Dubai: Businesses in the UAE and the Gulf are still spending heavily on their technology needs this year, but you would need to look elsewhere to confirm it. In other words, check out what these businesses had going in the ‘cloud’.
That’s right, cloud is where the tech spending was most visible, with storing and managing organisational data becoming the most pressing need for organisations. And keeping them safe too.
This is also the reason why it seemed that IT spending by corporates was not happening at the same levels as in 2020-21, when the need for remote working forced businesses of all sizes to go in for immediate upgrades to support the transition.
“Spending by corporates is on the rise, moving more to cloud-based opex (operating expenditure) rather than traditional capex (capital expenditure) models,” said Victoria Mendes, Research Manager for Data & Analytics (META) at the consultancy IDC.
We do not expect a lag as there is a mere shift in the spend from traditional to cloud, and we expect the tech spend from corporates to be on par, if not surpass 2019 levels.
So, it means less of the heavy spending on servers and costly upgrades to their IT systems - unless they are absolutely necessary. The other category that keeps getting the sign-offs from businesses is cyber security.
And tech industry sources say 2023 has all the makings for another solid year in spending. “In the UAE, government organisations are far out in front in making these investments and upgrades necessary for the ‘smart everything’,” said the general manager of an IT services company in Dubai. “The same can be said only for the biggest private companies here - there’s so much that needs to be done by others.
“Unless there’s a major worldwide recession and its effects are felt by Gulf economies too, the spending on IT will not stop.”
This is the backdrop then for the opening of the latest Gitex, now branded as ‘Gitex Global’, which will dwell deep on the fortunes of startups, fintechs, the Metaverse and, of course, the cloud among the key verticals. The 2022 edition starts Monday (October 10) and runs until Friday at Dubai World Trade Centre.
Global heavyweights such as Huawei, Amazon Web Services, Microsoft and Oracle have carved up enough space in the UAE’s transition towards the cloud. They have gone operational with cutting-edge data centres, while the G42- and e&- (formerly Etisalat) owned Khazna is the local powerhouse in this space.
Check out these numbers on the cloud spend in the UAE, and it gives even more evidence of why IDC’s Victoria thinks this is where the IT spending spree will continue to be.
According to IDC research, about 70 per cent of UAE enterprises are moving from the ‘discovery and piloting’ phase to ‘significant implementation of business apps in the cloud’. Public cloud spending in the UAE is expected to grow 31.6 per cent this year to $1.3 billion, while spending on private clouds continues to rise and ‘hybrid multi-clouds are increasingly the norm for organisations’. (Public cloud is where computing resources are owned and operated by the provider and web-shared with multiple tenants.)
Digital transformations - and a chance for VCs
On a parallel track, digital switchover projects will keep tech companies busy. “There will be a lot of focus on online payment services across categories, opening up more chances for fintechs to secure key contracts, funding,” said an industry source.
That would be cue for more action from tech startups in the region. Walid Hanna is the founder and CEO of Middle East Venture Partners (MEVP), the VC firm based in Dubai. Hanna reckons these will be the key trends in the tech startup area:
* Market penetration (of e-commerce, online payment, etc.) is still quite low compared to the Western markets (at 4x lower).
* The online banking infrastructure is under-developed, especially in the Levant and North Africa, which also gives room for further digitization down the line.
* Presence of a high under-banked population with low options for credits.
* There is still room for clearer regulation, especially in the fintech space. The UAE, Saudi Arabia and Egypt are the pioneers in the region.
* Exit options are increasing either from a M&A perspective or listing on stock markets, which was unimaginable three years ago.
MEVP has had several successful exits, out of which seven were in 2021 alone, including (Abu Dhabi headquartered music portal) Anghami.
“We closed a partial exit from Fresha, an online marketplace and SaaS (Service as a Software) management platform for spas and salons, yielding a 52x cash on cash return. The company started in the UAE, serving primarily the US markets. It subsequently expanded globally and moved its HQ to the UK.”
And then there’s Metaverse
Dubai’s digital transformation blueprint has set heavy emphasis on the Metaverse. The first set of Dubai entities, such as Dubai Airport Free Zone, have already come out with what their presence will be in parallel universe built around AR.
And Dubai entities’ presence on the Metaverse will be based on real-world problem solving and more.
This is how Sultan Ahmed Bin Sulayem, Group Chairman and CEO of DP World, said it just the other day: “We are exploring the usage of the Metaverse across our services, including simulations of warehousing and terminal operations, container and vessel repair inspections, safety training, and other commercial uses. Our customers will now be able to see and understand the whole supply chain from end-to-end – with full visibility – and take corrective actions in case of logistics bottlenecks.
By using this technology, we hope to keep trade flowing, increase visibility and minimise disruption to build trade networks fit for the future.
The cloud and the Metaverse - in IT, that’s where the spending will be...