The Future of IT in Gulf Countries: A Digital Transformation

The Gulf Cooperation Council (GCC) countries, comprising Arab states in the Persian Gulf region, have long been significant players in the global energy market due to their rich energy resources. However, these nations are now charting a new course towards diversification and the development of a digital economy and technology sectors.

Digital Foundation and Internet Penetration

• Five out of six GCC countries boast high internet penetration, with 100% usage in Saudi Arabia, Qatar, Bahrain, the UAE, and Kuwait, laying a strong foundation for digital transformation and innovation.
• In terms of web penetration, GCC countries are among the top performers globally, providing a solid base for digital growth.

Source: World Bank

ICT Spending

• The total Information and Communication Technology (ICT) spending in GCC countries is projected to reach $73.3 billion in 2023, nearly on par with Russia’s ICT market.
• Saudi Arabia and the UAE are the primary drivers, accounting for 74% of all ICT expenditures in the GCC.

Source: IDC, open sources, author’s analysis

IT Services and Software Markets

• Approximately 10% of the entire ICT market comprises IT services, with IT outsourcing as a significant segment.
• The IT services market is in an advanced stage of maturity, with an expected annual growth rate of around 8% over the next 5-6 years.
• The software market in GCC countries is projected to reach $4 billion in 2023, with corporate software dominating and expected growth of 3% to 5% over the next five years.

Source: Statista Market Insights

Source: Statista Market Insights, author’s analysis

Government Initiatives

• GCC countries are actively promoting IT and digitization through government policies and initiatives.
• Each country has specific strategies, such as the development of AI and blockchain technologies in the UAE, the creation of an innovation cluster for digital technologies in Qatar, and the Digital Government Strategy in Bahrain.

Infrastructure Development

• Infrastructure development is a priority, with plans to enhance IoT, fiber optic communication, and digital infrastructure.
• Saudi Arabia is investing in mega-projects like “Neom” and “AMAALA,” requiring substantial digital infrastructure, AI, IoT, edge computing, and 5G.

Data Storage and Cloud Services

• GCC countries are investing in local data storage and cloud services, reducing reliance on foreign infrastructure.
• Major companies like Amazon Web Services, Google Cloud, STC, and Alibaba are contributing to the growth of the cloud services market.

Source: Fitch Solutions, author’s analysis

IoT and Real-Time Data

• GCC countries are using modern technologies for real-time data collection and analysis, particularly for mega-projects.
• The IoT market is expected to grow significantly, with over 1 billion IoT connections by 2030.

Digital Transformation in Government Services

• GCC countries are actively digitizing government services to improve efficiency and decision-making.

AI Development

• Investment in AI is substantial, with governments in the UAE, Saudi Arabia, and Qatar leading the way.
• Saudi Arabia aims to be among the top 15 countries in AI development by 2030.

The Path Forward The GCC countries’ long-term vision and substantial financial resources position the region as a key IT hub. The emergence of over 45 unicorn startups with valuations exceeding $1 billion is anticipated, with many originating from Saudi Arabia.

Challenges

• Attracting a qualified workforce and providing comfortable living conditions for specialists.
• Ensuring political stability in the region.

The Gulf Cooperation Council countries are on a path of digital transformation, diversification, and innovation, setting the stage for a thriving IT future.

Author: Tserazov Konstantin

Source: AE Daily News – Gulf Countries: The Future of IT