Enterprise software, cloud demand fuels Middle East 2020 IT spending

Spending on IaaS and SaaS jumps, but MENA enterprises still invest in on-premises data centres, Gartner reports.

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Enterprise demand for software, data centre and cloud technology in 2020 will help boost overall IT spending in the Middle East and North Africa (MENA) after a decline last year, according to the latest regional forecast from Gartner.

Overall MENA spending on IT products and services will rise 2.4 percent this year to hit US$160 billion, acccording to Gartner. That will come after a 2.8 percent decline last year.

Enterprise spending on software applications and infrastructure -- including applications such as ERP and CRM but also operating system, database, backup and recovery software, and ETL (extract, transform and load) tools -- is expected to rise a healthy 12.3 percent to hit $7.4 billion.

"If I'm buying on-prem, licensed applications, that starts to build up a backlog that requires more infrastructure software," said John-David Lovelock, research vice president at Gartner. "One pulls the other along."

Takeup of cloud technology, however, is changing the overall picture for enterprise IT. "The more I go to cloud software the more I need multicloud management, cloud intregration tools and the less I need backup and recovery," Lovelock said.

In 2020 MENA spending on software as a service (SaaS), essentially applications hosted in service provider data centres, will rise 20.7 percent to reach $1.6 billion; spending on infrastructure as a service (IaaS) -- cloud-based compute and storage services -- will jump 37.9 percent to $312 million; and platform as a service (PaaS) spending will increase 23.2 percent to $434 million, according to Gartner.

"With PaaS, what you get (for example) is AI in the form of cloud and you get the processing, you don't just get the software -- it becomes a platform for doing things," Lovelock said.

Still, while the cloud technology growth rates look good in percentage terms, the spending on cloud in absolute numbers is starting from a very low base, Lovelock acknowledged.

In fact, on-premises enterprise data centre spending is still rising in the region -- it is expected to increase 1.1 percent to hit $4.8 billion this year -- and it is one of the few regions in the world where it is still doing so, Lovelock noted. Data centre technology includes servers, networking equipment, storage and unified communications.

Overall, cloud spending as a percentage of overall IT spending is a good proxy for determining maturity of digital infrastructure and in that regard MENA is about five years behind the U.S., Lovelock said.

While the Middle East is on a path to becoming more digital, Lovelock said, it is "hampered by the fact that delivery, at the end of the day, of products, services and offerings is not at the level of digital acceptance as it is around the world -- you can't coordinate 20 vendors across a digital interchange if you don't have a reliable internet connection."

Hurdles to cloud adoption include geography, availability and telecommunications. Cloud data centres are built typically where there is a certain density of population that has attracted spending on telecom infrastructure, Lovelock noted.

Availability of certain basic SaaS applications is also lagging. ERP systems, for example, need to have payroll and tax software applications that not only offer a local-language interface, but also conform to local accounting and bookkeeping regulations.

Availability of cloud-based services and products, however, is changing, especially in the Gulf region. Earlier this month, for example, Oracle opened a cloud region in Jeddah, to be followed later this year by a second one in Saudi Arabia and two regions in the UAE.  The move follows cloud data centre launches by Microsoft and Amazon Web Services last year, and IBM last month, in the GCC.

Otherwise, while enterprise spending is indeed helping to spur overall MENA IT growth, a big factor in this year's forecast has nothing to do with software or data centre spending, but with an uptick in mobile phone spending, expected to rise 6.7 percent. Since the phone market is near saturation point in the Middle East, though, spending on mobile phones is expect to decline in the next few years.

Copyright © 2020 IDG Communications, Inc.

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