BMI's Executive Summary

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Market Overview

The total size of the UAE IT market is expected by BMI to increase from around US$3.4bn in 2007 to close to US$4bn in 2012. With IT a key element of the Emirates' development, a number of major local and federal government initiatives together with a strong and diversifying economy should ensure continued growth over the forecast period. Meanwhile, the oil-led boom across the Middle East will continue to be a boost to IT and infrastructure spending in the UAE.

The federal government is also encouraging the development of 'smart cities', another regional trend. In 2007 the government announced that its target of getting 90% of businesses online by the end of the year was likely to be met. Services are becoming an increasingly important component of many deployment contracts, as evidenced by recent projects by leading UAE corporations such as Emirates Airlines and Etisalat.

Spending should be strongest in the government, financial, and oil and gas verticals. Other key non-oil sectors driving the economy include banking, which is likely to be the single largest industry vertical in terms of IT investments over the forecast period. Real estate has also experienced a massive investment boom in the past five years, and this is set to continue, with the National Bank of Dubai projecting at least US$50bn in outlays in property development in the emirate until 2010.

Industry Developments

The UAE federal government's recently announced UAE Strategic Plan calls for a strengthening of egovernment programmes. The focus of the programme is to support implementation of programmes at federal government level. The federal government ministries have often lagged behind progress by the leading local governments, particularly Dubai. As such, Dubai government, which has had many of its departments and services online for some time, will lend expertise to the project.

However, local government continues to dominate and accounts for around 20% of total IT Services spending. Dubai Municipality announced that it expects to spend anything between US$1.6mn and US$2.2mn per year over the next few years implementing its plan of getting 90% of government services online. Together with additional funds available from a separate infrastructure budget, it is likely the organisation will spend at least US$2.8mn annually on e-government initiatives. Abu Dhabi is accelerating its efforts to emulate Dubai, led by the Abu Dhabi Systems and Information Committee(ADSEIC), a body created in 2005 to develop and drive initiatives to transform government services in the Emirate.

Competitive Landscape

With government accounting for as much as 40% of IT spending, and e-government programmes alone around half that, vendors are continuing to find opportunities. Recently the Ministry of Development for the Government sector signed a strategic agreement with Microsoft Gulf whereby Microsoft will support federal e-government programmes with training and technical support. Under the agreement Ministries will also use legal Microsoft software. Meanwhile, the leading body for Abu Dhabi's e-government programme, the Abu Dhabi Systems and Information Committee (ADSIC) signed an Enterprise Licence Agreement with Oracle. The agreement establishes Oracle as a key technology partner and provides for the Abu Dhabi Government to buy Oracle software solutions and support and maintenance services.

The continuing growth in PC sales in 2007 in the UAE did not significantly alter the competitive landscape of a market which accounts for around 40% of regional PC sales. The market remains dominated by international players such as Acer, HP and Dell with the top five brands accounting for more than 50% of the market. Meanwhile, the share held by local assemblers continues to dwindle, due in part to their relatively weakness in the growth area of notebooks. However, local assemblers are hopeful that the future will be brighter and UAE-based firms such as Sky Electronics are fighting back.

Hardware

The UAE hardware market is one of the largest in the region, estimated at about US$1.4bn in 2007, up 12% from US$1.2bn in 2006. Much of the growth is being driven by small and medium enterprise spending, particular on mobile computers, which are expected to account for around 60% of sales over the forecast period. Notebooks are also proving popular with the consumer segment, particularly with the introduction of features such as wireless internet PC cards and entertainment features such as HD DVD. Sales of PC notebooks and accessories are expected to reach more than US$1bn in 2008, while the compound annual growth rate (CAGR) for the 2007 – 2012 period as a whole is expected to be in the region of 8%. Investment in education and e-government, fuelled by new oil revenues, will lead to desktop rollouts in schools, colleges and government offices across the Emirates.

Software

BMI estimates that the UAE's software spending will pass US$400mn in 2008, representing around 17% of the IT spend. CAGR for spending on packaged software is put at 10% over the 2007-2012 period, withthe UAE being of the region's fastest-growing ERP markets, as more businesses realise the benefits of efficient management of resources within their internal processes.

The UAE also has one of the region's lowest software piracy rates at just 35% according to the Business Software Association (BSA), which has praised the UAE government and Ministry of Economy for its efforts in promoting anti-piracy initiatives. The government has combated illegal software in a number of ways, both through anti-piracy legislation and enforcement measures. Customer relationship management (CRM) will be one of the growth areas with fewer than 2% of small- to medium-sized enterprises (SMEs) in the Middle East region having a specialised CRM application in place. BMI predicts plenty of room for growth in the forecast period as numerous untapped sub-sectors still exist. Key verticals include process manufacturing (mainly oil and gas), followed by the finance sector. Other key segments are telecoms and the public sector. During the next five years, in addition to CRM and enterprise resource planning (ERP), high-growth categories are set to include business intelligence, storage and security products.

IT Services

BMI expects that the IT Services market will reach a value of more than US$1,003mn by 2012, with outsourcing accounting for an increasingly large portion of up to one quarter. IT services revenues compound annual growth rate (CAGR) over the 2006-2012 period is expected to be 10%, encouraging vendors to shift their focus away from simply shifting boxes. Services are becoming an increasingly important component of many deployment contracts, as evidenced by recent projects by leading UAE corporations such as Emirates Airlines and Etisalat. Outsourcing is also predicted to be a growing trend, with recent landmark outsourcing deals awarded by entities such as the Abu Dhabi Water and Electricity Authority and civil service departments. Global vendors such as IBM Global Services are competing for this business with local companies such as Injazat Data Systems, which with its good government connections has grown to be a major force in the market, reporting BPO deals with 13 leading private and public organisations.

E-Readiness

The recent Global Information Technology report sponsored by Cisco noted the UAE's success in creating a good ICT environment by placing it top of the rankings for 122 countries. The survey, which looks at the propensity of countries to leverage the opportunities offer by ICT for development and increased competitiveness, praised the Emirates' good regulatory environment, and clear government leadership in leverage IT and promoting its use. According to the report, ICT has revolutionised the business and economic landscape and empowered individuals while fostering social networks and companies.

Overall internet penetration in the UAE was estimated at close to 40% by the end of 2006, far above the Middle East and North Africa (MENA) average, reflecting the Emirates' status as one of the most advanced IT countries in the region. Broadband penetration is around 10% and is expected to rise 60% over the forecast period. In terms of e-government development, phases to be introduced in the project last year (see Industry Developments) include e-portal, e-project, the HR Management System (HRMS) and the Financial Management Integration System (FMIS) projects. The e-government High Committee has expressed satisfaction with the progress made on implementation of the e-government initiative to date.

Contents

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Chapter 1 - Executive Summary

Market Overview

Industry Developments

Competitive Landscape

Hardware

Software

IT Services

E-Readiness

Chapter 2 - SWOT Analysis

UAE IT Sector SWOT

UAE Business Environment SWOT

Chapter 3 - Middle East Regional IT Markets Overview

IT Penetration

Market Growth & Drivers

Sectors & Verticals

Chapter 4 - Market Overview

History And Market Structure

Dubai Silicon Oasis

Dubai Outsourcing Zone

Hardware

Software

Services

End-User Analysis

Chapter 5 - Industry Developments

Industry Forecast Scenario

Table: UAE IT Historical Data And Forecasts

Chapter 6 - Macroeconomic Forecast

Table: UAE Economic Indicators

Chapter 7 - Country Snapshot: UAE 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 Profiles

IBM

HP

Oracle

Microsoft

Almasa Group

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: