Abu Dhabi, UAEWednesday 26 February 2020

ICT spending in META to rebound in 2020 after four years of decline

A push for digital transformation and innovation by government and private sector entities will drive ICT investments this year

Jyoti Lalchandani, IDC's group vice president, discussing 2020 industry projections in Dubai on Thursday. Courtesy IDC
Jyoti Lalchandani, IDC's group vice president, discussing 2020 industry projections in Dubai on Thursday. Courtesy IDC

Information and communications technology (ICT) spending in the Middle East, Turkey and Africa region is set to grow at a “modest” 2.3 per cent in 2020, after witnessing four straight years of decline, driven by government and corporate sector's push for innovations and digital transformation.

Total ICT spending in the region is expected to reach $212 billion (Dh778bn), which is $5bn higher than last year but still almost $8bn shy of $220bn peak in 2015, according to the latest report by International Data Corporation.

“In 2020, we are projecting [a] slight recovery, but it still lacks the level of 2015,” Jyoti Lalchandani, group vice president and managing director for META at the Massachusetts-based researcher, said.

“Two primary reasons behind this significant contraction are decline in [the] telecoms market and [falling sales of] consumer devices.”

Telecommunication services account for about 60 per cent of total ICT spending in the region, with the remainder going to IT services - both hardware and software.

IDC estimates a dip in revenues for the telecoms industry this year, but spending will grow as they look to widen their customer-base.

Revenue for the fixed-line voice market in 2020 is forecast to slide by 3.5 per cent year-on-year, whereas the mobile voice market will shrink by 1.9 per cent. However, sales of data services are expected to grow by between 6 to 9 per cent.

Despite the headwinds, overall telecom technology spending in the region will grow at a compound annual rate of 5.9 per cent and will rise above $5bn mark in the next two years, IDC said.

Spending on consumer devices in the region, however, will continue to decline. Regional sales of personal computers and tablets will go down by 3.1 per cent, while mobile phones sales will fall by 2.2 per cent. However, IT services and software industry will grow by more than 6 per cent this year, the report noted.

The overall increase in spending will be governed by digital transformation activities and a push for innovation by government and corporate sector entities. Together, they will account for 30 per cent of all IT spending in the region by 2024, up from 18 per cent in 2018.

“There are many factors that are giving us confidence in 2020 …. particularly the public sector [which] is leading the transformation and diversification efforts in the region, especially in the UAE and Saudi Arabia,” said Mr Lalchandani.

Government enterprise IT spending is increasing at a compound annual rate of 5.7 per cent and will top $8bn next year. A thriving start-up ecosystem and a large, young consumer base are also propelling ICT spending, added Mr Lalchandani.

Spending on artificial intelligence will top $600 million in 2023, doubling from $330m in 2018, and allocations for Internet of Things technology will grow six-fold to $17bn.

Many large organisations in the region still haven't started pursuing their digital transformation agenda and their uptake could mean a further increase in ICT spending.

“Only 54 per cent of organisations are currently engaged in digital transformation in META. Almost 15 per cent are planning to do it in future while 4 per cent do not have any such plan,” noted Mr Lalchandani.

At $14bn, South Africa is currently the biggest MENAT IT market, followed by Saudi Arabia ($12.2bn) and the UAE ($8.5bn).

"The digital economy is at a critical tipping point," said IDC's chief research officer Meredith Whalen.

"In just a few short years, IDC forecasts that nearly half of all GDP worldwide will come from products and services offered by digitally-transformed organisations,” she added.

Updated: January 26, 2020 02:34 PM

SHARE

SHARE

Most Popular