United Arab Emirates Information Technology Report Q3 2011

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United Arab Emirates Information Technology Report Q3 2011 Published on July 2011

Report Summary Market Overview UAE spending on IT products and services is projected to reach US$3.5bn in 2011 as resurgent growth is led by a continued rebound in PC sales. However, obstacles still stand in the way of a more pronounced recovery, including weak credit conditions and Dubai's onerous debt repayment schedule this year. Demand for IT products and services should continue to revive in 2011 with high single-digit growth. Abu Dhabi has been making most of the running and, in the wake of the Dubai financial crisis, but growth potential also exists in the northern emirates where the government has launched a major infrastructure investment programme. IT spending is projected to grow at a 2011-2015 CAGR of 8%. Cloud services are central to the Emirate's e-Government strategy for the next three years. Other fundamental drivers of IT spending should include local and federal government initiatives, long-term infrastructure projects, significant population growth and the development of non-oil sectors. Industry Developments The UAE's General Information Authority (GIA) is leading efforts to provide cloud services to federal government entities. In December 2010, the GIA delegations from various government bodies, including the Federal Council for National Affairs, the Ministry of Labour, and the Ministry of Environment and Water, to plan cloud strategy. 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 advantage 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 Growing demand for solutions in the UAE market has encouraged software vendors to seek new service partners. In April 2011, Epicor Software appointed the enterprise solutions division of Jumbo Electronics as a value-added-reseller for the UAE market. Meanwhile in December 2010 Microsoft announced that it signed an agreement with Aptec Distribution, which became its first valueadded distributor for the region. Vendors have reported a pickup in projects in key UAE verticals such as education, telecoms, health, energy and government. In February 2011, Indian IT vendor TCS signed a five-year contract with telecoms service provider du in the UAE for providing IT managed services. TCS will support the UAE company to achieve better customer satisfaction levels through improvements in service delivery. Another Indian IT giant, HCL reported in H111 that it had more than doubled its revenues from the MEA region, which still contributes less than one per cent of the group's revenue. Strong growth in the UAE was said to be one of the factors behind the growth. The company has set a target of US$100mn annual revenues from the Middle East region within two years. Hardware UAE computer hardware sales, including PCs, notebooks and accessories, are forecast at US$1.9bn 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. In H111, electronics retailers reported double-digit annualised growth during the 2011 Dubai Shopping Fair peak season. An influx of tourists has also boosted spending on consumer electronics goods, although in the wake of the Dubai financial crisis, access to credit remains a constraint on domestic consumer demand. Migrations to the Windows 7 operating system and product innovation could

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>> Get this Report Now by email! help to trigger a new cycle of hardware upgrades. Software BMI anticipates that the UAE's software spending will reach US$619mn 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. In 2011, small and medium-sized enterprises (SMEs) are expected to be a key focus for ERP vendors as the corporate market for solutions has become saturated. There are many untapped sub-sectors and there is growing demand for industry-specific solutions. 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 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 tenders from leading Emirati corporations such as the Emirates airline and Etisalat. One potential demand driver will be organisations looking for help with to utilise efficiencies from cloud computing. Particular areas of opportunity for cloud computing include banking and retailing as organisations in those fields look to save money on hardware investments. The use of subcontracting has increased, including support, with several large contracts and outsourcing deals announced in recent years. 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-thehome (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.

Table of Content Executive Summary 5 SWOT Analysis 8 UAE IT Sector SWOT . 8 UAE Telecommunications Sector SWOT 9 UAE Political SWOT 10 UAE Economic SWOT 11 UAE Business Environment SWOT . 12 IT Business Environment Ratings 13 Middle East & Africa 13 Regional IT Business Environment Ratings 16 Middle East and Africa IT Markets Overview . 17 Market Growth And Drivers . 19 Sectors And Verticals 21 United Arab Emirates Market Overview . 24 Background . 24 Hardware 25

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>> Get this Report Now by email! Software 28 Services . 31 IT End-User Analysis 32 Industry Developments . 34 Industry Forecast Scenario . 37 Table: UAE's IT Historical Data And Forecasts, 2006-2015 (US$mn, unless otherwise stated) . 40 Country Context . 41 Table: Rural/Urban Breakdown, 2005-2030 41 Table: Consumer Expenditure, 2000-2012 (US$) . 41 Internet 42 Table: Telecoms Sector -- Internet -- Historical Data & Forecasts . 42 Macroeconomic Forecast . 44 United Arab Emirates ' Economic Activity . 46 Competitive Landscape 47 Hardware 47 Software 49 IT Services 51 Internet Competitive Landscape . 53 Company Profiles 54 IBM . 54 HP. 55 Oracle . 57 Microsoft. 59 Almasa Group . 61 BMI Methodology 62 How We Generate Our Industry Forecasts . 62 IT Industry 62 IT Ratings ' Methodology . 63 Table: IT Business Environment Indicators 64 Weighting 65 Table: Weighting Of Components . 65 Sources . 65

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