Cloud computing in the Middle East: The next big tech market?

Recent developments such as the opening of big data centres and adoption of emerging technology by SMEs and startups are starting to turn the tide for cloud computing growth in the MENA region

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Cloud deployment in the Middle East and North Africa (MENA) is not as advanced as it is in other parts of the world, but infrastructure development is picking up speed as governments fund public initiatives, service providers rush in to a lucrative market, and fast-growth, small and medium-size enterprises (SMEs) adopt emerging technology.

This bodes well for economic development in the region since cloud technology, with its processing capabilities and data storage possibilities, is essential to unlock the potential of new technology such as blockchain or artificial intelligence (AI).

For now, despite an expected 1.8 percent year-over-year increase in IT spending -- to an estimated US$160 billion total in 2019 -- the MENA region is still lagging far behind its global peers when it comes to cloud spending, according to Gartner.

"The MENA region is not expected to reach the level of cloud usage that the United States had in 2017 until the end of 2022," said John Lovelock, research vice president at Gartner, in a market-analysis report.

But recent regional initiatives such as the government of Bahrain's "cloud-first policy", the ascent of innovative startups, and the willingness of fast-growing SMEs to adopt emerging technology is starting to change the cloud computing landscape in the Middle East.

Cloud vendors jump in to the lucrative MENA market

IDC estimates that the MENA region is worth US$2.2 billion to cloud vendors, a figure expected to increase 24 percent yearly on average to reach approximately US$5 billion by 2022.

Tech vendors are looking with interest at the potential for cloud expansion in the region, and this year they are making (or plan to make) the move in.

At the end of July, Oracle unveiled plans to move all of its 4,000 on-premise Middle East and Africa customers to the cloud within two years. In February, the American corporation inaugurated its first regional data centre in Abu Dhabi, enabling cloud application services for its customers in the UAE and the wider Middle East.

A few months afterwards, Microsoft launched data centres in Dubai and Abu Dhabi -- its first ones in the Middle East. This investment "is recognition of the enormous opportunity for digital transformation in the region,'' Microsoft said.

Amazon Web Services (AWS) announced in 2017 that it would be opening the first AWS Middle East Region in Bahrain by the beginning of 2019, although as of today the project has not materialised.

Meanwhile, the China-based Alibaba Group, in what it looked like an astute anticipation of an emerging market in the region, has been providing cloud services in the MENA region since 2016, when it opened a data centre in Dubai.

"The region is one of the fastest-growing public cloud services markets," IDC analyst Megha Kumar told The National. "The potential is huge given the ambitions of the public sector and their drive for innovation."

Public projects, cost efficiencies spur move to the cloud

Governments in the Middle East, meanwhile, are working to encourage cloud adoption.

Initiatives such as the UAE's Smart Dubai and Smart Abu Dhabi are allocating big bucks to cloud technology that can power their smart-cities projects.

Local governments in Qatar are also investing heavily in e-government projects and ICT sector development, which in turn is boosting the cloud infrastructure market.

Along the Mediterranean, the government of Israel published in May 2018 a cloud strategy plan that highlights the role the technology can play in the public sector to achieve "a real difference in citizens lives, while enabling cost effectiveness and IT agility."

Large and established organisations in the region have for the most part opted for private cloud deployment, deemed as the safest bet for digital assets security, according to MarketWatch.

Two sectors benefiting from public cloud computing, in particular for its scalability and cost-efficiency, are SMEs and startups. SMEs accounted for 24 percent of total cloud computing spending in the MENA region during 2017, a share of the market that will   grow, according to MarketWatch.

What challenges are slowing cloud computing adoption in MENA?

Despite these developments, cloud spending in the MENA region remains among the lowest globally, with some companies and businesses outsourcing their cloud operations to other areas of the world.

"There are insufficient local hyper-scale and large-scale data centres to support cloud systems, which cause local organisations to derive cloud offerings from abroad," explained Peter Sondergaard, executive vice president and global head of research at Gartner. "Moreover, latency, legal and local currency makes this option problematic and limits cloud adoption among businesses in MENA."

Another factor slowing down cloud expansion in the region is the acute skills gap, with currently more demand than supply of workers with cloud-computing related expertise. This accentuates the need for up-skilling and re-skilling workers in jobs affected by automation and emerging technologies.

If the skills gap is promptly addressed by governments, businesses and other stakeholders in the Middle East, over half a million jobs could be created in different industries and verticals across the region in the period 2017-2022, according to research from IDC and Microsoft.

Copyright © 2019 IDG Communications, Inc.

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