BMI's Executive Summary

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Overview

Saudi Arabia's IT market is set to continue on a strong upwards path driven by a buoyant economy and ongoing infrastructure deployments in major verticals such as oil and gas, financial, and telecoms. The value of the Saudi IT market is estimated to have been close to US$3bn in 2007. The market is expected to rise to US$5.1bn by 2012, growing at a CAGR of 12%, with IT Sector growth stronger than overall expected GDP growth and above the regional average. The Kingdom will continue to be a lucrative market for technology products and services over the forecast period, with high oil prices stimulating increased spending by most sectors.

With annual per-capita expenditures on IT reaching US$330, Saudi Arabia accounts for around 40% of IT spending in the Middle East region. Youthful population demographics, a regional economic boom fuelled by high oil prices, and specific factors such as the growing popularity of e-banking will all drive retail growth. In 2007 substantial budgets were allocated for e-government infrastructure development, as well as information society development and economic diversification and job creation. Meanwhile, in the enterprise segment, high liquidity is promoting investment, while improvements in the business environment are attracting new inflows of foreign direct investment (FDI). As elsewhere, SMEs are becoming a focus of IT vendor attention.

Government Initiatives

Two major government initiatives will be influential in the next few years. In 2007 a sum of US$800mn was assigned by the Saudi government for the roll-out of e-government infrastructure for remaining government organisations. The 'Yusr' project envisages that by 2010 all subjects should be able to deal with any government department online. Spending on e-administration in Saudi Arabia is set to be worth hundreds of millions of dollars a year as both government organisations become more aware of the potential efficiencies from applying information technology.

Meanwhile, also in 2007, the Saudi Council of Ministers announced approval of a new national plan to guide the Kingdom's continued transformation into a knowledge-based society and economy. One of the major goals is the further development of domestic telecoms and IT sectors as part of the government's economic diversification strategy. Among the component plans and programmes which have already started to be implemented is the project of Saudi Arabia's first Knowledge Economy City (KEC) which is to be constructed in Madinah at a reported cost of more than US$6bn.

Competitive Landscape

The continuing growth in PC sales in 2007 in Saudi Arabia did not significantly alter the competitive landscape of a market which remains dominated by international players such as Acer, HP and Dell. With growth expected to continue, part of the challenge for vendors is to establish the right distribution strategy, and in particular achieve the right relationship with channel partners. Leading notebooks player Acer recently announced that it has formed a partnership agreement with Metra Computer, a Saudi Arabian IT distributor. Saudi Arabia is Acer's strongest market regionally and it is hoping to use an aggressive channel strategy to capture a still larger portion of the market.

Turning to IT services, HP Services has launched a strategic partnership with local SAP consultancy company Al-Bilad Arabia, targeting the oil and gas sector. Meanwhile, SEDCO announced in 2007 that it had made a major new investment in EJADA, the IT services company formed from the merger of ACT and NEWTEK, is one of the largest IT services and solutions companies in the region.

Computer Sales

Sales of computers, including PCs, notebooks and accessories are expected to top US$1.4bn in 2008, with the segment forecast to grow at a CAGR of 11% in 2007–2012. The number of personal computer users in Saudi Arabia should continue to rise steadily over the forecast, with penetration approaching 30% led by programmes such as the 'Home Computing Initiative', which permits the purchase of computers at low prices and in easy instalment payment schemes. Telecoms liberalisation, with new licences in 2007, and a big push towards broadband penetration are also expected drivers of demand. E-government development and the rollout of WiMAX and wi-fi networks should also provide a boost to demand for computers.

Software

BMI predicts a software market value of US$497mn in 2008, up from US$437mn in 2007. The sector should continue to grow at a CAGR of 12 % over the forecast period. With the evolution of the regional economy, more innovative plans for expansion and development are being seen from many Saudi Arabian companies, driving more spending on software as companies adapt to a more e-enabled society. Saudi Arabia remains the largest market for software solutions in the region, ahead of the UAE. Oil and gas remains the largest software vertical purchasing sector, followed by telecoms, but large contracts are being seen in the non-oil manufacturing sector in areas such as chemicals and automotive.

T Services

The Saudi Arabian IT services market was worth around US$858mn in 2007, and is expected to grow at a CAGR of 12% over the 2007-2012 forecast period. In the past year demand for IT services, includingoutsourcing, has shown a strong growth trend in a number of sectors. However, support and maintenance account for around one third of spending on IT services. Sustained high oil prices have been driving spending on IT projects by government as well as in industries such as oil and gas, transport and utilities. In particular, the government's US$800mn budget allocation for e-government development should create opportunities for services vendors.

Contents

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Chapter 1 - Executive Summary

Overview

Government Initiatives

Competitive Landscape

Computer Sales

Notebooks

Software

IT Services

E-Readiness

Chapter 2 - SWOT Analysis

Saudi Arabia IT Sector SWOT

Saudi Arabia Business Environment SWOT

Chapter 3 - Middle East Regional IT Markets Overview

IT Penetration

Market Growth & Drivers

Sectors & Verticals

Chapter 4 - Market Overview

Government Authority

History and Market Structure

Hardware

Software

Services

End-User Analysis

Industry Developments

Chapter 5 - Industry Forecast Scenario

Table: Saudi Arabia IT Historical Data and Forecasts

Chapter 6 - Macroeconomic Forecast

Table: Economic Activity

Chapter 7 - Country Snapshot: Saudi Arabia Demographic Data

Section 1: Population:

Table: Demographic Indicators (2005)

Table: Rural/Urban Breakdown

Section 2: Education & Healthcare

Table: Education

Table: Healthcare: Vital Statistics

Table: Healthcare: Expenditure

Section 3: Labour Market And Spending Power

Table: Employment Indicators

Table: Consumption and Stratification

Chapter 8 - Competitive Landscape

Company Monitor

IBM

HP

Oracle

Arabic Computer Systems

Microsoft

Chapter 9 - BMI Forecast Modelling

How we generate our industry forecasts

IT Industry

Chapter 10 - Appendix: Regional Demographic Data

The Long View: Data Over The Economic Cycle (2000-2007)

Population

Household Spending Per Capita, US$

Private Consumption Per Capita, US$ PPP

Market Size, GDP, US$bn

Competitive Landscape for Middle East & Africa Information Technology: Sample of  
Companies Ranked

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Company profiles, including SWOT (strengths, weaknesses, opportunities and threats) analyses, business activity, leading products and services. BMI forecasts for all headline macroeconomic indicators, including real GDP growth, inflation, fiscal balance, trade balance, current account and external debt. Company profiles and SWOT analyses covering competitive positioning; leading products, services and brands; annual sales and share of domestic hardware, software and components markets; headline financials and M&A; pan-regional expansion strategies and strategic partners. Companies covered include:

Network of Information Technology Sources

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BMI's Middle Eastern and African IT Reports are based on an extensive network of multilateral organisations, government departments, IT industry associations, chambers of commerce and company reports. Information sources include: