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United Arab Emirates Information Technology Report Q4 2009Product Type: Market Research ReportPublished by: Business Monitor International Published: October 2009 Product Code: R302-8446 Description Market OverviewUAE IT spending is forecast to contract in 2009. UAE spending on IT products and services is nowprojected to reach US$2.8bn in 2009, down 8% from last year, with the steepest decline expected inhardware sales. Government spending and investment should help to support the market, with furtheropportunities in sectors such as education, heathcare, utilities banking and telecoms. The UAE IT market has received a double hit from the current economic uncertainty, which has impactedon both domestic and export demand. UAE economic growth is projected to suffer a reverse in 2009before picking up in 2010, and in H109 there were vendor reports of IT managers looking to cut costs,and delaying hardware updates. A number of other factors contributed to the slowdown, including theimpact of a falling population on consumer spending, as numbers of expats returned home. Despite the global economic slowdown, the total size of the UAE's IT market is expected by BMI to growat a compound annual growth rate (CAGR) of 10% to around US$4.1bn in 2013. A number offundamental drivers, including local and federal government initiatives, significant population growth anddevelopment of non-oil sectors such as real estate and tourism, should help to prevent market stagnation.Industry Developments In September the Jordan-headquartered Arab Bank announced that it had relocated its Gulf and Yemenback-office operations to the Dubai Outsourcing Zone, with the operation estimated to employ 300staff.The Dubai Outsourcing Zone initiative was expected to attract more outsourcing business to theUAE, with attractions including 100% exemption from taxes. In April 2009 the UAE Ministry of Education announced an AED79mn allocation for 2009 for aninitiative to supply computers and internet to state schools. Concerns had been growing that state schoolswere lagging behind private schools in terms of utilisation of IT and internet. The government willcollaborate in this initiative with Netgear. Another key area for federal IT spending will be healthcare. The Federal government's Wareed healthcareIT initiative aims to establish a completely integrated electronic platform linking 13 state run hospitalsand their 67 affiliated clinics across the country. Starting from July 2009, two new hospitals are expectedto be added to the system on a quarterly basis. Competitive Landscape Many leading PC vendors were optimistic about the prospects for notebook sales in H109. Despite thechallenging trading conditions, HP said that it expected a slight increase in year-on-year (y-o-y)shipments in 2009 and planned to boost sales in H209 with new releases of notebooks at sub-US$1,000price points. Acer has also refreshed its product portfolio with thinner, and lighter, models as itanticipated improved market conditions in the post back-to-school season. The growing popularity of netbooks saw Acer receive a boost in early 2009 when leading UAE telecomscompany Etisalat launched an Acer netbook bundle to subscribers in the UAE. Meanwhile, Samsungrecently claimed that its netbook range, launched last December, was enjoying great success in theEmirates. Samsung currently works with a number of major IT distributors in the UAE. Software vendors are focused on opportunities in the fast-expanding retail segment. In September 2009,SAP signed a deal to supply major retail group EMKE Group with its BusinessObjects solution. Thesoftware will allow EMKE to collate products data from its chain stores. Meanwhile, Microsoft wona contract from Aswaaq, the UAE's largest chain of supermarkets, to implement Microsoft's DynamicsNavision enterprise resource planning (ERP) solution. Hardware The UAE computer hardware market has been among the hardest hit in the region by the globalrecession. In 2009, the UAE computer hardware market is projected to have a value ofUS$1.5bn, representing a 12% contraction from 2008. As a major electronics re-export hub, the globalfinancial crisis and economic slowdown have had an impact on the UAE's exports, while a decline intourism has affected the carry trade. In H209, businesses are expected to maintain a cautious attitude to IT investments, but conditions shouldgradually improve later in the year. Stronger demand in the notebook sector is the main retail segmentgrowth driver, and notebok shipments have been boosted by netbook sales, which could account foraround 30% of category sales this year. In the challenging economic climate of 2009, desktops sales havebeen the main casualty of cutbacks in corporate spending. Software BMI forecasts that the UAE's software spending will be around US$507mn in 2009, with spendingholding up relatively well compared with hardware, even if little growth is projected from 2008 levels.Software represents around 18% of the IT spend. CAGR for spending on software is put at 11% over the2009-2013 period. The UAE is one of the region's fastest-growing ERP markets as more businessesrealise the benefits of efficient management of resources. In the short term, the economic slowdown represents a challenge to software vendors, as enterprises aretempted to focus more on the bottom line. Oil and gas is one sector that has been hit particularly hard bythe precipitous fall in oil prices since mid-2008, but BMI predicts plenty of room for growth in theforecast period as numerous untapped sub-sectors still exist, and there is growing demand for industryspecificsolutions. IT Services BMI predicts that IT services spending growth will be flat in 2009 but remain in positive territory duringthe 2009-2013 period. Spending will rise from an estimated US$816mn in 2009 to around US$1.3bn in2013. IT services revenues' CAGR over the 2009-2013 period is projected at 12%. The economicsituation, and credit tightening, has had an impact on demand in some key IT spending verticals such asoil and gas, construction and real estate. In early 2009 there were reports of IT managers in various sectors looking to cut costs. However, in somecases the emphasis was often more on scaling back projects by 10-20% rather than cancellation. In thegovernment sector, budgets have often already been commissioned, and so the effects were more likely tobe felt in the second half of 2009 and in 2010. Much will depend on the speed of global economicrecovery and the future trend of oil prices. E-Readiness The Emirates benefits from a good regulatory environment and clear government leadership in IT andpromoting its use. Although both dial-up and broadband internet connections are expected to continuegrowing over the next five years, broadband growth is expected to outpace the growth of dial-upconnections and will likely cause the dial-up sector to enter a period of gradual decline. Price cuts by bothEtisalat and du have helped to drive growth forward by making broadband services more affordable -particularly for residential customers. In January 2008, Etisalat announced that it had completed the firstphase of deployment of its fibre-to-the-home (FTTH) network. Looking ahead, local telecoms companiesdu and Etisalat both plan to launch WiMAX wireless services, and we expect this to give the marketanother major boost. Table of Contents
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