Manufacturing sector's investments drive IT growth in Saudi Arabia

Dubai: The growing manufacturing industry in Saudi Arabia is driving IT growth in the Kingdom, said a recent report from the Jeddah Chamber of Commerce and Industry (JCCI).

According to the report, there are approximately 3,986 manufacturing industries in Saudi Arabia with a total investment of 306 billion Saudi riyals.

"Manufacturing in the Gulf region has been investing quite heavily, particularly last year, in ERP solutions and specific applications related to manufacturing and distribution," said Margaret Adams, senior analyst, IT services, Middle East and Africa, IDC, a research house.

She told Gulf News that there is a lot of supply chain management investment. "Consolidation is the major theme across the industries but it has been quiet big in the manufacturing sector.

Adams said that adoption in managed services in the UAE and Saudi Arabia has been rapid and manufacturing is a prime candidate for that kind of adoption. "Manufacturing is important as a large sector, although the only area it would impact would be outsourcing and managed services," she said.

According to Madar Research the Enterprise Resource Planning (ERP) software market in the Gulf Cooperation Council (GCC) will touch $300 million by the end of 2009, as there is a rising demand within the regional enterprise and SMB sectors.

Further, the report estimated that the market will witness a compound average growth rate of 14 per cent in the next five years.

ERP spending in the GCC is expected to rise faster than the projected world average, which is between six per cent and nine per cent.

"We are anticipating healthy growth levels in the IT sector generated by the manufacturing industry," Adams said, adding that the impact will be felt by companies investing largely in infrastructure.

"There will be more investment in services as it is a healthy sector that is maturing."

A study done by the Central Department of Statistics, of the Saudi Ministry of Economy and Planning, showed that the annual value-added achieved by the manufacturing sector rose from 15 billion riyals in 1974 to about 92.6 billion riyals at the end of 2006.

The study revealed that the Saudi manufacturing sector posted an average six per cent annual growth rate over the period, which is considered the highest among the other economic sectors.

The sector's contribution to Saudi Arabia's GDP increased from 4.1 per cent in 1975 to 11.6 per cent at the end of 2006.

Simultaneously, the contribution of the manufacturing industries sector in the non-oil GDP increased from 7.8 per cent in 1975 to 17.3 per cent in 2006.

Research house IDC estimates that Saudi Arabia's IT systems spending will reach $3.7 billion this year.

The Saudi market for technology solutions is expanding and the manufacturing sector is growing remarkably," said Marc Van der Ven, managing director, Sage Software ME, a company that offers leading business management software and services. Sage has started working with Conti-tech, a IT solutions company in Saudi Arabia.

"With the expansion and boom in Saudi Arabia's economy, especially in the manufacturing sector, we have noticed a growing demand for enterprise resource planning solutions." said Prem Prakash, general manager, Conti-tech.