Qatar Information Technology Report Q3 2007: Industry Research Report

Qatar Information Technology Report Q3 2007

Published Date: September 2007

Published By: Business Monitor International

Page Count: 33

Order Code: R302-1342

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Market Overview

With Qatar’s economy set to remain on an elevated growth track, and tenders for new fixed and mobile telecoms licences in 2007, the economic environment should provide strong support for IT spending going forward. Qatar’s total IT market is expected to reach a value of US$273mn in 2007 and US$398mn by 2010. Led by dynamic ICT governing body ictQATAR, recently reinforced with a new government ‘Sponsor Group’, e-government projects continue to be rolled out. There are also programmes in areas such as education. High oil prices continue to underpin general economic buoyancy, while a growing economic diversification epitomised by buoyant construction and real estate industries. With Qatar now one of the richest countries in the world in per capita terms, BMI is confident that the IT sector should continue to grow particularly strongly, with software and services (41% of total spending) advancing at the expense of hardware (59%).

At the forefront of this growth will be the IT Services market, which as demonstrated by the recent contract won by EDS is becoming a source of great opportunity for vendors. The IT Services segment is expected to surpass a value of US$100mn within the forecast period, as major technology-using sectors such as financial services, communications, and oil invest to meet strategic objectives. The software market is also growing fast, with a new focus on applications from the SMB sector while larger companies still offer potential. Vendors are reviewing and expanding channel structures to take advantage, with a recent example being Microsoft’s decision to expand its contract with Mindshare to cover Qatar and the Northern Gulf states. Overall IT market CAGR is expected to be around 9%, with high oil prices encouraging more large scale IT investments and infrastructure developments. Meanwhile the measures to introduce telecoms liberalisation should provide a renewed boost to ICT development.

Industry Developments

In April the Qatar government established a new i-Gov Sponsor Group. The group is to provide all necessary support to the e-Government programme, which will still be coordinated by ictQATAR as one of its programmes. As the broad composition of the group suggests, the Group has a mandate to enhance institutional performance across economic, government, financial, social, education and health sectors. In practical terms the new body will provide links between ictQATAR and government ministries, involving them in executing the plan and removing any obstacles to doing so.

A milestone was reached for e-government with the announcement that the number of e-transactions in April 2007 exceeded the 50,000 mark (50,778). Progress is continuing with ictQATAR and the Ministry of the Interior teaming up in a recent announcement that government agencies and private companies in Qatar will now be able to issue Exit Permits for their employees electronically, through the e-government website. In April Qatar convened its first Government IT Forum.

Meanwhile, ictQATAR has also been focusing on raising e-participation among women. In April ictQATAR signed a memorandum of understanding (MoU) with fellow government body SCFA (Supreme Council for Family Affairs) aimed at promoting e-literacy among Qatari women, and in particular those not working. The programme is seen as an extension of the government’s ‘e-citizenship’ project, and will seek ways to allow women to fully participate in using e-services ranging from banking to booking holidays and using online forums.

Competitive Landscape

Global IT Services giant EDS has won a landmark seven year deal from the Qatar Foundation, a private non-profit organisation that oversees education, science and community development projects. The agreement will see EDS provide fully integrated IT managed services comprising IT operations, infrastructure management and service delivery. EDS opened its first Gulf States office in Bahrain twelve years ago and now employs close to seven hundred staff in the region with additional offices in Saudi Arabia and the UAE.

Meanwhile, Microsoft is expending its agreement with Dubai based distributor Mindware to cover the Qatar market. The new agreement also covers Kuwait and Bahrain and will particularly target SMEs and Education Institutions with licence solutions from Microsoft. The deal is good news for Mindware which has consistently enjoyed strong demand in markets where it offers Microsoft Products and is targeting US$30-40mn additional revenues from the new markets. In Qatar, Mindware will offer volume licence solutions from Microsoft including open licence, open value and schools agreements, as well as full packaged products.

Computer Sales

The Qatar PC market continues to be driven by demand for notebooks with channel sellers such as Mindbranch pricing more competitively to capture opportunities particularly in the household sector. The fast growth of notebook sales is sparking fierce vendor competition across all price segments. Notebook sales are now growing at something like twice the speed of desktops in the country.

Computer sales are expected to reach US$124mn in 2007, up from US$116mn in 2006. Overall, the computer market should have CAGR of 7% for 2006-2011, sustained by continuing high oil prices that are fuelling IT infrastructure investments, as well as various e-government and e-business initiatives led by ictQATAR. In recent years the Qatari riyal, as it is pegged to the dollar, has depreciated almost 35% against the euro. As a result, the market has become flooded with low-quality, often counterfeit, computer components and accessories. In response, global vendors are upgrading their services and support packages to defend their share against encroachments from local assemblers and distributors

Software

BMI predicts a value of US$46mn in 2007, up from US$43mn in 2006. With the evolution of the Qatari IT market, a stronger focus on software spending is now being seen, with most enterprise customers prioritising affordability and simplicity. Software spending CAGR is put at 11% for the 2006-2011. Major account spending is being driven by a desire for integrated solutions that provide a whole view of operations, rather than individual applications.

However, with SMBs accounting for around 34% of regional IT spending, vendors will continue to streamline applications to meet the need of this segment to increase efficiency in the face of more open and deregulated markets. The Qatar authorities have been stepping up their efforts to restrict the use and trade of pirated software, with a number of high profile raids.

IT Services

The IT services market is expected to be the fastest growing segment of the Qatar IT market between 2006 and 2010, outperforming the hardware and software sectors. Indeed, it has been increasing steadily for the last 10 years. With IT services spending estimated to grow to US$68mn in 2007, from US$61mn in 2006, the next period promises to see even more opportunities particularly in key sectors such as financial services and communications. CAGR for the 2006-2011 period is put at 11%, and fast demand growth is expected, especially from corporate and government clients.

E-Readiness

The introduction of more competition in mobile and fixed telephony sectors is expected to have a beneficial effect not just in terms of lower rates for consumers of telecoms services, but also as a stimulus for the IT market. Earlier this year the Qatar government recently made a long awaited step towards telecoms market liberalisation with its launch of a tender to operate the Emirate’s second fixed telephone service. The government also launched a tender for a second mobile licence. For full details, see BMI’s Qatar Telecoms Reports.

For IT vendors, the entrant of a new mobile operator is likely to mean more spending on IT systems especially BSS/OSS and ERP applications. Both new entrant and incumbents are likely to focus on developing sophisticated value added services and boosting up their back office and customer relations operations. Perhaps as a sign of what is to come, Qatar Telecom (Qtel) has declared that it has embarked on what it described as an ‘extensive transformation programme to make Qtel a leading full service provider’. A Qtel spokesperson said that ‘a high level of IT proficiency among telecom sector employees is essential in today’s world of rapidly evolving communications technologies and services’.

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