Market Report, "United Arab Emirates Information Technology Report Q1 2011", published

Jan. 31, 2011 - PRLog -- UAE spending on IT products and services is projected to reach US$3.5bn in 2011 as resurgent growth is led by a bounce back in PC sales, which recovered strongly in 2010. However there were concerns that sanctions against Iran could have an impact on the important re-export PC segment.

The UAE IT market has received a buffeting from global economic headwinds, but demand for IT products and services should continue to revive in 2011 with high single-digit growth. However, the property price slump and restricted credit are likely to continue to influence business and consumer caution. In the wake of the Dubai financial crisis, much spending is likely to be driven by Abu Dhabi infrastructure projects.

IT spending is projected to grow at a 2011-2015 CAGR of 8%. Several fundamental drivers of IT spending should help prevent market stagnation, including local and federal government initiatives, longterm infrastructure projects, significant population growth and the development of non-oil sectors.

Industry Developments

In September 2010, the UAE announced plans to set up the first microchip factory in the Middle East by 2015. The project is backed by the Abu Dhabi government-owned Advanced Technology Investment Company (ATIC) and is expected to cost the company US$6-7mn. The UAE plans to take adantage of growing demand in key re-export markets in the Gulf and India to reposition Abu Dhabi as a global technology hub.

Federal spending will be an important driver of IT opportunities.The Ministry of Education is leading an initiative to supply computers and the internet to state schools after concerns that they were lagging behind private schools in IT and internet use. Another key area for federal IT spending will be healthcare. The government's 'Wareed' healthcare IT initiative aims to establish a completely integrated electronic platform linking 13 state-run hospitals and 67 affiliated clinics across the country.

Competitive Landscape

Software market leader Microsoft hopes migrations to its Windows 7 operating system will continue to driver its sales in the UAE market, with Windows 7's share of the local operating system market still lagging that of Windows XP. In June 2010, Microsoft announced the availability of Microsoft Office 2010, Visio 2010 and Project 2010 in the Gulf.

Leading regional managed services provider Injazat Data Systems is reportedly considering building new tier-2 and tier-3 data centres in Abu Dhabi and al-Ain in a bid to expand its market.The company has around 600 employees and has claimed 45.5% of the local outsourcing market. The company's tier-4 data centre, which opened in 2008, was said to be the first of its class in the region.

HP Middle East said in 2010 it planned to concentrate on software and services to compensate for a decline in product sales in 2009. While sales of hardware declined that year, the company's regional software and services business showed solid growth. HP regards data centre transformation as a key driver of opportunity.

Hardware

UAE computer hardware sales, including PCs, notebooks and accessories, are forecast at over US$1.8bn in 2011, with high single-digit growth consolidating a recovery that began in 2010. The segment is forecast to grow at a CAGR of 8% between 2011 and 2015 in US dollar terms.

Software

BMI anticipates that the UAE's software spending will reach nearly US$636mn in 2011.The UAE is one of the region's fastest growing ERP markets, as more businesses realise the benefits of efficient resource management in their internal processes. Manufacturing and trading firms are seeking efficiencies by transitioning from manual environments to full automation of back-office systems. Customer resources management (CRM) is another growth area, with fewer than 2% of SMEs in the Middle East having a specialised CRM application in place.

IT Services

BMI predicts IT services growth will remain in positive territory over 2011-2015. Spending is forecast to rise from US$1.0bn in 2011 to more than US$1.5bn in 2015. The IT services revenue compound annual growth rate (CAGR) over the forecast period is expected to be 10%. Services have become an increasingly important component of many deployment contracts, as evident in recent projects by leading Emirati corporations such as the Emirates airline and Etisalat.

E-Readiness

The UAE benefits from a good regulatory environment and clear government leadership in IT. Although dial-up and broadband internet connections are forecast to continue growing over the next five years, broadband growth is expected to outpace the growth of dial-up connections and will likely cause the dialup sector to enter a period of gradual decline. Price cuts by Etisalat and du have helped drive growth by making broadband services more affordable, particularly for residential customers. In January 2008, Etisalat announced that it had completed the first phase of deployment of its fibre-to-the-home (FTTH) network. Looking ahead, du and Etisalat both plan to launch WiMAX wireless services and we expect this to give the market another major boost.

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Fast Market Research is an online aggregator and distributor of market research and business information. We represent the world's top research publishers and analysts and provide quick and easy access to the best competitive intelligence available.