x Abu Dhabi, UAEMonday 24 July 2017

Investing in IT will push region ahead

An opportunity for the Middle East to advance has opened up with the slowing of information technology spending in the West during the downturn.

IT companies such as the networking giant Cisco are keen to provide the region with the next generation of technology infrastructure.
IT companies such as the networking giant Cisco are keen to provide the region with the next generation of technology infrastructure.

At a time when IT investment is slowing in western economies such as those in Europe, it is rising rapidly in the Middle East. This offers countries such as the UAE an opportunity to overtake western countries in economic and social development.

According to Forrester Research's US and Global IT Market Outlook 2010 Q2, this year's global investment in IT will total about US$2.5 trillion (Dh9.18tn), with the Middle East accounting for an increasing share. Sclerotic economic performance in Europe, the impact of the global financial crisis on the UK, Germany, the Netherlands and Scandinavia, the bursting of the housing bubble in the UK, Spain and Ireland and the Greek debt crisis have hit Europe's economy hard and reduced future IT spending. Even the US is now falling behind the Middle East in terms of its IT investment growth rate.

"Western and central Europe will contain the slowest growing regional ICT," says Andrew Bartels, an analyst at Forrester, referring to information and communications technologies. Mr Bartels predicts the Middle Eastern IT market will see average growth of 10.5 per cent this year, with the US at 9.9 per cent and western and central European investment remaining flat since last year. "I think there is an opportunity for Middle Eastern countries such as the UAE to leapfrog some other more developed western economies," says Kevin White, the consulting director for the MENA region at the research company Ovum. "If the substantial investment being made at ground level were joined up with increasingly modern telecoms infrastructure and new technologies such as smart cards and Dubai's WiMax enabled Metro, progress could be remarkable over the coming years.

"Saudi is the biggest IT market. According to our figures, the next largest is the UAE. But I would argue that Egypt may be accelerating even faster than the UAE. There is a bigger ICT universe in Egypt than in the Emirates as a result of government initiatives and centralised IT investment." According to Ovum, the IT services market in the UAE will grow from about $755 million this year to $1.28bn in 2014, with Saudi Arabia's investment increasing from $1.94bn this year to $2.94bn in 2014.

IT companies such as the networking giant Cisco are keen to provide the region with the next generation of technology infrastructure. Cisco and Abu Dhabi Systems & Information Centre, the information and communications arm of the Abu Dhabi Government, have signed an agreement to help transform Abu Dhabi into "a sustainable, knowledge-based, connected emirate". Cisco believes that videoconferencing will be a key part of the UAE's future technological infrastructure, although the networking company is reluctant to reveal details of Abu Dhabi's modernisation programme.

According to Wael Abdulal, the collaboration manager at Cisco: "The deal signed with Abu Dhabi Government was not specific to a product. It is about connecting communities, and videoconferencing is a key component of connecting people." He outlines the ways in which videoconferencing could benefit the UAE: "We are working with the Government in the connected community initiative, working with connected health care, working with the schools, the university for the connected education initiative together with other initiatives. Government entities, schools, universities, hospitals, clinics and other services can now all talk among each other."

Cisco has more or less pioneered the technology of "immersive" videoconferencing, which incorporates the technology into the walls of a meeting room in an attempt to create the appearance that people in other locations are present. "The distance between Abu Dhabi and Dubai is now just a few metres. The distance between Abu Dhabi and the rest of the world is just a few metres. What we are seeing is just the tip of the iceberg when talking about productivity. We would need to multiply productivity when those rooms in the UAE are connected to global exchanges. The world would become much closer," Mr Abdulal says.

He adds that Cisco will use the UAE as a launch pad for the region and intends to "take what we are doing in the UAE and apply to the GCC". Mr Bartels says some segments of the Middle Eastern IT sector will grow faster than others. "Software will see the fastest growth, driven by business and government investments to catch up with the last generation of applications and analytics. The strong growth in software investment will also drive good growth in IT consulting and systems integration services."

He adds a caveat: "Because capital investment in computers and communications equipment was not cut as much as in the developed countries with their financial crises, there is less rebound in these categories, so growth will be more moderate." But according to a survey of small and medium enterprises (SMEs) in the Middle East conducted by Ovum, there is a growing market potential for 21st-century technologies such as videoconferencing among such businesses.

"There is significant interest in videoconferencing among SME telecoms managers in the UAE. Few enterprises use videoconferencing, but our research shows that telecoms managers expect this to increase," Ovum reports. The survey showed that while only 8 per cent of SMEs in the UAE were using videoconferencing last year, 41 per cent are expected to have adopted it by the end of next year. Analysts say the central pillar supporting the Middle East's IT growth and the roll-out of services such as videoconferencing is the region's telecoms infrastructure.

And to fund telecoms development, operators need to be convinced there is healthy commercial demand for new services. Ovum believes the evidence suggests there is enough demand among a wide range of organisations to justify increased investment by the region's telecoms operators. "Almost a quarter of SMEs surveyed agreed strongly that investing in the latest telecoms technologies will make them more successful," Ovum reports.

"This is reassuring for service providers as they invest in new services during this time of economic uncertainty."