New Market Study Published: United Arab Emirates Information Technology Report Q4 2010

Nov. 6, 2010 - PRLog -- UAE IT spending is forecast to bounce back strongly in 2010, despite current economic uncertainties. UAE spending on IT products and services is projected to reach US$3.3bn in 2010 as double-digit growth is led by a big increase in PC sales, which declined sharply last year.

Government spending and investment should help support the market, with further opportunities in sectors such as education, healthcare, utilities, banking and telecoms. UAE economic growth is projected to pick up in 2010, with a recovery in credit and loan markets expected by the end of the year. However, the property price slump and financial upheavals of late 2009 will continue to influence business and consumer caution.

IT spending is projected to grow at a 2010-2014 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 development of non-oil sectors. Industry Developments

In September 2009, the Jordan-headquartered Arab Bank announced it had relocated its Gulf and Yemen back-office operations to the Dubai Outsourcing Zone, with the operation employing an estimated 300 staff. The Dubai Outsourcing Zone initiative was expected to attract more outsourcing business to the UAE, with incentives including 100% exemption from taxes.

In April 2009, the UAE Ministry of Education announced a AED79mn (US$21.5mn) allocation for 2009 for an initiative to supply computers and internet to state schools. Concerns had been growing that state schools were lagging behind private schools in IT and internet use. The government will collaborate in this initiative with Netgear.

Another key area for federal IT spending will be healthcare. The federal government's Wareed healthcare IT initiative aims to establish a completely integrated electronic platform linking 13 state-run hospitals and their 67 affiliated clinics across the country.

Competitive Landscape

Software market leader Microsoft hopes migrations to its Windows 7 operating system, launched in October 2009, will boost its sales in the UAE market. In September 2010, web analytics firm StatCounter estimated Windows 7 had achieved a 21.5% share of the UAE operating system market, still behind its predecessors Windows XP, which accounted for 51.8%, and Windows Vista, with 22.5%. In June 2010, Microsoft announced the availability of its Microsoft Office 2010, Visio 2010 and Project 2010 in the Gulf region.

Dubai-based IT services giant Injazat Data Systems continues to build its partner network, signing an agreement in January 2010 with Alrowad IT Solutions to deliver a range of customised IT services to customers. In August 2010, Injazat signed a partnership agreement with telecom services provider Du to provide business customers with networked IT services. In 2009, Injazat also signed a Service Provider Licensing Agreement with Microsoft Gulf to enable Injazat to deliver Microsoft software.

HP Middle East said in Q110 it planned to concentrate on software and services this year to compensate for a decline in product sales in 2009. In 2009, as sales of hardware declined, the company's regional software and services business showed solid growth. HP sees data centre transformation as a key driver of opportunity. Meanwhile, joint venture Xerox Emirates also plans a focus on services in 2010 after the appointment of NTS as a local business partner.

Hardware

UAE computer hardware sales including PCs, notebooks and accessories are projected at around US$1.80bn in 2010, with a return to double-digit growth following a contraction in 2009. The segment is forecast to grow at a CAGR of 7% between 2010 and 2014 in US dollar terms.

PC shipments are forecast to bounce back in 2010, with the resurgent growth boosted by computer purchases deferred from 2009. In Q110, shipments growth was around 10% but much of the growth was fuelled by demand for lower-priced notebooks and netbooks, which deflated average prices. In the second half of 2009, stronger demand in the notebook sector was the main factor driving retail segment growth, as consumer sales felt the benefits of aggressive channel promotions.

Software

BMI forecasts the UAE's software spending will be around US$611mn in 2010. 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 both seeking efficiencies by transitioning from manual environments to full automation of back-office systems. CRM is another growth area, with fewer than 2% of SMEs in the Middle East having a specialised CRM application in place.

In 2010, SMEs are expected to be a key focus for ERP vendors, as the corporate market for ERP solutions has become saturated. The oil and gas sector has been hit particularly hard by the precipitous fall in oil prices since mid-2008, but BMI predicts plenty of room for growth in the forecast period. Many untapped sub-sectors still exist and there is growing demand for industry-specific solutions.

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