According to a recent study from IDC, IT services spending in UAE will expand by more than 15% year-on-year in 2007, after an almost 23% boost last year to nearly $508m.
While standard installation and support services still make up the largest chunk of the IT services market, the increased adoption of outsourcing and consulting services point to more strategic IT decision-making within the region and are a clear sign of maturation within the IT services sector.
“We’re entering a new era and vendors will need to change tactics to take advantage of it,” says Margaret Adam, Senior IT Services Analyst for IDC MEA. “IT services providers should streamline their operations and focus on strategic alliances, developing a pool of highly skilled individuals who can educate customers to the benefits of technology to their business.”
The type of services most in demand was hardware and software support and installation, accounting for a third of total market value, followed by systems integration with 26.1% share, and customization services with 16.3%. The combined outsourcing category comprised 16.0% share of the UAE IT services market last year, having grown an impressive 28.2% year-on-year. IS Consulting also showed significant gains, skyrocketing 88.6% in 2006, albeit from a relatively small base.
The top three players on the UAE IT services market in 2006 were MDS UAE, Emirates Computers, and Injazat, which together garnered less than a quarter of total revenue.
On the demand side, government contracts played a dominant role, responsible for 26.5% of total services spending. Banking followed with 13.1% share, and the telecommunications sector was the third largest with 11.1% of total IT services expenditure in 2006. In the coming years, these three sectors as well as construction, and oil and gas should provide the most opportunities.
“The small and medium-sized enterprise segment offers a significant opportunity for IT services providers,” said Barti Rajan, Research Analyst for IT Services, IDC UAE. “SMEs are beginning to recognize that purchasing external services is an alternative to trying to find affordable, skilled IT staff.”
IDC expects the IT services market in the UAE to increase at an annual average rate of 13.7% over the next five years as the federal and local governments pursue their economic development strategies, key sectors continue to expand rapidly, and demand shifts towards outsourcing business functions, combined with investments in infrastructure like storage, security, and ERP.
IDC’s UAE IT Services 2007-2011 Forecast and 2006 Vendor Shares (IDC #ZS08P) presents the IT services industry in the United Arab Emirates in 2006 and forecasts expenditure on IT services through 2011. The study provides market size information, vendor market shares, and revenues broken down by IT services categories and vertical markets. The study presents profiles of the top ten IT services providers including their IT services portfolio, their presence in individual vertical markets, and their largest contracts in 2006.
Tuesday, November 27- 2007 @ 16:44 UAE local time (GMT+4) Replication or redistribution in whole or in part is expressly prohibited without the prior written consent of Mediaquest FZ LLC.