Business | Technology
IDC slashes its forecast for growth of IT spend in Gulf region in 2009
Current global financial crisis will have an impact, interactions with managers show.
- By Naushad K. Cherrayil, Staff Reporter
- Published: 23:08 December 25, 2008
Dubai: Global research and consultancy firm, International Data Corp (IDC) has slashed its growth forecast for the Gulf's technology spending in 2009 from $15.93 billion to $14.95 billion, a revision of over 6 percentage points due to the current financial crisis, but still expecting a growth of around 11 per cent when compared to $13.4 billion in 2008.
"Our interactions with CIOs and IT managers suggest there is going to be an impact due to the current environment. But the impact is not going to be as severe compared to western markets," noted Jyoti Lalchandani, Vice-President and Regional MD, IDC MEA and Turkey.
He said the first factor is oil price, which stand at below $50, much lower than what we have seen a couple of years before, and the second factor is the financial crisis and exposure of many of our institutions to what is happening.
"Thirdly, we are seeing uncertain times for new emerging sectors like hospitality, tourism and real estate. Re-exports to traditional markets such as Iran, the CIS region and Africa are also documenting significant decline in demand, especially for consumer-related IT products such as PC's and peripherals," he said.
"We have read stories of companies laying off staff and looking at mergers and acquisitions.
Slowdown
"Given the overall environment, there is going to be a slowdown in regional IT spending as lot of decisions have been put on hold. One-third of IT budgets in the Gulf are focused on new projects and new initiatives and these are going to be the hardest hit," he said.
IDC said projects that are nice to have are going to be the hardest hit and projects that must have, just to keep the "lights on", will continue albeit at a much slower rate.
In the UAE, growth for next year is projected at around 13 per cent per cent in October but that is revised to 8-9 per cent at best, in December. Every month IDC is revising its forecast based on discussions with CIOs and IT managers, and monitoring consumer demand across the region.
IT spending, which is growing 2-3 times that of the GDP growth, is going to slow down and IT as share of GDP is around 2.5 per cent.
In the fourth quarter, we have revised our numbers as personal computing, peripherals, packaged software sectors are taking a big hit. Sales cycles are becoming much longer due to the uncertainty.
Financial and banking services have frozen a lot of budgets for new projects as we know that financial and banking services is one of the largest vertical sectors for spending.
"Our assumption is that until the first half of 2010, there is going to be a slowdown and only after that we expect double-digit growth in the region, depending of course on the economic situation and consumer sentiment" he said. The UAE, which is the most mature market in the Gulf, is going to be the worst hit due to the uncertainty while Saudi will weather the storm better as many projects are underway. Qatar may take a hit in real estate growth. Oman, which has seen moderate growth in the last couple of years, will be the only country to have minimal impact on IT spending.
The banking and financial sector will be the worst hit followed by real estate and construction, hospitality and public sector, depending largely on oil prices during 2009. Current uncertainty is going to offer new opportunities like virtualisation, software and services, managed services, outsourcing.
These new elements will drive growth in uncertain times. He said more consolidation is expected in the IT community. Smaller IT services companies and PC businesses will consolidate by the end of next year while small IT shops will disappear.
More from Technology
More from Business
Business Editor's choice
-
‘Wrong Way' Krugman
The source of our economic malfunction lies with government-mandated bank regulations
-
Greek exit could make Eurozone stronger
Departure will show limits of bailouts and allow remaining members to act much more like a unit
-
UAE upholds values of free trade
Recently released statistics confirm an established fact, namely that of the UAE embracing the free trade principle in general and imports in particular
