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RIYADH: Information technology spending in the Middle East and North Africa region will reach $193.7 billion in 2024, up 5.2 percent from the previous 12 months, according to a new report.

In its latest MENA IT Spending forecast, US-based consultancy Gartner said that while spending in the sector will increase, it will be at a slower pace than the 6.6% annual growth seen in 2023 .

This comes as tech startups in the region secured $429 million in funding in the first quarter of the year. In addition, MENA saw approximately $1 billion in technology commitments from venture capital in the first six months of 2024.

Earlier this year, global investment manager Investcorp committed $500 million to growth-stage technology companies in the region, while Singapore-based venture capital firms Golden Gate and the United Arab Emirates’ Polynome Group both committed $100 billions of dollars in technology investment in MENA.

Miriam Burt, senior vice president analyst at Gartner, noted that the slowdown in IT spending growth is caused by factors beyond the sector itself.

“While inflation in the region has eased, organizations in the Middle East continue to face challenges due to continued uncertainty caused by oil production cuts, downside economic risks related to regional geopolitical tensions, as well as supply chain disruptions on key shipping routes “, she. said.

“As a result, on-premises organizations are becoming more cautious with their IT spending,” added Burt.

Data center expenses will decrease

Data centers have been the focus of spending in recent years. Shutterstock

The report stated that despite growth in 2023, spending on data center systems is expected to decline by 0.3% in 2024, reflecting a shift toward alternative capabilities.

Spending on data center systems will decline from $4.82 billion in 2023 to $4.80 billion in 2024.

Systems in data centers include servers, external controller-based storage, and enterprise networking equipment.

“This is due to increasing demand for alternative options such as software-defined storage, hyper-converged infrastructure software and the ‘storage as a service’ model,” Burt said.

Spending on IT services in MENA is forecast to grow 9.6% in 2024 to reach $19 billion, up from $17.3 billion last year.

“IT leaders in the MENA region are primarily spending more on professional and consulting services to prepare their businesses for cloud migration, AI (artificial intelligence), generative AI and IoT (internet of things) deployments, and second, by taking advantage of the data monetization opportunities resulting from the convergence of these technologies,” added Burt.

“Security remains a key area for IT services spending, as well as the increasing purchase of products, services and tools through XaaS (Anything-as-a-Service) consumption models – both contributing to the overall growth of this segment ,” she added.

Declining demand for new devices

Shutterstock

Device spending is expected to decline by 4.5% in 2024 due to uneven demand for newer devices such as mobile phones across countries in the MENA region.

The subsector is set to decline from $28.3 billion recorded in 2023 to $27 billion this year.

Software will see the largest growth in 2024, with spending expected to reach $15.2 billion, up from $13.5 billion in the previous 12 months.

Communications services are expected to account for the largest share of IT spending in 2024, with $127.5 billion in spending, up from $120 billion in 2023.

“CIOs (chief information officers) in the MENA region are expected to increase their spending on cloud services. While AI/GenAI has some influence on cloud spending, it is not expected to have an immediate and significant impact on IT spending levels in MENA in 2024,” said Eyad Tachwali, senior advisory director at Gartner.

“Today, regional CIOs are primarily focused on lower-cost day-to-day use cases rather than expensive, game-changing AI,” he added.

Furthermore, the report stated that global hyperscalars, which have the ability to provide extensive infrastructure for storage and compute facilities for AI and GenAI, are accelerating investments in the country’s data centers, especially world-class green data centers.

“Some have launched sovereign cloud services tailored to the unique needs of specific Gulf Cooperation Council markets,” Burt said.

Gartner’s methodology for estimating IT spend is based heavily on rigorous sales analysis of over a thousand vendors across the full range of IT products and services.

On a separate note, other analysts say that Saudi Arabia is the fastest growing IT market in the Middle East, Turkey and Africa.

Jyoti Lalchandani, regional managing director of research firm IDC, said the broader spending in the information and communications technology market will reach $37.5 billion by the end of 2024.

The comments were made during the ICT Indicators Forum hosted by the Saudi Ministry of Communications and Information Technology, alongside the Saudi Commission for Communications, Space and Technology, in Riyadh on April 24.

It was also noted that spending in this area in the Saudi government sector will exceed $752 million by the end of 2024 as innovative technologies become fundamental to building an “experience economy”.

“Spending on artificial intelligence, big data analytics, IoT and cybersecurity is poised for tremendous growth and will account for nearly a third of total IT spending in Saudi Arabia in 2024. AI spending in Saudi Arabia will exceed $720 million in 2024, reaching $1.9. billion by 2027 at a CAGR (compound annual growth rate) of 40% – half of that will be on interpretive AI,” Lalchandani said.

“We’ve seen Saudi Arabia emerge as a cloud hub,” he added, with public cloud spending expected to exceed $2.4 billion in 2024 and reach $4.7 billion by 2027.

Software-as-a-Service will account for more than 50% of spending by 2024.

IDC also pointed out that cybersecurity spending alone will surpass $1 billion in 2024 and reach $1.6 billion in 2027.

“I remember a few years ago, the cyber security market was estimated to be around $500 million. Today, we’re talking about the double. We are talking about $1 billion in the cyber security industry and to hear it named as the fastest growing market in the region is truly a testament to our beloved nation,” said Salman Faqeeh, CEO of Cisco Saudi Arabia, while speaking in a panel. during the forum.

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