https://arab.news/j8s8p
RIYADH: Information technology spending in the Middle East and North Africa region is set to reach $193.7 billion in 2024, a 5.2 percent increase from the previous 12 months, according to a new report.
In its latest MENA IT Spending forecast, US-based consulting firm Gartner stated that while the outlay in the sector is set to increase, it will be at a slower rate than the 6.6 percent annual rise recorded in 2023.
This comes as tech startups based in the region secured $429 million in funding in the first quarter of the year. Additionally, MENA saw around $1 billion in tech commitments by venture capitals during the first six months of 2024.
Earlier this year, global investment manager Investcorp dedicated $500 million for growth stage tech companies in the region, while venture capital firms Singaporean Golden Gate and UAE’s Polynome Group both dedicated $100 million each for MENA-based tech investments.
Miriam Burt, managing vice president analyst at Gartner, noted that the slowing growth of expenditure in the IT sector is being caused by factors beyond the sector itself.
“While inflation in the region has eased, organizations in the Middle East continue to face challenges due to ongoing uncertainty caused by oil production cuts, downside economic risks linked to regional geopolitical tensions, as well as supply chain disruptions in key shipping routes,” she said.
“As a result, local organizations are becoming more cautious with their IT expenditures,” Burt added.
Data center spend to fall
Data centers have been the focus of spending in recent years. Shutterstock
The report stated that despite experiencing growth in 2023, spending on data center systems is projected to decline by 0.3 percent in 2024, reflecting a shift toward alternative capabilities.
Data center system expenditures are set to drop from $4.82 billion in 2023 to $4.80 billion in 2024.
The systems in data centers include servers, external controller-based storage, and enterprise network equipment.
“This is due to the rise in demand of alternative options such as software-defined storage, hyper-converged infrastructure software, and the ‘storage as a service’ model,” said Burt.
MENA IT services spending is expected to record an increase of 9.6 percent in 2024 to reach $19 billion, up from $17.3 billion last year.
“IT leaders in the MENA region are, in the first instance, spending more on professional and consulting services to prepare their businesses for cloud migration, AI (artificial intelligence), generative AI, and IoT (internet of things) implementations, and secondly, taking advantage of the data monetization opportunities resulting from the convergence of these technologies,” Burt added.
“Security remains a key area for IT services spending, as well as the increasing purchase of products, services, and tools through ‘XaaS’ (Anything-as-a-Service) consumption models – both contributing to the overall growth of this segment,” she added.
Demand drop of new devices
Shutterstock
Device spending is expected to decline by 4.5 percent in 2024 due to uneven demand for newer devices, such as mobile phones, in different countries within the MENA region.
The subsector is set to drop from $28.3 billion recorded in 2023 to $27 billion this year.
Software is set to see the highest growth in 2024, with spending forecasted at $15.2 billion, up from $13.5 billion in the previous 12 months.
Communications services are expected to account for the bulk of 2024’s IT spending, with $127.5 billion in expenditures, up from $120 billion in 2023.
“CIOs (chief information officers) in the MENA region are expected to increase their spending on cloud services. While AI/GenAI has some influence on cloud services spending, it is not expected to have an immediate and significant impact on IT spending levels in MENA in 2024,” said Eyad Tachwali, senior director advisory at Gartner.
“Regional CIOs’ focus today is primarily on everyday lower-cost use cases rather than on costly game-changing AI,” he added.
Furthermore, the report stated that global hyperscalers, which have the ability to offer extensive infrastructure for storage and computing facilities for AI and GenAI, are accelerating investments in in-country data centers, particularly world-class green data centers.
“Some have launched sovereign cloud services tailored to the unique needs of specific Gulf Cooperation Council markets,” Burt said.
Gartner’s IT spending forecast methodology relies heavily on rigorous sales analysis by over a thousand vendors across the entire range of IT products and services.
On a separate note, other analysts state that Saudi Arabia is the fastest-growing IT market in the Middle East, Turkiye, and Africa.
Jyoti Lalchandani, regional managing director of research firm IDC, said wider information and communication technology market spending is expected to reach $37.5 billion by the end of 2024.
The comments were made during the ICT Indicators Forum hosted by the Saudi Ministry of Communication and Information Technology alongside the Saudi Communications, Space, and Technology Commission in Riyadh on April 24.
It was further noted that spending in this area across the Saudi government sector would exceed $752 million by the end of 2024 as innovative technologies become foundational to building an “experience economy.”
“AI, big data analytics, IoT, and cybersecurity spending is poised for tremendous growth and will account for almost one-third of overall IT spending in Saudi Arabia in 2024. Spending on AI in Saudi Arabia will surpass $720 million in 2024, reaching $1.9 billion by 2027 at a CAGR (compound annual growth rate) of 40 percent – half of that will be on interpretative AI,” Lalchandani said.
“We have seen Saudi Arabia emerge as a hub for the cloud,” he added, with spending on public cloud forecasted to surpass $2.4 billion in 2024 and reach $4.7 billion by 2027.
Software-as-a-Service will account for more than 50 percent of the 2024 spending.
IDC further highlighted that spending on cybersecurity alone will surpass the $1 billion mark in 2024 and reach $1.6 billion in 2027.
“I do remember a few years ago, the cybersecurity market was estimated at about $500 million. Today, we’re talking about literally double that. We’re talking about $1 billion in the cybersecurity industry, and to hear it be called the fastest growing market in the region is really a testament to our beloved nation,” Salman Faqeeh, CEO of Cisco Saudi Arabia, said while speaking on a panel during the forum.