Technology is reshaping GCC economies – AI is only one part of it

As the GCC nations look ahead to 2025, the technology sector continues to emerge as a vital pillar of economic growth and diversification. The UAE, Saudi Arabia and Qatar are witnessing a remarkable evolution in their tech landscapes, driven by significant investments, the emergence of innovative start-ups, and a commitment to building knowledge-based economies.

Here are some of the key trends shaping this transformation.

Rise of the digital economy

One of the most significant trends is the rapid pace of digitalization taking place across sectors. The digital economy, propelled by increased internet penetration and smartphone usage, is expected to contribute over $30 billion to the region's GDP in 2025. Initiatives such as Saudi Arabia’s Vision 2030 and the UAE’s National Strategy for Artificial Intelligence are paving the way for comprehensive digital frameworks that encourage innovation and entrepreneurship.

Startups and innovation hubs

The GCC is also becoming a hotbed for startups, particularly in tech-driven sectors. The number of tech startups in the region has surged, with the UAE leading the charge. In 2023 alone, UAE-based startups raised over $1 billion in funding, indicating investor confidence in the local tech ecosystem.

We have seen the creation of several innovation hubs in the region, attracting global entrepreneurs and venture capitalists. These ecosystems foster collaboration between startups, established tech companies, and government entities, providing essential resources and support for entrepreneurs.

Cloud revolution

The adoption of cloud computing in the GCC has accelerated dramatically. As businesses increasingly move their operations to the cloud, overall spending on public cloud services across the Middle East, Türkey, and Africa (META) region is expected to grow from $11.5 billion in 2023 to $29.7 billion in 2028.

Indeed, organizations are increasingly recognizing the benefits of cloud solutions — scalability, cost savings, and improved collaboration. This has led to a surge in demand for hybrid cloud solutions, allowing businesses to balance on-premises infrastructure with cloud services.

Several global and local tech giants have facilitated cloud adoption by establishing local data centers. These data centers enhance service delivery and help ensure compliance with regional data sovereignty regulations.

Safeguarding the digital future

Cybersecurity has become a critical focus area as the GCC embraces digital transformation. With increased connectivity comes heightened vulnerability, necessitating robust cybersecurity measures, particularly as the region has witnessed a surge in cyber threats, including ransomware attacks and data breaches. As such, governments are taking proactive steps to enhance cybersecurity.

The UAE implemented its National Cybersecurity Strategy to bolster defenses against cyber threats. Similarly, Saudi Arabia's National Cybersecurity Authority implements regulations and frameworks to secure critical infrastructure.

IDC’s research indicates that organizations are increasingly investing in advanced cybersecurity solutions such as threat intelligence platforms and AI-driven security systems. Accordingly, the market for cybersecurity in the META region is projected to expand at a five-year compound annual growth rate of 11.2% to total $11.06 billion in 2028.

Connecting the future

The IoT landscape in the GCC is rapidly evolving, with an increasing number of devices connected to the internet. This connectivity is transforming industries, enabling smarter cities, and enhancing operational efficiency.

The region is investing heavily in innovative city projects, integrating IoT technologies to improve urban living. IoT is also revolutionizing multiple industries, such as manufacturing, logistics, and healthcare. In manufacturing, IoT devices enhance predictive maintenance, reduce downtime, and improve overall efficiency. In healthcare, remote monitoring devices enable continuous patient care.

Focus on AI

AI is at the forefront of the GCC’s tech evolution. Governments in the region are investing heavily in AI research and development. AI applications are increasingly being integrated into various sectors, from healthcare to finance, improving efficiency and service delivery.

In healthcare, AI-powered diagnostics and telemedicine platforms are revolutionizing patient care, while in finance, AI algorithms are leading to improvements in fraud detection and customer service.

Sustainability and green tech

As the GCC nations prioritize sustainability, there is a growing emphasis on green technologies. Initiatives like Saudi Arabia’s Neom project aim to create sustainable urban environments powered by renewable energy and innovative technologies. The region is increasingly investing in solar and wind energy projects, with the UAE leading the way in solar energy production.

Tech companies are responding to this shift by developing sustainable solutions. From electric vehicles to energy-efficient systems, the tech sector is aligning itself with global sustainability goals.

Outlook

Despite the promising trends, the GCC technology industry faces several challenges, including regulatory hurdles and a shortage of skilled labor. To sustain growth, governments must continue to enhance their regulatory frameworks and invest in education and workforce training programs.

Looking ahead, the GCC tech landscape is poised for further expansion. With continued investment in emerging technologies, a vibrant start-up ecosystem, and a focus on sustainability, the region is well positioned to become a global technology hub.