Low value-add deployment and support services continue to dominate Egyptian IT services market, according to IDC

According to a recent study from IDC, the bulk of IT spending in the developing Egyptian economy is still on PCs and other hardware, with IT services constituting only some 15% of the total market. In 2007, the IT services market in Egypt is expected to reach almost $163m, a 12% increase over 2006.

'Most companies in Egypt lack the financial resources necessary to invest in IT services,' says Vladimir Kroa, Research Director IT and Business Services and Solutions, IDC CEMA. 'Many of them have not yet finalized their IT infrastructure - hardware and software systems that need to be in place before a firm begins contracting more sophisticated third-party IT services. Finally, Egypt's is an emerging economy, meaning it is difficult for firms to align IT processes with business objectives.'

The IT services market in Egypt is dominated by local systems integrators who have the resources and expertise necessary to carry out large-scale projects and can work with diverse technologies. The top 10 IT services providers control two thirds of the market; the top three - IBM, Raya, Giza Systems - over 50%.

'New IT systems and infrastructures are being deployed in all end-user segments, including increasing adoption of IT among SMEs,' says Kroa. 'This creates an immediate need for basic services. Rapid development of the market brings about turbulent changes in distribution of market shares, with rocket rises as well as steep falls.'

Hardware support and installation services remain most in demand, accounting for 38.6% of total IT services revenue last year. Systems integration comprised 13.7% and software support and installation 9.8%. HW and SW support and installation are also some of the fastest-growing segments of the Egyptian IT services market, along with IT training and education and consulting services.

The bulk of the revenue from IT services in Egypt comes from the government, finance, and telecommunications sectors. The government continues to invest heavily in IT and related services, accounting for 27.5% of total IT services spending. The financial services segment placed second, accounting for 22.7%, followed by manufacturing, which accounted for 11.1% of the total.

'While the government aims to raise the standard of public services through investment into basic ICT infrastructure, banks and telecommunications companies are focusing their IT spending on business-critical solutions as their hardware systems are already in place,' says Kroa. 'Companies in these sectors will also continue to demand integration services as they expand.'

IDC expects spending on IT services in Egypt to grow 12.4% on average over the next five years to almost $260 million in 2011.

IDC's Egypt IT Services 2007-2011 Forecast and 2006 Vendor Shares (IDC #ZS01P) presents the Egyptian IT services industry in 2006 and forecasts expenditure on IT services through 2011. The study provides market size information, vendor market shares, and revenues broken down by IT services categories and vertical markets. The study profiles the top 10 IT services providers including their IT services portfolio, presence in individual vertical markets, and largest contracts in 2006.