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ICT spending in UAE to be flat this year

But the market is expected to grow at an annual rate of 5% over next five years

Gulf News

Dubai: Information and communications technology (ICT) spending in the UAE is forecast to reach $16 billion (Dh58.7 billion) this year compared to $15.9 billion last year, a research firm told Gulf News.

“The oil prices have had an impact on ICT spending with governments and organisations prioritising projects and spending only on projects that are critical or that will support process optimisation/transformation. The weak consumer confidence has impacted sectors such as smartphones and PCs,” said Jyoti Lalchandani, vice-president and regional managing director for Middle East, Africa and Turkey at International Data Corporation (IDC).

He said that software and services will perform better than primary IT markets since organisations are seeking solutions around process optimisation and automation. Due to the optimised budgets, this has fuelled the demand for outsourcing and managed services across major sectors.

IT services sector will grow the fastest this year with a year-on-year growth rate of 8.9 per cent, followed by packages software by 5.6 per cent, telecom services by 1.5 per cent while hardware is showing a negative growth of 6.7 per cent.

Optimisation and automation

Telecom services, which include fixed and mobile telecom services, will be the largest overall spending category at 51 per cent, followed by hardware at 27 per cent, IT services at 15 per cent and packaged software at seven per cent.

Lalchandani said that organisations are spending on solutions that allow for optimisation and automation. Essentially look for application workloads that streamline processes. Seek “software-defined” solutions to manage infrastructure needs and cloud services offerings for non-core applications.

“Transformation projects within BFSI (banking, financial services and insurance), retail, health care and transportation are fuelling uptake of solutions around cloud, big data and cognitive systems. Projects around physical and information security are also driving spend,” he said.

The UAE IT market is expected to grow at an annual rate of five per cent over the next five years.

He said the run-up to Expo 2020 in Dubai will see large scale innovation projects come to the forefront across all sectors. Future recovery around oil prices or improved stability will drive growth for the IT market.

“UAE is one of the few countries in the Middle East embracing digital transformation with plan to adopt technologies such as cognitive, robotics, augmented reality and virtual reality,” he said.

Customer experience

He urged organisations to boost customer’s confidence on services and gain higher wallet share. Most of the IT projects are either around optimising existing service delivery or around service innovation and customer experience (be it internal or external).

The government of Dubai is also investing heavily in innovative solutions that will strengthen Dubai’s Smart Cities vision. The government is also promoting the incubation of innovation by encouraging starts ups even putting across directive such as Open Data which fuels innovation and supporting research into concepts such as blockchain.

He said the challenges the CEOs and CIOs will be facing will be around skills for new technologies. Also organisations will need to build more dynamic security and business continuity strategies that address these new technologies.

“Budgets are a concern for sure. Spending has to be justified and accounted for by CIOs,” he said.

Reduce spending

Lalchandani said that cloud computing will play a critical role in terms of reducing spend but also supporting innovation around big data, internet of things and smart cities overall. Cloud computing will support organisations realise the ambition of being to access services anytime and anywhere.

“Nearly all sectors are embracing cloud, with certain sectors utilising more than the others. In certain sectors, government regulations tend to curb the move to cloud due to data regulations. The adoption of cloud will require public sector, private sector and vendor community to set up properly defined data regulations,” he said.

Factbox: IT trends

• Increased spending on cloud services for around SaaS and IaaS

• Demand for outsourcing and managed services

• Uptake of IoT is rising across transportation, utilities and smart cities projects

• Demand for security solutions

• Organisations around sectors such as telecommunication, transportation, government and retail are leveraging big data solutions for improved decision making and ensuring real time response to customers

• Infrastructure spend is around converged solutions

• Demand for innovation accelerators to grow around cognitive, IoT, 3D printing and AR/VR