percentage of local staff, will result in a shortage of skilled staff for service providers that have traditionally relied on expatriate IT professionals.

IDC also said that uncertainty around regulations pertaining to onsite support, and whether support staff will also be covered by Nitaqat regulations, will also create a scarcity of personnel.

Hamza Naqshbandi, senior research analyst for software and IT services at IDC Saudi Arabia, said that there is mnroe pressure on service prioviders to train and hire Saudi nationals more rapidly: "Tier II and III service providers that cannot afford the high costs involved in recruiting and training locals may be adversely affected in the short term."

In a research note, IDC said that it believes "there will be delays in projects, especially large infrastructure-driven mega projects, and existing contracts will face profitability pressures as resource costs go up. However, eventually the national pool of IT talent will grow and IDC expects the market to stabilise in the medium term."

The Saudi market is already seeing growing demand for advanced technologies, including social, mobile, big data analytics and cloud, with many CIOs launching pilot projects in these areas. Concerns around security, staffing and IT project management.

"The overall maturity of the Saudi market is increasing due to demanding, uncompromising, and more aware customers that understand the importance of IT to business growth and stability and, consequently, place ever-increasing pressure on ICT providers to deliver," said Naqshbandi.

"As Saudi customers become more demanding and technologically savvy, service providers need to stay abreast of emerging technologies and global best practices," he added. "Providers also need to engage more closely with customers, especially during long sales cycles, in order position themselves as ‘partners' rather than as ‘suppliers' in what is primarily a relationship-driven market."

Overall, the IT services sector in Saudi showed slower than expected growth in 2012, but still grew by around 11.3%, according to IDC figures. Expansion was largely driven by increased demand for both project-based and support-and-installation-based services.

There was increased competition among the top service providers in the Kingdom, and also from multinational vendors, although Saudi-based companies still dominate the sector. The top ten providers account for over half of the total market.

"The Saudi Arabian IT services market continues to attract global attention with its consistent double-digit growth," Naqshbandi commented. "The IT services landscape in the kingdom is expected to become more concentrated as multinational providers continue to strengthen their positions in key accounts, and as telecom operators broaden their IT offerings and local providers evolve their business models to focus on emerging technologies and up-and-coming sectors such as healthcare, education, and transportation."