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Saudi IT services market to reach $2.76bn this year

IDC predicts 13.8% year-on-year growth in services market in 2014

Saudi IT services market to reach $2.76bn this year
Saudi's IT services market is seeing growth driven by large scale infrastructure projects in key verticals.

Saudi Arabia’s IT services market will have generated annual revenue of $2.76bn in 2014, according to predictions by International Data Corporation (IDC). The market grew by 13.8% from $2.42bn in 2013, with growth fuelled by large-scale infrastructure-driven projects across the government, healthcare, education, and transportation verticals.

IDC’s forecast shows that IT services spending in Saudi Arabia is expected to exhibit consistent double-digit growth over the coming five years, expanding at a compound annual growth rate (CAGR) of 12.8% to total $4,438.96 million in 2018. Spending will be driven by infrastructure developments, e-government initiatives, and modernisation drives across verticals, as well as by the increased focus on digitisation and data explosion. The current transformation of telcos into integrated ICT providers will also drive market maturity and facilitate investments in managed and data centre-delivered services.

“Saudi CIOs have begun embracing disruptive technologies like cloud computing, mobility, and Big Data analytics,” said Hamza Naqshbandi, senior manager for IT services at IDC Middle East, Turkey and Africa. “Some organisations are already reaping the benefits associated with these technologies, such as improved operational efficiency, lower operating costs, and enhanced customer relationship management. This uptake will spur additional IT infrastructure mondernisation investments across key verticals like education, healthcare, and transportation over the forecast period, and we expect to see strong demand for various outsourcing services such as hosting infrastructure and managed services.”

The competitive landscape in Saudi Arabia is changing rapidly as the IT services market is becoming more concentrated. The top five service providers accounted for almost 33% of the total IT services spending in 2013. At the same time, end users are becoming more price sensitive as a result of the entry of low-cost offshore service providers to the Saudi market. This is leading to fiercer competition, which will compel providers to improve their integration and project management capabilities and offer superior service-level agreements.

“The Saudi Arabian IT services market is characterised by stiff competition – primarily due to the number and variety of operators/service providers – and price sensitivity,” Naqshbandi said. “Given the lack of formal procurement procedures, relationships are a critical factor in the buying behaviours of customers. For international service providers, global service-delivery capabilities are an advantage, but the establishment of a strong local presence, especially in account management, implementation, and support, is critical for success in Saudi Arabia.”

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